Assicurazioni Generali's (ARZGF) CEO Philippe Donnet on Nine Months 2020 Results - Earnings Call Transcript
Assicurazioni Generali S.p.A (OTCPK:ARZGF) Nine Months 2020 Results Conference Call November 12, 2020 6:00 AM ET
Company Participants
Philippe Donnet – Group Chief Executive Officer
Giulia Raffo – Group Head-Investor and Rating Agency Relations
Frédéric de Courtois – General Manager
Cristiano Borean – Group Chief Financial Officer
Conference Call Participants
Michael Huttner – Berenberg Bank
Peter Eliot – Kepler Cheuvreux
William Hawkins – KBW
Farooq Hanif – Credit Suisse
Nick Holmes – Societe Generale
Gian Luca Ferrari – Mediobanca
Emanuele Musio – Morgan Stanley
Operator
Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group Nine Months 2020 Results Conference Call. As a reminder all participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Philippe Donnet, Group Chief Executive Officer. Please go ahead, sir.
Philippe Donnet
Thank you. Good morning everyone and welcome to the presentation of Generali’s 2020 nine month results. And before we open the Q&A, I would like to address an issue that is on everyone's mind. As you have seen from our press release based on the current decision of our Italian regulator to stop the payment of dividends for macroeconomic reasons, our board of directors yesterday had no choice, but deciding not to distribute the second trench of the full year 2019 dividend by the end of the year.
At this stage, the Italian regulator does not permit us to distribute the outstanding trench of the full year 2019 dividend. Specifically, we received a letter from a regulator a few days ago clarifying that the application of the SRB recommendation does not have room for case-by-case evaluation. As a matter of fact, today our group is sound and solid and our 2020 nine month results are further proof of this fact. Even though Generali is strong and has achieved very resilient results, of course, we have to comply with the regulators decision.
Nevertheless, we are very proud of our achievements in terms of maintaining a very strong balance sheet and delivering resilient operating profits in such a challenging environment. Our operating results of over €4 billion is up by 2% year-on-year and last year was a record year for the group in terms of operating results. Even with the persistently low interest rate environment, our capital position is very strong with a solvency ratio at 203% at the end of September, the highest among our peers. It is important to note that this is after deduction of the full 2019 dividend and the accrual of pro rata dividends for 2020. Our liquidity position at the holding company has never been higher and our priority remains the execution of our strategy and making sure the group stays strong, resilient, and focused to be able to fulfill the needs of all stakeholders.
And particularly to reward shareholders with fair cash dividends as soon as we are allowed. To that end Generali's management remains committed to its dividend policy and in particular to fulfill its €4.5 billion to €5 billion arrange for cash dividend payments over 2019-2021 subject obviously to the easing of current regulatory decisions. Please note that on this call, we will focus on the questions related to our 2020 nine month figures and information in the press release we published today. We very much look forward to answering all your other questions on our Investor Day next week on the Wednesday, November 18.
Thank you so much for your attention. And, Frédéric, Cristiano and myself are now ready to take your questions. Thank you.
Question-and-Answer Session
Operator
Thank you. This is the conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Michael Huttner with Berenberg Bank. Please go ahead, sir.
Michael Huttner
Good morning. I had – I've got two questions, one which is really obvious – I don’t know, its really obvious, just want to do then, if I look at the screen right now, I see cost is up 3%, I see Generali is down 1%, I'm delayed. So I'm not saying, I mean, it's just the screen and today, and who knows what else is happening. But – and clearly to my mind, it’s – [indiscernible] (0:05:17) is paying a dividend, Generali isn't. And I was puzzled a little bit when you referred to dividends, when you effectively kind of stretched out the dividend share price through to 2022, payable in 2022, by referring to this €4.5 billion to €5 billion range.
So my question is really how likely do you think that the regulator will kind of say, okay, 2020 dividends okay to pay in 2021. And how likely is it that anything left over even your 2019 remaining dividend, they'll kind of keep pushing out and even push out the 2020 dividend? And then a separate question, a really simple one. Can you talk a little bit about the Switzerland impact? Are there any more such things in your portfolio? And what is the number you took in Q2, Q3? Thank you.
Giulia Raffo
I'll ask to our group CEO to answer about the dividend and to Cristiano to talk about Switzerland. Thank you.
Frédéric de Courtois
Hi, Michael. This is Frédéric.
Michael Huttner
Hi, Cristiano.
Frédéric de Courtois
No, this is Frédéric.
Michael Huttner
Frédéric, go ahead.
Frédéric de Courtois
Your question on the regulator is extremely tricky. I mean, we believe we have, as Phillip mentioned, all the prerequisites to pay the dividend, solvency, liquidity, resilience of the operating result, our regulator IVASS decision is not too low as to pay the dividend for macroeconomic reasons. We cannot say more than that. I mean, I can – I think at this stage you should speak directly to the regulators if I may say. So but on our side, we are confident and we believe we have all the prerequisite to pay the dividend.
Michael Huttner
I suppose the question is really positive was allowed, and you're not – that's something which kind of think, hang on, that's why it struck me a little bit.
Frédéric de Courtois
But to be clear, the decision of EVAs was a decision for all the Italian market. So this is not a specific decision for Generali.
Michael Huttner
Okay. You have not changed your mind?
Philippe Donnet
This is Philippe clicking, maybe I should add a word on this, because obviously I had some interactions with the Italian regulator. Obviously I told him that I was a bit surprise about this decision, because as for like I said it's only based on the macro economic considerations. It has nothing to do with our position, our capital and cash position, which they recognized as absolutely excellent. But they also told me that was positive that they are not in favor of the same dividend restrictions for 2021. This is what they told me a couple of days ago.
As you know, there are many regulators involved. The local regulators EIOPA, the European regulator, but also as I mentioned, ESRB but definitely the Italian regulator is not in favor of keeping these restrictions for 2021. And I think this is important, and this is a hopeful message.
Michael Huttner
Thank you.
Cristiano Borean
Hi, Michael this is Cristiano.
Michael Huttner
Hi, Cristiano.
Cristiano Borean
Hi, Michael this is Cristiano. Regarding the second question related to their situation back in third quarter, I just reconfirmed you what is the expected trajectory already mentioned in the healthier presentation for the full 2020 to be broadly in the ballpark of €600 million rotation of the reserve. I just recall you that some visitation will be non-tax deductible that's why you can get also this effect on the net.
Michael Huttner
Okay. But you couldn't just name the figure for Q3, would you?
Frédéric de Courtois
Yes, we have brought in line not far from in between CHF 450 million and CHF 500 million allocation.
Michael Huttner
Brilliant. Thank you very much.
Frédéric de Courtois
Next question, please.
Operator
The next question is from Peter Eliot with Kepler Cheuvreux. Please go ahead.
Peter Eliot
Thanks very much. The first one was just if you are able to give us well again, asking the numbers, if it's possible to have the expense ratio, or if you not want to sort of disclose the number, whether you can give us sort of any indications of the expense savings or the direction that's going? That'd be great.
The second question was organic capital generation seems to have been about six percentage points in Q3 alone, gross of dividend. Obviously a strong number. Just wondering if there's anything in particular that is driving that to maybe a stronger, normal – strong level than normal?
And mean finally, I mean, I know it's not necessarily the right time to talk about it, but we've seen a bit of M&A activity recently. I'm just wondering what you're thinking maybe of sort of the prospects to deploy some of the budget that you've got there’s any point? Just wondering if you can comment sort of really briefly generically about the outlook, the environment there. Thank you very much.
Philippe Donnet
Okay. I would ask to our GM to answer to the first question, our CFO to the second and our Group COO on the M&A point. Thanks.
Frédéric de Courtois
So, hi, Peter, on the expense ratio, so first in absolute terms, our expenses decreased by a bit more than 2.5%. And we believe that part of this expense decrease, which is due to the new way of working is here to stay for the long-term. If I look at the expense ratio, so the expense ratio is decreasing by 0.4 points. So it was at the end of September last year, it was at 27.9 and it does move to 27.5. Cristiano on capital generation.
Cristiano Borean
Yes, Peter capital generation you almost correctly pointed out we are closer to this 5% more than to the 6%. The drivers are mainly a very good, the best estimate combined ratio in nonlife and a 4.5% new business margin in the third quarter on life which is a very healthy capital generation production also prospectively.
Philippe Donnet
We can move to the next.
Cristiano Borean
Okay. Talking about M&A I would say that the framework for our M&A activity is still valid both in financial and strategic terms. We've been quite active actually in the M&A, not through a very big acquisition, but I always said that our priorities at the moment was small and medium acquisition. So this is what we've been doing fully in line with the strategy in order to strengthen our market position in countries where we already are, especially in central and Eastern Europe, we've been acquiring Adriatic Slovenica, we've been acquiring in Poland Concordia. We've been acquiring Seguradoras Unidas in Portugal. We are now the second player in Portugal, before this we were in a corner in Portugal. So we completely changed the situation.
We've been also quite active in the asset management with the acquisition of Sycomore of Union Investment in Poland as well. So we’ve been acting fully in our strategic and financial framework. We still have resources available for acquisition definitely. And I would say that this – what is new is that the COVID-19 crisis may create new opportunities for us that would not have been possible before. So I think that the good news is, we still have significant available resources for M&A. There will be new attractive opportunities for us. And we will continue being active, but we will continue being in the same time, as I always said, disciplined. So we will stick to our strategic and financial framework and in the same time, very opportunistic.
Peter Eliot
That’s great. Thank you very much.
Giulia Raffo
Next question, please.
Operator
The next question is from William Hawkins with KBW. Please go ahead.
William Hawkins
Hello, thank you very much. Top-down question, first of all, when you’re talking about your pre-tax operating results, you’re up 2% at the nine-month stage. You’re still talking about being down by the full year. And as far as I can feel, most of the drivers you’re talking about are actually still quite positive into the fourth quarter. So what am I missing? That’s going to be the big negative in the fourth quarter that, that takes you from being up to down, or are you just being pretty conservative in your guidance?
And then for the bottom up question, that’s slightly you look at that, your investment margin for life in the first half was just over €700 million. So that’s about €350 million a quarter. Could you give us an indication of what happened to that figure in the third quarter? And again, just what you’re feeling about the outlook for that number, because clearly it’s getting hurt by COVID, which we should think is one-off, but it’s also getting hurt by low yields, which may be more enduring. So I don’t really know relative to the $700 million you did in the first half. Is that a base from, which we step up again, or is it grinding down and down from that base? Thank you.
Giulia Raffo
I’ll let our CFO to answer to the questions.
Cristiano Borean
Hi, William. So regarding the first question, yes, we still give this guidance. I think we have been prudent in the volatile environment we are facing due to the second wave of the COVID part. And we need to take also this into account in the technical analysis for the final year. Regarding the investment margin of life, what is related is mainly explained by the investment margin effect on the third quarter, also impacted by the further allocation we gave to the guarantee reserve for our Switzerland operation.
And this has been also a couple that don’t forget to some also effect on our recurring investment portfolio, notwithstanding also the fact of that then don’t forget that there is also the effect of the private equity results, which has now been allocated in the segment of private equity. And – but later can be and will be allocated with the internal dividend to the operating results contribution of life, and then consolidated and netted out. So clearly there is an equity boom also of these factors. Hope I gave you more clarity, William.
William Hawkins
Yes. And if I may just follow-up again with regards to the top-down guidance, your combined ratio, is there any reason to assume that there’s going to be any kind of true-up volatility at the end of the year? Or given that it’s been staying at a pretty stable level in the first nine months? Can we take up through to the year end?
Philippe Donnet
William, I may take this one. We don’t expect any significant impact on our combined ratio of the second phase of lockdown. So it has – had been excellent over the first nine months. And again, no other significant impact over the next two months to three months.
William Hawkins
Thank you very much.
Giulia Raffo
Next question, please.
Operator
The next question is from Farooq Hanif with Credit Suisse. Please go ahead.
Farooq Hanif
Hi, everybody. Hope, you’re keeping well. So firstly, can you just give us a bit more detail behind the really strong asset management result? You talk about a disciplined approach leveraging multi-boutique, but what does that mean? Is it a revenue, is it inorganic sort of costs? But secondly, can you give us a bit more detail about the private equity dividend and the holding result? And how we should think about private equity dividends going forward? And then lastly, what can you tell us so far, or what are you willing to tell us today so far about the extra arrangements you will have with Cattolica beyond just the share in the stock? So I’m talking here about the reinsurance. I’m talking also about asset management. Thank you.
Giulia Raffo
I would ask our GM to answer to the first question, our CFO to the second, and our CEO on Cattolica. Thank you.
Frédéric de Courtois
Hi Farooq, so asset management, so you’re right that the result is really good. And by the way, we confirm our target for 2021. I think this is a mix of various factors. First, the inflows on third-party money have again been good over the quarter. So we had more than a close to $4.5 billion inflow of new money from a third-party asset management. But more than that, there are two important factors. I mean the first one is that we have extremely low cost and this is something we've already disclosed much lower cost than our peers globally.
So we have excellent margins on our asset management business. And the second factor is that we've been successful in doing what we had planned, which is moving more of our unit-linked business to our internal funds. And this is something that we had planned and this is something we realized and we are closed to our target and thesis. So the addition of all of these, and especially the low-cost lead to very good margins.
Cristiano Borean
Farooq, Cristiano for private equity. Let me guide you a little bit on how you should think, because this is a very, very, very spotted on point in my opinion. And thanks for asking. Because private equity, our portfolio has been managed since many years in a fully centralized way, which allowed us to have a very good selection. And by the way, for your information, this is a portfolio which has a 13% IRR, which is delivering the good results constantly.
Clearly, very some seasonality and volatility around this because of the nature of the private equity. What is important to know is that we have different vintages and seasoning as soon as a private equity investment comes to an end and there is a realization of the gain. You see the impact in the park of all being another in the private equity. And this is the allocation.
Then as soon as the investor, which is the company be either a holding per se or a life or non-life company, having the share of this investment. We received a dividend from this result. Then we have the effect of the dividend payment, which is accounted and helps in life to support the investment margin in our life to get to the investment results. And this is method out through a consolidation adjustment.
Going forward, due to the fact that our strategy to redeploy in real assets, among which various private equity is paying off and will pay off in the longer term, you should expect more effect of the dividend payments, hence consolidation or adjustment related to lease, but also a growing results coming from private equity because of the nature and the seasoning of those investments. Hope I gave you a little bit more clarity.
Farooq Hanif
So just to be also very clear on that point. So some of this PE dividend in the consolidation on the share would life does go to the policy holder as well.
Frédéric de Courtois
Yes. And when we present you the result, it is already accounted for this, because when we calculated the full impact on the operating and net result, it is already shown after the so-called the fed policy or the liability, which means that the figure we are already presenting is already netted out where the only effect would be the nesting of the dividend in the consolidation. But the result presented already today accounts already for this effect. Hope that, I was clear.
Farooq Hanif
Yes. Clear, thank you.
Philippe Donnet
On the Cattolica, this is Philippe speaking. Cattolica is a very good financial and strategic deal. As you know, we have now completed the capital increase dedicated to Generali. So we own now 24.46% of Cattolica. And we have an industrial and strategic partnership on the asset management internet of things, health insurance, and re-insurance, and through these – this partnership, we will create significant value for, I would say for both partners. So once again, it's a good financial and strategic deal. And then according to this agreement – to the strategic agreement, we are also open to look at the future together. I would say.
Farooq Hanif
May I just come back, just quickly on, asset management, when you're getting life insurance customers to move into the link funds? How much of that is justified by the performance?
Cristiano Borean
How much of that. I didn't get the question. How much of that?
Farooq Hanif
Sorry. When you’re getting people to move into your own boutique funds in unit-linked in life, which is helping your asset management result as well. How much of that is justified by the fact that these funds are performing a lot better?
Cristiano Borean
Well, I can – Farooq, I can answer it in two ways. First, I can tell you that the performance of our boutique over the past few months has been excellent. And the second way to answer is that we were very – and this is something we had already discussed in various road shows in terms of percentage of our internal fence in our unit-linked, we were very much below market standards. So we keep in an open architecture model for unit-linked, of course, but we have increased the share of our firms, and we are close to market standards now. But again, I insist on the fact that the performance of our boutiques excellent.
Farooq Hanif
That's really great. Thank you.
Frédéric de Courtois
Next question, please,
Operator
The next question is from Nick Holmes with Societe Generale. Please go ahead.
Nick Holmes
Hi, guys. Thanks very much. Two questions, please. Firstly, sorry to come back on the regulator, but do you think that more needs to be done to establish a level playing field across Europe. Because we're seeing such different regulatory behavior between different countries, I think that's kind of more of a problem. It's an – if you and sort of PAN-European, if you – I wonder if you could comment on that.
And then secondly, at the operating level, wondered with massive rebates, are you concerned that there could be more regulatory and political pressure to make rebates to customers who aren't driving because of lockdown? Is that something you might be worried about? Thank you very much.
Philippe Donnet
I would ask our General Manager to answer both the questions. Thank you.
Frédéric de Courtois
Well, thank you. Thank you, Nick. Well, obviously, the European regulators and I would say both, Europe and the local insurance regulators were not able to guarantee the level playing field, and this is definitely an important issue. And the industry has been talking about this with regulators. I have been talking about this to the Italian regulator and this is not acceptable. This is not acceptable, because this is no longer fair competition. Unlike the ECB, which is able to guarantee the level playing field for all the European banks, this situation is very different in the insurance industry.
First of all, I don't agree with the dividend ban for the insurance industry. We are not in the situation of the banks. We didn't get any benefit from any kind of capital relief. We didn't get any benefit for any kind of state guarantee for our products. Europe has always confirmed that the industry is very well-capitalized and especially, the large international groups and especially Generali. So there is no reason for this dividend ban for the insurance industry and on top of this, as you said and I fully agree on this, there is no longer a level playing field.
So we've been a strong on this, we've been talking about this in a strong way to regulators, that's why I'm pretty confident that the situation in 2021 will improve significantly on the regulatory basis.
Yes, there is political – sorry….
Nick Holmes
Sorry. I was just very, very quickly going to ask, do you anticipate any sort of change on the pass of the commission in looking at the level playing field in 2021?
Frédéric de Courtois
Well, as you can imagine, we have been very proactive and very talkative on this. And I think that everybody in Europe is aware of the situation that has been created. And the issue has to be addressed and will be addressed. As I said before, in the interaction – in the last interaction I had a couple of days ago with the Italian regulator, I was positively impressed by the fact that they told me, that they would not support the continuation of this kind of situation for 2021.
Okay. So this is what they told me a couple of days ago. As I also said, their decision in Italy is based on macroeconomic considerations, so it can change in a couple of weeks or month, I don't know, but I'm much more confident for 2021 definitely.
On the political pressure, on the rebates to customers, there is some pressure and it depends on the countries because we cannot say that we have the same, we have to face the same bridge pressure in all the countries, having said that this pressure, according to me doesn't make any sense, okay. Because, of course we know that the claims frequency during the lockdown is much slower than usual for obvious reasons, but in the same time we have to also to face claims that we didn't have to face without COVID.
So you cannot ask the insurance companies to give rebates when the frequency, the motor insurance frequency goes down and prevent insurance companies to increase the prices when they suffer more losses, because of the COVID or when they suffer the pressure of lower interest rates, I mean, the insurance business is a whole, you need to look at it overall. You should not look at a single business line and you need to look at it also on the longer-term. So this is the insurance business.
If not – if we should, if we're supposed to grant rebate because of two months of lower claims frequency, it means that there is no more benefit from diversification, and it would not make sense. So this kind of pressure on the rebates, which is limited to some business lines into a very short period of time, doesn’t make any sense, it's not consistent with the insurance business.
Cristiano Borean
If I may add on the rebates, I think we've managed it in the right way. In other words, we've not adopted in Generali the kind of general measures that some of our peers have adopted, like two months free for everybody.
What we've done is to make, to have a case-by-case approach with some discounts for some customers. And I think at the end, we had the better impact on customer satisfaction and on profitability. So I think we've managed it in the right way. And it also guarantees the fact that the mid-to-long-term impact on the average premium will be – will not be significant. So again, we, we stick to this approach. Yes, there is some more suasion from regulators, but we stick to this approach. And again, this will be well appreciated by clients.
Nick Holmes
That's very clear. Thank you very much.
Philippe Donnet
Next question, please.
Operator
The next question is from Gian Luca Ferrari with Mediobanca. Please go ahead.
Gian Luca Ferrari
Yes, good morning, everyone. The first one is on the capital gain on the private equity fund, probably I missed the Euro amount, if you can reiterate what was the impact in the nine months?
The second one is again, I'm sorry to go back to the great – the astonishing, I would say, a result of the asset management segment. I mean, on a year-on-year basis, the operating result has gone up by 74 million. But if I look at Banca Generali, the operating profit was up only 20 million. So I was wondering how we can reconcile that. What is explaining this additional 50 million increase in nine months 2020 versus nine months 2019?
The third one is again on Cattolica. There is the second tranche of the capital injection to take place in January. This is what the company told us yesterday. I was wondering if you are interested in acquiring some unsubscribed shares. And if you have already asked to give us a waiver to the mandatory tender offer in the case you are interested in acquiring those rights. Thank you.
Philippe Donnet
I will ask to our CFO to answer to the first question, for GM, the second one and our Giuseppe Catalano. [ph] Thank you.
Cristiano Borean
Gian Luca, so first question, the answer is €70 million net impact in the third quarter.
Gian Luca Ferrari
Thank you.
Frédéric de Courtois
On your second one, but Cristiano will help me. Banca Generali is holding and other, Cristiano, can you say more on the reconciliation.
Cristiano Borean
Absolutely. Absolutely. So first point, as Frédéric was correctly pointing out, we account for Banca Generali in the holding and other segment. So if I look at the first nine months, the increase in Banca Generali and the contribution to operating results is on the ballpark of the €20 million. When I look at the delta of €73 million coming from the asset management, you need to be aware that there are growth coming both from the boutique strategy, especially because of the fact that we increased our offer, and we were also able to over perform the benchmark.
So there are also revenues coming from the so-called performance fees, which are slightly higher in the third quarter compared to the – in the first nine months compared to – also to the last year. There is also the contribution coming from the total revenues. And this is basically splitted the revenues of the asset management segment comes in the ballpark of 60% on what is created by the group and 40% from the third party.
Gian Luca Ferrari
Well, that's very clear. Can we have also the amount of performance fees cashed in Q3 on the boutique platform?
Cristiano Borean
It is slight – very low double-digit effect. So – okay. So it's not…
Gian Luca Ferrari
Okay. Not that material. Thank you.
Cristiano Borean
Yes.
Gian Luca Ferrari
Thank you.
Philippe Donnet
Yes. So on Cattolica, there is not that much to comment. We definitely – definitely, we – the mandatory offer is not on the table. We are definitely not considering this situation. The inducted shares, we are considering what options we are going to choose on this, but we can do whatever we decide to do. We have no commitment of any kind.
Gian Luca Ferrari
Okay. Thank you very much. Thank you.
Philippe Donnet
Last question, please.
Operator
The next question is a follow-up from Michael Huttner with Berenberg Bank. Please go ahead.
Michael Huttner
Thank you so much. On – so on Switzerland, again, if you could remind us what is the normal run rate for additions to this low interest rate reserve? And then in your opening remarks, you said that liquidity was – has never been higher at the group level. So I just wondered if you can give us a figure here. And then last question, is there any potential – so you did the lovely deal on Generali Leben two years ago, I think now. Is there any potential for more such back book deals to kind of optimize your capital further? Thank you.
Cristiano Borean
Hi, Michael. So regarding Switzerland, I would like to give you more detail during next week Investor Day also to answer on this point. And for what regard the position of liquidity clearly is higher than the half year results and we will stick to the highest level. At the end of the year, if we will not pay the dividend, clearly we have this additional 720 million on what we were forecasting, but we consider them to be futurely engaged to our shareholders.
So, I want to tell you, we are at a very healthy and solid level, which allows us to pursue the full different strategy. And even there, I will give you a little bit further days during the Investor Day, so that you will understand the full leverage and the situation on how we are there. So please let me give you with some suspense a little bit, one week more.
Michael Huttner
Excellent, of course. And on bank books?
Giulia Raffo
And Michael on bank books so we are always active on this, because we consider if this is a way to optimize our return on equity, and there is always potential to do more.
Michael Huttner
That sounds very helpful. That's okay, I learned. Is this also something you'll talk about next week?
Giulia Raffo
Yes. Next week, we can discuss this more in depth on the midterm perspective.
Michael Huttner
Excellent. Thank you very much.
Giulia Raffo
Operator, are there other questions?
Operator
There is another question from Emanuele Musio with Morgan Stanley. Please go heads.
Emanuele Musio
Hello. Hi. Thanks for taking my question. Is a quick one on the non-life business? So far this year in the first nine months who reported, a more modest priority year development. So I was wondering, actually, if you can remind me, please. Why you decided to take these more conservative stances and whether we can expect stronger releases when maybe these uncertainties are gone?
Frédéric de Courtois
Sure. On this one. So yes we have lower previous year release compared to last year. And the answer is simple, is that we've made a cautious closing.
Philippe Donnet
And if I can integrate, I recall you again a strong capital generation coming from the nonlife, which is proving the point that Frédéric made.
Emanuele Musio
Okay. Thanks.
Philippe Donnet
Are there questions please?
Operator
There is a follow-up question from Michael Huttner with Berenberg. Please go head.
Michael Huttner
I'm sorry. I seem to be holding the line. And so the – so your plan – so it's 2021, and I just wondered if you can, I know we're nine months 2020, but if you can say anything today about the targets particularly the EPS targets for them? And then the second question is not more kind of granular, in your combined ratio that roughly 89.7%. Can you give a feel for how you've treated the runoff? Just as a background, I spoke with one of your competitors yesterday, and they've been very conservative on the runoff because they think that there may be a spike in accidents next year when people start driving again. And I just wondered how you'd looked at it? Thank you.
Philippe Donnet
Yes. So on the first one, on EPS targets, I'm afraid that you will have to wait until November 18th to get the answer, but we will be happy to answer you on this next week on the combined ratio. Frédéric?
Frédéric de Courtois
Yes, Michael. Showing the combined ratio, so as I said, we've treated it in a cautious way. Why did we do it like this? Because again, we have excellent technical result and we could afford to be cautious, easy to cover potential future losses on something else. The basic answer is no, as I've said, we expect negligible impact for us of the signal lockdown, midterm I am now more reassured on the fact, but I don't know obviously that we will not see a spike in the claims over 2021. But again, we have to see, because this is – we have to see what will happen because this is we are in unknown territories. But in any case we've not – we've not re-added to the reserves because we thought that, that we would have additional claims. I mean, we've done it because we already had an excellent technical result and that's it.
Michael Huttner
That's lovely. And may I just ask a very quick and it's just a numbers thing on Cattolica. What's the impact on solvency?
Philippe Donnet
Michael, it is less than two percentage points. The capital increase, we made IN Carrolica, by the way, and if you want to know the solvency of November 9, which already in bad, this impact is at 207% deducting all the dividend and discussion we are the pro rata for 2020 expected plus the second trash of the 2019, which we already discussed, fully deductable.
Michael Huttner
Well, amazing. Congratulations. Well, okay. Thank you.
Philippe Donnet
Are there others question on the queue?
Operator
[Indiscernible], there are no more questions registered at this time.
Philippe Donnet
Okay. Thank you. So, I say a big thank you very much to all of you for following us in this call. The Investor Relations team is fully available for you, and we look forward to hosted our virtual Investor Day in next week. Thank you very much.
Operator
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
