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Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group 9 Month 2025 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir.
Fabio Cleva: Hello, everyone, and thank you for joining our 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 for the Q&A. Let me hand it over to Marco and Cristiano for some opening remarks.
Marco Sesana: Hello, everyone, and good morning, and thanks for being with us today. So today, this set of results confirm the Lifetime Partner 27 driving excellence plan is starting on a very strong footing, thanks to, in particular, to the excellent performance of our P&C business. implementation of the strategy and of its work stream is the key focus of the entire group. One of the most relevant changes that we made in this strategic plan is reinforcing the role of the center in orchestrating more organically strategic business initiatives. Each management -- each group management committee member is sponsoring one of the planned strategic initiatives with the key head office function working in close cooperation with our business unit. We are reaping the benefits of being a group. As part of this approach, the whole GMC is very focused in sharing best practices and scaling up local initiatives. I could list many exciting developments I've seen over the past 9 months as part of this interaction, but let me just highlight 3 that I found particularly compelling. First, sophisticated Nat Cat modeling in major countries such as Italy, France and Czech Republic. So we developed a machine learning model for wind storm, severe convective storm combining internal claims data with external weather data through machine learning systems. And this approach will be soon be scaled to other countries. Second, claims automation in Austria. A great example of automation and speed of automated health claims reimbursement, which have now reached 56% of automation for invoice processing, and pharmacy invoices are settled in just 18 seconds. And finally, our group Geospatial platform. This provides advanced geospatial capabilities for underwriting purposes. This is already live in Italy, France, Spain and across the world in our global corporate and commercial business with further expansion in other business units planned for 2026. When I see this initiative on the ground, delivering tangible results, I'm very confident in our journey of delivering excellence. So let's now focus on our 9 months results. P&C continues to show positive momentum in terms of both top line up over 7% and margin expansion with the undiscounted combined ratio improving by over 2 percentage points compared to last year. At the beginning of the year, we told you that we were very confident about our development, thanks to the combination of larger volume coming through and sharp portfolio repricing in an environment where frequency is declining and claims inflation is under control. As you can see, we are very much on the right track to achieve our undiscounted combined ratio target well ahead of schedule. The top management team is thinking strategically about cycle management to ensure a continued improvement in the combined ratio, supported by our historical and reinforced technical excellence and to make today's underwriting margin resilient in the future. You can see this in the discipline we apply to underwriting. You can see this in our country-specific pricing approach and you will increasingly see this in the benefit we expect to generate across the P&C value chain from new digitalization and automation. In this quarter, as Cristiano will later explain, you can also see this in an even more conservative approach to initial loss peaks and clearly even more visible in the prior year development. What we see is an insurance sector that has been disciplined and continues to be disciplined. I want to reassure you that as part of the sector, Generali will be a force of discipline as the cycle progresses. Our P&C top line is continuing to grow and is mostly driven by the price effect, which we measure as the improvement of the average annual premium for the retail and SME segment. This pricing effect remained very significant at 9 months at plus 6.4% for motor and plus 5.2% for non-motor retail and SME. Looking at the technical margin. We achieved continued improvement in the average earned premium in comparison with that of the risk premium resulting from the combination of claim frequency and claim severity. In Motor, which represents around 1/3 of our P&C portfolio, the average earned premium increase for our top 10 market exceeded 10% at 9 months while the risk premium rose around 1%, thanks to decreasing claims frequency in most of the countries, coupled with well-contained claims inflation. In non-motor, the industrial KPIs point to a movement in the current year attritional loss ratio of around 1.2 percentage points very much spread across the majority of the business unit. At 9 months '25, the non-motor combined ratio is at 91.4%. These dynamics are at the core of a significant improvement in our P&C profitability and will continue to drive the improvement in the combined ratio. I thought it was helpful to provide you this context, and we are happy to help you bridge the P&C industrial KPI with our reported combined ratio in the Q&A. Now moving to Life. Let me remind you of our target together between EUR 25 billion and EUR 30 billion of cumulative Life net inflow in our Lifetime Partner 27 plan. We have exceeded EUR 10 billion at 9 months with a very good result for Protection & Health with EUR 3.7 billion and hybrid and unit-linked with EUR 4.7 billion. The improvement in the Life net inflow is a function of both the effectiveness of our distribution and the evolution of our product offering. Life net inflow also improved, thanks to the reduction of surrenders. Just to give you a sense, surrenders at 9 months compared to the same period of last year, were down by almost EUR 2.6 billion in Italy and by over EUR 500 million in France, consistent with our previous comments on the improvement in lapses. In the first quarter call, we gave you a new business margin guidance for the remainder of the year between 5.25% and 5.75%. In the second quarter, we had 5.64 new business margin. And in this quarter, we recorded a 5.74 new business margin. This demonstrates we have done quite well, not only in terms of volume but also in terms of margin. You will have noticed that at 9 months, the growth of new business value has also turned positive year-on-year. In addition to volume and marginality, let me also confirm the underwriting discipline of this new business with some key data points on the quality. Over 73% of our new production has no guarantees compared to 66.4% in the same period of last year. The share of new production coming from capitalized products is close to 85%. So to summarize, we continue to have a strong net flows with improving margin and confirming our underwriting discipline to ensure long-term resilience of our in-force book also thanks to the ongoing quality of the new business. Now moving investment portfolio. As you know, we have an allocation to private market, there is more limited that one of our main peers is around 18%. We do see value in a diversified portfolio. And therefore, we continue to aim at increasing our allocation to alternatives in a disciplined way. Our portfolio of alternative is balanced with strong safeguard to ensure it meets our strict criteria. When you look at the private debt portfolio of around EUR 19 billion, almost half of it is in real estate debt and infrastructure debt, both having a high-grade credit quality. Around 3/4 of our private debt portfolio is secured by collateral and our exposure to single borrowers is very limited. The allocation to direct lending, which has been the focus of the market recently is around half of our private credit portfolio and is therefore less than 3% of our general account. Also, the vast majority sit in Life portfolio with policyholder participation and very low guarantees. Only 23% of our private debt portfolio is in the U.S. And thanks to our strict investment guideline, we have had hardly any exposure to credits, which have been in the news recently. Given this strong framework, we are very comfortable with our portfolio. We continue to believe that there is value in gradually diversifying our government bond exposure into credit as I explained to our Investor Day in January. Our strategic asset allocation move is also well informed by the trends we are seeing in the government debt market, where there were also some downgrades recently. So to summarize, a very strong start of our strategic plan, coupled with the prudence we are exercising across the board, provide us with confidence that this trajectory will be maintained and will prove its resilience to a volatile external context. Thank you for your attention. And let me now hand over to Cristiano.
Cristiano Borean: Thank you, Marco, and hello, everyone. Let me provide you some additional color on our financial performance as well as some indications about the direction of travel in the fourth quarter. Let me start with P&C. As Marco described, the business performance has been very good and we are working to make sure that the strong margins you see in the current attritional combined ratio today will continue to improve in the future. In the last couple of years, the insurance industry and Generali have had a severe Nat Cat experience. Our 2023 and 2024 Nat Cat impact before insurance were well above the expected yearly losses. As you have seen, historically, the second and the third quarters are the most relevant in the terms of Nat Cat seasonality in our portfolio. So far, 2025 has been quite benign and well below our ex ante 2.8 percentage points Nat Cat budget. In light of this, we thought it appropriate to exercise an even stronger prudence on our reserving, always within the range of reasonable best estimate. This translated in a much lower prior year development as well as even more prudential -- prudent initial loss peaks for both the attritional and the Nat Cat component. Therefore, we further strengthened our balance sheet, making Generali very resilient in future years. Together with the accelerated trajectory observed in our P&C performance compared to the plan. This approach increases our confidence to exceed the Lifetime Partner 27 driving excellence key financial target. There is an old saying in financial markets. The income statement is your past, the balance sheet is your future. Having a balance sheet with a low debt solid solvency, high quality of capital and reserving makes me very comfortable that Generali is well positioned to prove its resilience. The fourth quarter Nat Cat experience has been benign so far, too. If this continues until the end of the year, in the fourth quarter, you should expect a prior year development pattern similar to this quarter. This would imply a full year 2025 P&C operating results of around EUR 3.6 billion. A more dynamic interplay between Nat Cat and prior year development is in our mind, the sensible thing to do when managing the business for the long term. Therefore, looking ahead in 2026 and beyond, we will calibrate our prior year development dynamically, always within the boundaries of the best estimate approach. I hope this clarifies the very low prior year development contribution this quarter and provide you a perspective on our thought process, which will always prioritize long-term sustainability of results versus short-term impacts from volatile components. This approach also enhances earnings predictability and mitigate P&L volatility. Let me now move briefly to the Life business. When looking at the 9 months 2025 results compared to last year, the 1.8 percentage point growth of the operating result should be read as a 4 percentage points of growth after accounting for the stricter discipline on cost allocation from nonoperating to operating result for around EUR 30 million. And excluding the lower investment income from Argentina. As of the end of September 2025, the group enjoyed strong new business volumes and positive economic variances, both supporting our CSM development. This was only partially offset by some operating variances in the region of EUR 200 million due to a tax regulation change in Germany affecting health business profit sharing and some model refinements. Looking ahead, as I've mentioned to you previously, during the fourth quarter, we performed the full annual review of all actuarial assumptions on longevity, morbidity, lapses, expenses as well as model refinements. The discussion on these are ongoing and will be finalized by year-end. Just to give you an indication, I would expect negative operating variances for less than 1% of our reported Life system stock. Moving to nonoperating results. Let me anticipate to you that we expect additional restructuring charges in the fourth quarter, and we may also see some impairments on real estate portfolio. This will be partially compensated by a lower tax rate as we have some positive tax one-off expected in the fourth quarter. When you take all these one-off effects into account, I think that with the information available as of today, an adjusted net result projection for year-end '25 of around EUR 4.25 billion would probably be a good ballpark. Moving to our capital position. The group solvency ratio remains solid at 214%, thanks to our healthy normalized capital generation and already fully embedded the EUR 500 million share buyback program. Looking ahead, let me share with you some of the key factors that we expect to impact our solvency in the fourth quarter. In addition to the standard review of the actuarial model assumption, First, the acquisition of MGG is expected to have a minus 2 percentage point of solvency impact. Furthermore, as we stated in our half year presentation, and should already known that in the fourth quarter, there will be a temporary effect related to the loss of the internal model application for Spain as part of the Liberty integration, which is a reverse merger, as we said with an impact of around minus 4 percentage points. This is expected to revert in 2027 being completely temporary. In the fourth quarter, you should also factor in noneconomic variances of around minus 1% or minus 2 percentage points impact on solvency, mainly stemming from the ongoing implementation of the SAA optimization, which Marco was referring. In addition, the rating downgrade of the Republic of France that occurred in October is expected to reduce our group solvency ratio by almost 1 percentage point. Regarding subordinated debt movements, the EUR 500 million redemption in November will be offset by 500-ish million issuance of our inaugural restricted Tier 1 bond. Before closing, let me summarize. We manage the business for the long term with a focus on sustainable value creation for our investors, also reflected in an EPS that is growing 16% year-on-year. The Lifetime Partner 27 driving excellence plan has started very well and the whole management team is focused on building on this momentum with a clear objective to do our best to exceed all our key financial targets. Thank you for your attention.
Operator: [Operator Instructions] The first question is from David Barma, Bank of America.
David Barma: Firstly, on P&C, could you come back, please, on the average gap between written premium growth and loss trends? I'm not quite sure I got the numbers that you gave in the opening remarks, Marco, and if you could highlight the main country drivers within that, it would be great. And then staying on P&C, on the expense side and particularly on the administration expenses. Could you give some color on how that developed in the quarter and whether you expect some of the measures that Marco, you discussed in the intro to already benefit the expense ratio in 2026, please? And then lastly, on the Life business. So sales were obviously really strong and the mix too, you're getting close to your 2027 new business margin target already. Are expenses, the main piece missing to get you to bridge that to 6%?
Cristiano Borean: Thank you very much, David. The first question, of course, is for Marco. The second one is for Giulio, and the third one is for Cristiano.
Marco Sesana: I go back to what I said during the speech. So what I mentioned was the growth of nonmotor average premium at 7%. And the growth of the risk premium was at 1%. So let me just give a word to clarify what we mean when we say when we give these measures. So we are measuring in motor, what we see coming through as the average premium of the single risk, right? So that's the -- that's what we see showing up and we measure the risk that we have in the portfolio. So when we give these 2 measures, what is important is to see that there is a margin gap between how much the risk is growing and how much the average earned premium is growing. In this case, 6% is very significant in terms of spread and in terms of margin. That means that in the portfolio that we have in the different business unit, there is an underlying potential to deliver more improvement in the loss ratio. So where do we see this? I would say we can go into the different details. But I would say that this is very spread across the top geographies. In some cases, it's more I would say, it's more pronounced. In other cases, it's less pronounced, but I hardly see any cases where we are not in this situation. So I could mention 2 geographies that I think are interesting. One is Germany because we focus -- like in the last 3 years, we really focused during this call in showing how much we were repricing the portfolio and the effort done by the German business unit is really significant, which, by the way, I want to thank the colleague for this. So we have done 3 consecutive years of double-digit price increase and I think the results are showing up, and we do see a significant improvement in the portfolio. The other geographies, clearly, Italy, which is going really well in terms of repricing versus the increase in risk. And also there, we see a margin into the portfolio that is really significant. So if you want, then we can go on more detail. But this is the picture that we see for motor. And I think this is what I mentioned. And I think it's a really positive news for the future.
Giulio Terzariol: Thank you, David. On the question regarding the expenses. Maybe let's start from the expense ratio. The expense ratio for the 9 months is going up 50 basis points. Here, we need to keep in mind that we have the impact of the purchase price allocation coming from the Liberty acquisition and also that we made some reclassification of expenses from nonoperating to operating. So if you adjust the expense ratio basically the expense for these impacts. The expense ratio is flat. Now to your question about the admin expense ratio, we are measuring the GEX ratio, which is basically the component of the expense ratio, which are not commissioned or incentive and that number is going down by 50 basis points. So that's an improvement. We don't see the same improvement in the expense ratio because of a little bit of mix, but also there is some conservative provisioning from the business units. So moving forward, we'd like to see clearly a better alignment between the improvement of the admin expense ratio. And also the end of the year anyway, we are going to report also the admin expense ratio so that you can see the development of the KPI. And then clearly, we are going to provide you also some more transparency about the movement or the other line items going into there. But from an efficiency point of view, we are definitely improving, there's going to be also a driver of improvement as we think about 2026 and 2027.
Cristiano Borean: David, regarding the Life sales and the driver. I would say, at the first 9 months already, higher growth compared to the acquisition cost is impacting 16 basis points onto this improvement. But the further way to project forward should embed also the focus on our protection business, which is something running at almost double-digit present value new business margin, and this is supporting a much better marginality. And this together with product features where you can even simply improve the features adding extra value not only managing on the part of the cost is driving it. But we are already on that trajectory. There will be also an extra focus on this topic, but it will not be the only driver to get there.
Operator: The next question is from Michael Huttner, Berenberg.
Michael Huttner: I just had 2. One is on the solvency, there are so many negative numbers. I came away with the conclusion, which I didn't add them up, but clearly, it will be down quite a bit. So let's say it's down 10 points. I mean, just rounding it. And I just wanted to hear, can you remind us are there any positive offsets? So clearly, operating capital generation, probably 5 points a quarter. And then I have no idea maybe you can say whether some of this resiliency or prudency you're building in, whether that's in the -- included in the operating capital ratio or not? And then, of course, the Solvency II review. So just a little bit would be lovely. Then on cash, I always like cash in here. Everything is doing so nicely, I'm just wondering whether Switzerland is returning your EUR 400 million now. And then the final one is on net inflows, which is an outstanding number, even [ Poste ] doesn't have such a good number. I just wonder whether you can talk a little bit about what's driving this and what it could mean for earnings growth going forward? Because clearly, this isn't in earnings, it's in OCG, but not in earnings.
Fabio Cleva: Thank you very much, Michael. The first question on the solvency movements and the one on the Switzerland remittance are for Cristiano while the one on net inflows is for Giulio.
Cristiano Borean: So first of all, I think I start from a point. What happened already is the Spain from October 1, 2025, has lost temporary I already said, up to 2027, the internal model eligibility. It is a 4 percentage point solvency group impact, which was already signaled at half year so it's not new. And I see also the projection by all of you for the year-end are pretty much embedding all what I already said. I think the 2 points of MGG were already signaled also in the press release is something known. I don't -- I think the only point, which I repeat in 2027, Spain will reverse this 4 points. Probably the downgrade of France, which is slightly less than 1 percentage point is something not in. But this has already happened. And if I just look at November 10 solvency ratio, which was the last updated number, we are basically 210%, and this is already embedding both the MGG acquisition, both the France downgrade and the 4 points of Spain. Clearly, what I was highlighting is you need to take 1 to 2 points on the SAA for the asset allocation improvement for the year to come. So it's not a huge number, and I think you are perfectly in line, and I think given the November is giving you. Let me speak a little bit about the Solvency II also review going forward. And one of the things which I think it is relevant for the Solvency II review, as we always said, is that we were between the 10 to 15 percentage points of benefit. I would say that the latest version of the delegated act, which has been approved and still needs in any case, a discussion with the college of supervisors on very minor topic, which has some uncertainty bring us I would say, on the top end of this range of the 10% to 15%, which is, I would say, positive also to allow us implementing our EPS accretion investment. Speaking about cash for Switzerland. For Switzerland, we both are extremely focused, you and me and not only you and me and many people in our company on this, I can confirm you that in the plan, we are going to start seeing a repatriation of excess capital, including remittances and capital support done, it will be gradual. And I think you should see this more coming in the end of the plan from 2027 onwards. There will be some positive 2026 potential expectations supporting our cash flow, but it is a gradual process. The company is fully focused now to increase the business results, and that will be further supportive out of this.
Giulio Terzariol: No. Thank you, Michael. Your question about the net inflows. Yes. Actually, the development is pretty good, and it's better compared to our plan because we were not planning to cross the EUR 10 billion threshold this year. But now, as you see in the 9 months, we're already about EUR 10 billion, so you can imagine also that we are going to have positive inflows in the last quarter. From a composition and inflows point of view, we see basically growth across all the different lines of business. From a geographical point of view, I can tell you, Italy is up EUR 1.3 billion, EUR 1.4 billion compared to last year. What we see in Italy actually is not so much the premium up. It's more than the surrender down significantly. In France, we are about EUR 300 million better. Also here, we have a similar situation. So from a premium point of view, we are relatively flat, but surrender much down. And in Germany, we're also up here, we have growth in premium and less surrender. So we see a similar dynamic in the different markets. If you look at the last quarter also, there was a good dynamic on the inflows. So quarter-over-quarter, you can see also that the present value in the business premium in the third quarter was ahead compared to last year. So we went from negative growth in present value new business premium to positive growth. Also the new business value is going into positive number. So really working in the right direction. From a profit point of view, you know the concept of the tab of Cristiano that if you feel the tab, you're going to get more profit. So basically, this is going -- this is reflecting anyway in a better composition between the release of the CSM and what can be the increase of the CSM due to new business also how the lapses are going down. Remember that last year, we had negative variation, negative experience variances due to lapses and this year, the negative variances due to lapses are nonexistent. So that's a positive that translates into better CSM release eventually.
Michael Huttner: Just one thing. I love the explanation. France, what was the figure? You said something lower 300 or 900?
Giulio Terzariol: France is about EUR 300 million plus of inflows, EUR 300 million plus of the inflows coming from hybrid and unit-linked products. That's what we say basically in France and protection is also a nice contributor.
Operator: The next question is from Iain Pearce of BNP Paribas.
Iain Pearce: Just one for me. I think in the introductory remarks, you mentioned some benefits from frequency, I was just wondering if you could elaborate what you're seeing on frequency sort of if you're seeing some different trends by market and also if you are viewing this as a long-term lower frequency trend or if there's anything abnormal in what you're seeing in frequency at the moment.
Fabio Cleva: Thank you very much, Iain. The question, of course, is for Marco.
Marco Sesana: So let's start with the general picture. We do see the decrease in frequency very broad in the different markets. So we -- I couldn't pick one single market that is an outlier. So this is really showing off in every single market. So whether this is a trend that we are going to see in the future, it's a different question. So let me elaborate. So I do think that we are going to see this again in the future, but let me explain you why. So we have 2 set of drivers, I would say. So the first is frequency is historically coming down in every market. So we are seeing a long-term trend of decreasing frequency in all the Western European markets. And I would say it's also Eastern European market. So it's consistent. And so therefore, I think this is going to happen in the future. There is a second driver, which I think is really important to mention because sometimes we always think that frequency is an external factor, but we have worked a lot on the quality of the portfolio. We have worked a lot on a few initiatives. One is loss prevention. So we are trying to put on the ground tools to make sure that we evaluate correctly every single risk that we take. The second one is pruning. So we have cleaned the portfolio from all the tail part of the portfolio that were unprofitable or as a prediction would look unprofitable. So this is something that we have driven that we think is going to give us benefit in the future in terms of frequency. And so when we think about frequency, you should always think a long-term trend, but also the type of active work that we have been doing over the past month in the quality. By the way, if you want a proof point of this, you could look at the trend of the man-made losses that really came down in the last quarter, thanks to all the initiatives we have done. That's it.
Iain Pearce: If I could just quickly follow up. Do you have a view of how much the combined ratio is benefited at 9 months from lower frequency versus your expectations?
Marco Sesana: So I would say in terms of industrial KPIs. So as we said, it's always -- there is always a link between the industrial KPI and the financial KPI. But clearly, then we -- you need to look at the different prudence that has been taken and everything, probably in the risk premium that we have, this has been the main factor of benefit that we see in the risk premium.
Operator: The next question is from William Hawkins of KBW.
William Hawkins: I've got 3 questions. I hope I can be brief. Thank you already, Cristiano, for what you said about the conservatism in your loss picks. I get the idea of what you're saying. I'm still not quite clear in the 9 months attritional combined ratio, how much -- how many percentage points of conservatism was there in that pick? Because before PYD, obviously, that ratio improved. It just would have improved more if you haven't been prudent. So I'm not quite sure the percentage point drag from the prudence. Secondly, please, now that you're very clear that you're managing your combined ratio, I think it is a reasonable question to ask, therefore, how many -- how much is it expected to improve per year because you're clearly managing so as you said, it will improve per year? And I don't know if we're talking 20, 50 or unlikely 100 basis points? And adjunct to that, how are we ever going to know when the underlying environment is making that improvement less sustainable because it's great that you're now managing the number, but I'm not quite clear how I'm going to know when you're losing the capacity to manage the number in the future. And then thirdly, please, the -- you've already talked a lot about the great Life new business results. I'm still not quite clear the thing that stands out to me is the present value of new business premiums seemed seasonally very, very strong in the third quarter. Normally, everyone is on holiday so that number dips 10% or even 20%. This time, it only dipped about 5% from the second quarter. And that can't be anything to do with surrenders because it's PVNBP. So what was the explanation for that? And is this the new normal? Is 3Q now going to be a lot stronger than it's been in the past few years? Or should we go back to seasonal dips in the future?
Fabio Cleva: Thank you very much, William. The first question on the conservative business is for Cristiano. The second one is for Giulio, while the third one on the levy business again for Cristiano.
Cristiano Borean: Thank you, William. So clearly, as we didn't exactly mathematically disclose the conservativeness of the prior year, but you can reverse back it yourself in any case. I try to answer with a different angle. The industrial development that Marco is seeing has an improvement, which is 0.4 percentage points better than the one you see in the accounts, which is a way to try to second guess your question, I think, to help you extracting at this point. I go to the second one, Giulio.
Giulio Terzariol: Thank you, William. Your question about the improvement in the combined ratio, first of all, from a price environment point of view, we think that next year, clearly, the gap between the price change and what we call the risk premium is going to narrow but is not going to vanish completely. So we might still have a little bit of room in Motor, potentially also in Motor, where we see also that the frequency tends to go lower, which is a consequence also of the action they were taking. So we might still have a benefit there, which is not going to be as strong, clearly, as what we are seeing right now. But let's say, there is still a little bit of way to go. Then the other improvement should come over time from the initiative that we have on the claims side. You remember, we discussed that also in January that we have initiative on the efficiency and the effectiveness in claims. And here, we have all the work we do on the network's theory, on anti-fraud, all these kind of elements. Price sophistication might help also to get more granular on some pricing. And then one driver moving forward of improvement in the combined ratio, that's going to be definitely something where we need to focus is the space ratio. So we go back to the improvement of the expense ratio that we are already seeing from an admin point of view, and we want this improvement to continue in the next years and reflect also in the total expense ratio that you see. So it's a combination of still some way to go some additional -- I think also about, by the way, the work that we are doing in Switzerland, Switzerland is, at the moment, having a combined ratio of 100% is not going to be the future. So also, we're going to have some improvement on some turnaround, some improvement coming from claims initiative than the expense ratio. So let's say that's our journey to improve our marginality, which is already very strong, is not finished.
Cristiano Borean: Just to clarify, I was speaking about the basis, not the delta, the basis before the 2 in order that you get that we increase this basis to answer to your first question. The question on the PVNBP. First of all, the third quarter is still compared to other quarters. I know that in the third, as you said, people should stay on vacation on the summer component. But I would say still weaker than the previous quarter. I've seen 3 major drivers of improvement, which are geographically aligned in especially France, where you had a very strong third quarter, and I think it is related to the very positive and stable return you can get from the saving component of our hybrid products, and that was clearly also linked not attractive anymore [ levy ] return given to the, let's say, low afferent to retail. On top of this, we had a small kickup from a new distribution agreement, which is opening up in Portugal with our postal partner Bank CTT. Together with the strong growth, which you've seen our basically all over the board and it's not generally specific, but we are seeing in both Hong Kong and Mainland China, which is a kind of market trend.
Operator: The next question is from Farooq Hanif at JPMorgan.
Farooq Hanif: First question, you kind of partially answered that, but you gave the average premium versus risk premium numbers for full year -- sorry, for 9 months, what is it in 3Q? We are already seeing a closing? That's my first question. Secondly, given everything that's gone in Italy, are you willing or able to talk about the bancassurance opportunity for you now in your Life business? You've been very quiet about that. Obviously, stuff happened -- stuff could have happened and didn't happen, just wondering whatever you feel like you can say about that? And the last question on nonoperating. So you're indicating a slightly higher restructuring cost, which will limit your adjusted net result. But I remember back at the CMD, you talked about how the nonoperating kind of holding expenses line is too high and will come down over time. How should we think about that going forward? Because it's obviously a big component of your adjusted net result. And I think we don't -- all of us especially me, spent a lot of time thinking about it.
Fabio Cleva: Thank you very much, Farooq. The first question is for Marco. The second is for Giulio while the third one is for Cristiano.
Marco Sesana: Yes. So let me say that, yes, we have disclosed the number for the 9 months. What we see in the third quarter is broadly in line with what we see in the 9 months. Clearly, again, we could go in much bigger detail on the different geographies. So there are some specific. So for example, when we -- I can tell you about Germany, where you have renewal of the portfolio that is clearly in the first part of the year, the third quarter looks a little bit how can I say, weaker in terms of development, and that is fine. So historically, that is the case. So I would say we tend to give the 9 months result because we think over the year are more stable and are more indicative of the different development so that's about it. So Italy is still very strong. Probably in France, we had to do some pruning. So the average premium, it's probably weaker, but overall in line with the development of the year. So I couldn't spot in the third quarter, anything that is like normal or it's diverging from the trend that we have shown on the 9 months.
Giulio Terzariol: So your question about bancassurance. First of all, as you know, we are very proud of our footprint from a tight agency point of view. So that's clearly the bread and butter, but this does not mean that we don't do bancassurance. So we have a few cases Cristiano was just referring to the new agreement in Portugal. We have a joint venture now in India with the bank. So we are going to push bancassurance also in India, we have a successful relationship with bancassurance in Spain, and you should not forget Banca Generali, which is also a bancassurance relationship. And clearly, if there are other opportunities in Italy, we're going to look at that. So there is -- our belief is if you have a business model centered around bancassurance that can be a little bit tricky. But if bancassurance is clearly selectively use it can enhance the franchise value and also the scaled operations. So from that point of view, if we find the right partner, we are very happy to engage with these business partners.
Cristiano Borean: So going to the nonoperating part. First of all, I confirm you that by year-end 2025 versus year-end 2024, EUR 80 million of nonoperating costs will be -- there has been already 60 because it's pretty linear throughout the year, evenly split between Life and P&C will be booked in the operating and have already been booked into operating result from the nonoperating like it was last year. So -- and this is done and is going already to reduce the expected project, the nonoperating charge going forward from the next years. In this quarter specifically, there has been one effect, and as Giulio was referring to Portugal, I'm referring back to India where probably you read, we set up a joint venture with our partner, and the cost of this setup was having a one-off charge related also to set up the marketing effect of around EUR 60 million, which is clearly related to a specific business development. Having said that, speaking about the restructuring costs. And by the way, this is a PV take. So it's one for now and not anymore what I was referring in India because it's taking the full charge projected in PV. So with regards to the restructuring charges, we are in a year where we have already exploited Germany restructuring, which will allow to better improve the GEX ratio, general expenses ratio for the future years and allow the improvement and digitalization of the company with the relative efficiencies. On top of that, we are in the process of implementing the Liberty integration, and we are in advance towards that. So that's why we can see something more in the fourth quarter, together with other countries where we are accelerating potential restructuring. That's why I was mentioning the fourth quarter with further restructuring charges, clearly, these will be counterbalanced by a much better tax rate because of some one-offs. So I would say there are 2 kind of form of one-offs, but the first one is forward-looking projecting the restructuring acceleration to have a better trajectory, and I confirm you that the nonoperating charges are materially going down for the next year.
Operator: The next question is a follow-up from Michael Huttner, Berenberg.
Michael Huttner: It's -- so here is my difficulty or my challenge. So your earnings are -- I look at your consensus sheets and look at what you're saying it's like it's the same number, right? Or I mean, there are small variances but it's -- there's a lot of accuracy here. But listening to you guys, it's like you're bubbling with excitement and stuff. And for me, the difference is, I think with Giulio you were trying to explain to remind me of is there's a difference between IFRS, which is CSM, which is incredibly slow. You have to fill the bathtub and wait for ages for the tap -- the water to come out. And then local GAAP, which is not IFRS. Now the reason I ask this is always cash. So is there more upside potentially in the cash than we're seeing in these numbers at the moment?
Fabio Cleva: So Michael, of course, this question is for Cristiano.
Cristiano Borean: So Michael, let me say, related to the CSM bathtub point that you were mentioning, not necessarily a higher life production materializes in a better CSM versus a local GAAP because, as you know -- sorry, a better local GAAP versus CSM because CSM sometimes has a revenue recognition and this revenue recognition is a pro rata temporary, sometimes in the new approach, you forget about the acquisition cost when you do many business and you have them immediately to be paid on the cash side. So clearly, on the CSM, this is amortized for the revenue recognition. This is called contractual service margin because you amortize it for the time of the service you give to the client. So the point is the CSM is a present value, while the local GAAP takes into account of the actual amount that you are usually paying. So it's a slightly more prudent in the Life. What -- so there is a gap usually negative between the service -- contractor service margin result and cash in a growing business. Clearly, if you are just making a company to run off, which is not the case of Generali, you can have the opposite but that is a different business model, especially for other integrators or run offers, let's call them. But what regards the cash element, the positive trend should come, in my opinion, you should read it from the acceleration of the P&C trajectory versus what we were projecting in the plan. And that because one thing I always report to the Board is the exactly almost equivalence between finance expenses discounting at this level, these 2 noncash item of the operating results, P&C, P&L, are canceling each other. So the results you are seeing is cash. That will be a better driver together with the improvement on some, let's say, cash trap as our favorite Switzerland topic.
Operator: [Operator Instructions] We do have a follow-up question from Michael Huttner, Berenberg.
Michael Huttner: Really sorry, it's a tiny question. In the past, you've always mentioned Argentina as a kind of negative adjustment as it were. And I think this morning, I don't think -- I'm not sure you mentioned it in your introductory remarks but when I was speaking to your wonderful IR, really wonderful IR. They did mention, and it sounds like Argentina is now turning to be a positive. Is there something there?
Cristiano Borean: Michael, I think in the third quarter, you observed a fluctuation. There was a positive contribution from, I think you are referring to the P&C component for Argentina. And instead of having a negative delta in the investment result, you had a small EUR 7 million positive in this quarter. Be mindful that Argentina is extremely, let's say, volatile in nature because of the way it does not follow the basic financial textbook rules but we know last year. First of all, when you manage Argentina P&C business, you have basically, in your investments, all inflation-linked because you need to be able to carry up -- catch up with the cost of your liabilities. And so the investment are mainly inflation linked in that environment. Last year, we had a huge spike of inflation, huge -- materially huge. I'm talking about something in the order of 200%. And that was getting to a point where the exchange rate was not following the international official party. So we were having massive positive contribution of inflation-linked component in the investment result without having a deep equivalent depreciation that basic finance should tell you should be followed. That's why we had this push up, okay? When you look at this topic into isolation and you isolate investment results versus the other part of the P&C, you can get things which could be completely offsetting, but you are seeing a very huge number on one side and on the other. If I take the P&C operating result at 9 months of Argentina, it's EUR 14 million. So I hope this helps for you to better understand. But last year was a very, very peculiar year because of that effect. By the way, the movement of the excess capital from Life in Argentina in the fourth quarter '24 that we made is affecting us in the Life investment operating result EUR 39 million this year on a like-for-like basis. So it was not an immaterial effect due to this, let's say, paradox or nonrational movement between inflation and FX rate.
Operator: The next question is from Elena Perini, Intesa Sanpaolo.
Elena Perini: Yes. I've got only one actually. Considering that you are improving your P&C trajectory, and you mentioned that some further cash can come from this improvement. Are you going to use part of it to make other, I don't know, bolt-on acquisitions to strengthen your presence in some markets? And then can you elaborate a bit on what could be the potential targets?
Fabio Cleva: Thank you very much, Elena. Giulio, would you like to take one?
Giulio Terzariol: First of all, really the good thing is to add the capital, to add the liquidity from an M&A point of view, I'll just tell you, right now we don't see much in the pipeline. So from that point of view, clearly, we can find a good target. We would definitely look into that. As you know, our preference is to do acquisition where we can realize cost synergies. We can strengthen the franchise. Tell you, Liberty is a great example of an acquisition where we can really create value. As of now as of the moment, I tell you there is not really much happening. On the question between then, clearly, every time we do an M&A, we are measuring the M&A against the buyback. And when we say we are measuring the M&A against the buyback, it's not just a comparison of the IRR because, as you know, the IRR can be very dependent on the terminal value but that's really about the EPS accretion that we get 3 or 4 years, let's say, 4 or 5 down the road. So if we find anything which is interesting, we're going to go for that, making sure that we can create real value. But at the moment, there is not much.
Operator: There are no more questions registered at this time.
Fabio Cleva: So thank you very much for dialing into today's call. Should you need any follow-up, please feel free to reach out to Investor Relations. Have a nice day. Bye-bye.
Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.