Generali Finance B.V. exercised the early redemption option of two perpetual subordinated notes rispettivamente per respectively for € 1,275 million and £ 700 million. These debts have already been refinanced through the subordinated bond launched by Assicurazioni Generali on 20 October 2015 for an overall amount of € 1,250 million, targeting institutional investors.
Moody’s confirmed the IFS rating at Baa1 for Generali, with a stable outlook.
Fitch confirmed the IFS rating at A- for Generali, with a stable outlook.
Board of Directors Approval of the Annual Integrated Report and Consolidated Financial Statements, the Parent Company Financial Statements Proposal, the Corporate Governance and Share Ownership Report and the Sustainability Report as at 31 December 2016 and the Remuneration Report
The long-term variable remuneration is based on a long-term plan based on Assicurazioni Generali shares (upon approval by the Shareholders’ Meeting) with the following features: – the plan is paid out over a period of 6 years and is linked with specific Group performance targets (Return on Equity and relative Total Shareholder Return) and the surpassing of a minimum Economic Solvency Ratio level – the plan is based on a three-year performance period and additional sale-restriction periods (i.e. minimum holding) on granted shares up to two years.
• Solid Group capital position confirmed, with the Regulatory Solvency Ratio at 177% and Economic Solvency Ratio a 194%
Equity securities: share portfolio Equity securities decreased in absolute terms, standing at € 17,701 million (€ 18,353 million at 31 December 2015).
The technical provisions and financial liabilities of the life segment - not including deferred liabilities towards policyholders - amounted to € 385,882 million; the increase of 4.4% reflects the increase in reserves for the traditional portfolio (+4.4%) as well as the linked portfolio (+4.8%), and benefits from the combined effect of net inflows and financial market trends reflected in the trend of the unit-linked reserves.
Gross written premiums in the P&C segment continued the recovery in place during the year, standing at € 20,783 million. The performance (on a like-for-like basis, +2.1%) can be attributed to the development of the motor segment (+4.3%), driven by Spain, CEE Countries, Germany and Argentina, which more than offset the continuing decline in motor premium income in Italy (-5.2%). France is stable.
The operating result for the property&casualty segment increased to € 2,044 million (€ 1,987 million at 31 December 2015). This increase (+2.9%) is mainly attributable to trends in the technical result, with a Group Net CoR of 92.5%, further improving (-0.7 pps) compared to the previous year.
Acquisition costs are essentially stable, amounting to € 4,246 million (+0.4%). The ratio of acquisition costs to net earned premiums therefore increased to 21.6% (21.3% at 31 December 2015).
With reference to the exposure to the various asset classes, the fixed income portfolio was up to € 29,136 million, accounting for 73.9% of the total. On the other hand, there was a fall in the exposure to equity instruments, from 6.3% at 31 December 2015 to 5.5%, while the exposure to real estate investments fell from 10.9% to 9.6%.
97 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
The capital requirement is calculated by means of the Group’s PIM for financial, credit, life and non-life underwriting risks. Operational risks are measured by means of EIOPA Standard Formula, complemented by quantitative and qualitative risk assessments. The PIM provides an accurate representation of the main risks to which the Group is exposed, measuring not only the impact of each risk taken individually but also their combined impact on the Group’s Own Funds.
Life underwriting risks derive from the Group’s core insurance business in the life segment. Life technical provisions refer mostly to traditional business, related to insurance with profit participation business. Unit-linked products represent a minor component of the Group portfolio in respect to the traditional business, although their incidence is increasing. For the Group’s life underwriting business key figures, please see the Section Details on insurance and investment contracts in the Notes.
Moreover, a particular emphasis is placed on the underwriting of new contracts with reference to medical, financial and moral hazard risks. The Group has defined clear underwriting standards through manuals, forms and medical and financial underwriting requirements. For insurance riders, which are most exposed to moral hazard, maximum insurability levels are also set, lower than those applied for death covers. In order to mitigate these risks, policy exclusions are also defined.
In addition to these areas, the International Operations cluster has been introduced, which includes Holding activities - including Group reinsurance and the international business of the Parent Company not allocated to the other geographical areas - the Europ Assistance business and securities and real estate investment management activities carried out for Group companies.
segments and territorial areas, the Management report includes the following alternative performance measures.
Starting from this integrated report, the Group has reviewed the portrayal of its operating segments in order to provide disclosures which are more closely aligned with the new organizational structure of the Group and to ensure an improved economic representation of the performance of the individual business and geographical segments.
With reference to holding costs, the general expenses incurred for management and coordination are considered as operating, by the Parent Company and territorial sub-holdings.
• costs arising from the assignment of stock options and stock grants by the Group.
The average investments (calculated on book value) included land and buildings (investment properties), investments in subsidiaries, associated companies and joint ventures, loans and receivables, available for sale financial assets, financial assets at fair value through profit or loss less financial assets and liabilities related to linked contracts, derivatives classified in financial liabilities at fair value through profit or loss and cash and cash equivalents. Total investments are adjusted for derivative instruments classified as financial liabilities at fair value through profit of loss and REPOs classified as other financial liabilities. The average is calculated on the average asset base of each quarter of the reporting period.
If in a business combination achieved in stages, the acquirer ’s previously held equity interests in the acquire is re-measured at its acquisition date fair value and any resulting gain or loss recognized in profit or loss.
The IASB will constitute a Transitional Resource Group (TRG), a public forum, as the TRGs for IFRS 15 Revenue from contracts with customers, and for the ‘IFRS 9 Financial Instruments in relation to the impairment, which will highlight to the IASB potential implementation issues arising from the application of the new standard by companies, and propose possible actions to address the potential issues identified. The membership of the TRG, which has yet to be defined, will include a variety of stakeholders such as preparers of financial statements, insurance companies, auditors and users of financial statements.
The amounts are accounted for net of the related deferred taxes and deferred policyholder liabilities.
The item refers to the Group consolidated result of the period. Dividend payments are accounted for after the approval of the shareholders’ general meeting.
This section comprises gains or losses previously recognized in equity, that are reclassified to the profit or loss according to IFRSs (e.g. following the transfer of a financial asset available for sale).
If an observable input requires an adjustment using an unobservable input and that adjustment results in a significantly higher or lower fair value measurement, the resulting measurement would be categorised within the level attributable to the input with the lowest level utilized.
According to this accounting model the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in an appropriate item of comprehensive income while the ineffective portion of the gains or loss on the hedging instrument is recognized in profit or loss. The amount accumulated in the other components of comprehensive income is reversed to profit and loss account in line with the economic changes of the hedged item.
Investment vehicles and entities supporting the activities of life companies are also reported in this segment.
Changes in the consolidation area compared to the previous year and the table listing companies included in the consolidation area are attached to these Notes, in the Appendix related to the change in the consolidation area, compared to 2015.
cash flow from operating activities 936 -915 637 736 cash flow from investing activities -319 960 -668 -726 cash flow from financing activities -137 -112 -112 63
No relevant transactions with minority shareholders occurred during 2016 2.2 Interest in Associates
Carrying amount of interest in immaterial associates 264 257 151 130
However, Assicurazioni Generali is part of a reinsurance contract with a vehicle which provides coverage with respect to the potential losses affecting Generali Group from catastrophes arising from Europe windstorms over a three year period. Generali Group is deemed to be sponsor since is has originated the insurance risk of the structured entity. Generali pays a premium of 2.25% per annum on the € 190 million of cover under the reinsur-ance agreement. The related cost is presented within the “Earned premiums ceded” line in the statement of Profit or Loss.
The cash flow hedging relationships mainly relate to cross currency swaps hedging subordinated liabilities issued by the Group in British pound and to micro-hedge and reinvestment risk reduction operations in the life portfolios.
In the Non-life segment insurance provisions remain stable (-0.1% compared to 31 December 2015).
Mathematical provisions and other insurance provisions 480 480 607 563 1,087 1,043 15 Deferred acquisition costs
Insurance provisions and financial liabilities related to policies of the life segment 2015), whereas investment contracts with discretionary participation feature amounted to 36.2% (35.3% at 31 December 2015).
Embedded Value, depending on the portfolio structure and on the economic contingencies. In particular the magnitude of variances depends on the alignment of some variables such as return of the fund, level of guarantee and structure of surrender penalties. Like the previous year, the offsetting effects of these factors result at Group level in an increase in the Embedded Value when the lapse rates decrease.
Unrealized gains and losses on available for sale financial assets -69 353
Reserve for other unrealized gains and losses through equity -941 -731
Notes to the income statement 225 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
Life net insurance benefits and claims 51,704 56,600 -577 -590 51,127 56,010
Change in other insurance provisions 633 2,218 -17 -25 616 2,193 227 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
Fee and commission expenses related to pension funds management 11 12 34 Expenses from subsidiaries, associated companies and joint ventures
231 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
41 Transfers of financial instruments measured at fair value between Level 1 and Level 2
Are corporate bonds, classified into available for sale and fair value through profit or loss. Their fair value is mainly determined based on the market or income approach. In terms of sensitivity analysis any changes in the inputs used in the valuation do not cause a significant impact on the fair value at the Group level considering the lack of materiality of these securities classified in level 3.
• Financial assets where the investment risk is borne by the policyholders and related to pension funds
It should be mentioned that the split of “Other changes” for each available for sale asset class contains relevant amounts deriving from some reclassifications between categories, incurred in the first semester of the year, and from changes in the consolidation perimeter. For what regards financial assets where the investment risk is borne by the policyholders and related to pension funds the relevant amounts of “Other changes” can be explained by the movements of specific assets within the class, for example cash and credits.
237 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
In line with the previous plans, the 2016 LTI plan can be treated as an equity-settled share-based payment falling under IFRS 2 scope, which provides a grant date measurement model seeking to capture the value of the contingent right to shares promised at grant date, to the extent that that promises becomes an entitlement of the counterparty, rather than the value of any shares finally delivered.
As far as other commitments are concerned, approximately € 953 million refer to potential commitments of the German life companies towards a German entity in order to protect the policyholders in the local market if the funds already available within the policyholders protection scheme are not sufficient to face the insolvency of one or more insurers.
Ot he r l oa ns a nd re ce iva ble s
Lo an s an d rec eiv ab les Av ail ab le for s ale fin an cia l a ss ets
Fin an cia l a ss ets a t fa ir v alu e t hr ou gh p rof it o r l os s
In co m e an d e xp en se s fr o m in ve st m en ts
Tr an sfe r to pr ofi t a nd lo ss ac co un t
Su m m ar is ed fi na nc ia l i nf or m at io n
GID Fonds AVRET 094 EUR 112,461,703 G 11 100.00 AachenMünchener Versicherung AG 100.00 100.00
GID Fonds AARGT 094 EUR 235,371,034 G 11 100.00 Cosmos Lebensversicherungs Aktiengesellschaft 100.00 100.00
SCI Generali Wagram 029 EUR 284,147 G 10 100.00 Generali IARD S.A. 100.00 98.86
SCI Espace Seine-Generali 029 EUR 1,000 G 10 100.00 Generali Vie S.A. 100.00 98.86
SCI du 33 avenue Montaigne 029 EUR 174,496 G 10 100.00 OPCI GR1 100.00 98.86
Generali Europe Income Holding S.A. 092 EUR 308,735,045 G 8 0.81 Generali Immobilien GmbH 100.00 99.61 5.46 Generali Real Estate Investments B.V.
Generali Saxon Land Development Company Ltd 031 GBP 250,000 G 8 20.00 Generali Italia S.p.A. 100.00 99.66 10.00 Alleanza Assicurazioni S.p.A.
Generali Alapkezelo Zártköruen Muködo Részvénytársaság 077 HUF 500,000,000 G 8 74.00 Generali Biztosító Zrt. 100.00 100.00 26.00 Generali CEE Holding B.V.
PT Asuransi Jiwa Generali Indonesia 129 IDR 1,103,000,000,000 G 3 98.00 Generali Asia N.V. 98.00 98.00
295 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
Cabinet Berat et Fils S.A.S. 029 EUR 8,000 a 11 100.00 Cofifo S.A.S. 100.00 98.86 1,814
COSEV@D Société par actions simplifiée 029 EUR 4,759,035 a 11 40.88 Generali France S.A. 100.00 98.86 3,396
Bien Être Assistance S.A.S. (*) 029 EUR 1,000,000 c 11 51.00 Europ Assistance France S.A. 51.00 50.99 576
SCI Font Romeu Neige et Soleil 029 EUR 15,200 a 10 100.00 Generali IARD S.A. 100.00 98.86 16
298 Generali Group Annual Integrated Report and Consolidated Financial Statements 2016
Generali 3 Banken Holding AG (*) 008 EUR 70,000 b 9 49.30 Generali Versicherung AG 49.30 49.30 83,121
Car Care Consult Versicherungsvermittlung GmbH 008 EUR 55,000 a 11 100.00 Generali Sales Promotion GmbH 100.00 100.00 1,061
Europ Assistance d.o.o. za posredovanje u osiguranju 289 RSD 1,405,607 a 11 100.00
The most significant transactions performed after the year end included the following: • On 23 January 2017 the Company purchased the voting rights to 505 million Intesa Sanpaolo shares, namely 3.01% of the share capital, by means of a stock loan.
responding amendments to the Regulation of the Board of Directors and the Board Committees. In view of the factors set out above, the Board of Statutory Auditors concludes that the Company’s RPT Procedures comply with Consob Regulation 17221/2010, as amended.
The implementation of the Remediation Plan agreed with IVASS during the preliminary process regarding the said application is proceeding as planned by the Group Risk Management Function. This implementation is monitored by the Risk and Control Committee and the Board of Directors; the Board of Statutory Auditors in turn has received regular updates on the matter as a result of its attendance at meetings of the Risk and Control Committee and the Board of Directors. The Company recently sent the Remediation Plan to IVASS, updated with some further actions, as a result of the request for additional documentation sent by the Regulator in December 2016, following the analyses conducted by the Board of Regulators during the year.
An innovative Insurance Linked Security (ILS) named Horse Capital I was placed in the capital market to cover the loss ratio on the aggregated motor third-party liability (MTPL) portfolio of 12 of the Group’s European companies.
The Digital Agent program is the Group initiative launched with a view to equipping our agents with suitable digital tools in order to understand and best adjust to customers’ new approach to insurance, through greater visibility online, in social media and in the mobile world. The creation of web&mobile tools has been completed in Spain and is underway in France, Germany and Austria. Agents in Indonesia, Italy and Spain are now equipped with tools allowing them to efficiently be on the social networks.
Nationality: Italian Professional background: Manager In office since 28 April 2016
Nationality: French Professional background: Manager In office since 17 March 2016
At 31 December 2016, total investments amounted to € 474,069 million, up by 4.7% over the previous year. Group investments amounted to € 395,752 milioni (+4.8%) and unit/index linked investments amounted to € 78,317 million (+4.5%).
Interest expense on liabilities linked to operating activities 358 411 -12.8%
The average duration at 31 December 2016 was 6.72 years compared to 6.68 years at 31 December 2015. The change in the average duration is a direct result of the re-financing operations described above.
Argentina is the main market in this region, where Generali is ranked as the fourth operator. The Argentinian market is characterized by an historically high inflation rate, and a volatile financial environment, both of which have accentuated after the last political elections in late 2015. However, in the second part of 2016, the economy began to show signs of stabilization and opening towards the international markets despite the recession, which are positive signs for the future of this key Latin American country. Despite the tough scenario for the insurance business, the Group has implemented best practices in its Argentinian subsidiaries, enabling them to stand out in terms of service quality and innovation. Brazil is the second most important country in this area, although the current economic crisis and political instability are limiting development. Despite systemic turbulence, Brazil boasts of an emerging middle class which represents potential for insurance market development in the coming years. The Group also operates in Chile, Colombia, Ecuador, Guatemala (whose disposal was finalised in early 2017) and Panama.
Result of the period attributable to the Group 2,081 2,030 Result of the period attributable to minority interests 158 229 16 EARNINGS PER SHARE Basic earnings per share (€) 1.34 1.30 From continuing operations 1.34 1.33 Diluted earnings per share (€) 1.32 1.29 From continuing operations 1.32 1.31 86 Generali Group Annual Integrated Report 2016
Financial liability A financial liability is any liability that is: (a) a contractual obligation: (i) to deliver cash or another financial asset to another entity; or