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

Hello, and welcome to the UNIQA Group results for the first to the third quarter 2025. My name is George. I'll be your coordinator for today's event. Please note this conference will be recorded. [Operator Instructions] I now hand the call over to your host today, Mr. Kurt Svoboda, CFO, to begin today's conference. Please go ahead, sir.

Thank you, and welcome to UNIQA's Group results after 9 months and the year '25. Yes. First of all, we have a very successful 9 months that we can report out. And with this, I would also like to make an introduction to the first analytics for the 9 months. On Page #4, we talk about a gross volume of around 9%, leading to EUR 6.4 billion after 9 months. You can read out later that in Austria, we grew by 5%. In the international business we grew by 10%. When we talk about growth, and let's do this here, I would like to inform that we have outstanding growth results, especially in the non-life business in Poland by 15%. We have Hungary by 12%. We have the region of Southeastern Europe, which is around 6% and even Ukraine runs in the non-life business to growth of around 18%. So quite tremendous results on the P&C side, which is on the one hand, one driver of profitability after 9 months. Austria is 5% is also worth mentioning because normally, Austria is on average between 3 and 3.5 percentage points, very mature market. So especially in the health side and also in the P&C side, we are outperforming the market. This is also a second pillar of the growth in profitability after 9 months. Generally, we are very satisfied with the diversification between Austria and international that is shown on the right-hand side of this page also around 56% is coming from Austria, roughly 40% from the international business and 5% from the reinsurance, which is also growing with the external reinsurance part in that respect. So that was a good diversification, well balanced and P&C with 61% on share of our revenues leads then with the good profitability with consolidated profit that has increased by 26 percentage points up to EUR 333 million. That means as an earning before tax, EUR 423 million. So that's as an introduction. I will come later onwards to the net combined ratio with a 91% and also the return on risk-adjusted capital of roughly 18% within the explanations in a minute. On Page #5, the growth we talked about, what I would like to draw the attention is about the technical result, which is an increase of 47.6% coming from a very good development on the base claims. That means we have around 52% base claims designed as claims lower than EUR 500,000. We have neglectable or more or less no NatCats in the portfolio this year. So that means you talk about an impact of 0.5% in relation to 8% last year, which Boris, I think everybody knows about the story. And finally, we have also a quite good development on our portfolio. And within this, we come to these technical results and to the combined ratio of 91 percentage points. Also I would like to highlight to take the attention towards is the new money yield and the average investment yield which is 4.7%, 3.1% higher than last year and also one part of the profitability increase after 9 months. When we go 1 slide further, it's about the return on equity, which is on a level which is much more higher than expected over the target range. I think this will be a topic for the next week's capital markets, but the 14.5% also reflecting the good profitability and also the stable development on the equity base. On Page 7, we talk about the CSM in Life & Health. I think we have to mention here 2 things. The first is in the development of the CSM, we have operative topics and nonoperative topics. Operative topics are that the portfolio is growing. Operative topics are that we have a profitability coming from good new business values in Life and in Health. In Health, we talk about new business values, margins about 9% or more. Life is about 3% to 4%, depending on the market. Nonoperative topics is, on the one hand, the movement of interest rate, is one thing and on the other hand, also the STRABAG sale that we had as an impact on the CSM as we have this allocated to the health business and therefore, the game goes first through the CSM and then over a release of 31 years to the P&L. So this has to be taken into consideration when we talk about release and sustainability ratio. Still, yes, this may be a weak point. The volumes in the Life business, especially in Austria, are not that big that they are compensating the high outflows from maturity levels from the last 10 to 15 years. And therefore, the lower sustainability ratio on a stand-alone basis for the Life business. I think growth, we take out in the beginning here, it just gives you a flavor on how this has developed over the recent years on the left-hand side, but also on a quarterly basis, and this is for us also key. We expect from a similar perspective and also how the portfolio of UNIQA is structured that the fourth quarter is the lowest one in the growth and that's also the reason why the profitability is in the fourth quarter of UNIQA generally lower than in the first 3 ones in total. Admin cost ratios on Page #8 -- Page #9, sorry, they are on a significant decrease level, which is in line with our targets and also in line with our internal benchmarks. So that means efficiency and also the first fruits from the IT transformation are visible. P&C delivers not only a very strong technical performance, but also a record EBITDA on Page 10 to be seen, pieces coming from the growth. This is coming from the good growth on the claims side and also from a favorable investment result of the net financial results seen. Same for Life business on Page #11, increase up to 33.8% to 143% on a technical basis. And the same for the Health business on Page #12. So 13% increase also on this level. I talked about the new business value in the group on Page #13. These are the numbers for that. So on the one hand, you can see on the left-hand side, the different contractual service new business margins divided into the different product lines and leading to a new business value on the right-hand side. And in comparison to the 9 months in 2024, we increased also the profitability value significantly within 2025. Core markets, Page #14, well balanced between Austria and international wise. Of course, one can say what is the balance when Austria delivers EUR 343 million and international EUR 184 million. Please asking to take into consideration that Austria from a governance topic is also financially and from the current topic, the owner of the International business unit. That means from an accounting perspective, each dividend that is paid from internationally to the holding company firstly, goes into Austria. And if you deduct the dividend streams from the Austrian result then you end up on a level of around EUR 200 million. And this is what I see as a well-balanced result between Austria and International. And this is also for us a key topic for the future. Investment activities on Page #16, just to give you some -- a little bit of flavor. So first of all, with the net financial result, we are in line with plan. We achieved with the 3.1% average yield and the 4.7% new money yield, a result, which is above market level. We have a favorable ordinary income. We have also a development where we see no impairments in the first 9 months. STRABAG contributes to the net investment income, but accordingly to the accounting scheme is then eliminated for the net financial result. With this, I come then to the outlook for 2025 and also for the announcement for next week's Capital Market event in Austria and in the U.K. in London. So first of all, we stick to our target range of EUR 490 million to EUR 510 million. Yes, we see the range and the achievements for the rest of the year in the upper level of this range and I feel quite comfortable also to keep the level of profitability, keep the level of the core business and with this also the level of progressive dividend payment. With this, about the outlook then for the years '26 and '28 and what this means for UNIQA 3.0, again, the announcement for the capital market events. And with this, I end my presentation, and I'm happy to take your questions. Thank you.

[Operator Instructions] Our very first question today is coming from Michael Huttner of Berenberg.

Fantastic. Congratulations. This is lovely results. I've got lots of questions. I hope that's okay. First one is on the P&C. So 91%. I think your target is below 94%. So well ahead. What could be a kind of normalized figure? The reason I ask is in the combined ratio, I can see 2 different, I can see man-made claims or large claims higher, but also, as you said, natural catastrophe or weather claims are very low. And then on the -- my second question is these wonderful growth figures. So Poland 15%, Southeast Europe 6%, Austria continuing growing across the board around 5%. And how sustainable is this? And presumably, if you address it next week, that's fine. On Poland, and here's the opposite. You can say this guy is completely nuts, the PZU reported virtually no growth, but they reported amazing combined ratio. So this is across PZU so not just Poland, but Poland is their main business. The combined ratio improved from 94% to 85%. And I think yours kind of stayed roughly stable around 90% or 91%. I just wondered what kind of different trends you're seeing? Or if you can talk about that. And then my final question, and I'm sorry for so many. In Life and Health, what I can see is that the CSM release rate so what I'm really asking is about profitability, but it's a funny way of asking about it. The CSM release rate is kind of nudging up. If I do the average, it was like 5.7% and 5.8% and now we're at 6-point something if I annualize it. And I just wondered, is this structural or is there some mix shift or...

Michael, thank you for your questions. I think we can take up the most here, the rest and final next week and happy to have you. So first of all, the normalized combined ratio is a fair point because we -- eventually, we see a very strong movement from NatCat. So we see a normalized combined ratio at the moment is if you add 1.5 percentage points on average. So that means we end up here at 92.5%, which is still below the target that we set. And this is roughly how we see at the moment a normalized combined ratio at UNIQA at the portfolio. Second question is about growth and sustainability of the growth. I would say, look, we have at the moment in -- we have in Europe a situation, which is for the financial sector quite positive. Despite I see personally, the economic in Europe, quite dangerous in the development rather skeptical. But for the financial sector, why is that favorable. First of all, interest rates help us. Secondly, it's about that wealth and that what people are having safeguards. And this is what we see generally as a tendency to get no risk on this level. Thirdly, when we talk about health business, we see quite -- even in Austria, a quite good growth to move from the social to the private Health business. And in Life business, it's an international game because here, we have biometric products and the need and also here with our partners, brokers, the bank generally and not to forget gives us also a situation that is much more better than we expected last year. And therefore, I would say the growth is to a certain level, highly sustainable. When you talk about Poland and when you talk about the combined ratio, we have reported out in the slides, the gross combined ratio of Poland. So not to forget about gross of net. We have here 92.7% in Poland, take into consideration that our Polish portfolio is quite big. And with the one or other major claim, we are up to 93%. But on a net basis, also including our internal and external reinsurance program even Poland is on a quite good level, which is also sustainable in the level between 90 and 92 percentage points. CSM, Michael, I think we can talk next week in much more detail because we have some information about this and what we're doing in that respect. Also our colleague from the personal lines with me so I would like to give the answer on that next week if this is fine for you.

We'll now move to August Marcan of UBS.

First, I have a couple on growth and then some on the full year outlook. On growth, could you split out the 5% in Austria and 10% international? How much was volume, how much was pricing? And what's the current environment? How do you see across your markets and across major divisions, motor versus general P&C? How is claims inflation versus pricing looking on your written business currently? And then my second question is on your full year guidance. You posted a very strong 9-month profit number, but you left the full year guidance unchanged. If I just assume that we have 4Q normalized cat level, does that imply a lower profitability for 4Q compared to what we saw, let's say, last 2 years? Or is there something that I'm missing here? And finally, on your solvency again, a very healthy strong number above 280%. Keeping in mind what one of your local peers has recently done? Does this change your M&A appetite, would you be willing to look at other geographies or maybe accelerate your inorganic growth? Or alternatively, if you don't see that as an option, would you return capital to shareholders?

Yes. Coming to your first question about growth volume, pricing inflation. Look, we have in -- let's start with inflation. Inflation at the moment plays for us, as UNIQA not the big role. Because in Austria, we have the automatic indexation in 99% of our portfolio, retail and corporate. And internationally wise, we are dealing with high pricing knowledge and with this also, we saw that in the history and even on the COVID, the tendency was more or less that we did not lose that much because of higher prices out of inflation adoption. So I would say here, tick-the-box inflation is under control, at least at this in the level as it is at the moment. So to not talk about an inflation increase of, I don't know, 100 basis points, I think then the game is different, but this is generally a different game. Talking about our pricing and volume. You can, on a roughly basis on the thumb rule count that 1/3 is coming from indexation, 1/3 is coming from pricing and 1/3 is coming from new volumes and new business. That's a rule of thumb overall when you talk about retail business. In Corporate business, there is no rule because corporate business is different. It's about ownership, it's about pricing and all the stuff to keep that thing out. But in retail business, I would say, the thumb of rule is 1/3, 1/3 and 1/3. Second question about the Q4 stand-alone basis. This means, of course, we priced in a little bit of, on the one hand, not that favorable claims management or claims development. Secondly, we stated this in my opening speech that Q4 is at UNIQA always the quarter where we have the less -- the premium income because of seasonality. And the third thing is to take into consideration a little bit the financial markets, and this led us to a situation to come up with the EUR 510 million on the upper level to achieve the target. This is so far, my explanation to this. But I understand your point and what I can state so far also the rest we can talk next week. We are very confident to end up on the higher level of this guidance. And Solvency II, yes, I think I state the same, as I said last year in London and in Austria, I think we have no change in the M&A appetite of UNIQA. We have defined our geographical footprint. They are not considering the Western part of Europe. In the Eastern part of Europe, we are open for everything. And M&A activities do not take place only in the traditional M&A part, meaning insurance, we also are investing and in touch with vertical integrations. We have the health care ecosystem so it's around many opportunities that we see there and a good Solvency II gives us here also a good backbone to come to the level that we expected. You're correct. But the point of share buyback I can also state also with next week, but no change to that what we said last year that means no plan for these times.

We'll now move to Antoine Bouchetoux of AlphaValue.

I've got 2, please. The first one is on large losses in P&C. I was wondering if you could confirm that large losses are included in the attritional that you published. And maybe give us some color on the EUR 233 million large losses in 9 months, and I think that was EUR 130 million in the third quarter alone and maybe provide some nice outlook for the fourth quarter. And then the second question may be a bit early to discuss this, maybe it's going to be a subject next week, I guess so. But to mention that UNIQA Re, the external business is expanding. I was wondering if you could give us a little bit more detail on that. The segments that you're targeting and maybe whether you expect to continue growing, softening reinsurance market at the moment, thank you.

Okay. So talk about large losses. Yes, they are part of the attritional claims. That's correct. Large losses defined as losses about EUR 0.5 million have generally an impact on our P&C loss ratio at the moment of 6% and this was last year, 4%. So we have higher loss, large losses in that case. We've also taken into consideration that fronting business is something that UNIQA is also considered not at UNIQA generally on the attritional claims. We have here 1.7% on a gross basis, but you have to carve this out on a net basis because this is a 100% reinsured. And yes, you're right. We had 1 big claim last year. But this year, we have a large loss situation more on a frequent level. That means between EUR 10 million, EUR 15 million so not the big losses between EUR 30 million, EUR 40 million, EUR 50 million. The frequency is getting higher in that respect. Second question is about UNIQA Re, yes, export business is something that we started in 2023. I will elaborate on that next week in more detail. But I can tell you that at the moment with a level of around EUR 270 million to EUR 300 million after 2 years, we are quite happy. Rest happy to inform next week.

[Operator Instructions] We'll now move to Rok Stibric of ODDO BHF.

Hope you can hear me. Congrats on the good results here. Really, really nice to see how you're progressing on the strategy. And you already talked quite a lot about some topics that I wanted to ask about, but I would still like to come back to the Solvency II ratio. I mean, right now, you are quite high with this number. And I was just wondering if there is no suitable M&A opportunities if investors could expect maybe a special dividend or something like that? I mean I understand that buyback is out of the equation here. But still, when I compare your return on equity and cost of capital, I think there is some more potential on UNIQA side. And I just wanted to hear what's your view on that.

Yes, Rok. Also here, give you a flavor on some guidelines and the rest we see next week in London do talk about this. But look, we have -- the solvency ratio is 283%. First of all, where does it come from? We have, on the one hand, an impact of more than 10% coming from the STRABAG development and around 11% in total over the years coming from the interest movements. So do I see this as a sustainable development. So STRABAG, I hope this because the company is great. And what they're doing is in Europe, a great construction company. But the point is if the stock value and the market value of STRABAG is stable on that level as is, I would say this is not only dependent from the operational development of the company. So I see this as a little bit of a risk. The same is for interest rates because interest rates are going up. Yes, UNIQA is very interest sensitive. We know this. We explained this so I just wanted to point this out because I have personally, I always say between 15% and 20% out of this 283% is market movement and not in our hand. So with this, we are down at 260% in my calculation, maybe others see it differently, but let's discuss this next week. And for the 260%, we want to be prepared for M&A activities. We have seen here lot of opportunities. And of course, we are looking on that. Again, the markets are defined at UNIQA so we have to take care that to have a placeholder between 15 and 20 percentage points for this. We want to bring down our leverage ratio. So this is also something that has an impact in the future to us. And then, Rok, we are down at the 230 and maybe even below. So this is how I see this. So meaning a very simple question from your side is a long answer. As a special dividend is for us, then we're thinking when we have a special situation because what I do not want to suggest to my shareholders is to say, let's just pay out some dividends because to come down with the solvency ratio. This is maybe it's easily done, but it's not sustainable. But if we have a special situation measurement, activity, sale, whatever realization, then we can talk about this.