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

Good day, and welcome, ladies and gentlemen to today's UNIQA Group results for the first quarter 2025 conference call hosted by Mr. Kurt Svoboda, CFO. My name is Sergei and I'll be your coordinator for today's event. [Operator Instructions] And now, it is my pleasure to introduce your host, Kurt Svoboda. Please go ahead, sir.

Yes. Thank you very much. And ladies and gentlemen, welcome to UNIQA's First Quarter 2025 Results Conference Call. I'm referring to the document, which is published on the website of UNIQA and starting on Page #4 with the glance to a good start into the fiscal year of 2025. With a very good growth of 13% gross written premium, leading with a 16.1% return on equity, driven by a very favorable net combined ratio of 88.2% and this leads to an EPS growth of 11%, accompanied by a very solid solvency ratio of 274 percentage points. If you turn right to the right, the split between the international and the Austrian growth perspective, we have a quite favorable mix between around 40% is coming from the international business and around 60% from the Austrian business. And this, together with this very good technical performance in the first quarter 2025 leads us to the earnings before tax and to the consolidated profit stated here on Page #4, EUR 151 million and EUR 119 million on consolidated profit for the first quarter 2025. This is an overview. Now going a little bit deeper into the results on Page #5 with the P&L. What jumps into the eye is besides the great growth on 13.2%, which I will elaborate a little bit later is the development of the financial result with minus 70% or on the net investment income of minus 54%. I will explain this part in more detail then on the section financial results later on. When we go on this table on the bottom line, we see the net investment yield on the contrary, 4.4% and an average investment yield of 2.9%. So this means that for us, performance is okay. The effects on the financial result I will explain, as I said, later onwards. What was the driver of this good performance was a very, very favorable development on the P&C side with no NatCat claims and very, very little large clamps in 2025 first quarter in both segments, Austria and International and with this leading to an 88.2% combined ratio. Of course, we know that the cut season is ahead of us, especially June, July, August, we expect the big cut events also in this year. And therefore, we have to also set this into context that we do not believe that the first quarter on the technical performance P&C will also be comparable in Q2, Q3 and in Q4. Then we move on, key financial indicators are a result out of the good performance. The contractual service margin on Page #7 is driven by a good new business value margin in Health, which is above 9%, 9.4 percentage points and in Life with 8.7 percentage points, leading to a sustainability ratio of around 75 percentage points in Q1 2025. The top line, we have a top line, which is composed on several segments. So first of all, let me in this stage, we explained that the good growth is driven by 2 elements. First of all, indexation and on the other hand, the operative growth in both segments. Turning to the indexations. So when we look on Austria, the growth in Austria is 4%. And this 4% I decomposite in terms of out of the indexation, 1.5% and around 2.6% is then coming from the operating results from new clients and from new business. This is the P&C part of Austria. When we look on the health side, the health side is a growth of 6.5% here coming 4.9% from the index and 1.6% coming from the non-index business of the operative growth. So you see the health business is especially in Q1, very index driven coming from the system that works in Austria. Life business, a little bit different, 2.3% growth in generally. The growth, including indexation is 2.1% excluding indexation, sorry, is 2.1%. The index is 0.2%. So a very little impact on index in the Life business in Austria, all numbers referring to Austria. International wise, we grew by around 12%. Here would say indexation is not the key topic because just to remind you, short-term contracts that are expiring on a yearly basis, and we have especially in the international business, a high prolongation in the first quarter. So here, indexation does not play a role. Of course, we increased prices, but this is then coming through new contracts or through renewals. So far, inflation to the top line. The cost side at UNIQA is going in the right direction. So if you look on the admin cost ratio, which is the target under UNIQA 3.0, we are going down from 15.6% to 15.4%, and this gives us also a great guidance on the efficiencies in our countries. Page #10, talking about the P&C result and on the combined ratio. As I said at the beginning, no NatCat and very little large claims and a favorable development on the base claim or attritional claims is leading to a very, very good technical performance on the P&C side in both segments, including then on the reinsurance side at UNIQA Re following our internal reinsurance program. The decomposition of the comp ratio you see in the middle of the chart. Just also have in mind that the runoff result of UNIQA is in a very stable position around 2% also here. And this leads to the loss ratio of net 58% in the first 3 months of the year 2025. On Page 11, talking about the CSM, I talked to you about favorable 8.7 percentage points on the new business margin. What leads to the little decrease of the new business CSM in totally is that even with high margins, we are missing a little bit on volumes the market tendency that we see in Austria. When I talked before on the good growth on the Life business, this is driven by unit and index-linked business, which is not part of the CSM and therefore, you don't see the reflection on the new business CSM. And we have, in relation to the last year or lower volumes in Czech Republic, Slovakia, Poland and Romania, which is also a little bit of a market topic because last year, the booming business in that respect. Differently, on the health side, top margins and high volumes are leading to a situation that still our CSM is increasing. Of course, we do not see the profits like in IFRS 4 immediately in the P&L. So therefore, the sustainability ratio and the composition of new business and release is key for us looking at and this KPI is for us at the moment in a very, very good position, and we don't see here any changes in the future. So on Page 13, a summary of the contractual service new business values in a split between savings and protection, health and unit-linked. In total, the EUR 60 million, also in line with the development of last year. So we don't see at the moment also here, no big topics in terms of the end year development. Now we come to the investment portfolio and to that what I stated in the beginning, I'm now on Page 15 and 16. Yes, we had an impact on the financial results in the first 3 months coming from the development on the stock market and impacted from the tariff discussion in the U.S. Why that? UNIQA is a benchmark investing in the MSCI World all countries Index, and this index has a benchmark in the first 3 months of minus 5.4 percentage points. UNIQA is ending up in that case with UNIQA World Selection, our self-managed fund with equities, minus 4.7%, so better than the benchmark, but in case, worse than expected because we expect this for us internally on a planned basis, plus 2 percentage points. So this is the reason why we got the hit of so-called unrealized losses of EUR 37 million, directly impacting the net financial result because this is P&C and not absorbed by underlying items in the life or in the health side. Yes, it's correct that, for example, the euro stocks or other indexes are outperforming that. But as we are investing globally and the reduction on U.S. stocks in our portfolio was a little bit absorbing that, but we could not manage to get rid of all these U.S. trades, we got this hit of this mentioned EUR 37 million on unrealized losses in the financial result. Besides what we also took is that on purpose, we sold some bonds in our portfolio because of getting higher yields in the future. So that means -- with this action, we bought a little bit of duration and we bought also a little bit of reduction on the sensitivity, especially on the health side. And we got, in that case, also a hit of minus EUR 20 million in our P&L. This is also reflected in the net financial result of the first 3 months. We did this because from an economic perspective, we say we can, with this have more ordinary income in the future. With this, we have less sensitivity on the health side and also have here with this a good economic benefit in Q2 following this year. We don't believe and we see also that we have a catch-up and we have enough potential so that this minus development on the financial side is not to be expected by the end of the year, but this is the reason why in Q1, we have this minus development on the financial result. If you look just on the net investment income, what jumps into the eyes a so-called periodic booking of STRABAG because last year, we had the so-called STRABAG adaptions coming from the real results that STRABAG is mentioning. We had booked this in the first quarter. This year, as the announcement of STRABAG was later than last year, we booked this in the second quarter. So what is to be expected here is that there is an additional benefit on the net investment income of STRABAG of EUR 55 million. The result on a net financial basis, so excluding Life and Health from underlying items is roughly between EUR 8 million and EUR 10 million. This has to come -- this comes then in Q2. So far, my explanations to the financial results and to the development, especially in comparison to the year 2024. If you now look to Page #18 before I hand over to questions and discussions, talking about, on the one hand, that we will propose to the AGM on 2nd of June a dividend of EUR 0.60. For the outlook of 2025, we stay very optimistic. So that means at least 6% on EPS at least as a growth and as our target. And in the absence of NatCat events or deteriorations on the financial markets, we are confident also to outperform 2025 to the existing target. So ladies and gentlemen, thanks for listening so far. And now I'm happy to take your questions and/or discussions.

[Operator Instructions] And our first question is from Michael Huttner from Berenberg.

Thank you for the lovely results on the clear explanation. I had 4 questions. I'm sorry, so on STRABAG, I saw the share price has kind of doubled year-to-date. And my question here is does that benefit at all UNIQA? Or is the accounting really or the only thing you book, the actual equity accounting, in other words profits and losses of STRABAG as they report them. And the second is on reinsurance. So I think last year in Q1, reinsurance costs a lot of money in terms of the difference between gross and net combined ratio. This year, it costs a lot less, I think it costs 2 points, and that's something in your Slide 10. Last year, I calculated, maybe I'm wrong, it costs 5. I just wondered what was the normal kind of expectation is in your thinking? And then also on reinsurance, I noticed that you have a strong growth in the inward reinsurance and the stuff you write, the reinsurance risk you accept. And I just wondered, is there anything here that could cause some earnings volatility? And then my last question, sorry about this, is on Health, I can kind of model the group as a whole because you gave a clear guidance at least 6% EPS and everything kind of hangs together. But when I tried to model the individual segments, I have a real difficulty with health because it used to be incredibly profitable. In '24 the profits came down, and now they're down again. And I don't know what right kind of level would be as a kind of run rate.

Yes, Michael, thanks for your questions. Happy to take them. The first one is, do we benefit by the share price, not directly because we have on an IFRS basis, the accounting principle of equity and equity means that we do not have an influence from the share price. We just have the influence from the earnings and from the profit carried forward. And on the local GAAP side, which is basis for dividends and all the stuff, we calculated on so-called -- acquisition cost, thank you. And with this then on the valuation of the company. So in that case, we have no direct impact from STRABAG in the results of Q1 or Q2. What we have is a higher dividend because of the very good result of STRABAG. This case directly to the UNIQA Austrian local GAAP. Second question is the reinsurance and 2%. Yes, you're right. So what you can calculate, Michael, is 2% is a normal basis of reinsurance costs that you can expect. The inward reinsurance, good point. Thank you for that. So we had a huge growth in that respect. So we had EUR 60 million in Q1 2024. This year, we have EUR 190 million. And the profit that we are doing now with Q1 is EUR 5 million and both the revenues and the earnings are part of the reinsurance results that you see in the segment. And the last point is, yes, you're right. This has to be an explanation here, but happy to give further information to those on a bilateral basis. The UNIQA Health segment is not only consisting on the health business so far, Michael, because we have, on the one hand, the result of the health insurance business in Austria and in international. What we then have is with the new concept and our new business model of Mavie, including also the 5 hospitals, the so-called former PremiQaMed hospitals. Now the new brand is Mavie Med. So we also have that since 2024, the impact of Mavie in the Health segment because Mavie is dealing with the health ecosystem. And so we are allocating this also to the health segment in the balance sheet. And as Mavie is starting as a start-up, we have here the earnings from the PremiQaMed hospitals. They are profitable. They are profit like all. The new Mavie ecosystem is at the moment so far a cost case and has also some topics of options and guarantees and is impacting here negatively the EBT of the health business. But we can provide you via our internal IR department the split between what is coming from the health insurance and what is coming from Mavie.

And our next question is from August Marcan from UBS.

Congratulations on a really good set of results. My first question is on top line growth. So you now said that for '25, you expect net income growth in line with your CMD around 6%. I was wondering, and then this might be greedy, why did you -- why not or did you consider upgrading your top line growth as well? If I'm not mistaken, it's 5% and you grew 13% in 1Q. And then kind of following up on that growth. In the P&C segment, can you give a bit of commentary how is pricing versus inflation going on in your major geographies currently on a written business? Are you still pricing above inflation? Is it in line? Or anything you can give us there would be helpful. And then finally, I know this is your favorite question, Kurt, but on the excess capital, you're still tracking materially above the target range. So let me ask this question in a bit of a different way. If there was an opportunity that would cost, say, 50 solvency, 50 points of solvency, is there any limiting factor we should think about that could prevent you from pursuing that opportunity? Or are you free to go for any chances like that?

Thanks for your question, especially for the third one. I'm starting with the first one. Upgrading the top line. Yes, you're right because if you look on our growth in both markets, we are far away from that what is 5% CAGR. On the other hand, we are at the moment, cautious. I think I will come up with a more detailed outlook in the half year results because we see at the moment in Austria, inflation is going up. We see in other countries, inflation is going up. We see globally volatility in the markets, many new governments coming in and making some cost programs in terms of the debt. And we have to wait and see what impact this maybe have on the insurance sector or generally in the financial industry. And if we can also -- because in that case, why I also explained in detail the growth and the split between index and non-index what this means for us on a midterm basis because I do not want to say now, yes, we believe that we can make more than 5%. And then in the half year, I say, okay, but this is not only for '25 and not for '26. So that's the answer in that way. If it stays like that, August, I'm quite confident that we have to also upgrade the top line. Second thing is P&C pricing and inflation. So far, we are able to price above inflation. That's correct in all markets, in all segments, even in the reinsurance side. The point is here also a very good question because economic-wise is, okay, where is the end of this line because how far can we as an industry go and the customers follow us. When all other things are also getting more expensive in that respect. But so far, we can say, yes, the pricing, the renewal took place on above inflation on average. And the third question is a clear yes. So -- and this is exactly that's what I always say. So if we have targets in different areas in the normal M&A activities so the traditional one, in what we also disclosed on the Capital Markets Day, the vertical integration so the topic of going into M&A activities in the sales side or on the health ecosystem, if we have here goodwills that bring us the solvency ratios down by 50%, 40%, we are not limited, and we are fine with this.

And our next question is from Antoine Bouchetoux from AlphaValue.

The first one is on solvency, a sort of follow up from previous question. I was wondering if you could give us more detail, actually, the actual numbers for own funds and the SCR and may provide some details on the main moving parts, which led to the significant improvement in the Solvency II ratio in the first quarter. So that would be my first question. And then maybe another follow-up on your topline growth in P&C, I understand what you were saying, but I was wondering if you probably have some visibility on the pricing effect for full year '25. And I was wondering if you could give us some indication on what we could expect in terms of top line growth in P&C in full year '25. And maybe finally, a very small question on life, I noticed that the CSM release ratio has increased in the quarter. So I was wondering if you could explain what the drivers were behind this increase in the life CSM release ratio and whether we should expect a similar increase going forward.

Okay. So Solvency II, the improvement of roughly 10 basis points, exactly 10 basis points, Antoine, are 3 elements: a, STRABAG and the interest rates that are -- have gone up. And the third one is the operating profit that was quite good and quite intense in that case. So these have -- these are the 3 elements that contribute to the increase on Solvency II. The growth in total on the year in the P&C side is around roughly 6.9% or roughly 7% group-wise, what we expect as a growth in P&C. I can split this if you want, in Austria, 4.6%; international wise 10.5%. Reinsurance, I leave out because it is a different topic in that respect. The last question was about your CSM release. The CSM release is driven by 2 elements. The first one is that we have a better situation on the capital markets. That's one thing. And the other thing is that we have this also on Page #11, an offsetting of an increase of service expenses that comes from the international business, and this was the first driver in that respect. So these 2 things lead to the higher release of -- if you want -- yes, the more detail in terms of offsetting is Poland, Czech Republic and Slovakia. These are the 3 countries that contribute to this.

And we will now move to our next question from Rok Stibric from ODDO BHF.

Thank you for the presentation is related to ask questions. I would just have one. It's related to the Alma cost, I'm sure that you're working hard to this transaction to get it close. I was just wondering if there's any update can we now expect into Q2, this topic to be closed? Or are there any headwinds that you're currently facing.

Thanks. We're waiting for the approval of 1 authority, and we expect this to come at least now by end of May and June, so that we expect also the so-called deconsolidation by half year this year.

Thomas Unger from Erste Group.

I just wanted to come back to the strong appreciation of the STRABAG share price. And if you could give us any indication of what impact that might have on your IFRS results towards the end of the year. I would assume that the carrying value at the end of the year will be adjusted. If you could talk about that. Does that -- is that in any form included in your optimistic outlook for this year? Or is it not factored in at all? And on solvency capital, you touched upon that was one of the factors that led to the 10 point -- sorry, the 10 percentage point increase quarter-on-quarter. So in terms of solvency ratio, it's all in already, at least the movement in Q1? Or is there more to come also for the solvency ratio? And also connecting to this topic, STRABAG, would you -- evidently, the share price is much higher than at the end of last year. Would you consider selling parts of the stake at any point in time? Is there any threshold where you would say, okay, now it's attractive enough, we'll diversify away from this one concentration? And then on the -- on your combined ratio, sorry, do you have any reserving in Q1 for the upcoming NatCat season in June, July, August? Is there any provisioning for these anticipated events?

Thomas, thank you. So first of all, starting with the first question on STRABAG. Michael Huttner also stated this question. The accounting scheme at STRABAG is for us independent of the share price. So the carrying value is good and the carrying value will increase, Thomas, but this is just for us a safeguarding that our value of acquisition costs and the local result is okay and the audit company is happy. But on the other hand, at equity means that no matter where the share price is, we are in that case, only dependent on the profitability of STRABAG. So that is how it works on IFRS. So at the moment, it's a pity that we cannot take this directly to our results. But on the other hand, if it goes in the other direction, it's also not going into the results. So at equity means no impact and no influence from the share price of the value and in that case, also then not on the P&L. So therefore, no considerations for the outlook. Yes, second question, Solvency II, all included, nothing to be expected. Of course, when STRABAG performs additionally in the Q2, like in Q1, there is an upside potential, but this is something that is a market value. The next question was on the reserving of cat events in the first quarter. No, we do not do such reservings because this would mean that combined ratio is even in that case, getting worse, but we have considered in our plan for 2025 and in the consensus and in our outlook, significant amounts of NatCat events and of large loss events. So far as these are sufficient, and this is what we see and expect because we also have increasing planning assumptions, we are safe and no deviations from the outlook. STRABAG is something that is dependent on the market, Thomas dependent on the situation, and we would inform if this is a topic for us. We have also syndicate if we have to consider in the one wrong direction.

Just on your planning for the combined ratio, what figure for NatCat events do you have planned in for 2025.

So we calculate on a net basis on the group always between EUR 50 million to EUR 70 million.

You have a follow-up from Michael Huttner from Berenberg.

Just 2. Firstly, on the sale of these 3 smaller countries. Is there -- would there be any impact to come either insolvency or earnings or anything.

All done, Michael, in the year-end 2024. So we had more or less a deconsolidation done so far. Out of the situation as these countries are not that significant. We did not move them to the other P&L position. So no matter what the result is, no matter what happens, all done, no impact.

Fantastic. And then just a kind of fishing question. Because I spoke to your lovely IR this morning and they said, yes, the life was not so bad despite the fact that we haven't launched new policies and I was thinking, we're about to launch new policies. So it's really a question, am I assuming right and whatever.

Say again, I didn't get.

Are you going to launch some new life policies, which would drive the growth?

Yes, we have in place some product features and some new products that we want to launch the market. Please understand that officially, I cannot explain you now more because of competition rules.

Sorry. Can you hear me?

Yes.

Just a quick follow-up on an earlier question. When you were saying about the life release, CSM release in life that was a bit higher in the quarter. If you can just clarify, is that a level that you think is going to be sustainably higher? Or is it just that was a one-off effect in the quarter? And another thing is on the external reinsurance, I'm sorry to bring this up. I know you mentioned it during the CMD. Do you have any figures on where -- how much premiums externally, like third party have you written so far? Or what's the target? Any number you can bring or you can give me on the third-party reinsurance that you want to do would be helpful.

Yes. So first of all, the -- you can count the CSM release as sustainable with existing macro environment, it's okay. And there's no one-off. And the question on the reinsurance side, so we expect for this year around a premium of EUR 200 million to EUR 250 million and calculate on an 8% earnings on average. And this business is something that we expect strategic-wise at UNIQA to be between EUR 300 million and EUR 500 million in the future.

It seems this was the last question today. With this, I like to hand the call back over to Kurt for closing remarks. Over to you, sir.

Thank you. And thank you for your participation and for your views. Ladies and gentlemen, I wish you a nice weekend, stay healthy and see and hear you soon. All the best. Goodbye.

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.