Earnings call: MAPFRE sees robust growth in H1 2024, led by LATAM

MAPFRE has reported a significant increase in its net result for the first half of 2024, with a 47% rise to €462 million, driven by profitable growth across most markets, especially in Latin America with Brazil being a standout contributor. The insurance company has seen a 5.5% increase in premiums, surpassing €15.1 billion.

The Life and General Property & Casualty (P&C) lines showed strong performance, alongside improvements in the North American and Latin American motor segments. Despite this, regions such as IBERIA and EMEA are still experiencing pressure on claims. MAPFRE’s Solvency II ratio stood at a healthy 197.7% in March 2024, as the company continues to focus on profitable growth and market diversification.

Key Takeaways

• Strong performance with a net result increase of 47% to €462 million.
• Premiums rose by 5.5%, reaching over €15.1 billion.
• Significant earnings contribution from Brazil, with robust growth in the Life and General P&C lines.
• Improvement in the motor segment in North America and Latin America, but pressure remains in IBERIA and EMEA.
• Solvency II ratio was at a solid 197.7% as of March 2024.
• The company’s strategic focus remains on profitable growth and diversification.

Company Outlook

• MAPFRE’s strategic plan and financial KPIs are on track, with a focus on high-margin businesses.
• The company expects to maintain a strong presence in the Life business, with growth in savings and positive trends in risk.
• Efforts are underway to improve the combined ratio in the Motor business across various regions, aiming for a figure below 100% by year-end.

Bearish Highlights

• IBERIA and EMEA regions are under pressure from claims.
• The combined ratio is expected to increase due to heightened competition and lower prices.
• Spain remains a concern with efforts focused on addressing challenges in the market.

Bullish Highlights

• Brazil’s performance is robust and is a key contributor to the group’s profitability.
• Life insurance premiums in Brazil grew over 6%, and in the rest of LATAM by 35%, with Mexico experiencing a 60% surge in Life Protection.
• General P&C business in Brazil displayed outstanding profitability.

Misses

• Savings were slightly down owing to the issuance of IBERIA in 2023.
• Germany faces challenges in improving the combined ratio for the auto business.

Q&A Highlights

• MAPFRE is strategically exploring inorganic growth opportunities in Spain, Brazil, Mexico, and Germany.
• The company is well-prepared for potential hurricane impacts, with reduced direct exposure in the US.
• A virtual meeting with analysts and investors is scheduled for July 29th.

In summary, MAPFRE (MAP) has demonstrated a strong financial performance in the first half of 2024. The company has shown resilience in its Life and General P&C lines, particularly in the Latin American market. While there are challenges in specific regions and segments, MAPFRE’s strategic initiatives are yielding positive results, and the outlook for the coming quarters appears optimistic.

Full transcript – MAPFRE (MAP) Q2 2024:

Operator: Good morning and welcome to MAPFRE’s Activity Presentation for the First Half of 2024. This is Leandra Clark, Head of Investor Relations, and we want to thank you all for being here with us today. It is a pleasure to have here with us Fernando Mata, Vice Chairman and Group CFO; José Luis Jiménez, Deputy CFO; as well as Felipe Navarro, Deputy General Manager in the Finance Area. As a reminder, we report the IFRS financial information twice a year, and we reported the half-year results to the CMV this morning. The information in this activity update is prepared under the accounting policies applicable in each country, unless stated otherwise. At the end of the presentation, we will go through the main IFRS KPIs. You can use the ask a question link at any point during the call, and we will open up the question-and-answer session at the end of the presentation. Let me turn the call over to Fernando. The floor is yours.

Fernando Mata Verdejo: Thank you, Leandra. Good morning, everyone. Thank you all for being here with us. The figures we released this morning confirmed the strong trends that we saw in the first quarter, which have gained momentum supported by our profitable growth strategy. We are growing strong in almost all markets and continue working to correct imbalances with visible improvements, especially in underperforming businesses. We are leveraging our proven business model with high levels of diversification as we continue growing in the most profitable segments. LATAM, especially Brazil, continues to be the largest contributor to earnings for the Group with €203 million. Regarding lines of business, Life and General P&C are showing an excellent performance. There has been a strong turnaround in motor in North America and across Latin America. However, in IBERIA and EMEA, we are still seeing pressure on claims caused, although behavior in recent months suggest that we should begin to see a change in trend. Regarding main regions and business units, IBERIA maintains leading market shares in the main line of business with a 37% increase in the result. In North America, the result is up €58 million, thanks to the already implemented technical measures. MAPFRE continues to grow this profit, supported by solid business growth and the absence of relevant net-cat impacts with increased prudence in our reserves. We’re proud to say that all financial KPIs are in line with the targets set at the AGM in March. Premiums are up 5.5%, over 6%, excluding Life Savings, reaching more than €15.1 billion with solid growth in LATAM, IBERIA, and North America, as well as reinsurance. The net result, which stands at €462 million, is up 47%. This strong performance is based on, first, relevant improvement in Non-Life with a 1.3-point reduction in the combined ratio to 95.7%. Second, the Life business, especially in LATAM and IBERIA, which continues to contribute very positively to profitability. Lastly, the growing contribution of financial income, which for Non-Life reached €401 million, up 11.6%, and is also an important driver for the Life business. With the result, we have delivered an ROE of 10.6%, 11.6%, almost 12%, excluding the 2023 goodwill write-down. Regarding Solvency II, the ratio was 197.7% at March 2024, and we are no longer including transitional measures. That’s all for me. Now, I will hand the floor over to José Luis to run us through the main figures.

José Luis Jiménez: Thank you, Fernando, and thank you all for being here today. First, I would like to go over the main premium figures, Non-Life premiums are up 6.5% to nearly €12 billion, with General P&C up over 4%; Accident& Health, 8%; and Auto, 5.5%. Life premiums are growing around 2%, with saving flat after a really strong first half in IBERIA last year. Life Protection is growing well over 10%, with excellent performance in Mexico. The Reinsurance segment is growing close to 9%. As you can see on this chart, our business makes this well diversified with around 79% in Non-Life and 21% in Life, with important share in high margin businesses like Life Protection and General P&C. The main figures by region are displayed on this slide, and I will comment on the main trends. In IBERIA, net profits stand at €168 million, with a return on equity of 13.5%. This includes €21 million from the sale [ph] of a property in Madrid, due to the regular portfolio rotation. Non-Life is up 6.4%, with strong trends in homeowners, condominiums and health. Life Savings premiums are down to an extraordinary 2023, while protection is growing around 4%. LATAM continues to generate a large share of profits, with €203 million and a return on equity of 17%. Non-Life profitability has improved across the region, and the Life business and financial income continue performing very positively. Regarding Brazil, profitability has been exceptional with a return on equity of 23%, and the net result is up to €121 million, including a €6 million loss from the floods in Rio Grande do Sul. In local currency, premiums are up 1%, and in euros reflect the slight depreciation of the Brazilian real. The Non-Life combined ratio is down significantly to 77%, with motor [ph] improving 2.5 points on General P&C at an excellent 68.6%. The Life Protection business also had a strong contribution to results. The rest of the countries in LATAM maintain their strong profitability, contributing €82 million. Regarding North America, the net result is up nearly €60 million, reaching €41 million compared to losses of €80 million in the previous year. Underwriting measures and strong tariff increases are the main drivers, with premiums up almost 5%, which continue feeding into P&L. The combined ratio is down over 8 points, now under 100. In Puerto Rico, premium volume is slightly up, with a net profit of nearly €10 million. In EMEA, the losses have improved by €6 million, down to €8 million. In Turkey, financial income is boosting results, with a profit of over €50 million. On the other hand, auto remains challenging in Germany and Italy. In MAPFRE, premiums are up 5.5%. The combined ratio is down to 95% supported by tariff, especially for cat covers. So, as a reminder, this is a traditional formula ratio. Other reinsurance that are now reporting on the IFRS may treat reinsurance commissions differently, typically posting lower ratios. The flood in Rio Grande do Sul had a €41 million net impact. There have been no other relevant catastrophe events, but we are seeing an increase in secondary perils. Net profit is nearly €140 million, up 50% and return on equity is over 12%. MAWDY continuous growing and post a net result of €3 million. I would also like to comment on two specific items. Hyperinflation had a €36 million impact, mainly from Argentina, and positive tax adjustment from previous year had a €25 million impact. On the right, you can see the combined ratios by segment. General P&C had an extraordinary performance. Premiums are up over 4%, and the combined ratio is down almost 3 points to around 83%. The net result was nearly €199 million, up €54 million. In Brazil, premiums are down 2%, with Agro temporarily lower due to the subsidy allocation calendar. We expect premiums to catch up during the year. The net result of €70 million reflects a limited impact from Rio Grande do Sul. The combined ratio stands at an excellent 68.6%. In IBERIA, premiums are up 7%, driving by homeowners and condominiums. The result is up 40% to almost €74 million, and the combined ratio is down 8 points to 95%. North America reported a result of €21 million compared to €2 million in 2023, with an excellent combined ratio of 89.7%, on the back of tariff adjustments in homeowners. Other LATAM also increased its contribution to the result by €70 million. In summary, General P&C, our largest line of business, is highly profitable and diversified. In Auto, we are starting to see some green shots in model with a strong reduction in net losses, down from nearly €36 million last year to just €19 million. IBERIA is still inspiring its volatility, while tariff increases are gradually feeding into results. The turnaround in the U.S. was noteworthy, with Brazil and North America now reporting profits. Other markets in Latin America are performing quite well, mitigating the complicated situation in Germany and Italy. The Group’s strategy is to focus on profitable growth. Premiums are up 5.5%, within 2 units down around 6%, as a result of selective underwriting. In IBERIA, premiums were up 5.7%. The portfolio stands at around 6 million vehicles, down under 3%. We are focusing more on retail than fleets in line with our risk appetite. There has been a relevant increase in the average premium, around 8.4%, with the market only up 7.8%. We are confident that we are now pricing above expected claim inflation. In North America, premiums grew almost 8%, with units down 5.6%. In Brazil, premiums are down 4.4%. The portfolio of vehicles is down 1%, where we also have a lower appetite for fleets. The Group auto combined ratio was 104.8%, improving 1.4 percentage points. IBERIA reached 106% in the first half of the year. We have seen some pressure on claim costs, especially in bodily injury, while material damage claims are very well controlled. The premiums are up 4.5%, still below the 6% growth rate, and will continue to catch up. In North America, the rate improved over 7.5 points, and will also continue to come down based on tariff. Just this quarter, we put through an additional 5% increase. Brazil’s combined ratio is down 2.5 points to 101.6%. We are committed to continue adjusting pricing as much as necessary, while defending our portfolio. Tariff still needs to earn through P&L in certain markets. Brazil and the U.S. have already improved, while Spain and EMEA will need some time to reach optimal profitability levels. Data in [rest amounts] [ph] makes us more confident that we are on track. Now, we move into the Life business, which is another relevant profit contributor. Direct insurance premiums are up nearly €130 million. Saving is slightly down because of the extraordinary issuance of IBERIA in 2023, but it still stands at over €1.5 billion, while protection is growing over 10%. In IBERIA, Life Protection is up 4% outperforming the market, with the combined ratio improving over 1 point to 67.9%. The financial result was strong with net realized gains up from €2 million to €30 million, due to the sale of a real estate as well as recurring financial gain. In Brazil, Life Production premiums are up over 6% in local currency and the combined ratio stands at 82.4%, up 2 points, reflecting higher commission, but still at excellent levels. In the rest of LATAM, Life insurance is up 35%. Mexico stands out with 60% growth in Life Protection. That reliable result for the Life business reached €167 million, up 37%. Now, I will hand the floor over to Felipe to discuss the main balance items.

Felipe Navarro: Thank you very much, José Luis. On the left of the slide, you can see our capital structure. Shareholders’ equity is over €8 billion quite stable throughout the year. Currency conversion differences have been limited with the U.S. dollar and Latin American currency appreciation of setting the 10% depreciation of Brazilian real. Leverage is stable at 23%. Regarding investments, the main changes in asset allocation are related to a reduction in government bonds in Brazil for a dividend upstreaming as well as currency depreciation. A lower cash and equivalent instruments switching into short duration bonds. Spanish sovereign debt continues to be the largest exposure with €9.5 billion. We have more than €13 billion in assets under management through pension and mutual funds, placing us among the leading non-bank players in Spain. As a reminder, a large share of our €31 billion fixed income portfolio is immunized or matched. So we will focus on the actively managed portfolios which are in the main contributors to the net income. The euro area portfolios have a market value of over €12 billion. During the year, duration is down and yields are steadily increasing. Yields on IBERIA Non-Life and Re continue their upward trend reaching 2.6% and 2.7%, respectively, with reinvestment rates still above the portfolio yields. The other main markets amount to around €7.6 billion. We have increased duration by 60 basis points in Brazil and 10 basis points in the U.S., although LATAM is down by 30 basis points. Yields are relatively unchanged in both North America and other LATAM. In Brazil, our portfolios are well positioned. Although yields are down by over 1 point, the market yield is of nearly 10% is now well above the current portfolio. Non-Life financial income is up €42 million, growing 12%. IBERIA is up mainly due to the real estate gains that we already mentioned. MAPFRE RE and other LATAM will also continue growing when North America and Brazil have been stable. In EMEA, we have been tactically reducing our exposure to euro denominated investments in Turkey and we are now investing at high rates while currency gains are down. We realized €33 million net financial gains set over the year proof of MAPFRE’s ability to generate alternative source of income. Here, you can see the main KPIs under IFRS 17 and 9 compared to our local gap. Insurance revenue is up over 6% in line with premium growth excluding Life Savings, reaching €12.7 billion. The net result stands at €494 million, up 65% with an ROE of 10.4%. The main differences are related to the discounting impacts as well as changes in the interest rates. The combined ratio was 93.6%, down 2.5 points year-on-year. We are calculating both ratios under the same methodology, treating reinsurance commissions as a lower expense. Shareholders’ equities amounts to over €8.5 billion under IFRS, and it’s relatively stable under both standards. The CSM was €2.5 billion, down over 3%, mainly due to the currency depreciation, with a €60 million total impact, mainly from the real, as well as a higher Life Protection commissions in Brazil. The CSM, net of tax and minorities, was €1.5 billion, slightly up compared to the year-end. I will now hand the floor to Fernando for a few closing remarks. Fernando?

Fernando Mata Verdejo: Thank you, José Luis. Thank you, Felipe, for your quite comprehensive presentations. To wrap up, we have now reported two quarters with excellent results that confirm that we are aiming for with our new strategic plan, and all financial KPIs are on track. We continue growing about inflation, tariffs are being updated to the new economic context. The Group is well-focused on profitable growth, concentrating on high margin businesses, like Life Protection and General P&C, or other strategic segments like health. We keep setting new premiums and revenue records, and this should continue in the second half of the year. Once again, our proven business model, based on high levels of diversification, both by geographic and product mix, allows us to face the challenges from the geopolitical context, with a sustainable result. This puts us in a strong position to leverage growth opportunities and overcome any headwinds that come our way. Data business is getting back on track in most countries and we’re turning around [lots making] [ph] segments in the countries that are facing the biggest challenges. We did it already in Brazil, the U.S. is now showing excellent performance. Are we sure in the near future IBERIA will do the same? We’re managing our investment portfolio prudently and as long as market rates stay above portfolio deals, we expect financial income to continue growing in the coming quarters. Finally, our financial strength will continue to underpin future growth and our commitment to value creation for shareholders. Thank you very much for your attention. I will now hand the floor over to Leandra to begin the Q&A session.

A – Leandra Clark: Thank you, Fernando. Although most of you are already familiar with the process, just as a reminder, you can use the Q&A tool at the bottom of your screen and we will organize the questions by topic and answer them as time allows. The first set of questions that we have are regarding the business in IBERIA. We received a question from Banco Santander (BME:), where they’re asking about the strong performance in IBERIA Life profitability, especially in Life Savings. Any reason, any one-offs, is this sustainable?

José Luis Jiménez: Thank you, Juan Pablo. Yeah, Life, I think, is performing well, and we also expect that Life Savings continue to do so on the second half of the year. The reason to say something like this is because, there is not too much competition in terms of saving products, and I think that incident [ph] we have an important role to play. So we are working on that and we expect to launch new products on the coming month.

Leandra Clark: Thank you. Also, just as a reminder, we did have one one-off in the financial income, which mainly affected the Life business, which was €21 million from the sale of real estate for a property in Madrid. If you need further information, it’s in the disclosure. We also received another set of questions for the Non-Life business overall. Carlos Peixoto from CaixaBank. Would like to know about the drivers for the uptick in the P&C combined ratio in IBERIA and our outlook for 2025. Paz Ojeda has a similar question and would like to know the reasons for the different trend in our ratio compared to other market players, in particular in general P&C.

Felipe Navarro: Okay, Carlos, Paz, I mean, the main reasons for this uptick in the General P&C is related mainly with commercial lines that had an excellent performance during the first quarter. In any case, I mean taking into account this kind of business, I think that we need to look on a half-year basis since there could be some volatility and some changes between one quarter and the other. The general trend is still positive, and we think that that is going to continue. And it’s going to be underpinning the good performance of the business in IBERIA overall.

Leandra Clark: Paz, also has another question regarding the health business. She notes that the seasonal improvement in the health business that we usually see in 2Q has been less than other quarters. Is there anything we need to comment specifically regarding the health business?

Felipe Navarro: I think that is mainly comes through the same trend as we had in previous years, is showing a better second quarter than the first quarter. And we will continue improving during the year, because of the way this business has been accounted on how the premiums are and by the beginning of the year. So we expect that he’s going to continue improving during the rest of the year and we don’t see and no special threats on this line of business.

Leandra Clark: Thank you, Felipe. Paz also has one more question on the Spanish business regarding the tax rate in the second quarter standalone the rate in Spain was quite low, could you explain this please and can we extrapolate this to the rest of the year?

Felipe Navarro: I think that we cannot extrapolate these for the rest of the year. I mean there was this allocation of this review of the taxes that usually happens in the month of July and happen in the month of June. This is the main – It’s just a calendar equation just for this year. That is nothing that is going to change the tax rate in Spain and is going to continue quite stable during the rest of the year.

Leandra Clark: Thank you, Felipe. We can also give you more specific data regarding the tax impacts after the analyst call. We have another question from Carlos Peixoto and actually several analysts regarding the General P&C business in Brazil. David Barma also, and Ivan Bokhmat would like to know if the current levels of profitability are sustainable over the medium-term. What would be needed for this to be reversed and what are the drivers of the outperformance in this line of business in the General P&C and I guess agro business in Brazil?

José Luis Jiménez: Well, we have to say that the performance of the business in Brazil has been outstanding. And we will keep those levels of profitability that will be great, but issue that at some point it could deteriorate a bit, but not too much. So we are confident that the levels in Brazil will continue for the time being.

Felipe Navarro: Just for the sake of, I mean, just repeating something that was already set up during the presentation is that there was a certain mismatch or between the moment that different tax – different allowances were made on the Brazil agro business. So we expect that is going to catch up during the rest of the year, so nothing to be scared of or nothing to be threatening the increase of the levels of premiums in the business in Brazil for General P&C.

Leandra Clark: Thank you, Felipe. I think the next question from Paz Ojeda was asking about the sharp slowdown in the second quarter in premiums, and again, like Felipe said, it was regarding the calendar of subsidy allocation for the agro business. Thank you. Carlos Peixoto from CaixaBank has a question regarding the auto business in Brazil. He noticed a slight uptick on the quarter and would like to know whether we could expect it to fall below 100% this year. And what is our outlook for 2025?

José Luis Jiménez: Well, I would say in the case of Brazil, the combined ratio is very close to 100%. We also should be in mind that rates in Brazil as well are around 10%. This is a rate that we would like to see in the rest of the market as well. But as we are doing in the case of Spain, we are trying to be more selected on the customer base. We are reducing our exposure to fleets and putting more focus on customers. So we expect that the ratio will continue improving in the coming quarters as well.

Leandra Clark: Thank you. We’re going to move on to another business region. We have questions regarding EMEA. Ivan Bokhmat has commented that the business has turned around quite nicely. Should we assume a positive result moving forward or have there been any one-offs in the second quarter?

José Luis Jiménez: Well, in the case of EMEA, we have four countries. Turkey is performing extremely well. The profit during the first half of the year has been around €50 million. It is true that we have one one-off in the selling of the live unit in Turkey. But the company is performing extremely well. Once again, I mean with rates around 50% in our reinvestment, I think the finance and contribution is great. So in Turkey, we expect as well that the outlook for the country will improve in the second half of the year. If inflation continues going down, as everybody has seen in the country right now, we see that the performance of the unit will continue. Malta is performing well, I mean, selling overall life-saving products. We also spent about the second half of the year with new products on the shelf. And Italy is performing in line with our expectations. The main issue has been Germany, but we are putting all the focus trying to reduce the combined ratio in autos.

Leandra Clark: Thank you, José Luis. We have another question moving on to North America. Maks from JB Capital, would like to know if we could get the 100% combined ratio in North America Motor ahead of a 4Q year-end?

José Luis Jiménez: Yes, we are working on that to be below 100%, probably we are just around the corner and we see the trend continue we have seen in the last month. I’m sure that we will be below 100.

Leandra Clark: Thank you, José Luis. I think moving on to the next set of questions, Ivan Bokhmat has commented on the impact in the Group from the losses from the flooding in Brazil given the industry estimate, it seems that we had a low impact, what is our expectation going forward?

Felipe Navarro: I think that we are excellently protected, I mean, from the direct insurance point of view. I think that we’ve been booking the maximum loss that we can have from this event, that is under €6 million. From the reinsurance perspective, I think, that we already been commenting on how is our policy, how is our retention is limited in this kind of business. And I think that we’ve been extremely prudent with the reserves that we are putting on this event, and it in any case is not higher than €40 million, I think that we are accounting on a €37 million net. So I think that we are quite confident that is going to be have a limited impact on the numbers of the group. In any case, I think that we need to continue seeing the development of the claim, but we are quite confident that our reserves are more than enough.

Leandra Clark: Thank you, Felipe. We have some questions regarding North America and the rest of Latin America, especially in the P&C business. Juan Pablo from Banco Santander, would like to know what was behind the significant drop in the combined ratio, was there anything extraordinary? Is the improvement in other LATAM and North America sustainable?

Felipe Navarro: I think that we need to divide this in between the two regions. I think that North America has experienced an excellent first half of the year. It was related with main two drivers. First one was related with the increasing premiums that we were doing since last year and together with this there was quite a benign weather during this first half of the year. So that put us in a very, very nicely situation for the General P&C and mainly the homeowners’ business in North America. LATAM is still performing well and moves in swiftly into the profitability for the General P&C. And this combined ratio should be totally adequate running for this line of business. So nothing extraordinary that we need to mention on the combined ratios in LATAM, North America, apart from these two comments that we’ve been announcing from this since the beginning of the year. I think that what we are doing is that collecting the fruits that we’ve been planting during last year.

Leandra Clark: Thank you, Felipe. Going back to Brazil, we received a question from Maks at JB Capital, regarding if we have any actions in place in order to protect ourselves from future depreciation of the Brazilian real.

José Luis Jiménez: Not yet. I mean, the real depreciation probably has been a shock during the last, I would say, 2 months, which in most of the cases is related about two issues. One is the fiscal adjustment from the government, and the second one is the new or potential candidate to run the central bank in Brazil. But we are confident that one of these two events could be resolved in the coming month, and probably we will see some improvements from the effects from now till the end of the year.

Leandra Clark: Thank you, José Luis. I don’t know if we have something else.

Felipe Navarro: Yeah, there’s something that we need to mention as well. I think that the way we are protecting our exposure to this kind of depreciation is that we are distributing dividends as frequently and as often as we can in order to bring back the different monies to the euros as fast as possible. And this is the best way to protect from the regular business into this devaluation.

Leandra Clark: Thank you, Felipe. We’ve received some questions regarding the outlook for the Life business for the rest of the year and for next year from Carlos Peixoto at CaixaBank. He would like to know specifically the outlook for premium volumes in IBERIA and in Brazil.

José Luis Jiménez: You mean in Life?

Leandra Clark: In life.

José Luis Jiménez: In Life business. Well, in Life, in IBERIA, we have in terms of savings that we will continue with the trend. Last year during the first half we have some kind of extraordinary policies around €400 million. So we have to catch up from now till the rest of the year to improve our future in savings. But in terms of risk, we think that we will continue with a positive trend and growth will be from now till the end of the year.

Leandra Clark: Thank you, José Luis.

Felipe Navarro: Just to comment on the kind of performance of the Life business in Brazil, as we mentioned during the first quarter, there was a change in the commissions for the Life Protection business in Brazil and it was related with performance of this line of business during the COVID. You might remember that during the COVID the performance of the Life Protection business in Brazil was extremely poor. And there was a decision to reduce and to reshape the performance of this line of business in order to compensate for this period of time. Now, we are going back to normal business and we are moving into higher commissions for this line of business. So what we should expect is that will be an excellent performance on this kind of business in the future. This change in commission to reduce and to reshape the performance of this line of business in order to compensate for this period of time. Now, we are going back to normal business and we are moving into higher commissions for this line of business. So what we should expect is that will be an excellent performance on this kind of business in the future. This change in commissions has already been done, so what we are seeing right now, the trend that we are seeing right now in the comment regions for the Life Protection business should continue and is going to be maintained during the future quarters.

Leandra Clark: Thank you, Felipe. Now, we’re going to move on to the Motor business in IBERIA. We’ve received quite a few questions. So first we’ll start with the evolution of insured units and policy holders. Juan Pablo Lopez from Banco Santander has mentioned that he’s seen a falling number of units in a year and how are we seeing competition. And David Barma would also like to know if we’re comfortable losing more volume going forward and what are our expectations for retention in general for the year?

Felipe Navarro: Thank you very much for the question. I think that is something that we would like to mention. And there is something that we need to bear in mind when you’re looking at these kind of figures. I think that we’ve mentioned already that our appetite is to perform better. And following this idea, what we are doing is to try to affect the lines of business or the parts of the business that is less performing. So what we are seeing right now is that on this reduction of the number of units, two-thirds of it account for non-performing fleets that are being restructured or adapted to the profitability that we need on the market. And only 1% is coming from individual risks. So it is totally compatible with what we’ve been mentioning in the past. We are quite comfortable with these levels. And if we will continue in this trend, we are going to see a much better performance on the Motor business in the future quarters.

Leandra Clark: Thank you, Felipe. Regarding Motor, we’ve received from, I’m not going to name the analysts, because I think we’ve received from all the analysts that cover us, four questions. The first one is, what were the drivers for the quarter-on-quarter deterioration in the Motor combined ratio? Number two, what do we expect? What have we seen in average tariffs increases? And do we expect it to continue at the same rate in coming quarters? And three, what is the outlook for the combined ratio for next year?

José Luis Jiménez: Thank you, Leandra. Regarding the different questions, I mean, coming back to the first one, regarding the Q-on-Q deterioration, it’s quite difficult to guess what’s going to happen next quarter. But the important thing here is that we know how to sort it out. I mean, as well as we did in Brazil and afterwards in the U.S., now is the time for Spain. And in Spain, we know that, as our Chairman has said, probably by the end of the year, there will be 1 month where we will reach 100 or even below. So that’s what we are working on right now. In terms of the relevant increase in the average premium, it’s around 8.4%, with the market only up 7.8%. And there is another – the third one, I can’t remember.

Leandra Clark: What is our outlook on tariffs for going forward and the outlook for the combined ratio for year-end and 2025?

José Luis Jiménez: Well, I think we have to adjust the tariff to the inflation. If the inflation continues high, and we are seeing a trend in bodily injury that is increasing. We have no doubt that we will continue rising tariff in order to try to balance the new situation. So looking forward, obviously, we have tried to adapt to the market conditions in order to try to make it profitable.

Felipe Navarro: Just if I may, I would like just to mention a couple of things, I mean, just to give you some depth on this kind of how the inflation is behaving during this first half of the year. It is mainly driven by this, what José Luis was mentioning, that was bodily injuries that were really very – with a very high increase year-on-year. And it was above 20%, and you have to bear in mind that it means that it accounts for more than 30% of the cost of our claims. The rest of the material damage and the assistance business is with really, really moderate inflation. So that moves in the right way. So what we can see in the future and taking into account that probably this impact is already being adopted in this first half, because there was a reinforcement of reserves that was done during the first half of the year. The evolution of the combined ratio during the rest of the year should be better, moving around of 103%. What we mentioned in the first quarter was that we would probably be hitting this below 100% combined ratio on the 1 month of the last quarter this year. And I think that we already saw in the month of June this level. So we are quite confident that there is a lot of signs that there should be a changing trend on the Motor business in Spain in the rest of the year. So that puts us in a quite solid position to improve the combined ratios in this line of business.

Leandra Clark: Thank you, Felipe. We’ve received two questions on the reinsurance business. The first one from Ivan Bokhmat. What would be our view on a potential impact from a hurricane that reaches US$50 billion at an industry level? And Carlos Peixoto from CaixaBank, would like to know our outlook on the evolution of the combined ratio in reinsurance for the second half of the year and going forward?

Felipe Navarro: On the impact of a hurricane in the future, the US$50 billion. I mean, it depends very much on where does it impact, how does it impact, and how is our exposure. As you know that we’ve been reducing very much our direct exposure in the U.S., in the south part. I mean, Florida is a region that we are not present anymore. We have indirect exposure for Groups that we’ve been reinsured globally in the U.S. And, I mean, there will be no main concern from us on a face value for our impact in this region. What could be more important for us will be an impact of a heavy wind or a hurricane impacting in the Northeast, where we have presence in direct insurance and the reinsurance covers are higher, obviously, because of exposure in this region, and there will be higher impacts. In any case, we need to evaluate how it is going to impact, how it is going to affect the regions, and how it’s going to move. What I can say is that MAPFRE is much better prepared for those kind of events. Their reserves are still high for those kind of events. The premiums have been adapted and are adequate to the risk of the market, and I think that in a long-term business that we need to look the cat business as a long-term business, we are in a much healthier position than we were in the past. Regarding the evolution of the combined ratio on the second half of 2024 on the reinsurance business is that we’ve been quite prudent for the first half of the year. I think that looking at our confidence intervals on the reserves, we are on the high side and we are very well equipped for the second half. In any case, it will depend very much on the behavior of strong winds and hurricanes in the second half. We need to wait and see, and to see if the hurricane season is going to be as bad as, as he said and where the hurricanes are going to hit land if they ever happen. I would be prudent. I think that the levels of combined ratio that MAPFRE RE has are totally compatible for a good performance during the second half of the year, and those levels should be seen in the rest of the year. If you compare a little bit on the combined ratios, as we mentioned, between MAPFRE RE and other reinsurance companies is that we are mentioning them at the combined ratios under local accounting gaps and that makes us why we show or post higher combined ratios than in other lines of business, if we were looking on a like-for-like basis with other competitors will be at least 5 points lower than that we are showing right now. So under IFRS, we are quite positive from this line of business, I think that the expansion on the capital base of this unit was the right decision that was made at 2 years ago and we continue being very, very confident that this line of business going to contribute on the profitability on the combined ratio and on the ROE of the group for the rest of in the next year-and-a-half. Yes, of course.

Leandra Clark: Thank you. Maks from JB Capital has another question moving on to Solvency and excess capital. Given this excess Solvency, could you consider inorganic opportunities to deploy it?

Felipe Navarro: I mean, we are – I think that our Chairman already said that we are happy with footprint that we have. In any case, I think that we are strategically looking at certain opportunities that could be built in, not in the next 6 months, but in the future in the different areas. We want to rebuild our bancassurance in distribution in Spain that is mainly driving the new business in for Life. We want to enforce and reinforce certain regions. I think that Brazil is an area where we could grow, if we find something compatible with the agreement with Banco do Brasil. Mexico, being an economy that is very much linked to the U.S. could be an excellent opportunity to reinforce our capabilities. And the last acquisition that we made was in the Life business in Mexico. And Mexico has an excellent potential growth in the near future. We could see U.S. with other lines of business and other states something very limited with no exposure in the full country. And if we want to look at European markets, I think that on top of Spain, Germany, where we have a presence only in Motor business and direct motor business, that could be a good fit for complementing other insurance companies. So those are the main areas where we could see some inorganic growth. In any case, there is nothing on the table right now that should be mentioned. And as I said, very, very happy with the footprint that we have at present. So we don’t want to expand to other regions or the countries or to other areas.

Leandra Clark: Thank you, Felipe. We’ve received a few follow-up questions on the Motor business in IBERIA from David Barma. I think they’re very much related. The first one is, can you explain the comparison of your loss ratio and its evolution compared to your peers? And is this possibly explained by a different geographical footprint in Spain compared to them in regarding claims frequency?

Felipe Navarro: There, I think that different things that we need to bear in mind when we are looking peers against our company. And I don’t like to speak about how the different companies are putting in place or moving or behaving. I mentioned that we have a policy that is taking into account how we are reducing or adapting the fleet business in Spain that is going to change a little bit how we are exposing the future. Second is that if we look into the IFRS evolution is going to be totally different from the local gap. Local gap in this case is taking more time in order to show the evolution under IFRS. We see a quality improvement that is faster and has been adapted on a faster way. And definitely, I mean, the portfolio is changing a little bit and adapting to the new situation. The gain or the premiums that are going to be allocated during the second half of the year are higher than the ones that we had in the previous year. We are quite comfortable on the level of tariffs that we have already been. We are posting renewals on new business. And we are very much confident that this is going to be changing in a medium-term, the shape of the motor business. As I said, there were some extra reserves during this first half of the year related mainly to bodily injuries and the behavior of this kind of claims, unfortunately, it’s not going to change. I mean, this is something that has been partly because of the changes in the Baremo, partly because of some kind of social inflation related with how the magistrates regard to look at the other different bodily injury claims. And in any case, it’s going to be there and for the future. But on the other hand, we are quite confident that we are putting into renewal premiums that are going to be providing us with a much better combined ratio for the rest of the year and, of course, for 2025.

Leandra Clark: Thank you. We have two final questions. The first one from Paz Ojeda, a follow-up on the outlook for insured vehicles in Spain. Is the portfolio cleaning already done and when can we expect a return to growth?

Felipe Navarro: The portfolio cleaning is something that is ongoing. And as I explained a lot of times, I mean, this is a question of how the behavior of the premiums or the renewals are happening. We change, I mean, most part of the portfolio is automatically renewed. I mean, the levels of renewal in our portfolio is over the 84%, 85%. So that means that we are putting into the market every year around 1 million cars that needs to be renewed. And we need to capture those million cars from other companies, from new business, from new cars. And that is something that is continually happening. So I cannot say that there is a portfolio cleaning except for the fleet business, which has already been addressed. But for the rest, I think that we are participating in the portfolio. We are placing our renewals and renewal rates at levels that are very compatible with the levels that we have right now. And as I was saying, I mean, there is only 1% of affection for the individual business. So I think I’m quite confident that this, whenever we are going to be profitable again, we can be turning around this level of losing units in the future. So it’s something that is already built, is already in the strategy, but it’s going to take as much as it needs in order to make this line of business profitable again.

Leandra Clark: Thank you, Felipe. The last question is a follow-up on the Non-Motor General P&C business in Brazil. And specifically, he would like to know what gives us the confidence that profitability will continue? Or putting it another way, what do you see as a trigger or a catalyst for margin normalization or an increase in competition?

Felipe Navarro: It’s quite a difficult question. I mean, traditionally, General P&C in Brazil is mainly driven by Agro business. Agro business is moving ahead quite profitably. There are things that may happen that could affect part of the Agro business. As I mentioned in the past, Agro business is basically one-third related to Life Protection for the owner. One-third is on the protection of what is built on the premises, on the farms. And one-third is fitted with Agro business. What we are seeing is that we’re still managing a leading position in the Brazilian market. This is not changing or not dramatically changing in the short-term. The capacity that MAPFRE has together with Banco do Brasil in a distribution way is still very high. The way the market is behaving is very compatible with an extremely good profitability. What happened in the last year and the first half of this year is that there were no big events that were affecting this line of business that could be hindering this profitability. To give you an idea on the floods in Rio Grande do Sul, there was already 70% of the crops that were collected, so that was a very limited impact in the farms on this line of business. It should be normal that the combined ratio would grow a little bit to higher levels that should be normal, but for this we need to have first lower prices, because of a much higher competition. And we don’t see big changes in this line of business. The second one is a much higher loss ratio coming from any of the three areas that I mentioned. I don’t see main changes for the life protection side and the others will depend very much on the weather and the climate impacts in this moment. So for the moment, so far so good, Brazil is an excellent contributor to the profitability of the Group. And we hope that it’s going to continue for the second half of the year on their own.

Leandra Clark: Thank you. We have no further questions. Just before I hand the floor to Fernando for some closing remarks. As a reminder, we will be holding a virtual meeting with analysts and investors on next Monday July 29th at 12:30 CET. If you haven’t received the invitation, please let us know. And the team will be available after the call if you have any further questions or need help finding the information on our website. I also want to thank you all for being here with us today and also, Fernando, José Luis and Felipe, for joining the call.

Fernando Mata Verdejo: Thank you, Leandra. A couple of minutes just to wrap up. First to thanks for your questions, and I guess the answers given by Felipe and José Luis, we appreciate Felipe and José Luis. Quite clear and very helpful, hopefully for you. Just a couple of things. One is a reminder, as Felipe said, we compared with our peers, it’s important to move to IFRS figures, which, by the way, we pretty satisfied extraordinary combined ratio stands at 93.6%. And net results, particularly is hitting €500 million. The difference between both accounting standards are mainly evaluation on insurance liabilities. So, for us, local figures are pretty important that those reflects, in a better way, a cash generation. Regarding other questions, just to clarify, Brazil, I mean, the flood in Rio Grande do Sul is going to be my view alone, they claim, well, single claim, or perhaps different claims, but MAPFRE is very well reserved, very well prepared. And so far, most of the other costs is due to IBNR and very few claims, has been reported. But Brazil and also MAPFRE, both Parisian, they perform extraordinary well. We consider both, as state-of-the-art operations, and we’re pretty proud of the way that they’re performing. We know that already Spain is your main concern. We know that we’re doing what we had to do. We focused in previous quarters on rates. Unfortunately, we focused as well, 2024, in under rating measures. And we chopped some of the fleets that was heavily impacted by bodily injured claims, as Felipe said. And this is the main reason for the drop in units that we presented. In any case, we increase the prudence level in our reserves, because there are some uncertainties in the near course due to the expected inflation on the Baremo mainly. But all in all, in a nutshell, we are quite satisfied with the results presented. The new strategic plan, the update that we made at the AGM is giving fruits, is bearing fruits, and our views that they are looking for the coming quarters is pretty positive. So for those that are taking some days off in August, hopefully take a rest and enjoy your holidays. Thank you and bye-bye.

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