Assicurazioni Generali SpA

MIL:G

Earnings Call Analysis

Generali's Q1 2024 Performance Highlights Solid Growth Across Segments

Generali reported a solid first quarter of 2024 with a 5.5% increase in operating results. Life insurance saw €1.5 billion in net inflows for protection products and €1 billion for unit-linked products. P&C gross written premiums grew by 11%, with motor segment premiums rising by 6.3%. The firm's Solvency II ratio stood strong at 216%. Despite market challenges, Generali's strategic actions from the previous year have positively impacted margins and the group remains optimistic about future growth.

Improved Net Inflows in Life Segment

In the first quarter of 2024, Generali Group experienced a significant improvement in its Life segment. Net inflows in Protection and unit-linked products reached EUR 1.5 billion and nearly EUR 1 billion, respectively. Outflows from savings were limited, suggesting a considerable improvement from last year. New commercial actions began in 2023, underpinning strong Life production in 2024. This strategic focus on new business underwriting and capital-light products with protection riders has shown positive outcomes.

Growth in P&C Segment

Generali's Property & Casualty (P&C) segment reported strong growth, with gross written premiums increasing by around 11% (6% excluding Argentina’s hyperinflation effect). This growth was supported by tariff strengthening, particularly in the motor segment. The average premium rose by 6.3% year-on-year, signaling continued profitable growth. Technical measures aimed at enhancing the portfolio and managing claims also contributed positively. The consolidation of Liberty Seguros, which contributed EUR 219 million to premiums and improved the combined ratio by 0.1 percentage points, has also been a notable factor.

Solid Financial Performance

Generali reported a 5.5% increase in its operating result, with contributions from all business segments. Adjusted net results rose by 8%, excluding a significant capital gain from the disposal of a London building last year. Remittance to the parent company was approximately EUR 4 billion, highlighting the group's strong cash flow. The capital position remains solid, with an estimated Solvency II ratio of 216% after accounting for a EUR 500 million share buyback.

New Business Margin Analysis

The new business margin experienced a contraction of 179 basis points compared to last year, attributed to three main factors: an accounting impact (90 basis points), a business mix change (60 basis points), and market effects (30 basis points). Despite these factors, the margin is expected to improve in the second quarter of 2024 as these impacts normalize.

Impact of Regulatory Changes in China

The first quarter saw exceptionally strong volumes in China due to impending regulatory changes. The Present Value of New Business Premiums (PVNBP) in China more than doubled year-on-year, increasing the country's weight in the group's PVNBP to over 8%. This surge was primarily driven by the savings business, which generally has lower margins.

Risk Management and Guidance

Generali maintained its focus on risk management, especially in the P&C segment. Effective price changes outpaced loss trends, contributing to positive developments in the combined ratio. The group will provide updated guidance on the combined ratio and insurance finance expenses by midyear, incorporating the full impact of Liberty Seguros’ acquisition.

Strategic Focus and Forward Looking

Generali remains confident in its strategic direction, focusing on commercial actions that align with market dynamics. The significant improvements in both the Life and P&C segments, supported by strong financial performance, indicate resilience and a positive outlook for continued growth and profitability.

Earnings Call Transcript 2024-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group First Quarter 2024 Results Presentation. [Operator Instructions]At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agencies Relations of Generali Group. Please go ahead, sir.

[Fabio Cleva, executive]

Thank you. Hello, everyone, and welcome to Generali first quarter 2024 results call. Here with us today, we have the Group General Manager, Marco Sesana; the CEO of Insurance; Giulio Terzariol; and the Group CFO, Cristiano Borean.Before opening the Q&A session, let me hand it over to Marco and Cristiano for some opening comments. Marco, the floor is yours.

[Marco Sesana, executive]

So good morning, everyone. Our first quarter results confirm the group delivery and the positive effect of commercial action implemented in 2023 to address the macro context challenges.In Life, we are very pleased by the return to positive net inflow. The first quarter figures confirm what we told you throughout the second half of 2023, that the situation was under control. It also demonstrates our ability to meet customer demand for protection and unit-linked products.Protection net inflows reached EUR 1.5 billion, while unit-linked net flows were close to EUR 1 billion. Protection continues to generate over 40% of our new business value. Outflows from savings were limited, a significant improvement compared to last year, and were very much related to low-value products. In fact, the commercial action implemented since 2023 underpinned the strong production seen in Life overall.Our business units have adapted to meet changing customer appetite and perceived market competitiveness by continuing to update existing products and launch new products that are more attractive in this new market condition. The strong Life production also reflects positively seasonality in the first quarter, especially in China. As such, we expect some moderation in the coming quarters.We maintain our strong focus on new business underwriting discipline for Protection and Health businesses and on capital-light products enhanced by protection riders. The share of capital-light products has remained stable, while the average guarantee of the European Life business has continued to decline.In line with our plan ambition, our strategy will continue to be oriented to bundle solutions that address multiple customer needs within a single product. As overall market conditions continue to normalize and improve, we plan to gradually scale back some of the commercial incentives introduced last year to support production. This is expected to have a beneficial effect on margins.Moving now to P&C. So P&C business growth in the first quarter confirmed the trends seen in 2023 with gross written premium growing around 11% or over 6% when excluding the impact of hyperinflation in Argentina. At the full year 2023 presentation, we disclosed an increase in the average premium in our retail and SME book of 6.1%. At the end of the first quarter 2024, the average premium was up 6.3% compared to the same period of the last year, with growth supported in particular by the motor segment.Tariff strengthening above market inflation remained a key management focus, especially in Germany, Spain and Italy. We are also continuing to implement technical measure aimed at pursuing profitable growth, especially in terms of portfolio enhancing and claims management.The strategy on pricing and technical excellence is bearing fruit, with the first quarter attritional current year undiscounted combined ratio confirming the positive trends already visible in the fourth quarter. We are also seeing a stabilization in frequency and a moderation of claims inflation, which serve well the trend in technical profitability.Let me, however, flag that at the start of the second quarter, we had a specific man-made accident in the GC&C book with a preliminary estimate in the range of EUR 25 million, EUR 30 million.So turning to the first quarter, we saw the consolidation of the Liberty Seguros into our number, and integrating Liberty in an efficient and effective way will further strengthen our platform as we enter into a new strategic cycle in 2025. Asset Management saw its recurring revenues increase by 3% year-on-year, thanks to the higher average asset under management. This number do not yet reflect the consolidation of Conning since the closing of the transaction took place in April.In the press release, we have provided some element to assist the comparison to the first quarter 2023 from an operating and net result basis, given the difference in timing in the booking of variable costs, costs related to Conning transaction as well as tax payments. When you neutralize for this effect, the operating result was basically at the same level of the last year, and the net result reduction would be between 4% and 5%.Moving now to investment. So our investment yield remained very good versus the in-force book at around 3.7% in life and 3.5% in P&C. Looking at the different asset classes. On listed equity, we remained -- we maintained a prudent approach. In credit, we confirm our conservative approach with low exposure to more cyclical sector and high leverage company. We experienced negligible rating downgrades in the portfolio. On private debt, we have been more selective in terms of new commitment, balancing attractive opportunity, especially in private debt valuation with ILM constraints.In conclusion, our first quarter results confirm the group continued ability to deliver solid growth and execute on our strategic plan in line with our Lifetime Partner purpose. As we move forward through the last year of this strategic cycle, we are very confident about the direction of the group.Now, Cristiano, over to you.

[Cristiano Borean, executive]

Thank you, Marco, and hello, everyone. Let me provide you some additional color on our first quarter 2024 financial results to complement the business perspective. The numbers we released today show a strong and resilient performance.The operating result has increased by 5.5%, with positive contribution from all segments. The adjusted net result increased by 8% once we exclude the EUR 193 million net capital gain realized in the first quarter of last year from the disposal of a building in London.Remittance has flown to the parent company in a very satisfactory way. As of today, we have already received around EUR 4 billion of remittance from subsidiaries, which is roughly 90% of the total amount expected for this year.The capital position is solid. The Solvency II ratio is today estimated at 216%, including the impact of the LTI buyback announced this morning. Please note that we will deduct the EUR 500 million share buyback from the Solvency II ratio once we receive the approval from the regulator, which should come before we report our half year results.Let me share with you some specific color on Life and P&C to complement what already reported in the press release. On the Life side, the comparison of the new business margin versus last year reflects some peculiar factors. I think that the best way to look at it is to divide it in 3 components. One, there is a pure accounting component. Two, there is a business mix component. And three, there is a market effect.As already explained in the press release, there is an optical negative impact of around 90 bps stemming from the IFRS 17 accounting of the French collective protection business. This business with relatively low profitability generally allows for 1-year coverage from January 1 until December 31, with the contracts being issued in December of the previous year.The major part of the contract issued in 2022 was in that onerous, and was, therefore, recognized in the fourth quarter of 2022 as required by the accounting standards. This implies that the first quarter 2023 new business margin at the group level was higher because of the lower volume of the French collective protection business. Conversely, the contract issued in December 2023 were considered profitable, albeit with a low profitability, and hence, are entirely recognized in first quarter 2024.The high volumes and low margin of this business explained around 90 basis points of the difference between first quarter '23 and first quarter '24 new business margin. Such accounting effect will gradually decline as the year progresses.Let me now focus on the mix component and on the market effects. The commercial actions implemented in Italy to attract customers have been particularly successful at Genertel Life, which was where the vast majority of the Italian lapses took place last year. The rebound in new production at Genertel Life has been very strong in the first quarter 2024. The share of the Italian PVNBP attributable to Genertel Life has increased from around 12% last year to around 21% this year, driven by the saving business. Since Generate Life has an average new business margin, but it is roughly half the average of country Italy, this different mix also affected the group's new business margin.Please also consider that starting from the second quarter of 2023, we have implemented commercial actions in order to support the volume growth, which resulted in a lower new business margin. The effect of these commercial actions is still present in 2024 new production, making the first quarter of 2023 a tough comparison.On top of this, as highlighted by Marco, the first quarter volumes in China have been exceptionally strong in anticipation of the regulatory changes, which came into effect in April. As a matter of fact, the PVNBP in China has more than doubled year-on-year on China's weight in the group PVNBP, and that weight has increased from around 5% to over 8%. This was led entirely by the saving business, which has a new business margin below the group's average also because of the current market conditions in China.The combination of these effects together explain around 60 basis points of the contraction in the new business margin between the first quarter '23 and first quarter '24. Furthermore, the change in the financial market variables, in particular, the decline in interest rates has reduced the group new business margin in the first quarter of this year by around 30 basis points compared to the same period of 2023.To sum up, the 179 basis point contraction in the new business margin reflected 90 basis points pure accounting impact from the French protection business, 60 basis points from mix with more savings and more China, and 30 basis points from market variables.Looking ahead, most of these factors will normalize and I expect the new business margin to increase in a visible way already in the second quarter of 2024.Moving to P&C. This was the first time we consolidated the Liberty Seguros, specifically for 2 months in the quarter. Liberty has contributed to the top line with EUR 219 million premiums and to the operating result for almost EUR 220 million. Liberty has increased our first quarter combined ratio by around 0.1 percentage points.At our half year results, I will provide you an updated guidance on our undiscounted combined ratio on the current year discounting and on the insurance finance expenses for the full year 2024, also embedding the consolidation of Liberty Seguros. This is also because we need to wait for the final purchase price allocation exercise on insurance assets and liabilities of Liberty to be completed in accordance to IFRS 3 before providing a new guidance.Speaking to P&C, in our P&C combined ratio, prior year development has been broadly in line with our 2 percentage point indication. As you've seen, our first quarter prior year development at 1.8% has not been impacted by late claims or revised claims costs from the 2023 Italian hail storms. This reflects the conservative initial loss peaks that I mentioned to you at our full year results.Finally, besides the impacts on the top line highlighted in the press release, the moves in the Argentinian peso and the inflation are reflected in higher insurance finance expenses and an increase in the investment income. The insurance finance expenses were minus EUR 213 million at first quarter '24, increasing by EUR 123 million year-on-year.In particular, the increase in the pure unwinding component of the liability for in card claims has been around EUR 80 million. This is in line with our guidance of EUR 250 million increase for the full year 2024 compared to the EUR 149 million recorded in 2023.However, there are other EC components that are more volatile. We have always mentioned that those related to IAS 29 hyperinflation accounting being potentially the most relevant. In fact, they have impacted EC by around EUR 60 million in the first quarter of 2024, increasing by EUR 40 million versus the same period of last year.However, this is also mirrored in the higher investment income but completely offsets the higher insurance finance expenses. In the first quarter, the P&C operating investment income increased by EUR 124 million year-on-year with around EUR 50 million of this increase coming from Argentina.I hope that these elements were helpful to better understand the trends of our first quarter figures. As already mentioned, we are very happy with this strong and resilient numbers. Thanks for your attention.And operator, now we are ready to take the questions.

[Operator]

[Operator Instructions] The first question is from Will Hardcastle with UBS.

[William Hardcastle, analyst]

First of all, within motor ex-Argentina, the premium growth looks to be 5.5%. I guess this strikes me as maybe either at or below average price increases being achieved. Is that right? And I guess in which geographies are you growing volumes versus contracting? And is there any -- are any of those particular geographies experiencing significant pickup in competition?And just coming back to the new business margin versus the volume growth, really helpful explanations there. I think what you're saying, and correct me if I'm wrong, is that whilst it won't immediately revert back to a more normalized type level of growth and margin in Q2, it will be pretty close. And then from the second half, you'd expect it to be operating at more historical levels. Is that correct? Or may it drag on a little bit longer?

[Fabio Cleva, executive]

Giulio, the first question is for you, while the second question is for Cristiano.

[Giulio Terzariol, executive]

Will, this is Giulio. Yes, starting from the motor, growth is exactly as you said, 5.5% if you exclude Argentina. Now, in reality, what we see, we see a nice increase in the effective price change and we see a nice increase basically across all our entities. Just to give you an idea, in Germany, Italy, Spain, Portugal, we are in the high single-digits, and then the other markets where we are more in the middle digit.From a risk in force point of view, usually, we are pretty flat. There is one country where we are down a little bit, which is Germany. But when you put all together, I will say it's a very strong picture.What is also important, we are looking at the effective price change and we're comparing that to the loss trend, which is basically the combination of frequency and severity. And we can see that the effective price change is well ahead of the loss trends. And this is basically across all the geographies.So from that point of view, we have really a nice development on the motor side. And considering also that we are going to see some of the net premiums aren't going up because of the injected rates, we're going to see also a further positive development of the combined ratio in motor assuming that clearly frequency severity stayed [Audio Gap].So all in all, I will say good on the growth side coming from price changes and also effective price changes north of the loss trend and north also by, I will say, a few percentage points.

[Cristiano Borean, executive]

Yes. Will, yes, what I wanted to say, I add a little bit of color on to that. If you just take out the protection -- group protection France point, basically, the new business margin of the quarter would be 4.7% -- slightly more than 4.7%, which is telling you that notwithstanding the higher production in China, we are running at that level of marginality in this quarter with lower interest rate.And so you have, for sure, no more the effect of dilution. Or if you just look in isolation the quarter, this will not impact. It will be averaged out throughout the year. So divided it in a certain -- it will be only 1/4 the full yearly effect.And the less weight expected on China, because, as you understood or you may be know, the rush or the sale was related to some cap in the broker channel commission were -- clearly accelerated some sales before the 1st of April. So we don't think this is something will happen again in the projection for a slowdown on that part.On the other side, there is another positive effect of slightly higher interest increase, which stays together with the negative effect of the commercial action on the margin. While I recall, we didn't comment maybe, but I want to highlight the new business value overall went up 5% broadly.Last information, the market sensitivity to the new business margin in this kind of mix for 50 basis points is about 25 bps of sensitivity up and down with the design were clearly up, go up, down, go down. And on the pure saving business, the sensitivity is double on the margin, okay? So for 50 bps, you have 50 bps new business margin effect.So there is an embedded slightly lower due to market economic considerations something of the order of 25 bps that you can project.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Peter Eliot with Kepler Cheuvreux.

[Peter Eliot, analyst]

Three for me, if I may. On the -- first of all, are you able to say anything on the flows and operating variances that you've seen in Q2 to date? Just wondering how that trend is continuing. The second one was, looking at asset management, you make the point on sort of the timing differences. Can we assume that the Q2 cost to income ratio should be a few points better than normal and the net results should also be a higher proportion of the operating than normal? Just to understand that should normalize.And then the final one. Giulio, you mentioned the earned premiums to increase from the injected rate from here. I'm just wondering how much more is still to come on that journey given -- I mean, I think quite a lot was done in Italy early last year. So I'm just wondering if you can sort of update us or remind us how far through that journey we are.

[Fabio Cleva, executive]

Cristiano, the first and second questions are for you, while the third one, Giulio, is for you.

[Cristiano Borean, executive]

Peter, so regarding the operating variances, I would like to highlight that I think part of them are mainly explained by the effect we have observed in Italy on some exit of product value, which is, on average -- you know the marginality in Italy is higher than the average of the group, plus some one-off effect of some risk margin adjustment.Overall, the operating balances accounted for slightly less than EUR 200 million, EUR 170 million, of which 1/4 is a one-off effect. The rest has been a pure negative lapse experience. Going forward, I think that part of this trend could slightly continue. We had some adjustment in the projected full average surrender rate over the whole runoff.So clearly, this is on the present value making the right assumption, but can be a little bit bumpy quarter-over-quarter, year-over-year. Having said that, I think that this is it for the operating balances.For the asset management side, we first need to embed one information. We need to full embed from the second quarter the integration of Conning. And clearly, on Conning, there are some integration costs which should be projected in. Overall, in the discussion with the business unit, we have the confirmation that if you look at the full 2024, you should confirm and see a cost/income ratio guidance of 60% confirmed with these -- all these effects.

[Giulio Terzariol, executive]

Okay. So on your question regarding how far we can go. It's always is an answer market by market. I would say where we are pushing still on rate increases as we go into the second part of the year is in Germany. So on that geography, you're going to see an additional improvement. And we're already running right now at a good combined ratio.In Italy, I will say there is still some room, but I would say that's relatively lower compared to Germany. And then another geography where we definitely are pushing rate increase is Spain. So all in all, I will say, when you look at the portfolio, there is still some room to go.And then, clearly, we're going to react also to the trend that we see, as I was saying before. We see a positive difference between effective rate changes and the loss trend. Especially we see frequency going down. That's more or less across the portfolio.And then on the severity side, I will say, this is in the -- below 5% in general. So we are more at a 3%, 4%. And also we see that on spare parts, there is a deceleration of inflation. So clearly, we're going to react to what we see. But we feel pretty good about the actions that we are taking. But also on this one, Marco can add his point of view.

[Marco Sesana, executive]

Yes, Peter. So Marco Sesana here. And I just wanted to add that really at group level, we are pushing this year for additional increase. So as long as we will see risk premium going up, we will make sure that every business unit of the group will price in an additional rate increase. This is very important.What we are seeing -- as Giulio was saying, what we are seeing now is the work we have done in 2023. And we will push also this year, because as we are entering into a new cycle, especially for motor, it's very important that we keep -- that we move ahead and we don't lay back just waiting for the new development of the cycle. So we will push for rate increase all of this year. And then we will see, as Giulio said, the market condition.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Michael Huttner with Berenberg.

[Michael Huttner, analyst]

So cash, large loss and more cash. So on the cash, thank you very much Cristiano. I take it -- so EUR 4 billion divided by 90% would give me [ 4.4 ]. And I think last year it was 3.6. Is that about right? Am I thinking right numbers for cash remittances, in which case it's extraordinary. You're working -- this is a number I had for 2025. So we're 1 year early. And maybe you can -- any comment on this, where it's coming or whether they're one-offs? Anything would be very helpful.The second is, if I remember when you did the -- announced the Liberty Mutual deal, there was a bit of excess capital. And I wondered whether you already upstreamed that or you plan to upstream it? And also have you got more precise ideas about the business, which doesn't quite fit, which is Italy.And then the last point. You mentioned man-made, a large loss in April or maybe May, I don't know. Maybe you could comment and give us a feeling on the combined ratio, both for Q1 and Q2 in terms of man-made.

[Fabio Cleva, executive]

Thank you very much, Peter. I would say that all the 3 questions are for you, Cristiano.

[Cristiano Borean, executive]

Perfect calculation of math. Yes, this is the expected number for the year. Don't forget that this year was a specific year where we are cashing in EUR 400 million about from -- we have already cashed in EUR 400 million from the integration of Cattolica. And now this has been already paid to us, which is a kind of one-off from the capital synergies exploited.Then there is a one-off of Austria of around EUR 200 million and EUR 100 million from the Central Eastern Europe, a better -- a longer term profitability and capital position. So this I would not immediately project them as a fully recurring element. As I already commented, I would treat more, especially the Austrian one, as an over-the-cycle excess capital capability over a 3-year cycle.Second point related to cash, again, you ask me on Liberty, is the excess capital coming to the parent company? You can bet on it for sure. And clearly, we did some anticipation in the form of bridging already this year, which, as I told you at the Investor Day end of January, is embedded in the final acquisition cost also to buy the Liberty part.The rest of the timing is that we will do it next year. And if it is needed, a further year depending on the speed, acceleration that can be taken. But potentially, this should be available starting from next year.On Italy, I think I already asked you – I already answered you about the Cattolica part. For sure, we are continuing, as you heard, to put capital in a more fungible way also according to what we announced yesterday with the merger of Genertel Life into Allianz, which, as you know, is a very, very capitalized company. And this is fostering and enhancing more from the next cycle further consideration on capital fungibility for [ Mama ], head office.Regarding large losses, the experience -- I think that Marco already told you that in the second quarter, we are experiencing something in the order up to EUR 25 million, EUR 30 million the accident. I think it is the NL1. And related to the effect we had this year in the first quarter, EUR 54 million of man-made claims compared to the EUR 100 million we had in the first quarter '23. So basically, this is the positive upside versus this quarter.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from William Hawkins with KBW.

[William Hawkins, analyst]

First of all, you've danced around this a bit already, but I wondered if we could just be a bit more precise about your view that the undiscounted combined ratio should be below 96% at the full year stage. If I take the first quarter and add back light net caps, the figure seems to be almost exactly 96%.So I'm just wondering, from your point of view, does that may be more bullish on the targets because you've got all those rate increases still coming through? Or should I temper my enthusiasm because you've had the tailwind of manmade and maybe there could be more Liberty Seguros or stuff to come? So if you could just talk about the below 96% target, please?And then secondly, thanks for all the color. But can I just be simple and ask what was the PVNBP for China and this French collective protection business in the first quarter, please?

[Fabio Cleva, executive]

Thank you very much, William. Both questions are for Cristiano.

[Cristiano Borean, executive]

William, so I think that we are broadly being in line to this guidance. But if you just make the math and you take the 93.7% and you normalize for the expected 2.7 percentage point of net cat budget for 2024 and you have 0.2% lower prior year, you end up at 95.8%. But don't forget, this number embeds Liberty.The guidance was done before and the impact of Liberty is a 0.1 percentage point. Having said that, I want to recall that, again, we maintained a very prudent initial loss picks as a position also in this quarter.Then, moving into what is the PVNBP of China in the French protection business. So the French protection business, PVNBP on the first quarter is EUR 3.14 billion of PVNBP. While on China, we have EUR 1.4 billion of PVNBP accounted this year this quarter.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Iain Pearce with Exane PNB Paribas.

[Iain Pearce, analyst]

The first one was just on Non-Life. And I'm really just trying to understand why you haven't been looking to deploy more capital, particularly growing the risk exposure given where rates are and the positivity you're talking about on rate increases versus loss cost trends. And if you could separate that out between Germany and non-Germany particularly thinking shrinking in Germany, I mean looking at your combined ratios for Germany over the last couple of years, they look pretty strong.So just trying to understand why there's not more growth in risk exposure in non-Life? And then the second one is on the French protection business. Would you normally expect that that would be onerous inception? Or was there something specific about last year that made that onerous and that going forward, we should assume that this is included in our margin assumptions.

[Fabio Cleva, executive]

Thank you very much. And the first question is for Giulio. The second one is for Cristiano.

[Giulio Terzariol, executive]

Yes. So I would say, first of all, clearly, P&C is an area where we're deploying capital. Then I wouldn't say that you can look at that on a quarterly basis. And also, as you know, there are certain dynamics regarding inflation. So we need to take ash on the pricing side.And we have been very, very firm on taking action to make sure that we don't have surprises because now we see that severity is stabilizing. We see, not in Germany, but otherwise we see also frequency going down, but we don't have a crystal ball. So from that point of view, we are taking action in order to make sure that we have a very profitable business.The combined ratio in Motor is indeed improving. As Marco was saying before, we are going to be anyway cautious to make sure that we have a very healthy book. And then the trajectory on the long term is clearly to grow the P&C business where I would also say that part of the strategy is anyway to grow, not necessarily motor but also in non-motor.So no change in the direction, but clearly, we need to make choices. And we need to be on the cautious side because it happened to some companies last year that they got surprised by the change in frequency or severity. So I think at this point in time, we want to avoid any kind of surprises. That's on the Life side.And for the French business, I think, I can say same thing if you want Cristiano, because I had a similar experience in my previous Life on the profitability of this book. That's a book that can be marginally profitable. So there's not something specific now to us, but that's something which is relevant for the market.I will say that if you are capable to push the combined ratio to level 90%, 98%, considering the marginality of the capital requirement and also considering that in reality, this business also covering for overheads. If you can push a 98% the combined ratio, you get into a situation where you can make even a double-digit ROE.In our case, in 2022, I understand there was a broader line. And so that's the reason why we had this kind of accounting noise. But now, as you see, we are basically operating at a level which allows to get to this profitability. And as you can imagine, we're going to do our best to make sure that we keep this level of profitability.But Cristiano, if you want to add anything?

[Cristiano Borean, executive]

Just add to factor in the model going forward, Iain, I think that this has always been there. This is a business we are always doing. And as Giulio was telling you, it's just a matter of this technical combined ratio plus the risk adjustment that you have to put, which if you just move slightly higher from the 98% to the 99% and you become owner or vice versa. So this was always there. We're always there in every year.So there is no change in the way we are seeing and in the economic value creation and capability of the group, nothing changed. It is just this technicality of the accounting moment when you do it because if it is done, this EUR 3.14 billion of PVNBP. In the first quarter, they are very much into waiting it altering in the end of the new business margin. But on a yearly view, it is always there and that's always been there and that is the feature.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Farooq Hanif with JPMorgan.

[Farooq Hanif, analyst]

I'd like to just return to Liberty Seguros. So you're saying that a 0.1% impact on the combined ratio just for 2 months this quarter. That doesn't seem a lot, given the commentary you made at the last Investor Day about the lack of profitability in Spain.Can you just tell us what the average or what the combined ratio is for Liberty? And whether this is actually making -- going to make a very big difference to your combined ratio given pricing actions in Spain? Just wondered, whether you've been a little bit bearish in your guidance around that, if you could talk about that that would be helpful.And then secondly, could you talk about why you're giving up margin to grow Genertel so much? I mean it doesn't seem like it seems like a type of contract that is very open to lapses. It's hot money. It's lower margin. Just kind of wondering whether the issue is that you weren't able to deploy capital and other growth areas? Just wondered kind of what the strategy was around Genertel?

[Fabio Cleva, executive]

Thank you very much, Farooq. The first question is for Cristiano, while Marco will take the second one.

[Cristiano Borean, executive]

Okay. Farooq, so basically, the 0.1%, it is not so much. It is actually 13 basis points, so if you put it in basis points, and it is 2 months. So 2 months, 13 basis points means 20 bps, so 0.2% on a, let's say, a run rate basis, which is exactly what we were telling you at the Investor Day in January.For sure, regarding the future combined ratio calculation, I again recall you that one thing is the underlying economic point. The other thing is the effect of the PPA. The PPA rule under IFRS-17, are particularly counterintuitive in the way you need to treat the acquired premium, because there is a shift between, let's say, loss ratio and the expense ratio.So overall, looking at an underlying profitability, I ask you to wait for the half year results to give you the full view with the PPA effect and with the real underlying giving you the guidance. So far, the first quarter, the first 2 months, we had a positive contribution in the combined ratio, both on the total discounted one.And in the undiscounted, both of them were below the 100% part of which the combined ratio of discounted one was 97% and the other one was 99.4%.

[Marco Sesana, executive]

On Genertel Life, I think if we look back of what happened last year with the increase in interest rates. So we have seen that really the portion of the portfolio where we suffered, lapses were really the banking. And I would say these types of clients that are like private or upper affluent. So, where there is a more tactical view of the -- getting some point better on the yield.So we have seen that trend, in particular, in Italy that was the portfolio that suffered from lapses, the bank assurance portfolio. So we thought that it was important to maintain assets under management into the segregated fund. And so in that particular portfolio, you remember, we introduced several new products and several new product features that helped the client to stay there, giving up few margins.So as we said and I said during the opening point, we're going to see how much that is needed going forward. So we're going to evaluate quarter-by-quarter? How much that is needed to help us into the segregated fund maintenance, into the asset under management maintenance. So we will look and how much we can take back about -- on the profitability, take back for us, and we will see.So we thought at this moment, it was interesting to keep assets under management to those portfolios.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Andrea Lisi with Equita.

[Andrea Lisi, analyst]

The first one is on performance fees. If you can provide us an indication of performance fees in the Asset Management division in the quarter. And the second one is if you can provide us a breakdown of the combined ratio in motor and non-motor.

[Fabio Cleva, executive]

Thank you very much, Andrea. The first question and also the second question are both for Cristiano.

[Cristiano Borean, executive]

Okay. Andrea, the Asset Management, this division itself got EUR 3 million of performance fees, while the Wealth Management division of Banca Generali got EUR 54 million of performance fees. For what regards the asset management, I would like to recall you that it is a little bit different from the system of accounting of wealth management. So the performance fees are mainly booked in the fourth quarter. So you should expect an asymmetry throughout the year for the way the part is built. So the breakdown of combined ratio motor versus non-motor. Combined ratio total, accounting combined ratio, Motor is 96.2% and the undiscounted is 99.5%.But I recall you that this has a 2.9 percentage point improvement in the current and discounted component without a natural catastrophe and embed also very prudent prior year development, as I told you before. On non-motor, the combined ratio is 88.1%, the accounting one, decreasing 0.4 percentage points for the first quarter of '23. And the undiscounted one is 90.4%, decreasing by 1 percentage point versus 2023 first quarter.So again, the numbers are there, are strong. The margins are improving and the expected trajectory and result is very well under control.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Steven Haywood with HSBC.

[Steven Haywood, analyst]

Two questions for you, just on some of the numbers, please. On your first quarter non-operating profit, can you give us a number that came through on the non-operating and side of the profit for the group and then indicate what the percentage of minorities are and also the tax rate percentages coming off, so that we can see where this side of things are going to get to the net adjusted result that would be very helpful.And then, secondly, can you just disclose the solvency own funds and SCR on nominal amounts at the end of the first quarter?

[Fabio Cleva, executive]

Thank you very much, Steven. Both questions are for Cristiano.

[Cristiano Borean, executive]

Okay. Thank you, Steven. So I give you the 2 visions. One is the pure accounting net result. So the EUR 1.26 billion net result effect, where you have minorities impacting EUR 114 million and the tax rate all-in is 28.4% on this part.If you just concentrate on the adjusted net result, which is the one where we are focusing our earning per share accretion target, this has a EUR 113 million adjusted minorities, effect and the tax rate is 28.4%. There is a slight difference between the adjusted view and the net results view, because clearly, there is the effect of the sale of Tuscany and also the effect of the last year a sale of the London real estate, which was a kind of participation exemption capital gain.Last point on solvency on funds, on funds, EUR 49.2 billion first quarter '24, while solvency capital requirement, EUR 22.9 billion for 215% of solvency ratio, sorry.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Farquhar Murray with Autonomous Research.

[Farquhar Murray, analyst]

Just 2 questions, if I may. Firstly, you've mentioned conservative loss picks. Could you give us a sense of what the detail is behind those loss picks where you think you're being conservative? And what gives you some confidence around that? And then more generally, how will you approach that for the remainder of the year?And then, secondly, just coming back to Life reduction and the kind of reduction in the new business margin. Obviously, you've mentioned product incentives to restore net inflows. Could you maybe give us a sense of how large those trade-offs are in terms of IRR outcomes being achieved as distinct from margin? And were there elements of production where Generali was accepting kind of below cost of capital or negative margin production to some more inflow?

[Fabio Cleva, executive]

Okay. Cristiano, the first question is for you and if you want us to comment on the second one, which clearly can be complemented by both Giulio and Marco.

[Cristiano Borean, executive]

So the conservative initial loss picks accounting, I think it is demonstrated starting from the point that we were not having any negative deviation in a very complex estimation of, for example, the large loss in natural catastrophe experienced last year in Italy.And I think this is, if you, I mean, compare to the market development, you can see that this is a very clear point of how this is developed. On the other side, the first quarter being very benign on the natural catastrophe. There is always an important prudence in the way both new account for the existing or new account for the prior year element. This is what I meant by saying conservativeness in the initial loss picks.And this has been applied I would say, quite across the board in the different business unit. For what regard the trade-off and the IRR, I would start with an important reasoning, which I think we were already starting sharing with many investors. The commercial actions, which we have done starting already from 2023 to stop the inflow, are meant to have a double effect.The first effect is, first of all, to recover and bring new assets to be invested to allow for a faster increase of the return of the segregated fund, which is value accretive on one side. And on the other side, this is helping maintaining commercial dynamics, which is positive.On IRR give up, when I let Giulio integrate on that on the IRR give up, I think that you should not look in isolation only the new business margin component on the profitability. But you should look at the overall effect and allowing for, I think, just the last case, for example, as in France, the more you produce, the less you are in the use of the so-called PPE, which is allowing you to have a more prudence in the balance sheet. Giulio?

[Giulio Terzariol, executive]

Yes. To your question, when we set IRR below cost of capital, I would say almost never. So from that point of view, it's, that would be an extreme situation. And especially, this is not the situation now. So just take Italy, we are running a 5% new business margin. And we know that what we are selling is capital light.So by definition, the IRR reality should be very high. But there is a simple answer to your question. IRR below cost of capital is something that doesn't sound a good idea.But Marco, if you can share the same?

[Marco Sesana, executive]

No, I agree on your comment. I just want to add that we do have a process at group level; that look every single product that we put on the market. So it's a product approval governance. So we look at every product that is that we decide to put on the market. And we look at the profitability. We look at the use of capital. We look at the type of guarantees. We look at the structure.So I would say if we will make any decision on affecting an IRR, which is below the cost of capital is going to be a very specific one and a very cautious one. It's not something that is coming just from somewhere for the sake of volume. And as Giulio said, in this case, I think we are I don't see any big issue, a big market producing under the cost of capital. So there is not that case at the moment.

[Farquhar Murray, analyst]

Okay. Then just to summarize that, I mean, is it fair to say the trade-off on margin is much bigger than what's actually happening in IRR terms for Manmade?

[Marco Sesana, executive]

Yes, I agree.

[Fabio Cleva, executive]

Next question, please?

[Operator]

The next question is from Elena Perini with Intesa Sanpaolo.

[Elena Perini, analyst]

The first one is on the combined ratio. So you basically confirmed your guidance of below 96% undiscounted. I was wondering about potential guidance on the discounting impact, considering that the 2.7 percentage points are in the first quarter, which is usually the highest one in terms of seasonality throughout the year?And then, the second question is on your tax rate. You mentioned the tax rate of 28.4% in the first quarter, also impacted by the capital gain on Tua. Can you provide us more or less with the guidance for the full year?

[Fabio Cleva, executive]

Thank you very much, Elena. Both questions are for you, Cristiano.

[Cristiano Borean, executive]

Yes. Elena, so I would say that, first of all, on the discounting side, you need to understand that when we make a guidance or an estimation for the year going forward, we need to make an assumption on the behavior of the interest rate. All else equal, with this kind of level of interest rate, our guidance over the EUR 650 million discounting or slightly higher, depending on the interest rate is confirmed.So there is no change around that for different combination, but we are getting there. For sure, and even more precise one will be given, including the full effect of Liberty as I told you in the half year result, but this is the broad figure. The EUR 28.4 million, the guidance for final year '24, clearly, this quarter had some specificities of some positive effect. We need to have a wait also throughout the year to unfold the full introduction of the global minimum tax, which is imposing a minimum 15% tax rate.And for example, we have operation. I just make an example in Bulgaria or Branson specific agreement in Luxembourg, which could bring further impact. And we already guided for something in the order of EUR 50 million net result impact coming from the application of this in 2024, which confirms our range unchanged 30% to 33%, I would be, in any case, more looking on the lower end of this range according to the actual situation.

[Fabio Cleva, executive]

Next question, please?

[Operator]

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

[Michael Huttner, analyst]

So the first one is on operating capital generation, which 6% times 4 is 24%. And I think last year, you were somewhere around 21%. So maybe if you -- any comments on this, it's a fantastic figure.And then, the second one is a much broader figure. All of you are obviously a little bit experienced I mean that because I'm older than anybody here. But how long can this cycle where you're producing -- I mean, these are quite astounding numbers in terms of whatever you can think of IRR, combined ratio, whatever, whichever metric you look at, these are amazing figures.When -- is there no competition left in the market? There's nobody coming in and saying, "Oh, this is nice. We'll do some of that."

[Fabio Cleva, executive]

Thank you very much, Michael. The first question is for Cristiano, while Giulio and Marco will comment on the second one.

[Cristiano Borean, executive]

Yes. So Michael, I would not exactly multiply by 4. We confirm the guidance of the 21%, 22% number. Don't forget that going forward, all this new change we have in the long-term incentive plan being part of both of our operating result impact.It is part also of the capital generation effect, so affecting it slightly dragging down compared to the past because in the past, we were mainly doing capital increase. Now we are using the cash. So there is a small adjustment of one point. But in any case, that is the range.And it is mainly driven by Life because of, for sure, the unwinding and the value of new production, together with the real world versus risk neutral result, helped also by a little bit of a positive effect on the market on one side. But on the other side, there is also the non-Life growing, so going above -- of the 6 points, slightly more than 2.5 percentage points are coming from the non-Life.And don't forget, but there is also the financial segment, which is brought by our activity in the asset management and wealth management together with the normal cost of the holding, which is a deduction. So I would say that this 21% to 22% range could be the best projection you can make.

[Giulio Terzariol, executive]

Yes. So I would -- so your second question is really a broad question. So I wouldn't probably give you a very short answer and then we can probably deep dive in other occasions. But I would say, on Life, the type of work that we have done transforming our business, making it capital light, including protection, including hybrid products; so making it really resilient to different conditions. I think give us the confidence that clearly we are as every insurer we are working in this environment with these financial contest and everything.But I think our -- the resilience of the margin of our business, I think it's very strong. On P&C, I would differentiate the cycle between motor and non-motor. Clearly, motors, we have seen you're right. So historically, there has been cycle. For non-motor cycle has been less pronounced. And I would say it's more a matter of our development of the book.On motor, anyway, I would say that as long as we look at our exposure, meaning the risk premiums, so inflation and frequency development. And we price according to this type of development. I think it's something that we'll continue to do because this is the way to protect our profitability. And we have for more profitability then to top line. So we really care of bringing home profitability and pricing according to the development.So overall, as we always said, so we have a portfolio that is mainly done by retail and SME, so small risk price according to the different exposure, capital light with protection. So overall, I think we have a very solid portfolio that is resilient to very different condition externally. So I would give you some confidence on how we can carry on in the next months.

[Operator]

Mr. Cleva, gentlemen, there are no more questions registered at this time.

[Fabio Cleva, executive]

So thanks very much for everyone for dialing into the call. Should you need any further assistance, please reach out to the IR team. And we wish you a pleasant rest of the day. Goodbye.

[Operator]

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