At 31 December 2018, Generali reached and surpassed its financial targets of more than € 7 billion in cumulative net operating cash in the 2015-2018 period and an average operating return on equity of more than 13%. The proposed 2019 dividend per share will enable Generali to reach and exceed the target of more than € 5 billion in cumulative dividends in the 2015-2018 period.
Share held in the Indian insurance joint ventures with Future Group increased to 49%. Through this transaction Generali will accelerate the leverage of the far-reaching distribution network of Future
Group to offer insurance protection solutions in the Indian market with a focus on digital.
Option of early redemption announced on all perpetual subordinated notes outstanding belonging to ISINs XS0415966786 and XS0416148202, to be exercised in March. The exercise of this option was authorized by the Italian insurance regulatory agency (IVASS)
FOCUS ON HIGH POTENTIAL INSURANCE MARKETS: 15%-25% earnings CAGR 2018-2021 depending on country/segment
Running a sustainable business, pursuing excellence in our internal processes, and living the community, playing an active role where we operate, beyond our day-to-day business, represent our commitments to stakeholders and the society as a whole. We have renewed them in the Charter of Sustainability Commitments.
Profits and losses on the realisation of other durable invest. 159,435 8,099
Claims, maturities and surrenders, net of the transferred reinsurance, were down (from 111,515 thousand to 101,324 thousand), with claims affecting premiums improved, from 78.5% to 75%.
The Generali Global Health segment of the London branch recorded negative results of -3,932 thousand (-2,485 thousand in the previous year) with a gross collection of 142,561 (97,250 thousand in the previous year).
The dividends received from the companies of the Group totalled 2,148,254 thousand, an increase of 167,010 thousand compared with the previous year (1,981,244 thousand). The main income from the shareholdings is the dividend received from Generali Italia, totalling 1,000,000 thousand (in line with the previous year).
Estimate of the reduction of costs arising from the verification of fraudulent motor claims Article 30, paragraph 2, of the Italian Law 24/03/2012 no. 27 introduced the requirement for insurance companies authorized to operate in the motor vehicle liability line of business, to indicate an estimate of the reduction in charges for fraudulent, claims resulting in from independent fraud control and prevention activities. IVASS
The categorization of the identified risks is consistent with the structure provided by IVASS Regulation n. 38 of 3 July 2018, Art. 19.
The own funds decrease as a result of the reduction of the value of the participations mainly due to the worsening of the financial market conditions.
The solvency requirement consequently decreases in line with the reduction in the value of the participations.
In addition to equity risk, the Company is also exposed to interest rate risk, arising from investments in bonds, and to currency risk arising from direct exposures due to branches (in particular linked to the UK branch) and from the participations in subsidiaries located in non-Euro area, mainly in Central-Eastern Europe.
The liquidity sources not related to the Company’s operating activity are the dividends received from the subsidiaries, loans obtained, interest income on loans and credits and other cash flows linked to disposals and investments.
C. INVESTMENTS I - Land and Buildings 1. Property used for own activities 11 304,136 2. Property used by third parties 4. Other realty rights 14 0 5. Assets in progress and payments on account 15 2,370,747 16 99,866,395
b) From other investments aa) income from land and buildings 35 0 bb) from other investments 36 279,690,045 37 279,690,045
PROFIT AND LOSS ACCOUNT Current Year 7. PREMIUM REFUNDS AND PROFIT-SHARING, NET OF REINSURANCE 65 72,507,298 8. OPERATING EXPENSES a) Acquisition commissions 66 219,043,522 b) Other acquisition costs 67 10,396,917 c) Change in commissions and other acquisition costs to be amortised 68 0 d) Collecting commissions 69 93 e) Other administrative expenses 70 47,715,884 f) (-) Reinsurance commissions and profit sharing 71 72,349,389 72 204,807,027 9. INVESTMENT CHARGES a) Investment administration charges, including interest 73 15,735,039 b) Value adjustments on investments 74 26,779,386 c) Losses on the realisation of investments 75 748,327 76 43,262,752 10. EXPENSES AND UNREALISED LOSSES ON INVESTMENTS FOR THE BENEFIT OF POLICYHOLDERSWHO BEAR THE INVESTMENT RISK AND ON INVESTMENT RELATING TO THE ADMINISTRATION OF PENSION FUNDS 77 20,650,419 11. OTHER TECHNICAL CHARGES, NET OF REINSURANCE 78 719,571 12. (-) ALLOCATED INVESTMENT RETURN TRANSFERRED TO THE NON-TECHNICAL ACCOUNT (item III. 4)
The estimated realizable value of the receivables from policyholders is determined on a flat-rate basis, according to the analysis of the collections trend of each single line of business, given the experience acquired.
The Italian direct business portfolio includes the provision for unearned premiums, the provisions for outstanding claims, and the equalisation provisions.
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 the contracts of the credit line of business signed or renewed before the 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, instituted in relation to 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 ) and computed according to the instructions of paragraph 1 Sec. III of the specific above-mentioned Regulation.
The Company, in the calculation of the mathematical reserves, follows the provisions set out in paragraphs 13 and 14 of Annex 14 to Regulation No. 22 dated 4 April 2008, and operates a cautious assessment on the basis of best estimate and a reasonable margin for adverse deviation of the factors considered. In particular, consistent with paragraph 19 of Annex 14 to Regulation No. 22 dated 4 April 2008 mentioned above, the Company makes use of the same technical bases that have been adopted for the calculation of the premium, for almost all of the technical provisions whose corresponding assets are valued according to the acquisition price. In any case, the amount of the mathematical reserves cannot be lower than that calculated with reference to the minimum guaranteed or surrender value conditions, if established.
The methods of determination and the results of the analysis of the technical provisions of the indirect business are the subject of a technical report of the Actuarial Function, as provided by paragraph 4 of Art. 23-quarter of the Regulation No. 22 dated 4 April 2008.
Pursuant Art. 7 of ISVAP (now IVASS) Regulation dated 11 March 2008, No. 17, which implements Art. 11 paragraph 3 and 348 of Legislative Decree dated 7 September 2005, No. 209, general expenses are recognized to the relevant segment, when they are directly attributable to that segment, based on the information relative to the cost centre, reflecting the organization of the Company.
Decreases for the year for: long-term devaluations 25,566 other changes 219
Initial amount depreciation quota for the year 5,980 other changes 1,046
Generali Paneurope DAC 25 355 2.2.1 Equities – Item C.II.1 2.2.1 a) Variation in equities over the year – (attachment 5)
No other non-life business technical provisions were written in the financial statements to be charged to reinsurers.
Write downs of receivables from policyholders for premiums, carried out over the year and charged to the technical accounts, amount to 301 thousand.
Lloyds Banking Group Plc 363 GBP fixed perpetual yes Tier I
The extraordinary reserve decrease of 3,357 thousand is consequent to the share capital increase, whereas the rise of 73,488 derives from the allocation of the previous year residual profit.
Final amount of the 2018 financial year 1,565,165 3,568,250 −3,040 793,055 92,676 802,313 30,425 118,769 20,123 153,474 4,155,965 1,893,328 313,033 1,473,283 14,976,820
Solvency II; — bonds for 1,000,000 thousand Euro with the following characteristics: • maturity 4 May 2026; • fixed interest rate until due date; • subordinated towards all the non-subordinated debtors, including policyholders; • suitable to cover the solvency margin; — bonds for 1,250,000 thousand Euro with the following characteristics: • maturity 27 October 2047; • early repayment option for the Company from 27
— Natural disaster risks: the premium reserve for each business is integrated with an additional allocation
There are no contracts with the characteristics indicated in the paragraph 45 of the Annex 15 of the ISVAP (now IVASS) Regulation No. 22/2008 amended and supplemented.
Creditors arising from reinsurance operations 0 154,068 0 5 0 154,073
Section 16 – Receivables and Payables 16.1 Duration of receivables and payables
I. Guarantees issued a) Guarantees and endorsements issued in the interest of parent companies, subsidiaries and affiliates 0 0 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 796,291 1,895,083 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 0 45,315 m) Assets deposited for direct reinsurance operations 170,767 118,458
The following table is a breakdown of all contracts outstanding at year end, divided by purpose and contract type.
The amounts mainly concern the reinsurance relations of the Generali Employee Benefits unit with the captives of multinational clients.
Technical balance of direct business 895 15,560 1,221 57 1,654 4,612
Technical balance of direct business −2,710 −1,846 5,082 −1,101 330 −1,428
(+) Positive share of investments allocated from the non-technical account 16,056 13 646 1,745 52 5
The breakdown of the main items and changes during the year is provided in the tables below; all amounts are recorded in the income statement.
Devaluations of credits due by policyholders 8,208 291 0 0 8,208 291
Unrealised income and gains on investments for the benefit of policyholders 0 415 0 0 0 415
Other income: Recoveries of administration expenses and charges 0 32,026 0 0 0 32,026
Losses on the realisation of investments 0 0 0 0 0 0
Hedging operations regarding assets and liabilities, and the other operations provided by the investment Policy adopted by the Board of Directors pursuant IVASS Regulation No. 24 dated 6 June 2016, as already specified in the Notes to the Accounts, have determined a total net loss of 22,699 thousand relating to the realized economic components. For the life business, the net result is negative for 25,886 thousand (expenses of 26,757 thousand among the other charges and income of 871 in the financial management). For the non-life business, the net result is positive by 3,187 (income of 6,473 thousand in the financial management and expense of 3,286 thousand among the other charges).
Pursuant to the above-mentioned resolution, sums due for services rendered during the year by Ernst & Young S.p.A., are indicated in the following table.
Increases (+) / Decreases (-) of non cash-items Change in technical reserves -238,722 -798,396 Changes in provisions 27,501 2,255 Change in depreciation and amortization 10,861 24,869 Adjustments/Reversal to equity investments 60,789 28,606 Other adjustments for non monetary items -7,457 66,949 2. Cash flow before changes of the net current assets -452,823 -709,808
Equity Increase in capital and paid capital reserves 0 0 Use of capital reserves to pay dividends 0 -153,485 Dividends paid to shareholders based on profits of the previous years -1,330,761 -1,095,876 2. Cash flows from equity -1,330,761 -1,249,361
I - Debtors arising out of direct insurance operations a) for premiums - current year 71 102,079 3. Current accounts with insurance companies 75 1,096 4. Policyholders and third parties for recoveries 76 3,765 77 129,043
3. Other prepayments and accrued income 98 42,990 99 76,941 210 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
2. Unearned premium provision for supplementary coverage 119 46,557 3. Provision for claims outstanding 120 1,230,286 4. Provision for profit sharing and premium refunds 121 81,609
Increases for the year ............................................................. + 13 15,970 43 1,126 for: 14 15,950 44 1,046 other changes .................................................................. 15 20 45 80 Decreases for the year ........................................................... - 16 0 46 1,418 for: 17 0 47 1,411 other changes .................................................................. 18 0 48 7 Amortised final goodwill (b) (*) ........................................... 19 220,171 49 5,688
Le ga l e xp en se s (c la ss o f i ns ur an ce
L (c la ss o f i ns ur an ce
ire ct b us in es s gr os s of re in su ra nc e
Net balance of accepted business (+ o -) .................................................................... C 9 −7,403
Change in mathematical provision and in other technical provisions (+ o -) ................ ...... - 3 17,365
Balance of other technical income and charges (+ o -) ............................................... ...... + 4 16,509
S um m ar y la yo ut o f d ire ct b us in es s pr em iu m s w rit te n
288 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Business Units. While the GHO acts as a strategic guidance structure, it leads and coordinates the Business Units, which value entrepreneurship and local autonomy. Organisational governance takes place through integration and coordination mechanisms between the Business Units and the Group Head Office functions, represented by: – the Group Management Committee (“GMC”), which supports the Group CEO and top management in sharing the main strategic decisions; – the three main cross-functional committees that support the Group CEO in addressing the Group’s strategic decisions: Balance Sheet Committee, Finance Committee, Product & Underwriting Committee; – Business Strategic Reviews, Clearance Meetings and Capital & Cash Deep Dives, which ensure the alignment between the GHO and the Business Units with a respective focus on strategic actions and discussions, economic-financial performance, remittance and capital optimisation; – 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” departments, which have hierarchical reporting that is carried out more directly and systematically by the GHO, are the Group Chief Risk Officer, Group General Counsel, including Group Compliance and the Group Audit; the other Group Functions are “dotted”.
The other implementation activities, for which the transitional provision of Art. 95, paragraph 1, of IVASS Regulation n. 38/2018 requires the adjustment by 31 December 2019 and the adoption of the appropriate resolutions within the first half of 2019, have been almost completely completed within the first quarter of the current year. The remaining activities are being finalised, and are expected to be completed within the first half of 2019, in full compliance with the regulatory deadline. The BSA has constantly monitored the activities of adapting the governance structure of the Company and Group to IVASS Regulation n. 38/2018, receiving periodic information from the company functions involved, and formulating recommendations and suggestions where deemed appropriate.
As regards the administrative accounting system and the financial reporting process, the Board of Statutory Auditors monitored (inter alia) the Company’s activities designed to assess their adequacy and effective operation on a continuous basis. The Company pursued this objective by adopting a “financial reporting model” consisting of a set of principles, rules and procedures designed to guarantee an adequate administrative and accounting system. In line with the Company’s ICRMS, the financial reporting model involves the corporate bodies and operating and control structures in integrated management, in compliance with the different levels of responsibility. The main characteristics of the model are described in the Corporate Governance and Share Ownership Report. Data and information relevant to the performance of their respective tasks pursuant to Art. 150, para. 3, TUIF and Art. 74, para. 3(e) of IVASS Regulation n. 38/2018were exchanged with the managers of the auditing firm, and no noteworthy aspects emerged. At the meeting of 25 March 2019, the Board of Statutory Auditors examined the draft of the additional report prepared by the auditing company EY pursuant to Art. 11 of EU Regulation 537/2014, which reported no significant shortcomings of the internal control system in relation to the financial reporting process. That report was discussed and analysed during information exchanges between the Board of Statutory Auditors and auditing firm. As part of its role to oversee the suitability of the administrative -accounting system, the BSA also established, pursuant to Art. 15 of the Market Regulation of 28 December 2017, that the Company’s organisation and the procedures adopted enable the Company to establish that the companies controlled and incorporated by it which are governed by the legislation of countries not belonging to the European Union and are required to comply with the Consob regulations have an administrative/accounting system suitable to supply the Company’s management and external auditors regularly with the economic, capital and financial data required to draw up the consolidated financial statements. At 31 December 2018, the following are non-EU companies relevant for the purposes of the Market Regulation: Generali Personenversicherungen AG, Generali (Schweiz) Holding AG and Generali China Life Insurance Co. Ltd.
The Board Review process for the 2018 financial year, which involved all Directors and the Chair of the BSA, was conducted by means of a questionnaire developed by a main external consulting company, accompanied by interviews aimed at enhancing the individual contribution of each Director. In order to ensure the confidentiality of responses and monitor their consolidation process, the results of the procedure were managed by the external consultant who reported to the GSC and Corporate Affairs Function. The results of the Board review were presented, shared and discussed by the Board of Directors in the meetings of 12 December 2018 and 30 January 2019, in which the Board of Statutory Auditors took part. The Board of Statutory Auditors acknowledges that, in compliance with the recommendations of the Self-Governance Code, the outcomes of the Board review have been taken into consideration by the GSC and the Board of Directors - supported by the ARC - for the purposes of drafting the “Opinion for Shareholders on the size and composition of the Board of Directors for the three-year period 2019-2021”. This opinion was approved by the Board of Directors on 20 February 2019, as previously sent to the Board of Statutory Auditors, and was the subject of prior publication with respect to the date of the Shareholders’ Meeting called to appoint the Board of Directors for the three-year period of 2019-2021, so that the Shareholders could take the assessments carried out by the BSA and its recommendations into account in the selection of the candidates with adequate advance notice with respect to the last date of filing of the lists.
Shareholders & Governance governance@generali.com Manager: Michele Amendolagine 310 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018