The rise in interest rates cost Grupo Catalana Occidente (now GCO) 719 million euros in 2022 due to the loss of value it entailed for its fixed-income portfolio, as explained by its CEO, Hugo Serra, at a conference organized by the consultancy PwC and Foment del Treball.
Serra, who presented the company’s 2022-24 strategic plan, explained that the firm closed last year with permanent resources of 4,916 million euros and that the valuation adjustment of its fixed income portfolio was not relevant due to the great diversification of the group’s investments: only 51% of them at the end of 2022 were in fixed-income securities, mostly short-term, and 20% in treasury and monetary assets, with another 13% in equities and another 13% in estate. The value adjustment of its fixed-income portfolio was not made in the income statement, which closed with a profit of 211 million euros, but in the value of its permanent resources on the balance sheet, as provided for in accounting regulations.
Serra explained that the group is now immersed in the integration of its traditional insurance companies (Catalana Occidente, Plus Ultra, Seguros Bilbao and Nortehispana), a process that began gradually a decade ago and that now, after having all the services integrated, will culminate with the integration of the commercial networks, “which is where we play the future”, and of the corporate structures. The employment adjustment, of 488 people according to the agreement reached with the unions, will cost 120 million, which the firm already provisioned in its accounts last year. “Our focus is to gain efficiency,” he acknowledged, as well as to continue growing.
Serra explained that one of the challenges facing the group is the drop in profitability of some lines affected by inflation, such as multi-risk insurance and especially automobile insurance. “We have benefits, but the sector as a whole operates in automobile insurance in technical losses,” said Serra, that is, the price of the premium does not cover the costs of compensation.
The companies suffer an increase in the cost of repairs, but also “the frequency of accidents has increased because the use of private vehicles has increased, even when the price of fuel has been very high,” he said. For this reason, he warned, “companies are going to start raising premiums.” At the other extreme, he explained, is his funeral business, in which he is the leader with the purchase of Mémora, “which is profitable and stable.”
