The gradual change in the demographic structure, the climate change, the technology that is more and more widespread and sophisticated, and the new events - at times unsettling - taking place in international politics are just a few elements of the environment in which an operator like Generali has the mission to manage risk. On the other hand, the needs of customers and the possibility they have to choose from diversified and increasingly personalised solutions are growing each day and opening doors to business opportunities unheard of until now.
The new Charter of Sustainability Commitments of the Group was approved by the Board of Directors of Assicurazioni Generali. This document outlines the position of Generali with respect to sustainability as well as its commitments to stakeholders.
On 13 September, an agreement for the transfer of the entire shareholding in Generali Nederland N.V.2 was undersigned with an initial compensation of € 143 million, subject to adjustment on the closing date of the operation as well as approval, inter alia, from the competent authorities. The operation was completed in February 2018.
During the course of 2017, the global economy grew at a rate that was greater than expected due to the dynamic nature of domestic demand in developed economies. The Eurozone grew not only as a result of dynamic consumption but also as a result of increased investment. Within Eastern European countries, the positive economic trend continued, driven by consumption and a growing labour market, including salary increases which sustained inflation. Within Europe, significant events include the victory of Macron within the French presidential elections, the advance elections in the UK as well as the advance elections in Catalonia. On the global level, on the other hand, the year was characterized by significant political uncertainties (Russiagate, tensions with North Korea) which influenced the confidence levels of operators within financial markets. Within the USA, GDP growth compared to the previous year was 2.2% and the labour market continued to gain strength, with an unemployment rate that fell in November to 4.1%, the lowest level in the last 17 years. Significant uncertainty developed in relation to the abolition of Obamacare and tax reform; the primary point of the latter was the decrease in fiscal load for companies. Inflation remained, in any case, low despite increases in both the USA and Europe. Growth in Asia, in particular China, continued at significant levels. With regard to the insurance sector in Italy, Germany, France and Spain (in a persistent environment of low interest rates and stringent capital requirements), the Life business was characterized by the sale of unit-linked policies, which however failed to offset the decrease in traditional products. P&C business continued to grow throughout Europe: in Italy the slight increase in the P&C business was mainly attributable to the health insurance business; in France, Germany and Spain the result was also positively affected by the motor business
8,900 managers responsible for people trained by internal trainers by 2019
• we align the Group organization with the business evolution, with a clear model that is based on shared rules, local empowerment and integration mechanism • we identify and invest in new key capabilities, in particular those related to insurance sector through the Group Academy and qualified, internal trainers
Group CEO the main person responsible for Company management, in the capacity of Managing
Within a challenging economic and financial environment, we are convinced that our governance - which complies with the best international practices - is adequate for effectively pursuing our strategy of creating value for all stakeholders in the medium-long term.
— In December, the Generali Group executed an agreement for the transfer of its entire interest in Generali PanEurope, a company present in the Irish market, directly held for 69.518% by Assicurazioni Generali S.p.A.. Following this operation, Generali will receive an initial payment of 230 million euro (plus all interest accrued as at the closing date of the operation) and a possible deferred payment up to a maximum of 10 million euro, 12 months after the closing of this operation. The amount of the payment will be subject to an adjustment as at the closing of the operation. Furthermore, Generali will receive about 56 million euro as a repayment of some intragroup loans; therefore, the total amount to be paid to Generali at the closing of this operation will be about 286 million.
Gross written premiums amounted to 3,369,394 thousand, a decline from the 3,667,601 thousand of 2016. In detail, the premium income from the life segment amounted to 1,708,336 thousand (2,007,507 thousand in the previous year) while from the non-life segment was 1,661,058 thousand (1,660,093 thousand in the previous year).
As shown above, more than 90% of the net underwriting results of the Company are generated by the following units: – Reinsurance accepted directly by the Parent Company; – United Kingdom; – Generali Employee Benefits
Also in reference with the reinsurance directly accepted by the Parent Company, to be noted is the decisive recovery in financial profitability reflected in the technical interests of the reinsurance treaties with the subsidiary Generali PanEurope dac, within the segment III (agreements with the risk borne by the policyholders) for 40,810 thousand. This increase affects the improved technical interest of the entire life segment of the Company, with neutral impact on life net underwriting balance.
Income taxes for the year show an overall income of 121,491 thousand (190,212 thousand in the previous year). The decrease is primarily due to IRES tax income which was down from 217,729 thousand in the previous year to 161,760 thousand for the year in question, following the increase of profit for the year net of dividends received from the companies of the Group.
& Co. Retail KG i.L. (-30,865 thousand), in Lion River I N.V. (-9,136 thousand) following primarily the share capital repayment and sale of the interest in Aseguradora General S.A. (-1,169 thousand); — reduction due to the counter-measurement in euro of the equity investment in the currency for 120,485 thousand.
was fully repaid (381,100 thousand). The increase in this item was partially offset by fewer units of mutual funds for 464,510 thousand (referring almost entirely to the sale of units of the Generali Money Market fund).
Moreover, the offer of training and update programmes for the development of language skills continues, along with other initiatives supporting the specialized knowledge of professional skills such as the Internal Audit Progamme, specialised training on Big Data and Machine Learning, as well as on the security of Web Applications.
(b) Included pecuniary loss, legal protection, assistance and credit and suretyship 67 Parent Company Financial Statements
70 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
— In February, Generali Group. completed the sale of its entire investment held in Generali Nederland N.V. (and its subsidiaries) to ASR Nederland N.V..
The purpose of risk monitoring and reporting is to keep Business Functions, Senior Management, BoD and the Supervisory Authority informed on the development of the risk profile, on the risk trends and on the breaches of risk tolerances.
Own funds (OF) are classified into Tiers, representing different levels of quality with respect to loss-absorbing capacity criteria. Tier 2 OF refer to subordinated debt, while Tier 3 OF refer to deferred taxes.
6 Solvency II technical provisions reliability and adequacy are evaluated by the Actuarial Function.
Dear Shareholders, the profit for the year amounts to 1,404,459,284 euro.
(of which, income from Group companies 41 0 ) 42 1,339,406,272 3. INCOME AND UNREALISED GAINS ON INVESTMENTS FOR THE BENEFIT OF POLICYHOLDERS WHOBEAR THE INVESTMENT RISK AND ON INVESTMENT RELATING TO THE ADMINISTRATION OF PENSION FUNDS 43 93,674,335 4. OTHER TECHNICAL INCOME, NET OF REINSURANCE 44 16,835,736 5. CLAIMS INCURRED, NET OF REINSURANCE a) Claims paid aa) gross amount 45 2,104,367,322 b) Change in the provision for claims outstanding aa) gross amount 48 154,923,663 6. CHANGE IN THE PROVISION FOR POLICY LIABILITIES AND IN OTHER TECHNICAL PROVISIONS, NET OF REINSURANCE a) Provisions for policy liabilities aa) gross amount 52 −478,603,710 b) Change in the provision for unearned premium provision for supplementary coverage aa) gross amount 55 5,358,486 c) Other provisions aa) gross amount 58 227,533 d) Provisions for policies where the investment risk is borne by the shareholders and relating to the administration of pension funds aa) gross amount 61 −169,801,698 116 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
(of which, income from Group companies 201 1,998,648 ) 202 989,185,735 119 Parent Company Financial Statements
The financial statements of Assicurazioni Generali at 31 December 2017 comprise the Balance Sheet, the Profit and Loss Account and the Notes to the Accounts and relative attachments, in addition to the Board of Directors’ Report on the Company about the performance of the Company in its entirety.
Financial investments are subdivided into fixed securities, which remain permanently held by the Company, and current securities, which are used for trading; their classification, which also applies to own shares, is based on the criteria specifically set by the Board of Directors, in line with the requirements of ISVAP (now IVASS) Regulation No. 24 dated 6 June 2016.
All assets have been recorded at acquisition cost net of specific depreciation.
The item also includes the suspense account for balances between the life and non-life segment.
The provision for unearned premiums includes: a) the provision for premium instalments calculated, for all lines of business, using the analytical method “pro rata temporis” with reference to Credit contracts signed or renewed before or on 31 December 1991, the calculation criteria set by attachment 1 of the specific above-mentioned Regulation No. 15-bis have been applied; b) additional provisions to the provision for premium instalments, regarding the peculiarities of certain risks (hail and other natural disasters as earthquakes, seaquakes, volcanic eruptions and related phenomena, risks deriving from the use of nuclear energy, risks included in the suretyship lines of business ) are determined in line with the provisions of paragraph 1 Sec. III of the specific above-mentioned Regulation.
Part B – Information on the Balance Sheet and the Profit and Loss account
Initial amount depreciation quota for the year 5,151 other changes 1,154
Investments in Group comp. and comp. in which a significant interest is held
No investments relative to contracts linked to pension funds have been recorded.
Section 4 – Reinsurers’ share of technical provisions - Item D bis 4.1 a) Breakdown of Other technical provisions – non-life business Item D bis I.4
The negative reserve for own shares, constituted as provided by the amended and integrated Regulation No. 22/2008 amounted to 3,040 thousand. Pursuant to the OIC 28, own shares are recorded at a value corresponding to their cost of purchase.
10.4 Changes during the year to the mathematical provisions – Item C.II.1 – and the provision for profit-sharing and premium refunds – Item C.II.4 (attachment 14)
The “tax fund” includes the amount of 45,110 thousand to cover the tax for the transfers of real property that will be due in the next financial years in Germany, following the repurchase operation of the minority participations in the subsidiary Generali Deutschland Holding AG. During the year the fund was utilized for an amount of 13,328 thousand.
Profit portfolio on provisions and other technical items 0 0 0 13.8 Details of miscellaneous liabilities – Item G.IX.3
I. Guarantees issued a) Guarantees and endorsements issued in the interest of parent companies, subsidiaries and affiliates 0 269.500 b) Guarantees and endorsements issued in the interest of associates and companies in which a significant interest is held 0 0 c) Guarantees and endorsements issued in the interest of third parties 0 0 d) Other personal guarantees issued in the interest of parent companies, subsidiaries and affiliates 1.895.083 2.369.000 e) Other personal guarantees issued in the interest of associates and companies in which a significant interest is held 0 0 f) Other personal guarantees issued in the interest of third parties 0 0 g) Real securities for bonds of parent companies, associates and affiliates 0 0 h) Real securities for bonds of associates and other companies in which a significant interest is held 0 0 i) Real securities for bonds of third parties 0 0 l) Guarantees issued for bonds of the Company 45.315 47.578 m) Assets deposited for direct reinsurance operations 118.458 131.806
The following is a breakdown of all contracts that were outstanding at year end, divided by purpose and contract type.
Total 58,048 18.8 Other technical charges net of reinsurance – Item I.8
Section 19 – Information on the life business technical account (II)
184 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Pre-paid and deferred taxation relate to items that combine to form the income tax in a tax period other than that in which they are recognized in the income statement.
Investment income: Income from land and buildings 0 38 0 0 0 38
Dividends and other income from equities 0 1,970,536 0 8,396 2,312 1,981,244
The negative results of outstanding swap contracts, held primarily for hedging purposes, were determined by the exchange of periodic cash flows; those relating to closed positions were determined by closing transactions of currency swap. For the positions in future, the results arising from the settlement of variation margins and commissions on the hedging transactions concluded during the year.
The information provided by the regulation in force, regarding Stock Options granted and the emoluments due to the Board of Directors and the Board of Auditors, to General Managers and Managers with strategic responsibilities of any type also including those of subsidiary companies, are indicated in the remuneration Report.
5. Information according to the CONSOB resolution No. 15915 dated 3 May 2007. Pursuant to the above-mentioned resolution, sums due for services rendered during the year to Ernst & Young S.p.A., are indicated in the following table 194 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Change in the liquidity for the year -1. + 2. 116,526 102,414 199 Parent Company Financial Statements
II - Provisions relating to the administration of pension funds 56 0 57 3,268,077
Previous year brought forward 22,607,333 carried forward 26,631,769 225 Parent Company Financial Statements
ep os its w ith c ed in g co m pa ni es
Sh ar es in c om m on in ve st m en t f un ds 0, 1, 2, 0,
Liabilities - Variation for the year of the components of the provision for unearned premiums (item C.I.1) and those of the provision for claims outstanding (item C.I.2) of non-life lines of business
M ot or , o th er c la ss es
Investment management charges and other charges: ..................... Charges referring to equities ................................................................... 1 6,871 31 7,595 61 14,466 ..................... Charges referring to investment in land and buildings ............................ 2 1,909 32 0 62 1,909 ..................... Charges referring to debt securities ........................................................ 3 3,227 33 4,051 63 7,278 ..................... Charges referring to shares in common investment funds ....................... 4 0 34 0 64 0 ..................... Charges referring to shares in common investments ............................... 5 0 35 0 65 0 ..................... Charges referring to other financial investments .................................... 6 19,600 36 828 66 20,428 ..................... Interests on deposits received from reinsurers ........................................ 7 49 37 5,241 67 5,290 Total ........................................................................................................................... 8 31,656 38 17,715 68 49,371 Value re-adjustments on investments referring to: ..................... Land and buildings ................................................................................. 9 3,607 39 0 69 3,607 ..................... Shares and participations in group comp. and other companies .............. 10 2,997 40 0 70 2,997 ..................... Debt securities issued by group companies and other companies ........... 11 0 41 0 71 0 ..................... Other equities ......................................................................................... 12 264 42 18 72 282 ..................... Other debt securities ............................................................................... 13 5,068 43 3,544 73 8,612 ..................... Other financial investments .................................................................... 14 24,958 44 6 74 24,964 Total ........................................................................................................................... 15 36,894 45 3,568 75 40,462 Losses on the realisation of investments: ..................... Losses on the sale of land and buildings ................................................. 16 0 46 0 76 0 ..................... Losses on equities .................................................................................... 17 202 47 0 77 202 ..................... Losses on debt securities ........................................................................ 18 341 48 52 78 393 ..................... Losses on other financial investments .................................................... 19 9,555 49 230 79 9,785 Total .................................................................................................................................. 20 10,098 50 282 80 10,380 GRAND TOTAL .............................................................................................................. 21 78,648 51 21,565 81 100,213 260 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Balance on the technical account for direct business (+ o -) ........................ A 7 −22,207 7 −2 Balance of reinsurance ceded (+ o -) ............................................................. B 8 −7,703 8 0 Net balance of accepted business (+ o -) ........................................................ C 9 −188 9 31
ha ng e in th e pr ov is io n fo r u ne ar ne d pr em iu m s (
um m ar y la yo ut of te ch ni ca la cc ou nt sb y br an ch
Change in the equalisation provision (+ o -) ............................................................................... D 10 0
ro up c om pa ni es a nd c om pa ni es w he re a si gn ifi ca nt in te re st is h el d I: In co m e
In te re st s o n de po sit s w ith c ed in g co m pa ni es
Total ........................................................................................................... 5 200,031 35 6,722 65 206,753 Foreign portfolio: - Wages ...................................................................................................... 6 37,207 36 18,786 66 55,993 - Social contributions .................................................................................. 7 10,082 37 6,789 67 16,871 - Other employee costs ............................................................................... 8 2,473 38 2,312 68 4,785
The organisational structure of the Company and the Group and its developments are described in detail in the Corporate Governance and Share Ownership Report. The Group’s organisational structure is confirmed in its Functions, and promotes the integration of best practices regarding insurance, financial and investment techniques, activation of Group synergies and focus on operational efficiency at global level, including through Centres of Expertise supporting the entire organisation. The Group’s organisational structure is based on two dimensions: Group Head Office (GHO) and the Business Units. GHO acts as the strategic policy, guidance and coordination structure for the Business Units. The Business Units promote local entrepreneurship and autonomies, and provide international control. The organisational governance is ensured by integration and coordination mechanisms between the Business Units and the Group Head Office functions, represented by: – the Group Management Committee (GMC), namely the group of top management executives which discusses the main strategic decisions; – the Quarterly Business Review processes, which ensure alignment between GHO and the Business Units in terms of strategic objectives and the results trend; – three main cross-functional committees that support the Group CEO in guiding the Group’s strategic decisions: the Balance Sheet Committee, Finance Committee and Product & Underwriting Committee; – the Functional Guidelines and Functional Councils, through which functional coordination is implemented at global level; – a matrix system of reporting lines, classified as “solid” or “dotted” according to the intensity of guidance and coordination between the GHO Functions and the corresponding functions in the Business Units. The “solid” Functions, namely those in which the guidance and coordination activity is most intensive, are the Group CRO, Group General Counsel, including Group Compliance, and Group Audit; the other Group Functions are “dotted”.
The main characteristics of the Internal Control and Risk Management System are described in the Corporate Governance and Share Ownership Report. The Company has an internal regulatory system applicable to the whole Group, called the Generali Internal Regulation System (GIRS). That system is structured on three levels: – Group Policies, approved by the Board of Directors; – Group Guidelines, approved by the Group CEO or the managers of the Control Functions; – Group Operating Procedures, approved by the relevant functions of Group Head Office.
Also during the financial year that has just ended, following the Letter to the Market dated 5 June 2017 in which IVASS requested life insurance companies to conduct a self-assessment of the risk of money-laundering and financing of terrorism with reference to the 2016 financial year, 44 Group companies operating in the life sectors conducted the said self-assessment activity. This self-assessment process was conducted on the basis of the specific methodologies indicated by IVASS, requiring the risk to be measured by analysing and evaluating the following aspects: (i) the intrinsic risk associated with the nature of the business actually carried on; (ii) the ability of the internal control system to mitigate the intrinsic risk; (iii) the residual risk to the company after evaluating the effective ability of the internal control system to mitigate the intrinsic risk. On the basis of the results, actions designed to further mitigate the money-laundering and financing of terrorism risks were identified, to be implemented in the 2018 financial year by the Company and the Group. The risk mitigation actions planned for the 2018 financial year, delineated by the Company following the said self-assessment activity, were approved by the Board of Directors on 13 December 2017, after consulting the Risk and Control Committee and the Board of Statutory Auditors. The BSA will regularly monitor its implementation during the coming financial year.
In view of the evolutionary nature of any internal control system, specific updates were planned for 2018, as part of the process of ongoing improvement of the efficacy of the system pursued by the Company.
As stated in para. 2.3 above, the holding in BSI was sold by the Generali Group to the Brazilian company BTG in September 2015, as a result of a divestment process commenced by the Company in early 2014, and BTG subsequently transferred the holding to the Luxembourg company EFG International in 2016. As clarified by the Bank of Italy in the press release dated 5 May 2017 cited by the shareholder, its audits were conducted in October 2016, when BSI had not belonged to the Generali Group for over a year. The Company is therefore not entitled to obtain detailed information about the purpose of the audit or the nature and timing of the alleged breaches of the money-laundering legislation. Moreover, according to the information obtained at the Company’s internal offices in the course of the ongoing litigation with BTG regarding claims for damages made by the latter (see para. 2.3 above), the alleged breaches to which the Bank of Italy’s audit relates involve conduct and facts which took place after 15 September 2015, the closing date of the sale of BSI to BTG. Moreover, the Bank of Italy, in a subsequent press release dated 13 November 2017, announced its Order of 26 October 2017 whereby it revoked the prohibition on performing new operations and cancelled the procedure for closing the Italian subsidiary of BSI, previously initiated by Order dated 26 April 2017. With reference to BSI’s position in the Generali Group before its divestment, the BSA has made the appropriate checks at the relevant offices of the Company, and found that the information flows between the subsidiary BSI and the parent company Generali were subject to significant limitations. Firstly, the said limitations were connected with the regulatory and legislative provisions applicable to Swiss banks, in particular those governing banking secrecy, and secondly, when the acquisition of BSI by Generali was authorised, the Swiss authorities expressly required the bank to maintain an independent position within the Generali Group, adopting specific measures to protect its independence. More generally, since this Board of Statutory Auditors took office in April 2014, it has always paid specific attention to monitoring activities relating to preventing and reducing the risk of money-laundering, which was defined as one of the Group’s top priorities. In the 2017 financial