01 Directors’ report on 4 operations for the year ended 31 december 2017 02 Poste Italiane financial 136 statements for the year ended 31 december 2017 03 Reports and Attestations 548
On the basis of these unique characteristics, in early 2018 we drew up the new Deliver 2022 Strategic Plan, which sets out a plan for the Group’s development in line with market needs. This includes a focus on professional development and the nurturing of talent, whilst committing to an investment programme of approximately €2.8 billion over the period of the Plan, centred on digital development, automation and reorganisation of the service model for retail, business and Public Administration customers.
The soundness of the choices we have made enables us to pay our shareholders a dividend of €0.42 per share for 2017, which will increase by 5% a year until 2020, after which our intention is to maintain a minimum payout of 60% from 2021.
All of our activities, impacts and achievements are built on a solid foundation: our people, our human capital. This is why training, professional development, the appreciation of diversity, safety in the workplace and the wellbeing of all our employees are cornerstones of the Group’s strategy.
Directors’ report on operations for the year ended 31 December 2017 Statement from the Chairwoman and the Chief Executive Office
(1) The Board of Directors was elected by the Annual General Meeting held on 27 April 2017 to serve for a period of three years, and will remain in office until the Annual General Meeting’s approval of the financial statements for the year ended 31 December 2019.
(2) The Board of Statutory Auditors was elected by the Ordinary General Meeting of 24 May 2016 to serve for a period of three years and will remain in office until the General Meeting’s approval of the financial statements for the year ended 31 December 2018. On 30 January 2017, the Alternate Auditor, Andrea Bonechi, resigned from his position with immediate effect. As a result, the Annual General Meeting of 27 April 2017 elected Antonio Santi to serve as an Alternate Auditor.
(3) The Supervisory Board was appointed by the Board of Directors’ meeting of 24 May 2016 for a three-year term. (4) The only internal member, Head of Poste Italiane SpA’s Internal Auditing. (5) This member was appointed by the Board of Directors’ meeting of 22 June 2017 (as replacement for Gennaro Terracciano, who resigned on 17 March 2017)
DIRECTORS Giovanni Azzone Mimi Kung Carlo Cerami Roberto Rao Antonella Guglielmetti Roberto Rossi Francesca Isgrò
Corporate Governance Poste Italiane’s shares are listed on the Mercato Telematico Azionario (the MTA, an electronic stock exchange) organised and managed by Borsa Italiana SpA. The Company is controlled by the Ministry of the Economy and Finance (MEF), which holds 64.26% of the share capital, including a direct 29.3% interest and an indirect 35% interest through Cassa Depositi e Prestiti SpA (CDP), itself controlled by the MEF. The remaining 35.74% of the share capital is represented by the free float.
Poste Italiane has adopted a “traditional” governance model, separating the roles of the Board of Directors and the Board of Statutory Auditors. The Company’s accounts are audited by an independent firm of auditors.
The Board of Directors consists of nine members (eight non-executives and one executive) and normally meets once a month to examine and vote on resolutions regarding the Business Plan and the annual budget, the operating performance, the results of operations, proposals relating to the organisational structure and transactions of strategic importance. The Board met 14 times in 2017. Of the nine members of the Board, seven meet the requirements to qualify as independent.
The role of the Chairwoman is to lead and oversee the Board of Directors. She is the Company’s legal representative and exercises the powers provided for by law and the Company’s By-laws, and those assigned by the Board of Directors’ meeting of 28 April 2017, and subsequently modified at the meeting of 25 January 2018.
As a result of the new Supervisory Standards applicable to BancoPosta RFC, issued by the Bank of Italy on 27 May 2014, Poste Italiane, in providing financial services to the public, is comparable – for the purposes of application of corporate governance regulations – to a major bank in terms of size and operational complexity.
In line with the new strategic guidelines set out in the Deliver 2022 Strategic Plan presented to the financial community on 27 February 2018, the Group’s activities are divided into four operating segments: Mail, Parcels and Distribution; Payments, Mobile and Digital; Financial Services; Insurance Services.
The transaction, between related parties (given that Poste Italiane SpA and Invitalia SpA are under the common control of the Ministry of the Economy and Finance), in accordance with the law and the related regulations, was approved by Poste Italiane SpA’s Board of Directors, with the prior consent of the Board’s Related and Connected Parties Committee.
The partial demerger of assets belonging to Postecom SpA to Postel SpA, consisting of Postecom’s investments in PatentiViaPoste ScpA and Consorzio Poste Motori was effective for legal, accounting and tax purposes from 1 April 2017, as was the merger of what remained of the company with and into Poste Italiane.
On 21 December 2017, Poste Italiane and Anima Holding SpA (in which Poste Italiane holds a 10.04% interest) signed a Memorandum of Understanding with the aim of strengthening their partnership in the asset management sector. The transaction envisages The partial spin-off of management of the assets underlying Poste Vita SpA’s Class I insurance products (totalling over €70 billion), previously attributed to BancoPosta Fondi SpA SGR, to Anima SpA SGR. As a result of the spin-off, following receipt of the necessary consents from the relevant supervisory authorities, Poste Italiane SpA will receive newly issued shares in Anima SpA SGR that will at the same time be acquired by Anima Holding SpA in return for a cash payment of €120 million. The partnership agreements between the Poste Italiane Group and Anima Holding SpA, dating back to July 2015, by virtue of which Anima Holding SpA has been delegated to manage the retail funds established by BancoPosta Fondi SpA SGR and the assets underlying Poste Vita SpA’s Class III insurance products, will be amended and expanded. The extended partnership will have a duration of 15 years.
On 6 March 2018, Poste Italiane SpA and Anima Holding SpA, together with Poste Vita SpA, BancoPosta Fondi SpA SGR and Anima SpA SGR, to the extent of their respective responsibilities, signed implementing agreements designed to strengthen their partnership in the asset management sector, in accordance with the terms and conditions announced in December 2017.
Finally, with the aim of more effectively driving growth in the payment services market and strengthening the service offering for retail, business and Public Administration customers, Poste Italiane has decided to combine the Poste Italiane Group’s distinctive competencies in the field of mobile and digital payments in one entity.
(*) BancoPosta’s Internal Auditing function reports directly to the Board of Directors and the Board of Auditors
In 2017, a process to develop the organisational model was launched aimed at guaranteeing a sharper focus on business priorities, strengthening oversight of the quality of services provided to customers and strategic stakeholders, and enabling operational efficiencies by creating a shared services centre to ensure a correct balance of service quality, flexibility and cost control, and greater efficiency in the management of the control system, partly through the use of technologies.
�� The establishment of the Chief Operating Office function to create a centralised customer services and back office model that guarantees operating excellence and improvement of the customer experience.
Moreover, as mentioned above, in order to better tackle the competitive challenge already underway in the payments sector, and also with regard to the introduction of the new European Payment Services Directive (PSD2), the Payments, Mobile and Digital function was established with the aim of creating a single payment solutions offering by combining the Group’s distinctive competencies in this area.
Directors’ report on operations for the year ended 31 December 2017 2. Organisational structure
The customer contact channels are managed by two Poste Italiane business functions dedicated to the sale of products and services and specialised by type of customer: Private Customer and Business and Public Administration.
Organisational initiatives aimed at optimising the commercial management of the retail and SME segments continued during the year. The “New Retail Service Model”2 was implemented at further post offices and the process of enabling post offices to use the “guided consultancy” platform was completed. In addition to helping counter staff with regulatory requirements regarding investment products and services, this platform serves as a guide in identifying the best investment solutions for customers. At 31 December 2017, the platform was present in all post offices.
Commercial network (number) At 31 December 2017 At 31 December 2016
3. The figure refers to registered and active users at 31 December 2017. 4. Chatbot (from chat and bot, which is an abbreviation for the word robot) is a program through which you can “speak” to a robot equipped with artificial intelligence that is programmed to give structured, sensible and pertinent answers to questions it has been asked.
The logistics network6 is locally organised on two levels, the first of which deals with coordination and is represented by Area Logistics Offices responsible for one or more regions, whilst the second is operational and includes sorting centres (mechanical and manual) and distribution centres (Delivery Offices).
5. Postel SpA, SDA Express Courier SpA, Consorzio Logistica Pacchi ScpA and Mistral Air Srl report to the Mail, Logistics and Communication function. 6. The logistics process covers receipt, collection, transport, sorting and delivery
Despite the recovery in oil prices from September (Brent rose from $56.7 per barrel at the end of September 2017 to around $67 per barrel at the end of December), as a result of demand trends and maintenance of the agreement to curb supply among the main oil producing countries, inflation remained moderate, due to the effects of certain structural changes relating to the labour market that kept a lid on wage rises.
In the United Kingdom, after the preliminary agreement on future relations with the European Union (a two-year transition period is envisaged), the economic cycle registered a favourable trend (according to data from the Office for National Statistics the growth stood at 1.5%, higher than the consensus estimate of 1.4%), characterised by positive signs of recovery in private consumption and a low unemployment rate, accompanied by an acceleration in inflation linked to the weakening of sterling. In this context, the Bank of England tightened its monetary policy stance, bringing the official rate back to 0.5%, after reducing it following the Brexit referendum.
The promising international economic scenario also favoured the performance of the main emerging economies, which were set on a positive growth path, albeit at varying paces.
The euro area economic cycle indicator (€-coin), which estimates the underlying trend for the area’s GDP, rose from 0.68 in January 2017 to 0.91 in December.
Directors’ report on operations for the year ended 31 December 2017 3. Macroeconomic environment
However, the 2% inflation target set by the ECB has not yet been reached, partly due to the steady strengthening of the exchange rate.
In this favourable international scenario, the Italian economy registered a robust growth rate, even though the economic activity trend was lower than in many other Eurozone countries and in the EMU as a whole. Unlike in the past, the recovery is affecting all economic sectors, from industry to services. Investment also picked up, boosted by fiscal stimulus policies. The Bank of Italy’s coincident indicator, ITA-coin, rose from 0.10 in January 2017 to 0.49 in December, highlighting the expansionary phase.
Employment and the labour market in general have benefited from this favourable economic situation. The banking sector continued its efforts to reduce non-performing loans (net non-performing loans fell by approximately 26% from €86.8 billion in December 2016 to €64.4 billion in December 2017).
On the bond markets, the spread between ten-year BTPs and Bunds was somewhat volatile, with values above 200 basis points in the first half of 2017, then normalising from July onwards (fluctuating between 150 and 190 basis points) and reaching around 160 basis points at 31 December 2017. The yield on ten-year BTPs fluctuated between 1.90 and 2.40% during the first half of the year. In December it touched a low of 1.65%, before closing the year at 2% as a result of the increase in market rates.
As noted in the section on the organisational structure, from 2017, the method of presenting the revenue and cost components relating to the life and non-life insurance businesses has been revised. In this regard, the statement of profit or loss now includes a new item, Revenue from insurance services after movements in technical provisions and other claims expenses, providing a synthetic indication of the Insurance Services segment’s contribution to the Group’s operating result. This item is defined as the sum of premium revenue net of outward reinsurance premiums, income and losses from financial instruments attributable to insurance activities and movements in technical provisions and other claims expenses.
Results of operations for the year ended 31 December (€m) 2017 2016 Increase/(decrease)
Finance income/(costs) and profit/(loss) on investments accounted for using the equity method (56) 15 (71) n/s
Net debt/(funds) of the Mail, Parcels and Distribution segment (ESMA) (845) (705) 140 19.9%
Number of cards in issue (in millions) 25.2 23.5 1.7 7.2%
Average return on current accounts without capital gains 2.70% 3.10% -0.4%
Gross premium revenue, Poste Vita group (€m)3 20,404 19,938 466 2.3%
Consolidated operating results The performance in 2017 has enabled the Group to achieve consolidated operating profit of €1,123 million, registering growth of 7.9% compared with the previous year (€1,041 million). This was primarily due to the positive contribution to the result from the Insurance Services segment.
Profit for the year of €689 million is up 10.8% on the previous year (profit of €622 million), despite the impairment loss of €82 million on the Contingent Convertible Notes subscribed for by Poste Italiane in December 2014 at an original cost of €75 million and issued by Midco SpA, in addition to the impairment loss of €12 million on the investment of Poste Vita’s free capital in the Atlante fund.
With regard to the Contingent Convertible Notes, On 11 May 2017, the Court of Civitavecchia declared Alitalia SAI SpA, a 51% owned subsidiary of MidCo SpA, to be insolvent. On 5 July 2017, a general meeting of Midco SpA’s shareholders approved the company’s financial statements for the year ended 31 December 2016, in which its investment in Alitalia SAI was written off. The financial statements show that the company’s equity has been reduced to such an extent as to trigger conversion of the Notes held by Poste Italiane SpA into equity instruments. Based on the above events, a non-recurring loss equal to the total value of the Notes, amounting to €82 million at 31 December 2016, including interest recognised, has been recognised in finance costs for 2017.
In detail, total revenue from Mail, Parcels and Distribution services amounts to €3,631 million, marking a decline of 5% compared with 2016. This reflects a reduction in traditional letter post, with the number of items falling from 3,430 million in 2016 to 3,167 million in 2017 ( a decline of 7.7%). Parcel revenue, on the other hand, continued to grow, with volumes rising 16.5% from 97 million items (revenue of €649 million) in 2016 to 113 million (revenue of €693 million) in 2017.
The cost of goods and services is down from €2,442 million in 2016 to €2,370 million in 2017, reflecting a reduction across all items of expenditure and the Group’s commitment to achieving cost savings.
Working capital: Trade receivables and other receivables and assets 6,032 5,843 189 3.2%
Provisions for employee termination benefits and pension plans (1,274) (1,347) 73 -5.4%
The Poste Italiane Group’s capital expenditure amounted to €467 million in 2017 (up €16 million or 3.5% on 2016) and was designed to support achievement of the objectives in the “Deliver 2022” Strategic Plan. Most expenditure is focused on Mail, Parcels and Distribution services, where the upgrade of the Group’s technological resources and its logistics network continued, with a view to boosting overall sorting capacity and responding to the growth in volumes driven by e-commerce, as well as to improving the quality of service provided. The process of renewing the hardware used in post offices and the evolution and enhancement of the applications used in supplying services also continued.
Investment also focused on development and supply of the kits used by postmen and women (POS devices and printers), with the aim of driving the development of the Group’s business processes.
In the Financial Services segment, in 2017 the Group invested in ICT assets to support the market position, the offering and revenue. Expenditure focused on improvements to the quality of processes, above all in relation to Postal Savings and Loans, and on ensuring compliance with regulatory requirements for the banking sector (MiFID, the prevention of money laundering and the financing of terrorism, Bank of Italy and CONSOB supervision). In terms of transaction banking, the commercial rollout of the new BancoPosta account began in May. The new product enables account holders to access all the services across a range of channels.
The increase in net deferred tax assets, amounting to €270 million, largely reflects the net positive effect on taxation of fair value losses on investments in available-for-sale financial assets (a reduction in deferred tax liabilities).
The net balance of “Non-current assets and disposal groups held for sale” and “Liabilities related to assets held for sale” has decreased by €660 million, following completion of the sale to Invitalia of the 100% interest in Banca del Mezzogiorno – MedioCredito Centrale on 7 August 2017.
Directors’ report on operations for the year ended 31 December 2017 4. Group financial review
Cash and deposits attributable to BancoPosta - - (2,494) - - (2,494)
Technical provisions for insurance business* - - - 123,579 - 123,579
Analysis of net (funds)/debt for the mail, parcels and distribution segment (ESMA)
The net funds attributable to the Mail, Parcels and Distribution segment are up €140 million from €705 million at 31 December 2016 to €845 million at 31 December 2017. This reflects: �� an outflow of €318 million for investing activities, primarily linked to capital expenditure of €425 million, in addition to acquisition of the investment in FSIA Investimenti Srl for €278 million and the sale of BdM-MCC SpA for approximately €390 million; �� he net outflow for dividends of €465 million, which takes into account dividends paid to shareholders (€509 million); �� a positive movement in working capital, totalling €155 million, deriving from the collection of Universal Service compensation of €108 million; �� a negative movement in tax liabilities/assets of approximately €129 million; �� an operating loss of €30 million.
Adjustments and eliminations Total of which early retirement incentives 492 - 6 1 - 499
The Express Delivery and Parcel services market, on the other hand, continued to grow, registering an 8%7 increase in domestic activities (which account for approximately 80% of the total) compared to 2016, while services based on delivery to or receipt from overseas countries grew on average by 12.5%¹.
Universal Service Obligation (USO) compensation and tariff subsidies (3) 305 371 (66) -17.8%
(1) The figure for 2016 does not include unaddressed mail. (2) Includes services for publishers, multi-channel services, printing, document management, other basic services. (3) Universal Service compensation also includes compensation relating to the standard parcels service. Tariff subsidies relate to external revenue earned on products and services discounted in accordance with the law.
Despite a reduction in volumes (2 million fewer items compared with the previous year), the Recorded Mail segment registered an increase in revenue of €981 million (up 1.7% compared with 2016), primarily due to tariff adjustments applied to Registered Mail and Legal Process products from 10 January 2017.
Direct Marketing and Unaddressed Mail volumes fell respectively by 8.1% and 11.9%, due to customers rationalising their mail spend.
Integrated Services registered a decrease in volumes and revenue of 20.6% and 15%, respectively, compared with the previous year. This decrease is mainly due to a fall in the number of Integrated Notification Service (SIN) deliveries, as well as tariff adjustments resulting from competitive pressure on SIN Registered Mail product.
Finally, other revenue includes, among other things, services for publishers, which fell as a result of the continuing decline in the number of subscribers for printed publications and the increase in digital subscriptions.
Regulatory environment The Contratto di Programma (Service Contract) regulates relations between the Ministry for Economic Development and Poste Italiane SpA in connection with the Universal Postal Service.
The Decree also confirmed the reduced rates for promotional mailings by non-profit associations and organisations and reinstated the related government tariff subsidies until 2019.
ed articles, removing the exclusive right to offer services relating to legal process and the notification of violations of the Highway Code (art. 1, paragraph 57). The law also establishes that the issue of an individual licence to provide such services must be subject to specific requirements and a universal service obligation covering the security, quality, continuity, availability and provision of the services. In this regard, the regulator (the Autorità per le Garanzie nelle Comunicazioni or AGCom) launched a public consultation and subsequently issued Resolution 77/18/CONS regarding regulations governing the issue of special individual licences to provide postal services relating to legal process and related communications, as well as notification of violations of the Highway Code.
Operating review As part of activities to optimise its operating processes, during the year the Group completed the study of a new joint delivery model, aimed at ensuring the evolution of the delivery network in line with the development of e-commerce and changing customer needs. In particular, the new model enables parcels to be delivered via the network of postmen and women, and introduces afternoon and weekend shifts in order to facilitate successful delivery and meet addressees’ expectations. This new model was agreed with the labour unions and will be progressively implemented starting in 2018.
In addition, as part of the digital transformation process, a digital pick-up service for undelivered registered mail was launched in July, which may be subscribed to via Poste Italiane’s SPID enabled PosteID digital identity service. Secure access via Poste ID and the use of a remote digital signature means that this service has complete legal validity, equivalent to physically picking up items at the post office.
In September 2017, SDA subscribed for Uptime’s entire share capital. The latter then filed for a voluntary early arrangement with creditors. The above claim for €66.4 million in damages from SDA and Poste Italiane has not been taken up by the liquidator overseeing Gepin’s bankruptcy and has, therefore, been cancelled. Formal cancellation of the claim by the Civil Court of Rome is now awaited.
Directors’ report on operations for the year ended 31 December 2017 5. Operating results by operating segment
The quality of the universal postal service The quality results achieved for the Universal Service, whose objectives are defined by AGCom, are shown below. Poste Italiane sends these results to the regulator, except for those regarding ordinary mail, which are monitored by an independent specialised body appointed by the Authority9. The regulator verifies compliance with the objectives and publishes the results annually, together with those regarding ordinary mail reported by the independent body.
Regulatory and market environment With Legislative Decree 218 of 15 December 2017, published in Official Gazette no. 10 of 13 January 2018, EU Directive 2015/2366 on payment services in the internal market (so-called “PSD2”) has been transposed into Italian law. The creation of a “single payments area” in Europe has, for some years, resulted in restructuring and innovation of the payments market, given further impetus with the entry into effect of PSD2, which has also increased the level of competition. The principal changes introduced by PSD2 regard the opening up of the market to greater competition, resulting in the launch of new forms of payment and new market entrants (PSPs – Payment Services Providers), resulting in an improved offering. Another important aspect regards greater protections for digital payment service users, both in terms of security, data protection and authentication, and in terms of new responsibilities for users.
Italy’s payment services market is characterised by a highly dynamic electronic payments segment driven by online payments (bank transfers and payments by card), which were up 13% in 201610 compared with the previous year, and in general by card transactions (up 14% in 2016 versus 2015). Direct debits have also seen strong growth (up 16% in 2016 versus 2015). Overall, the number of payments made using instruments providing an alternative to cash rose 8% between 2015 and 2016, confirming the trend seen in recent years.
9. With Resolution 608/16/CONS published on 10 January 2017, the Authority, following the outcome of the tender procedure launched by Resolution 132/16/ SAG, selected the company, IZI SpA, for the three-year period 1 December 2016 - 30 November 2019.
10. The annual report of the Bank of Italy’s “Payments Committee Italy” for 2016.
In this market environment, it will become increasingly important for market operators to increase their focus and degree of specialisation, and to speed up the development and rollout of new payment solutions to offer to consumers, businesses and the Public Administration. Moreover, this will have to be accompanied by cost efficiencies in order to compensate for the decline in margins, which will continue to be a feature of the sector. This has resulted in a number of major combinations, in Europe and in Italy, aimed at created large “hubs” specialising in the handling and commercialisation of payment services.
Following an assessment of the impact of the new legislation in 2017, steps were taken to amend contract terms and conditions (those for current accounts, debit cards, acquiring and prepaid cards) and implement changes to IT systems, procedures and organisational arrangements (above all, a review of the processes for managing complaints and for making refunds in the event of unauthorised transactions). A specific training programme will also be run in 2018, with the aim of updating both network and headquarters staff on the key changes introduced by the legislation.
11. Win-Back offerings aim to regain former customers who can opt for mobile number portability (MNP). 12. Source: AGCom Communications Observatory no. 4/2017.
of which personnel expenses 31 31 - n/s of which early retirement incentives - - - n/s
In line with the digital transformation process, the BPIOL Remote Banking offering has evolved towards personalised solutions for specific customer targets, such as BPIOL EASY, the new Remote Banking solution for freelance professionals and sole traders with simpler online banking needs.
Development of the Bollettino service (for paying bills) continued, with the inclusion in the new BancoPosta and Ufficio Postale apps of the functions offered in the payments section of the website at www.poste.it. The aim is to standardise the user experience across the various channels, creating a single digital ecosystem.
As regards electronic money, the new PostePay Evolution Business card for freelance professionals and sole traders has been launched, enabling the holder to access collection services through a range of channels, thanks to synergies with BancoPosta’s acquiring services. At 31 December 2017, the number of Postepay cards issued exceeds 17 million, including approximately 4.7 million Postepay Evolution cards, whilst the number of Postamat cards in circulation is stable at 7 million.
Financial market trends Global equity markets performed well in 2017. The US S&P500 index closed the year up 18.6% over the year, whilst European bourses (the Dow Jones Euro Stoxx) rose 8.1% over the same period. Italian equities outperformed the European average, with the FTSE Mib, after a choppy start to the year, rising strongly from April on to register an annual increase of 19.7% at the end of December.
On the bond markets, the spread between 10-year Treasury Notes (BTPs) and 10-year German Bunds was highly volatile, reaching peaks above 200 basis points in the first half of 2017, before returning to more normal levels from July (ranging between 150 and 190 basis points). The spread was 159 basis points at 31 December 2017.
In the currency markets, in 2017, witnessed a sharp fall in the value of the US dollar (the euro/USD exchange rate at the end of December 2017 was 1.20, compared with 1.14 at the end of June 2017 and 1.05 at 31 December 2016). Likewise sterling, after remaining broadly stable in the first half of 2017, went into decline, presumably due to uncertainty surrounding the startup of negotiations regarding the country’s exit from the European Union (the average euro/GBP exchange rate at the end of December 2017 was 0.89, compared with 0.88 at 30 June 2017 and 0.86 at 31 December 2016).
Banking system Funding by Italian banks in 2017, represented by deposits by resident Italian savers and the issue of bonds, was stable overall, with total funding at December 2017 amounting to approximately €1,728 billion, down 0.01% on the previous year. As in past years, this reflects an increase in deposits by resident Italian savers (current accounts, certificates of deposit and repurchase agreements) of €51 billion in absolute terms year-on-year (up 3.6% compared with the end of 2016), offset by a sharp decline in investments in bonds, amounting to the same amount (marking a year-on-year decline of 15.2%).
Funding costs (deposits, bonds and repurchase agreements) are down compared with the figure for the end of 2016, with the average cost of customer deposits in December 2017 standing at 0.89%, compared with 0.99% in December 2016.
Doubtful loans within the banking system, after impairments and provisions made from own funds, amount to approximately €66 billion in November 2017, down on the figure for December 2016 (€87 billion). In percentage terms, doubtful loans have fallen from 4.89% of total loans in December 2016 to 3.74% in November 2017. The average interest rate applied to consumer and corporate loans continues to be very low, with a figure of 2.69% in December 2017 (2.85% in December 201613.
In addition, Legislative Decree 90/2017 came into effect in July 2017, implementing Directive (EU) 2015/849, regarding “prevention of the use of the financial system for the purposes of money laundering or terrorist financing” (the so-called Money Laundering Directive IV), which has amended Legislative Decree 231/07. The Decree emphasises the need for a risk-based approach, inducing regulated entities to adopt measures designed to identify, assess and mitigate the risk of money laundering and terrorist financing, resulting in changes to the way in which checks on customers are carried out. In this regard, a number of assessments of the Company’s procedures were carried out (the organisational structure and internal control systems) and the process planning of the necessary changes began, including the training of personnel. The scope of entities belonging to the category of Politically Exposed Persons (PEPs) was also expanded and, in the case of bearer passbooks, the new regulations have introduced a ban on their issue and transfer and a requirement to close all such accounts by 31 December 2018. Specific limits have also been imposed on the distribution of bearer prepaid cards.
Financial services segment profit or loss for the year ended 31 December (€m) 2017 2016 Increase/(decrease)
Operating profit generated by the Financial Services segment in 2017 amounts to €646 million, down 2.1% compared with the previous year (€660 million). The change essentially reflects the impact of non-recurring transactions (the sale of the investment in Visa Europe Ltd. in 2016 for €121 million and of shares in Mastercard in 2017 for €91 million), with a €30 million reduction in gains with respect to 2016, and an increase in provisions for risks and charges, linked to financial instruments and investment products sold in previous years, whose performance has not been in line with customers’ expectations.
The segment’s total costs are broadly in line with the previous year (down 0.1%), as the above increase in BancoPosta RFC’s provisions for risks and charges were offset by a reduction in intersegment costs.
Operating review Commercial initiatives designed to enhance the offering of Postal Savings products and to strengthen the position in the transaction banking market and in the distribution of consumer and corporate credit continued.
With regard to Postal Savings, in an effort to boost deposits, with a view to fulfilling its role as a provider of a Service of General Economic Interest (SGEI), the range of savings products was extended in terms of both type of product and the returns on offer. A number of initiatives were launched, alongside a highly effective advertising campaign through major media outlets, relating to the offer of several Supersmart offerings with different durations (180, 360 and 540 days), aimed at all the holders of Libretto Smart books, and a BFP a 3 anni Plus interest bearing postal certificate. These initiatives have begun to bear fruit in terms of an increase in Postal Savings deposits, above all with regard to net inflows into Interest-bearing Postal Certificates. In addition, the simplification of processes undertaken in 2017, involving both physical and virtual channels, has resulted in a number of changes, including the introduction at post offices of the “Passbook Transformation” service, which enables holders to change the form of their passbook by dematerialising their paper version and switching from an Ordinary version of the book to the Smart version. At the same time, passbook holders can also request and/or activate related products and services.
In terms of transaction banking, the commercial rollout of the new BancoPosta account began. The new product enables account holders to access all the services across a range of channels, managing their account from a post office, their PC or from a smartphone equipped with the new BancoPosta APP.
With regard to third-party loan products, new solutions have been introduced with a view to expanding the offering and making products more accessible. In particular, the offering of personel loan products for current account and savings book holders has been revamped and the range of BancoPosta salary loans has been expanded. This included the addition of an offering specifically targeted at public sector employees, who now have the option of obtaining additional cash equal to one monthly repayment, provided that, when this sum is aggregated with the existing salary loan, the total does not exceed two-fifths of their monthly salary. For the business segment, December witnessed the commercial rollout, in partnership with Compass, of the Fido POS product, offering a revolving short-term credit facility to freelance professionals and sole traders who have an account with BancoPosta.
In terms of BancoPosta’s capital structure, the CET 1 ratio for 2017 is 17%, compared with 16% in 2016, confirming the strength of the entity’s balance sheet, which was further boosted by Poste Italiane SpA’s contribution of fresh capital of €210 million in 2018.
The insurance services market Based on the available official data (source: ANIA), new business for life insurance policies in 2017 amounted to €82.4 billion (down 5.2% compared with the previous year). If new life business reported by EU insurers is taken into account, the figure rises to €99.9 billion, down 5.2% on 2016.
Analysing the composition and performance of new business, Class I premiums amount to €51.4 billion, down 18.1% compared with the previous year. New business for Class V policies also declined (down 8.1%), with premium revenue totalling €2.1 billion. New business for unit-linked Class III life products bucked the trend, generating premium revenue of €28.0 billion (up 32.9%). The contribution from new inflows into individual pension plans was also positive, with inflows of €1.5 billion, registering an increase 3.7% compared with 2016.
In terms of distribution channel, as regards policies sold by Italian and overseas insurers, agents continued to lead the way with a market share of 76.8%, slightly down on the figure for previous years (77.5% in the third quarter of 2016). Brokers represent the second most popular channel for non-life products, with a market share of 8.1%. Banks and post offices also recorded growth in their market share to 6.7% (5.7% in the third quarter of 2016).
Movements in premium reserve, technical provisions, reinsurance and other Non-life claims expenses (22) (30) 8 -26.7%
Net finance income amounts to €44 million (income from the investment of free capital, totalling €71 million, after deducting interest payable on subordinated loans, amounting to €27 million) and profit for the year totals €546 million (up 39.3%).
The Poste Vita group’s total premium revenue, after the portion ceded to reinsurers, of €20.3 billion, marking an increase of 2.3% compared with the €19.9 billion of 2016. This was generated essentially by the sale of life products, amounting to €20.2 billion (€19.8 billion in 2016), whilst there was strong growth in sales of non-life products, which premium revenue of €99 million (€80 million in 2016).
Net revenue thus amounts to €1,457 million, marking growth of 17.2% compared with 2016 (€1,242 million).
The commercial strategy focused almost entirely on sales of Class I and V investment and savings products (traditional separately managed accounts), with premium revenue at the end of the year amounting to approximately €19.7 billion (€19.3 billion in 2016). Premium revenue from Class III policies in 2017 amounted to €537 million (€475 million in 2016). The commercial launch of a new unit-linked product, offering a form of long-term savings plan (an individual savings plan, or PIR - Piano individuale di Risparmio)14 was launched on 27 June 2017. Premium revenue from this product amounts to €225.1 million at the end of 2017.
In terms of investments during the period, the investment policy was marked by the utmost prudence. This has resulted in a portfolio primarily invested in Italian government securities and corporate bonds, with an overall exposure that, whilst lower than in 2016, represents over 80% of the entire portfolio. In addition, whilst maintaining a moderate risk appetite, during the year the company continued with the gradual process of diversifying investments by increasing its exposure to equities (up from 14% of the portfolio to the current 19%), above all multi-asset, harmonised open-end funds of the UCITS (Undertakings for Collective Investment in Transferable Securities) type.
14. Individual savings plans (Piani Individuali di Risparmio or PIR) are the new form of investment product introduced by the government in the 2017 budget law, with the aim of supporting Italian SMEs. These products offer significant tax breaks for investors.
15. Gross premium revenue for the period amounts to €131.1 million
In terms of the prudential Solvency II requirements, which came into effect from 1 January 2016, an early indication of Poste Vita’s solvency position at 31 December 2017 shows that it has own funds of €8,519 million, up approximately €456 million on the €8,063 million of the end of 2016. This reflects the positive impact of financial market trends on the securities portfolio and on technical provisions (a reduction in the spread on government securities and an increase in risk-free interest rates). The growth in own funds was, however, accompanied by an increase in capital requirements of €307 million (from €2,737 million at the end of 2016 to €3,048 million at 31 December 2017), reflecting the increase in capital required to cover technical risk, primarily due to growth of the business (for example, surrender risk under the standard formula), partially offset by the investment diversification policy adopted by the company from the first quarter, which has resulted in an overall reduction in capital requirements in relation to market risk.
As a result of the above trends, whilst slightly down with respect to the figure for the end of 2016 (a decline from 294% to 279% at the end of December 2017), the solvency ratio continues to be well above the regulatory requirement and the market average.
With particular regard to the Atlante fund, the Group, when preparing the financial statements for the year ended 31 December 2016, had already recognised an impairment loss on the investment of equal to approximately 50% (€106 million, including approximately €94 million recognised in deferred liabilities due to policyholders).
As regards the Atlante II fund, the value of the fund’s units, as announced by the management company at 30 June 2017 (the latest available figure), reflects the historical cost of the investments.
Introduction On 22 October 2014, the European Parliament and the Council of the European Union approved Directive 2014/95/EU (the Barnier Directive) regarding the disclosure of non-financial information by companies. The Directive was created to improve the uniformity and comparability of non-financial information, and to map and monitor risks associated with business activities and thus facilitate investors’ access to such information.
The Directive was implemented in the Italian legal system by Legislative Decree 254 of 30 December 2016, which obliges large companies that are public interest entities to provide a non-financial statement “insofar as necessary to ensure understanding of a company’s activity, its performance, results and the impact it produces”.
The purpose of Poste Italiane’s Non-Financial Statement (NFS or “Statement”), prepared for the first time with reference to the financial year ended 31 December 2017, is to ensure that the Group’s organisational model, activities, main risks and performance indicators are understood with regard to environmental, social, personnel, and human rights aspects as well as the fight against active and passive corruption, and that they are relevant to the Company’s activities and characteristics.
Sustainability challenges Digitalisation, globalisation, new demographic phenomena and lifestyles, climate change and depletion of natural resources, are just some of the current trends. Understanding, interpreting and responding to these social, environmental and economic changes, integrating sustainability into the business to improve competitiveness and ensuring long-term profitability by creating shared value, add up to the challenge companies are facing in the third millennium.
In the financial sector, regarding Payments, Mobile & Digital, new payment methods, faster and more efficient transactions, security and personal data protection have been promoted with the introduction of PSD2 (the Revised Payment Service Directive), the EU directive on the retail payment system, which has been in force since January 2018.
16. The Internet of Things (IoT) is the expression used to define all electronic equipment and devices, other than personal computers, that are connected to the internet (e.g. cars, fitness sensors, air-conditioning systems, etc.).
Health and healthy lifestyles are some of the issues covered by the new insurance sector models that are emerging in Europe, based on incentives for virtuous customer behaviour that can generate positive impacts on the community and insurance companies’ costs.
Climate change With the 2016 Paris Climate Agreement, 195 countries committed to keeping the global temperature increase well below 2 degrees Celsius compared to pre-industrial times. It is estimated that emissions of 26 billion tonnes of CO2 equivalent would have to be cut by 2030 to remain below 1.5 degrees. Companies are called upon to assess the possible risks and opportunities (e.g. energy efficiency, sustainable mobility, and green financing and insurance services) associated with their business, taking into account national and international developments.
In 2017, the Group carried out a materiality analysis in order to identify the relevant topics to ensure understanding of its activities, performance, results and impact. Indeed, materiality is the threshold beyond which a topic becomes sufficiently relevant to be reported.
The process that led to definition of the material topics was broken down into three phases: �� Identification of relevant topics, based on analysis of the external scenario and comparable companies, sustainability trends, commitments already made by the Group and communicated in public documents, stakeholder expectations, and international standards (Sustainability Accounting Standards Board, RobecoSAM).
�� Attribution of relevance of the topics identified based on internal analysis of corporate documentation and policies, interviews with the various corporate departments, and the expectations of key stakeholders via listening and engagement initiatives.
The impact of the material topics identified are all caused by the organisation, with the exception of the topics relating to sustainable logistics and health and safety, which are also caused by suppliers who operate on behalf of Poste Italiane, accounting for a significant part of the Group’s operations.
Im pa ct o n st ak eh ol de r pe rc ep tio ns a nd d ec is io ns
Establish relations with labour unions, based on principles of fairness and respect for roles, with the aim of finding shared solutions aimed at achieving growth, competitiveness and business continuity.
Health and safety Ensure high standards of health, safety and security for workers and custo
Inclusion For the Group, inclusion means: �� promoting access to financial and insurance services for the most excluded groups; �� contributing to the process of integration of the most vulnerable groups; �� promoting access to new information technologies and digital literacy (e.g. Education 2.0 in schools).
Sustainable logistics Provide logistics solutions that reduce atmospheric emissions and the use of non-renewable natural resources, with particular reference to the mail and parcel delivery sector.
Corporate Governance Maintain a sound Corporate Governance system consisting of rules, standards, practices and a monitoring system, to reduce the risk of behaviours and decisions that may compromise the organisation’s value and operating performance. Comply with current legislation regarding combating all forms of active and passive corruption.
Our stakeholder [GRI 102-40 GRI 102-41 GRI 102-42 GRI 102-43 GRI 102-44] The stakeholder dialogue and engagement procedures are based on respect for Poste Italiane’s policies and organisational models, which are essential for guiding relations with the various stakeholder categories, taking into account expectations and integrating them within corporate strategies.
The following table shows the main stakeholder categories and engagement methods, as well as the types of activity through which Poste Italiane constantly communicates and interacts, based on an approach that takes into account the legitimacy of a relationship, proximity, influential power and impacts linked to its activities.
�� Contacts during the launch of relevant projects, publication of documents, interviews, events
Poste Italiane’s Consolidated Non-Financial Statement (“NFS” or the “Statement”), which was prepared for the first time with reference to the year ended 31 December 2017 in compliance with the requirements of Legislative Decree 254/2016, and was approved by Poste Italiane SpA’s Board of Directors on 29 March 2018, pursuant to art. 3, paragraph 10 of the Decree, requires a separate assurance report from the independent auditors, PricewaterhouseCoopers SpA.
The Poste Italiane Group guarantees its stakeholders that its business will be conducted in line with the objectives set by the Board of Directors, in awareness of the risks that may affect the achievement of these objectives and the value of the Company. The principal risks associated with material topics deriving from the Group’s activities are shown in the table below.
Malfunctions and/or deficiencies in the security of IT systems that may lead to personal data breaches, loss or impairment of data, operational freezes or slowdowns, and customer service disruptions.
Health and safety Risks of non-compliance with regulations that protect workers’ health and safety, which may lead to criminal, civil and/or administrative sanctions, as well as financial, economic and/or reputational damage to the Company.
Inclusion Risks connected with lack of attention to inclusion issues, leading to negative impacts on the Company’s reputation.
Risks connected with inadequate assessment of social and environmental impacts in the development of new products and services, which may influence stakeholders’ perception of the Company.
The 13 material topics identified above have been grouped into three value areas, which comprise the way in which the Poste Group is integrating sustainability into its core business, including: �� Looking to the future
Activities to combat cybercrime and regarding innovation in the security field
ESG product investment and development To be defined in the next sustainability plan
Postal services �� the Digital Pick-up service for undelivered registered mail, which enables the addressee to collect a registered item in the event of non-delivery due to the addressee’s absence, as an alternative to the physical process, via the SPID enabled PosteID Digital Identity service; �� the Electronic Postman service, which enables direct payment of pre-paid bills for the main utilities to postmen and women at one’s own home, topping up telephone and Postepay cards, and booking collection of registered mail or a PosteMobile SIM card by making an appointment on the toll-free number 803.160 or via the www.poste.it website; �� hybrid electronic mail, which breaks down into these phases: electronic acceptance, electronic sorting, printing, enveloping and delivery of a message in paper form.
Transactions carried out via consumer digital channels (websites and apps) (***) (millions) 33 39
Poste Vita Insurance Group customers registered in the reserved area (no.) 316,436 417,657
(*) App downloads refer to iOS and Android users who have downloaded the app from the launch of the first version until the date indicated (31 December 2016 and 31 December 2017).
(***) Including SEPA and overseas bank transfers and certified transfers qualifying for tax relief, giro transfers, the electronic payment of bills, tax returns, Postepay top-ups, Moneygram, money transfers, telephone top-ups.
Dematerialisation of contracts and transactions The Electronic Management of Contracts and Transactions (EMCT) project aims to implement complete electronic processing, which will enable elimination of the printing and paper storage of millions of pages of documents in post offices, and notification of customers via email regarding their contract copy with the introduction of electronic originals signed by electronic signature and stored in accordance with regulations. In 2017, dematerialisation procedures were extended to new contracts and transactions.
At the end of 2017, the new dematerialised management procedures were extended to 9,943 post offices (78%) and approximately 5,000 Consulting Rooms (75%) and now cover 90% of the main procedures carried out by customers and 96% of the corresponding transactions.
The environmental benefits include lower consumption of resources (paper) and waste generation (toner cartridges), less energy used for printing, and reduced CO2 emissions. In terms of improved operational efficiency, benefits include more rapid consultation of documents and quicker access to information, and shorter response times for checks and assessments. For customers, dematerialisation means that the process of entering into a contract is simplified (e.g. opening a current account in real time).
Digitalisation of relations between citizens and the Public Administration With a view to simplifying relations, Poste Italiane, which acts as an intermediary between citizens and the Public Administration, operates as an Identity Provider, via the PosteID Digital Identity service, which is enabled by the Public Digital Identity System (SPID).
The Sportello Amico network, which is present in 5,734 post offices (45%), offers services including payment for healthcare, the printing of birth, death and other certificates, the issue of land surveys, and the issue or renewal of Electronic Residence Permits. In 2017, 894,000 residence permit applications were handled, and subsequently dematerialised and sent to the relevant police headquarters.
The main objective in managing IT security is to guarantee adequate levels of confidentiality, integrity, and availability of the data and services provided. In order to pursue this objective, in addition to technological measures, organisational and regulatory provisions have also been adopted for operating processes, thus guaranteeing an adequate level of protection, as well as a constant flow of information to internal auditing bodies and/or the relevant authorities.
�� Cross-cutting security technology infrastructure. The security infrastructure platforms serve to guarantee and protect corporate IT resources against targeted cyberattacks, while at the same time ensuring the Company’s compliance with laws and regulations.
�� Management of IT security incidents regarding prevention of, response to and management of IT security incidents through a single synthesis and activity coordination hub, via integrated management of information flows deriving from the various IT security controls, thus providing a single operational interface for security information sharing activities externally, and continuous security support internally.
�� Third party certification. Faced with external influences, due to the increasing complexity of the business and changes in legislation and regulations, as well as developments in the internal environment, aimed at boosting technological leverage and raising the quality of its offering, Poste Italiane guarantees structured oversight of quality issues in the IT and security areas. This oversight is based on the application of an Integrated IT and Security Quality Management System that incorporates the aspects highlighted by international standards and industry benchmarks.
Poste Italiane has obtained certification for its integrated management system regarding IT and security service provision processes, in accordance with the ISO 27001 (IT Security), ISO 20000 (IT processes) and ISO 9001 (Quality international standards).
IT risk analysis is aimed at identifying and assessing potential breach scenarios regarding the confidentiality, integrity and availability of the ICT resources that support business services. The methodology is broken down into several macro-phases involving identification of analysis areas and the related scope of the assets, identification and assessment of impacts, threats and vulnerabilities, calculation of potential risk, actual risk and the treatment of residual risk.
With particular attention paid to the scope of Bank of Italy Circular 285/13, the annual IT risk analysis update regarding BancoPosta’s ICT assets was carried out, including a focus on the assets that support online payment services in compliance with Guideline 2.1 issued by the European Banking Authority (EBA).
This activity led to preparation of a Synthesis Report on IT risk analysis for 2017, which was approved by Poste Italiane’s Board of Directors in December.
In addition, security requirements were provided not only for IT but also for the process relating to provision of new business products and services during the “Service Creation” phase, including SPID, the new Poste.it Business portal, and Personal Financial Management in the BancoPosta app.
In compliance with current legislation regarding data security, and the prevention and combating of cybercrime, specific incident handling procedures have also been set up regarding the prevention, management and escalation of cyber security incidents that cause damage to the Company’s IT assets, violation of internal policies and/or regulations, and the loss, modification or unauthorised disclosure of or illicit access to personal data transmitted, stored or otherwise processed. The management of IT security incidents is formalised via a specific operating procedure that enables security incidents to be monitored and dealt with.
Regarding personal data protection, Poste Italiane has adopted preventive security measures to minimise the risks of destruction, loss, unauthorised access and unauthorised processing of personal data, in compliance with the requirements of Legislative Decree 196/2003.
Total number of complaints received regarding violations of privacy 12 6
Total number of breaches of customer privacy and losses of customer data identified 0 0
6. Digital security 7. Critical applications security 8. ICT security compliance 9. Environment certification security 10. Internal auditing system 11. Corporate customers’ security
In addition to the implementation projects, the initiatives that have been fully deployed include: �� the Secure Code Review, which entails a security review of the application code to ensure that security checks are in place, that they execute what has been requested, and that the code has been developed in line with the principal secure development best practices.
In recent years, the Company has set up three technological hubs to guarantee and monitor cyber security: Poste Italiane’s Computer Emergency Response Team (CERT) is made up of a team of security experts and is responsible for coordinating all activities to respond to computer emergencies. The CERT is aimed at security specialists and large organisations, as well as customers and consumers, to whom it offers its experience and expertise to ensure that the internet is used correctly. In particular, the Centre deals with prevention, analysis and protection from cyber threats; it coordinates all activities in response to cyber emergencies and builds up relations with private individuals with a view to sharing knowledge in the field of cyber security. For example, information sharing in 2017 enabled useful information to be shared on newly detected threats and related Indicators of Compromise (IoC), with regard to specific threats, attacks and vulnerabilities with a potential impact on the Company’s infrastructure and assets.
The Security Innovation Lab set up in Trento in collaboration with the Italian hub of EIT Digital – a core partner of the European Institute of Innovation and Technology (EIT) ¬– is engaged in applied research and has launched numerous project initiatives as part of the European FP7 programmes – the Seventh Framework Programme for Research and Technological Development – and Horizon 2020, the European Framework Programme for Research and Innovation (2014-2020).
The objective is to manage – from a protection but also and above all from a prevention perspective – new emerging risks in a
context that for business growth requires products, processes and services with innovative characteristics, new technologies, and a high level of competitiveness. Participation in these projects has brought technological, procedural and economic benefits, as well as enabling Poste Italiane to be part of a network of over 50 partners in the various member countries, including universities and research centres, public institutions (ministries and agencies) and private companies.
Customer experience and the quality of products Adoption of service models aimed at promoting the quality of the products and services offered. Systematic engagement, satisfaction surveys and effective complaints management, which are essential elements in enhancing the relationship with customers and responding to their needs. Offer a unique and distinctive experience that goes beyond traditional product and service provision.
A quality management system has been adopted in compliance with the ISO 9001 international standard, in all the sectors in which the Group operates.
Since 2016, improvement of the process of monitoring the quality of customer relations has been integrated with Lean Six Sigma methodology, which is based on analysis of a large amount of data and the use of statistical tools to identify the causes of problems encountered by customers.
The relationship with consumer associations In 2011, Poste Italiane and representatives of the 19 consumer associations that belong to the Advisory Committee signed a framework agreement, which was renewed in 2014, that defined rules for dialogue and established Cantiere consumatori, a permanent advisory working group, aimed at constantly improving the quality of the products and services offered to customers. The agreement guarantees stability in relations with consumer associations, and has boosted dialogue and cooperation. The permanent working group has given rise to various projects to provide joint information to customers on important issues such as new products, tariffs and service reorganisation, while settlement procedures have continued to be a tool for the amicable settlement of disputes. Since 2015, settlement procedures have been part of the AGCom (Italian Communications Authority) dispute management system and are among the list of alternative dispute resolution (ADR) procedures recognised by law, including with regard to the European Union. In the last two years, Group company settlement procedures have generated a total of 3,043 applications for conciliation, of which 2,452 have been discussed. Taking into account the outcomes over the last two years, agreement has been reached by the parties in 75% of cases.
Retail postal product disputes discussed 678 831 of which settled 88% 84%
Bancaposta product disputes discussed 352 370 of which settled 51% 49%
IRS Real Estate Fund disputes discussed n.a. 35 of which settled n.a. 100%
Keeping in touch with customers The cooperation of customers in the submission of complaints is essential in identifying and eliminating the causes of inconveniences and putting in place the necessary corrective actions to improve processes. All Group companies have implemented specific procedures that set out principles and rules for handling complaints, which are approved and periodically reviewed by the Boards of Directors.
** The high volume of mobile telephone complaints in 2016 is connected with technical malfunctions occurring during initial trials of the mass migration of customers from the ESP to the FULL platform. In 2017, complaints decreased thanks to certain measures taken, implemented from the end of 2016.
Post office waiting times The new queue management system, present in 2,948 post offices (23%), is a multi-channel system that cuts service provision and use times by scheduling priorities and flows based on the number of users in a queue. The new technology enables the use of various channels to access a post office, including a service selection kiosk, a reader for BancoPosta, Libretto and Impresa cards, digital channels (apps and websites) for booking appointments, and QR code scanning for collecting mail and parcels held at post offices.
Overall post office experience* 8.4 8.7 * Source: Post Office Barometer 2017, 5,069 interviews with post office users, Doxa.
Combatting corruption Comply with current legislation regarding combatting all forms of active and passive corruption.
Total number of employees involved in specific training activities regarding corruption prevention issues*
Reports handled (no.) 282 290 of which relating to corruption (no.) 23 23 of which confirmed (no.) 1 0
Relations with social partners [GRI 102-41] Establish relations with labour unions, based on the principles of fairness and respect for roles, with the aim of finding shared solutions aimed at achieving growth, competitiveness and business continuity.
Relations between Poste Italiane and the labour unions is based on a system involving negotiation, dialogue, consultation and periodic, preventive reporting, in compliance with the collective agreements that apply to Group companies and cover 100% of employees. Poste Italiane’s National Collective Labour Agreement covers approximately 95% of employees, while SDA and Mistral Air have autonomous contractual regulations. In line with sharing activities with the labour unions, on 8 February 2018 a draft agreement was signed regarding reorganisation of Delivery activities.
National Collective Labour Agreement for nonmanagerial Poste Italiane staff As already mentioned, on 30 November 2017, the new National Collective Labour Agreement for non-managerial staff was signed for a three-year period (from 1 January 2016 to 31 December 2018). In terms of remuneration, the increase in minimum wage rates was defined and a one-off payment was agreed to cover the period between agreements. On the regulatory front, the text of the agreement was revised to incorporate legislative changes and two important protocols on “procurement” and “harassment and violence in the workplace” were signed. With regard to relations, the national and corporate/regional bargaining structure was modified, with related clarification of the matters subject to bargaining, and the single text on representation signed by Confindustria and the labour unions on 10 January 2014 was adopted. Finally, the participation system was strengthened through the reconfiguration of the Poste Italiane Group’s National Committee (formerly called the Joint National Observatory), and through the introduction of a new supplementary health care committee.
Paid leave for union representatives in accordance with art. 30 of Law 300/70 An agreement was reached with the unions on 7 February 2017 regarding the provision of paid leave to union representatives, in accordance with art. 30 of Law 300/70. The agreement is valid for three years (2017–2019) and, compared with 2016, has reduced the total number of hours of leave available over the three-year period by approximately 66,000.
The Joint National Body for workplace health and safety also continued its activities regarding the uniform and correct application of the guidelines on workers’ health and safety, with a special focus on issues relating to the new criteria for assessing the risk of work-related stress.
Strengthening of sorting and delivery processes With regard to the Amazon contract, and in particular management of the increased volumes of the Promopacco Plus product, on 4 August 2017 an agreement was signed regarding steps to strengthen the sorting and delivery processes. The agreement introduced new shift arrangements to be agreed upon in subsequent regional-level agreements.
Health and safety Ensure high standards of health, safety and security for workers and customers at all the Group’s premises; on all the means of transport used, including by suppliers, for delivery services; when staff are travelling.
The Group has also adopted all the necessary measures to reduce accidents, workplace injuries and occupational diseases, and promotes people’s psycho-physical wellbeing via prevention policies and programmes and information and awareness-raising campaigns. SDA and Postel have received OHSAS 18001 certification for their workplace health and safety management system, which involves central and regional facilities and identifies roles and responsibilities in the implementation of obligations. In 2017, the employer model was redefined by dividing the Company into 7 production units (instead of the previous 5), with identification of acting managers among Employers as defined by Legislative Decree 81/2008, as amended.
The Group’s health and safety policy defines the key elements of the management system, including: �� continuous assessment of risks and the definition/update of related rules and procedures; �� ensuring that innovations and changes in work processes are always accompanied by workers’ health and safety objectives; �� timely adaptation to all regulatory changes and updates; �� identification of roles and responsibilities within the organisation and allocation of the necessary resources for planning and implementing the programmes aimed at achieving the objectives; �� effective and transparent communication that ensures dissemination of any information that might be useful for prevention purposes, including cooperation and coordination measures with contractors; �� periodic review of the management system by senior management to assess its correctness and effectiveness with a view to achieving continuous improvements.
As regards the Air Safety regulatory requirements applied to Mistral Air’s fleet, in 2017 renewal of the Airport Handling Agent Certification was requested, which enables mail ground handling services to be carried out at sites inside and outside an airport. This certification, together with the Agent Regulations certification, enables security checks to be carried out on cargo and mail, in order to guarantee the safety of persons and prevent unlawful acts from being committed on aircraft.
Post office security The physical safety strategies, procedures and measures put in place to protect employees and corporate assets are designed to limit exposure to criminal attacks and have positive effects on the safety conditions of workplaces and areas open to the public. During 2017, initiatives were continued to ensure standardised management of security and caretaking services, with extension of the scope of responsibility to the entire Group with regard to the specific needs of individual companies. In particular, activities continued to strengthen the security of post offices, with integration of and replacement by high-tech alarm and video surveillance systems, as well as implementation of anti-theft protection systems and building improvements to raise the level of physical safety and prepare them for the installation of new ATM equipment.
Occupational injuries The most accident-prone process is delivery, where the most hazardous activity is the use of motorcycles.
In 2017, the second OHS Operational Audit/Awareness Raising activity provided for in the OHS Verification and Monitoring Plan continued, involving 18 key post offices in terms of size and number of delivery staff, as well as 50 Distribution Centres among those with the highest injury rates. This awareness-raising activity was supported by OHS technical audits (plant and structural aspects) carried out at 122 operating and management sites throughout Italy, and 59 audits on the management systems adopted in accordance with OHSAS 18001.
Cases of occupational disease 9 12 14 10 * Accidents occurring on the move are not included. The number of accidents and accident rates do not include data for Mistral Air Srl, which is only included in the figures for occupational disease.
Human capital Identify the best talents, promote training courses and strategies for professional enhancement and development. Protect the Group’s intellectual assets, skills, know-how, experience and organisational knowledge.
The objective is to build an organisation in which everyone may access a career development path, in which individuals participate personally with responsibility and involvement in the Group’s development, by behaving ethically and guaranteeing the centrality of customers and service quality.
The Code of Ethics, which has been in use for several years, sets out a commitment to guarantee a working environment based on values of respect for people’s rights and freedom, and equal social dignity without discrimination on grounds of nationality, language, gender, race, religious belief, political and labour union membership, or physical or mental conditions. The Group also encourages participation in corporate volunteering initiatives in collaboration with the PosteInsieme not-for-profit foundation.
Compliance with the Code of Ethics is also verified through analysis and assessment of reports of its violation. These activities are carried out with the support of the functions concerned (Internal Auditing and Corporate Affairs /GRM-Fraud Management and Security Intelligence). The Code of Ethics is also an integral and substantial part of the Organisational Model adopted in compliance with the provisions of Legislative Decree 231/2001. [GRI 102-16]
With 136,555 FTE employees working nationwide, Poste Italiane is Italy’s largest employer. The Group’s workforce comprises 72,307 women and 64,248 men, 93% of whom are on permanent contracts. As can be seen from the table below, fixed-term contracts were used more extensively in 2017 than in 2016. This reflects specific organisational efficiency requirements in the postal sector linked to seasonal peaks and the need for specific offices and zones.
Part-time contracts are widely used for organisational efficiency and work-life balance reasons, particularly by women. The percentage of female staff among middle managers and executives is 45%.
Men Women Total Men Women Total * Expressed in full-time equivalent term
�� Specialist technical training regarding business support, aimed at front-end staff and in general at sales channels and customer relations, with particular reference to the world of financial and insurance specialists; training regarding regulatory compliance requirements (including on matters relating to IVASS, the insurance regulator, and MIFID II, the Markets in Financial Instruments Directive, and the ESMA Guidelines); training for postmen and women whose role, given their proximity to the general public, carries great social responsibility; behavioural/cross-cutting training aimed at enhancing professional effectiveness and increasing skills that serve the business.
Responsible supply chain management [GRI 102-9; GRI 102-16] Guarantee ethical behaviour within the supply chain, with particular reference to: legislative compliance; measures to combat fraud and corruption; working conditions and health and safety; and environmental aspects.
Commercial relations based on transparency and ethical negotiations can help to increase the effectiveness of business processes and competitiveness. In this context, a Code of Conduct has been in place for several years, aimed at guiding relations with suppliers and partners and promoting the spread of ethical principles and social responsibility in the supply chain, and also encouraging the achievement of quality (ISO 9001), environmental (e.g. ISO 14001), social (SA 8000) and occupational health and safety (OHSAS 18001) certification. The development of transparent and lasting relations with suppliers is a goal to be pursued, with a view to improving the service offered and more generally in the interests of Italy’s economic system. The Code of Conduct for suppliers and partners is also one of the corporate monitoring tools used to prevent the offences set out in Legislative Decree 231/01.
The entry into force of the new rules, via the Corrective Decree of 20 May 2017, required an update of procurement and regulatory procedures, as well as of the documentation for tenders and contractual standards.
In November 2017, the Board of Directors of Poste Italiane approved the Internal Regulations regarding the procedures for awarding works, service and supply contracts, and completed the update of its internal procedures, which govern the procurement process regarding contracts subject to the Public Procurement Code, pursuant to the Code, as well as contracts excluded from the Code’s scope of application.
Social and environmental provisions in contracts GRI 414-1 In its relations with the suppliers of works, services and goods, Poste Italiane operates on the basis of standard contractual provisions which may be revised in the light of regulatory provisions or adapted to meet specific internal requirements. Special attention is paid to social and environmental aspects: provisions regarding the regularity of social security contributions and remuneration; compliance with labour laws (Legislative Decree 276/03, Public Procurement Code); the applicability of Collective Labour Agreements; the absence of violations of occupational safety laws (Legislative Decree 81/2008); and the absence of environmental offences (Legislative Decree 152 of 3 April 2006).
Following the signing of the Transparency Protocol with the tax authorities, the contractual standards were supplemented with a specific provision.
Green procurement [GRI 308-1] Green Public Procurement is a strategic choice for Poste Italiane as it combines sustainability in terms of reducing environmental impacts with cost savings. Article. 34 of the “Public Procurement Code” (“Energy and environmental sustainability criteria”) – with regard to the award of public contracts of any nature and value – has made it compulsory to include in the project and tender documentation at least the technical specifications and contractual provisions contained in the “Minimum Environmental Criteria”, or “MEC”, listed in the documents approved for each product or service category by specific Ministerial Decree.
Memorandum of Understanding with the tax authorities In December 2017, Poste Italiane and the tax authorities signed a Memorandum of Understanding with the aim of combating tax evasion, tax avoidance and fraud. The Company has undertaken to make data and information available to the tax authorities, which may be useful in pursuing these objectives, also via access to its own systems, including the web-based “Identity Check” system for reporting relevant information and news relating to the prevention and suppression of economic and financial offences.
Equal opportunity access to services The attention Poste Italiane pays to customers with disabilities is an important value that has led to the creation of a new generation post offices without architectural barriers. Examples include ATMs with a headset attachment to provide a complete voice guidance system, which helps visually impaired and blind customers; and the navigation guidance system, which uses a series of high-contrast graphic maps that can be activated using a numerical touchpad. All of Poste Italiane’s 7,257 ATMs enable visually impaired people to make withdrawals, and since December 2017 the list of movements has also been available.
Total number of ATMs 7,249 7,257 of which: ATMs with touchpads for the visually impaired and the blind 7,249 7,257
To support the staff, the ethnic post offices are equipped with all communication and advertising material translated into the various languages of the identified target customers. At the end of 2017, 27 ethnic post offices were in operation, and also included the offering campaign for Italians of Chinese ethnicity who need to send parcels or remittances, or make calls to China.
At 31 December 2017, approximately 1 million cards had been activated.
Directors’ report on operations for the year ended 31 December 2017 6. Consolidated non-financial statement
Inclusion of minors In the financial sector, new types of products and services have been progressively introduced over the years, to meet the different needs of customers. For example, the Saving Book for minors is a simple solution designed to introduce young people to the world of savings. The types of Savings Book vary according to a minor’s age: Io cresco (I grow up) from 0-12 years old; Io conosco (I know) from 12-14 years old; and Io capisco (I understand) from 14-18 years old. Each product offers three different levels of autonomy for savers. Similarly, the Interest-bearing Postal Certificate for minors and the “Piccoli e buoni” savings plan are specific products for this category of customer.
The Risparmio che fa Scuola project arose from an earlier memorandum of understanding signed on 28 October 2014 by Poste Italiane, Cassa Depositi e Prestiti SpA and the Ministry of Education, Universities and Research, in which the parties committed to promoting the culture and values of savings at Italian schools of all levels. At the end of 2017, the memorandum of understanding was renewed, for a five-year period, in order to relaunch the project through the creation of a training programme aimed at giving young people the necessary economic, financial and citizenship skills to use savings as a development tool for Italy. Teachers who participate in the project will be able to obtain training credits that will contribute to their school’s self-assessment report. The programme will be proposed to all schools throughout Italy.
Inclusion of senior citizen customers In Italy, more than 21% of the population is over 65 years of age, and around 70% of this age group are customers of the Group. The level of digitalisation of senior citizens falls as they grow older, and in particular internet use halves if the 55-59 age group is compared to the 65-74 age group (falling from 60% to 26%). With the aim of facilitating access to new digital services and facilitating the inclusion of citizens, the digital literacy programme, “Grandparents online. Everyone’s young at Poste Italiane”, was introduced. Likewise, the “Poste Italiane is here” initiative was launched, which assigns postmen and women the task of loaning a tablet computer to the over-65s and teaching them how to use it.
In October 2017, the “Senior Programme” campaign was also launched for the over-60s, involving approximately 2,000 post offices (15%), with the aim of promoting a package of dedicated services, with special benefits ranging from fixed and mobile telephone solutions, to the PostaProtezione Infortuni Senior insurance policy and the Quinto BancoPosta Pensionati loan product. In 2017, a substantial portion of customers opening a retail current account or a prepaid card (Standard or Evolution) were in the categories most at risk of financial exclusion (young people, senior citizens and “new Italians”), obviously taking into account the specific nature of the products under consideration (e.g. Postepay is very common among young people due to its simplicity and online payment function).
Percentage of Postepay standard card holders who are "new Italians" 12.4 12.6
Percentage of young Postepay Evolution card holders (under 35) 44.4 45.9
Percentage of senior Postepay Evolution card holders (over 65) 5.3 5.5
In 2017, Poste Assicura launched the “It’s always a good day to protect yourself” competition, dedicated to all Italian citizens who have decided to purchase personal and property protection products. The competition provided for the award of 54 premiums per month, with a total of 324 premiums.
managers and staff on maternity leave to promote an effective return to work. The service saw 100 activations in 2017. An online community was also set up for women who participate in the programme.
Poste Italiane also participates in the “Diversity and Inclusion” network, aimed at identifying and sharing best practices and possible synergies, and also joined the “Women in Motion” initiative, designed to promote the study of technical subjects among the younger generation, via inter-company counselling and community initiatives. Regarding parental leave, the Company guarantees better treatment than that provided by law. Indeed, the female staff who benefit from it are entitled to 100% of their salary for all 5 months of absence from work, compared with the payment of 80% of salary provided by law. In addition, 80% of salary is guaranteed for the first two months (instead of the 30% provided for by law) for a parent who opts to benefit from it, limited to the first six years of the child’s life.
When new legislation is introduced on maternity and paternity protection, specific information campaigns are carried out to update staff on the arrangements provided to protect this right, in order to encourage and support active parenthood for both parents.
Equal Opportunities Committee The Equal Opportunities Committee was renamed the “Committee for implementation of the principles of equal treatment and equal opportunities” on the occasion of renewal of the National Collective Labour Agreement and is made up, at national level, of six members appointed by Poste Italiane and one representative from each national labour union signing the National Collective Labour Agreement appointed by the labour unions themselves. The Committee, which is aimed at strengthening a culture of diversity in order to eliminate obstacles to the achievement of equal opportunities, meets quarterly at national level and every six months at regional level.
Inclusion of disabled people Regarding the inclusion of people with disabilities, the Company implements concrete measures to contribute to the elimination of physical, sensory and cultural barriers. The related training initiatives are: �� “School ship” - a project aimed at improving professional inclusion through computer literacy and behavioural courses for deaf people. The method used involves setting up field trials of diversified training actions, to be systematised and replicated in various areas at national level.
�� “Culture and Disability” - modules for Postal, Communications and Logistics function trainers (activated in 2016) to raise awareness of disability issues among the people involved, provide information and define strategies to overcome barriers of various kinds, and to make training courses accessible to everyone. The classroom trainer awareness-raising plan also led to a complete review of the teaching material.
To make its logistics even more sustainable, Poste Italiane has adopted PTV Smartour, a software application for planning and optimising transport and distribution that manages delivery and collection of orders using an algorithm that enables route optimisation.
In addition to the Sorting and Distribution Centres, Service Centres that carry out value-added activities (for example, dematerialisation, electronic document management, address standardisation, etc.) in relation to specific services may also be present at Area Logistics Offices.
The Group’s commitment is reflected in the growing use of vehicles with a lower environmental impact, including 4,369 alternative fuel vehicles, of which 1,064 electric-powered vehicles, 119 hybrid vehicles and approximately 3,192 petrol/natural gas and petrol/ LPG powered vehicles. CO2 emissions per km travelled decreased in 2017 from 215 grams per km to 210 grams per km, thanks to the introduction of LPG vehicles, vehicles with lower engine capacities and measures to optimise transport loads.
Energy consumption and CO2 emissions within the corporate road fleet [GRI- 302-1; GRI- 305-1 GRI- 305-2]
Logistics under contract A part of the Group’s logistics services, equal to approximately two-thirds in terms of energy consumption and a significant portion of dedicated human resources, are managed by Poste Italiane and SDA Express Courier (the Group company that provides express courier services to business customers) with the help of a network of suppliers.
Energy consumption and CO2 emissions of logistics road vehicles under contract [GRI- 302-2; GRI- 305-3]
The Company is included in the list of airlines operating in the 31 EEA (European Economic Area) member states and is subject to EU Directive 2008/101/EC (EU ETS). In line with these commitments, special attention is paid to environmental protection through monitoring emissions and optimising the fleet’s fuel consumption.
Energy within the Group (GJ) 919,688 1,104,614 * Includes flights made by Alitalia on behalf of Poste Italiane. ** Conversion factor: 1 tonne of jet fuel * 3.15.
Mobility management In 2017, the Group continued to promote mobility management, with the aim of proposing sustainable mobility solutions in urban areas. Agreements for the benefit of staff continued, including the purchase of annual local public transport season tickets at reduced rates and in instalments in various Italian cities (in some cases extended to employees’ children), and initiatives to raise awareness of the importance of adopting sustainable lifestyles in order to help reduce CO2 emissions into the atmosphere. In this context, in 2017 the Company car-sharing service for continued in Milan, accessible via the “PosteMobilityOffice” platform, which enables use of only one private vehicle by a group of employees for their daily commuting. In addition, 900 car-sharing driving time vouchers were allocated in the cities of Milan, Turin, Florence and Rome to promote new collective forms of urban transport. Two campaigns dedicated to cycling were also promoted during the year: #IoVadoInBici, for employees who have
opted to commute to and from work by bicycle; #MyPostoBiciVerona, for Sorting Centre staff in Verona who systematically use bicycles as a means of transport, and who have been provided with free bicycle parking spaces under a special agreement.
Energy consumption and emissions Real estate assets, comprising approximately 15,000 sites, are responsible for more than 60% the Group’s internal energy consumption. This derives from the use of electricity (72%), natural gas (23%), LPG, diesel and district heating (5%). In 2017, over 95% of electricity was supplied from renewable sources via Guarantee of Origin certificates and a small share of it (7,057 GJ, equal to 0.4%) was self-produced by Company-owned photovoltaic plants. The reduction in the use of non-renewable electricity and the consequent reduction in indirect emissions (Scope 2) is due to the increased self-production from photovoltaic plants and the process of internalising data storage and management activities at Group-owned data centres that use renewable electricity.
In order to ensure oversight of consumption and reduce environmental impacts and costs, a single supplier was contracted for electricity and one for gas, so as to have an organisational basis for the individual utility consumption for each month of supply.
In 2017, the energy use optimisation plan continued, including introduction of initiatives aimed at reducing waste by installing and activating energy consumption meters that enable monitoring of trends, analysis of consumption, taking measurements at the most energy-intensive sites, and correctly setting temperatures and operating times for cooling and heating systems. In particular, a project was launched to improve efficiency, through replacement of fluorescent lamps with LED lighting.
Percentages of energy consumption relating to real estate facilities by type of business
Direct and indirect CO2 emissions relating to real estate facilities [GRI- 305-1; GRI- 305-2]
Regarding natural gas consumption, new systems to optimise thermal energy were installed on 2,800 devices (timers, human presence sensors) and low-performance boilers were replaced with high-performance condensing boilers.
Waste management Waste management is governed by Legislative Decree 152/2006, which regulates the entire process from collection and transport to recovery or disposal. The waste produced by Poste Italiane is similar to municipal waste (allocated to public collection services in accordance with the procedures laid down by the specific local regulations), which includes special, hazardous and non-hazardous waste. A portion of the waste that is similar to urban waste, for example paper and plastic, does not come under municipal management and is sent directly for recovery via operators authorised to manage special waste. It is then managed in accordance with the same requirements as those for special waste, and the Company benefits from reductions in the tax or tariff established by municipal regulations.
A large portion of special waste consists of non-hazardous waste (paper, cardboard, plastic and wood packaging), while special hazardous waste (mainly electronic waste and scrapped vehicles) derives from certain postal centres and the Group’s data centres.
Total hazardous waste (t) 142.5 346.0 - other types of disposal 124.8 65.4
Total non-hazardous waste (t) 21,821.6 25,790.6 - other types of disposal 398.0 418.0
Water supplied by public water mains or other water service management companies (m3) 91,307 94,023
GRI 102-7 Scale of the organisation (total number of employees; net sales or net revenues; total capitalisation; quantity of products or services provided).
GRI Standard Indicator number and title References Parts omitted Reason Explanation
GRI 102-14 Statement from senior decision-makers on the importance of sustainability for the organisation and its strategy
GRI 102-1 Name of the organisation Directors’ Report on Operations: 1. Statement from the Chairwoman and the Chief Executive Officer
GRI 102-2 Activities, brands, products and services "Directors’ Report on Operations: 2. Organisational structure and operating segments
GRI 102-6 Markets served (including geographic locations where products and services are offered; sectors served; types of customers and beneficiaries)
GRI 102-8 Information on employees and other workers (including significant changes) broken down by type of employment and contract, region and gender.
Directors’ Report on Operations: 2. Corporate actions during the year; Organisational structure of Poste Italiane SpA; Report on Corporate Governance and the Ownership Structure: Section I Governance structure and ownership structure
Poste Italiane applies the precautionary approach referred to in Principle 15 of the United Nations Rio Declaration to environmental protection in the development and introduction of new products and services and in the planning of new operational activities.
GRI 102-12 Subscription to or adoption of codes of conduct, principles and charters regarding sustainability
GRI 102-20 Responsibility of the highest governance body for social, economic and environmental topics
GRI 102-22 Composition of the highest governance body and its committees, including: independent members; executive and non-executive members; men and women with competencies relating to economic, environmental, and social topics; members of underrepresented social groups; stakeholder representatives
Report on Corporate Governance and the Ownership Structure: 6 Board of Directors; 6.1 Current membership and period of office (ex art. 123-bis, paragraph 2 d), Consolidated Law on Finance); 6.8 Independent directors; 6.10 Assessment of the operation of the Board of Directors and Committees; 6.11 Diversity policies (ex art. 123-bis, paragraph 2 d), Consolidated Law on Finance)
Within the organisation, the Corporate Social Responsibility function established within the Group Risk Management structure (which does not report directly to the Board of Directors) promotes the Company's objectives in the social, environmental, ethical and sustainability governance fields, and the related implementation and reporting of results. The function also monitors the risks associated with the most significant sustainability aspects which may negatively affect the Company's reputation and identity. The Chief Executive Officer has direct relations with various categories of stakeholder and delegates specific tasks via internal service orders to Company departments in relations with stakeholders.
GRI 102-24 Criteria used for nominating and selecting highest governance body and committee members, taking into account independence, expertise and experience (including on social and environmental topics), and also considering gender issues and other diversity indicators
Report on Corporate Governance and the Ownership Structure: 6.6 Chief Executive Officer; 7.2 Audit, Risk and Sustainability Committee (formerly Audit and Risk Committee)
GRI 102-27 Measures taken to develop and enhance the highest governance body’s collective knowledge of economic, environmental, and social topics
GRI 102-25 Processes for the highest governance body to ensure conflicts of interest are avoided and managed
Report on Corporate Governance and the Ownership Structure: 6.3 Role and functions (ex art. 123-bis, paragraph 2 d), Consolidated Law on Finance); 6.8 Independent directors; 6.10 Assessment of the operation of the Board of Directors and Committees
GRI 102-30 Highest governance body’s role in reviewing the effectiveness of the organisation’s risk management processes for economic, environmental, and social topics
GRI 102-33 Process for communicating critical concerns to the highest governance body
Report on Corporate Governance and the Ownership Structure: 5.5 Equity participation by employees: voting rights mechanisms (ex art. 123-bis, paragraph 1 e), Consolidated Law on Finance); 7.2 Audit, Risk and Sustainability Committee (formerly Audit and Risk Committee)
GRI 102-36 Process for determining remuneration of the highest governance body
GRI 102-48 The effect of any restatements of information given in in the Non-Financial Statement, and the reasons for such restatements
GRI 102-40 A list of stakeholder groups engaged by the organisation
GRI 102-52 Reporting cycle (annual, every two months, etc.) Annual reporting cycle
GRI 102-16 Values, principles, standards, and norms of behaviour of the organisation
GRI 102-42 The basis for identifying and selecting stakeholders with whom to engage
GRI 102-53 Contact point for questions regarding the NonFinancial Statement and its contents
For clarification or further details on the topics presented, write to: INVESTOR. RELATIONS@posteitaliane.it
GRI 102-56 The organisation’s policy and current practice with regard to seeking external assurance for the NonFinancial Statement
GRI 302-1 Energy consumption within the organisation Green building Sustainable logistics Total internal Group energy consumption* 2016 2017
GRI 306-2 Total weight of waste by type and disposal method Green building
Health and Safety Absenteeism rate Information unavailable It is planned to report this information in future reporting cyclesDisclosure regarding contractors
In 2017, the boards of directors of Group companies were chaired by 56 persons, 59% of whom were over 50 and 41% between 30 and 50 years of age. The percentage of women is 32% of the total, including 35% in the 3050 age group and 30% in the over-50 age group.
GRI 404-1 Average hours of training per year per employee by professional category and gender
GRI 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data
Principles regarding reporting content and quality The 2016 GRI Sustainability Reporting Standards **findings** and the approach taken by Poste Italiane are shown below.
The information was based on the social and environmental aspects of the context.
Stakeholder inclusiveness Identification of the material topics took stakeholders' expectations into account.
Unless otherwise indicated, all the indicators presented in the document are representative of all Group companies.
Balance The document provides information that enables an assessment of overall performance and impacts.
Comparability Performance data are presented for 2016 and 2017 to enable analysis of the perfomances.
Promptness The timing of the release of the document is close to the events described.
With the aim of improving the governance of risk management processes and making them more efficient, a single department was created in 2017 to oversee and manage all the risks to which the Group is exposed. The new Group Risk Management function (“GRM”) is supported by specialist units that report directly to the function (direct support), and by other risk managers (indirect support ) present within Poste Italiane (including BancoPosta RFC) and in other Group companies. With particular reference to financial risk, the GRM function provides a single point of reference for coordinating the Risk Management functions of the companies subject to supervisory standards.
With regard to ensuring use of a structured and integrated process for risk management, the GRM function has drawn up a Group Risk Management process, divided into the following stages: �� Risk management guidelines: Poste Italiane SpA’s Board of Directors, in consultation with the Audit, Risk and Sustainability Committee (“ARSC”), defines the Group’s risk management guidelines, ensuring that the principal risks are correctly identified, measured, managed and monitored. In addition, the Board, within the scope of its responsibilities and management role, determines, in consultation with the ARSC, the degree of compatibility of the risks with management of the Group in line with strategic objectives; �� Definition and revision of the Group Risk Management framework: the GRM function, normally on an annual basis, reviews and updates the risk assessment tools and methods used, in keeping with developments in the business, in the relevant regulatory environment and in leading practices; �� Goal Analysis & Risk Briefing: at least once a year and with the support of the specialist units, the GRM function analyses the goals and related corporate processes and arrives at a preliminary identification of the risks that could threaten achievement of key objectives; �� Integrated Risk Assessment (Identification, Valuation, Aggregation & Prioritization): the GRM function, based on a preliminary mapping of the risks identified during the previous stage, integrates and extends the analysis together with Risk Owners and through the specialist units, the Group’s principal areas of risk, with the aim of identifying, describing, evaluating and presenting the risks in an aggregate, prioritised form; �� Risk Treatment: the risks identified and evaluated during the Risk Assessment stage are then used, at least once a year, to draw up the best risk management strategies, in keeping with the risk appetite. In particular, Risk Owners identify the most appropriate management strategies for the risks falling within their area of responsibility, based on the earlier prioritisation of the risks and a cost-benefit analysis carried out in collaboration with the GRM function; �� Risk Monitoring & Reporting: periodic monitoring, by the GRM function, of shifts in the Group’s risk profile takes place throughout the year, with the assistance of the various specialist units, using specific indicators, defined during the previous Risk Treatment stage. This process may also take place alongside ad hoc studies and analyses deemed necessary in order to fully comprehend the risks being monitored and identify any emerging risks.
Revenue from sales and services amounts to €8,060 million, a reduction of 1.9%, essentially due to lower revenue generated by the Mail, Parcels and Distribution segment.
Personnel expenses are down 2.1% from €5,988 million in 2016 to €5,865 million in 2017, reflecting a reduction in the ordinary component (down €107 million), reflecting a decrease in the average workforce during the year (approximately 2,700 fewer FTEs compared with the previous year) and early retirement incentives.
The following table shows a breakdown of the permanent workforce, broken down by region, at 1 January 2018 and shown in FTE terms.
(*) Shown in full-time equivalent terms. Poste Italiane SpA’s permanent workforce including seconded staff.
21. The workforce at 1 January of each year is identical to the workforce at 31 December of the previous year. 22. Art. 22, paragraph IV of the National Collective Labour Agreement for Poste Italiane’s non-managerial staff allows the use of fixed-term contracts “up to an annual average of 8% of the permanent workforce at 1 January of the year of recruitment”; for 2017, 8% is equal to 10,617 and 10,275 FTEs.
Net working capital: Trade receivables and other receivables and assets 4,061 4,027 34 0.8%
Poste Italiane SpA’s net invested capital amounts to €2,239 million at 31 December 2017 (€2,050 million at 31 December 2016).
The increase of €130 million in provisions for risks and charges, marking the balance of new provisions and uses/releases, primarily regards the liabilities that Poste Italiane will incur for staff taking voluntary early retirement by 31 December 2019 and an updated estimate of the liabilities deriving from BancoPosta’s operational risk.
Non-current assets held for sale and discontinued operations are down €384 million following completion of the sale to Invitalia of the 100% interest in Banca del Mezzogiorno – MedioCredito Centrale on 7 August 2017. The reduction also reflects the reclassification to non-current assets of the carrying amount of the investment in BancoPosta Fondi SpA SGR.
Equity amounts to €5,512 million at 31 December 2017, marking a reduction of €648 million, due primarily to movements in the fair value reserves net of tax (€713 million), as a result of positive and/or negative movements in the value of investments in securities held by BancoPosta RFC, and the payment of dividends totalling €509 million, as approved by the Annual General Meeting of 27 April 2017 (€0.39 per share, paid to shareholders on 21 June 2017). The above reductions in equity were partially offset by profit for the year of €617 million.
Directors’ report on operations for the year ended 31 December 2017 8. Financial review for Poste Italiane SpA
Corporate governance at BancoPosta rfc With regard to BancoPosta RFC’s governance, the rules governing the organisation, management and control of BancoPosta’s operations are contained in the specific BancoPosta RFC Regulation approved by the Extraordinary General Meeting of 14 April 2011 and recently amended by the Extraordinary General Meeting of 31 July 2015. Following the issue by the Bank of Italy on 27 May 2014 of an update to the prudential supervisory regulations for banks, the corporate governance regulations for banks are applied to BancoPosta (Part One, Title IV, Chapter I “Corporate governance” of Circular no. 285). Further information regarding the corporate governance structure is provided in Poste Italiane’s “Report on Corporate Governance and the Ownership Structure”, approved by the Board of Directors and published in the “Governance” section of the Company’s website.
On 25 January 2018, Poste Italiane SpA’s Board of Directors approved the separation and transfer of certain assets, contractual rights and authorisations from BancoPosta RFC to a new e-money and payment services unit to be set up within PosteMobile SpA, as well as the separation of the contractual rights and authorisations relating to back-office and anti-money laundering activities. These corporate actions were subject to approval by Extraordinary General Meeting, following prior receipt of all the consents needed to comply with existing statutory and regulatory requirements. Submission to the Bank of Italy of a request for authorisation to remove the ring-fence from the assets, contractual rights and authorisations that make up the e-money and payment services unit was also approved.
�� the guidelines in the Internal Control and Risk Management System (also “SCIGR”), describing the roles and duties of BancoPosta RFC’s control functions, and the procedures for coordinating and ensuring the exchange of information between these functions and Poste Italiane’s control functions and the flow of information to corporate bodies; �� the system for delegating powers to function heads in accordance with their responsibilities.
The risk assessment techniques, methods, controls and periodic audit findings are shared amongst the above control functions to promote synergies and take advantage of the specific expertise available.
ended the year at levels similar to those seen at the end of 2016 (around 160 basis points), but with a yield on 10-year BTPs of 2%, reflecting the increase in market rates.
Following the positive performance of current account deposits in 2017, from June onwards, the process of monitoring the risk profile indicated that there had been a decline in the leverage ratio to below the threshold set in the Risk Appetite Framework (RAF). The leverage ratio at 31 December 2017 stands at approximately 3.11% (3% being the minimum level required by the regulations). In order to restore the leverage ratio to the target level set out in the RAF (3.15%), on 25 January 2018, Poste Italiane SpA’s Board of Directors approved the recapitalisation of BancoPosta by transferring free reserves of €210 million. The relevant functions will continue to keep a close eye on the leverage ratio throughout 2018 to ensure, over time, that it continues to meet the related targets, thresholds and limits established in the RAF.
In terms of operational risk, with regard to real estate funds sold in the period 2002-2005, which have given rise to a number of complaints and disputes, Poste Italiane SpA is closely monitoring market developments and the related initiatives put in place in order to protect its customers, in order to assess any impact on provisions for risks and charges in the financial statements. In this regard, with a view to protecting and maintaining its positive image among customers and the Group’s reputation for operational credibility, based on trust and transparency, on 19 February 2018, Poste Italiane SpA’s Board of Directors approved an initiative designed to protect customers who, in 2004, against a different economic and regulatory backdrop compared with today’s, purchased units issued by the Europa Immobiliare 1 fund and who have held the units through to the date of the fund’s maturity on 31 December 2017.
Net interest income / Net interest and other banking income(3) 26% 26%
Operating expenses / Net interest and other banking income(4) 83% 84%
(1) Return On Assets. Represents the ratio of profit for the period and total assets. (2) Return On Equity. Represents the ratio of profit for the period and equity after deducting profit for the period and the valuation reserves. (3) Represents the contribution from net interest income as a ratio of net interest and other banking income. (4) Cost/income ratio.
Operating results Reclassified income statement for the year ended 31 December (€m) 2017 2016 Increase/(decrease)
Net interest and other banking income amounts to €5,641 million (€5,596 million in 2016) and, in addition to the interest margin and net fee and commission income, includes the net profit from the sale of financial assets, totalling €624 million (€587 million in 2016). This benefitted from €91 million in non-recurring income generated by the sale of 756,280 Class B Mastercard Incorporated shares (in 2016, non-recurring income included €121 million resulting from the sale of the share in Visa Europe).
Net operating expenses of 4,674 million are down on the previous year (€4,692 million in 2016), primarily due to a reduction in in “Other administrative expenses”, which are down from €4,653 million in 2016 to €4,616 million, These include €4,418 million (€4,457 million in 2016) in transfer payments to other Poste Italiane functions in accordance with the “General Guidelines governing the process of contracting out BancoPosta’s corporate functions to Poste Italiane” and the related operating guidelines for 2017. Personnel expenses of €93 million (€98 million in 2016) regard BancoPosta employees shown in the following table. In carrying out its activities, BancoPosta RFC is, however, the recipient of services provided by other Poste Italiane functions, particularly post office and Contact Centre personnel, paid for in accordance with the operating guidelines governing relations with Poste Italiane.
Finally, it should be noted that, in carrying out its activities, BancoPosta RFC makes use of real estate assets (e.g., use and management of office space for BancoPosta’s operations) and technology assets (e.g., the design and implementation of new services, the development and maintenance of operations and business software) owned by Poste Italiane SpA. The provision of these services is regulated by operating guidelines and remunerated through the payment by BancoPosta RFC of transfer prices to Poste Italiane.
Available-for-sale financial assets 39,140 37,263 of which government securities/securities guaranteed by the government 39,099 37,159 of which equity instruments 41 104
Due to banks 5,950 5,799 of which repurchase agreements 4,482 5,381
Due to customers 53,686 50,374 of which amounts due to current account holders 46,468 45,098 of which: Profit for the year 585 568
Held-to-maturity financial assets, consisting of fixed payment or fixed maturity debt securities, amount to €12.9 billion, up €229 million on 31 December 2016. This is primarily due to the redemption of matured securities, totalling €1.3 billion, and the purchase of new securities with a nominal value of approximately €1.6 billion.
Other asset items primarily include cash and cash equivalents of €3,217 million (€2,511 million at 31 December 2016), represented by cash at post office counters and companies that provide cash transportation services, consisting of cash deposits on postal current accounts and postal savings products. Other assets amount to €2,063 million (€1,766 million at 31 December 2016) and almost entirely relate to the payment of tax withholdings and items in progress that will be settled after the end of the reporting period.
The amount due to customers is up from €50.4 billion at the end of December 2016 to 53.7 billion. This regards current account deposits of €46.5 billion (€45.1 billion at 31 December 2016), other forms of deposit of €3.7 billion (€2.8 billion at 31 December 2016), primarily including Postepay and Postepay Evolution accounts, totalling €2.8 billion (€2.1 billion in 2016) and amounts due to the MEF in relation to advances from the State Treasury, totalling €3.5 billion (€2.4 billion at the end of 2016).
This item also includes hedging derivatives of €1,637 million, down compared with the figure of €2,304 million at 31 December 2016, following an improvement in the fair value of outstanding derivatives and the early unwinding of contracts with a nominal value of almost €2 billion.
23. The RAF consists of a framework that defines, in keeping with the maximum acceptable risk, the business model and strategic plan, the risk appetite, risk tolerance thresholds, risk limits, and risk management policies, together with the processes needed to define and implement them.
Outlook for BancoPosta RFC In 2018, BancoPosta RFC will continue to implement the strategic objectives forming the basis for the Business Plan, with particular attention to: �� developing the customer base, through targeted offerings of products and services capable of consolidating customer relations and boosting both deposits and the related investments in financial instruments; �� implementing the strategy aimed at expanding the range of Post Savings products, with the objective of improving its ability to meet the different needs of savers in a changing market environment; �� expanding the distribution of consumer credit products.
Intersegment transactions Intersegment transactions between BancoPosta and Poste Italiane functions outside the ring-fence are set out in Poste Italiane Financial Statements for the year ended 31 December 2017 (BancoPosta RFC’s Separate Report, Part A of the notes).
In the Mail, Parcels and Distribution segment, the Group aims to improve its competitive position in the parcels market, taking advantage of the opportunities arising from the growth of e-commerce and the trend towards digitalisation of the Public Sector, with opportunities to develop new integrated services for citizens.
The Group will be engaged in a process of redefining the segment, which has been underway for some years, through the use of new automation technologies to support production processes, and the introduction of an innovative delivery operating model, the Joint Delivery Model. This model, based on the expected evolution of customer volumes and requirements, provides for a basic alternate day structure for all standard mail deliveries, and daily deferred delivery rounds for express mail deliveries for business customers. Priority will be given to increasing the efficiency and quality of postal services, maximising synergies in the logistics and operations network, and enhancing all available Group assets.
In the Financial Services segment, the Plan aims to take advantage of the opportunities arising from recent regulatory innovations (MiFID 2 and IDD), taking advantage of current strengths: customer base, distribution network and brand. At the same time, Postal Savings will benefit from the new agreement with Cassa Depositi e Prestiti signed in December 2017. In addition, the active management strategy for the financial instruments portfolio is aimed at stabilising the overall return from interest income and realised capital gains.
During 2018, the Group will also continue to enhance the value of its investment in Anima Holding SpA.
On the bond market front, in early 2018, despite the political uncertainty in Italy, the yield on 10-year BTPs remained between 1.90% and 2.10%, and the spread with the Bund fell below 140 bps.
As in previous years, the Group will continue its strategy of actively managing its portfolio of financial instruments, with a view to stabilising the overall return.
In this competitive environment, and in view of the digital payment opportunities (in Italy cash is used in 85% of transactions, compared with an EU average of 68%), on 25 January 2018, Poste Italiane SpA’s Board of Directors decided to submit the proposed separation and transfer of certain assets, contractual rights and authorisations from BancoPosta RFC to a new e-money and payment services unit to be set up within PosteMobile SpA, for approval by shareholders. This will enable the latter to operate as an e-money institution.
The entry into force of the new EU Payment Services Directive (PSD2), from January 2018, will entail the adoption of new rules and business models for financial intermediaries operating in the payments sector, thereby increasing competition at national and international level. The lawmakers’ intention is to open up the European payments market to new operators who will go beyond the existing “current account - payment services” combination, thus helping to increase competition, so as to guarantee consumers, businesses and Public Administration entities innovative services, wider choice, lower prices and more secure transactions. In this scenario, the Poste Italiane Group will have to protect its market – especially the market for payment services linked to current accounts – from the arrival of new operators and the evolution of existing ones, whilst also benefitting – especially through the development of the Postepay platform and innovative and digital payment services – from the development of its offering to current account customers of other banks, both in Italy and overseas.
The Group intends to maintain its leadership in the life insurance business, by providing customers with the best products in the current economic and market environment, strengthening its pension fund offering, and continuing to develop private pension plans, an area in which the Group is already the market leader. In the non-life sector, the objective will be to pursue rapid growth in the accident, welfare and non-vehicle non-life sectors, taking advantage of strong untapped potential in these markets.
As part of the initiatives aimed at redefining the universal postal service, with Resolution 395/15/CONS AGCom authorised the gradual implementation, in three phases, of an alternate day delivery model for mail within the scope of the universal service.
Following the implementation of the first two phases of the model, involving approximately 2,600 municipalities and 16 Italian regions, the third and final phase was launched on 20 November 2017, which will involve a further 2,500 municipalities in 18 regions.
Appeals against this resolution were lodged with the Lazio Regional Administrative Court, but these were later withdrawn, resulting in cancellation of the related proceedings, except in the case of the Municipality of Tarzo, where formal withdrawal is pending.
Regarding licence obligations in the postal sector, AICAI (the Italian Association of International Air Couriers) and Confetra (the General Italian Confederation of Transport and Logistics Companies) have challenged AGCom Resolution 129/15/CONS (“Regulations regarding the requirements to be met in order to offer postal services to the public”, by which AGCom has established the conditions applicable to the issue of individual licences and general authorisation by the Ministry for Economic Development, before the Regional Administrative Court, claiming that application of the obligations provided for in these regulations to their members is unlawful. In the challenge, AICAI argues, among other things, in favour of the exclusion of express couriers from any obligation to contribute to the universal service compensation fund.
In January 2016, Lazio Regional Administrative Court referred the matter to the European Court of Justice, requesting a ruling on the compatibility of Italian legislation with the European postal directive, including express couriers’ contribution to the universal service compensation fund. On 28 November 2017, the Advocate General’s conclusions were presented to the Court, 24. On 29 July 2014, the board of AGCom issued Resolution 412/14/CONS, approving the measure defining the methods for calculating and quantifying the net cost of the universal postal service for 2011 and 2012. In confirming that the cost of the universal service for 2011 and 2012 was, in certain respects, unfair and thus merits compensation, the Resolution quantified the cost for 2011 and 2012 as €381 million and €327 million, respectively, compared with compensation originally recognised by Poste Italiane of approximately €357 million and €350 million, respectively. On 13 November 2014, Poste Italiane lodged an appeal against this Resolution before the Regional Administrative Court.
On each of the points highlighted, the Company has formulated its own proposals, as requested by the regulator.
On 18 December 2017, three appeals were lodged before the Lazio Regional Administrative Court, respectively, by the Fulmine Group Srl (AREL - Delivery Licensees Agency consortium company), Nexive SpA and Assopostale/GPS/MailExpress/CityPost, in which the alternative operator claimants requested its cancellation, with prior injunctive relief, in those parts where it determines the amount of coverage by alternative networks, redefines the access points and the related obligations for Poste Italiane, provides for the replicability test tool, and does not regulate the obligations regarding access to infrastructure. The appeal is pending. At a hearing on 7 February 2018, injunctive relief was not granted and a hearing on the merits of the case was not scheduled for the near future.
GPS has challenged certain communications sent to it by AGCom before the Lazio Regional Administrative Court. The communications were aimed at obliging the operator to agree to Poste Italiane’s new Contract Terms and Conditions (deemed by AGCom to be in line with the resolution). AGCom also initiated a penalty procedure against GPS regarding this matter, which was subsequently dismissed by the regulator in Resolution 456/17/CONS due to absence of the obligation to agree. On 5 May 2018, Poste Italiane lodged an appeal against this dismissal.
Poste Italiane introduced a number of changes to the prices charged for certain postal services falling within the scope of the universal services (signed-for products) from 10 January 2017, in keeping with the limits and requirements established by AGCom in Resolution 728/13/CONS. The new price list and the related acts are the subject of a legal challenge brought by the consumers’ association, CODACONS. A date for the hearing on the merits of the case is awaited.
26. Third-party operators may deliver items entrusted to them to post offices for delivery to post boxes, if they are correctly addressed and the post office where the post box is located is specified.
Following the decision taken by the Antitrust Authority, H3G filed a civil action before the Court of Rome, requesting that Poste Italiane and PosteMobile be ordered to pay damages of €375.8 million for the violations that were the subject of the aforementioned proceedings. At a hearing on 29 March 2017, the investigating judge ordered a court-appointed expert’s report.
Finally, on 28 March 2018, Poste Italiane, PosteMobile and WindTre SpA reached an agreement whereby, without any recognition and in order to restore peaceful business relations, the parties abandoned the dispute in question. By signing the agreement, Poste Italiane undertook to pay WindTre SpA a total of €1.5 million to cover the operating, general and staff costs incurred, also in relation to disputes, including but not limited to the collection and processing of information and corporate data by WindTre’s offices, legal fees and legal aid expenses, charges relating to technical consultancy services, etc.
The AGCM has lodged a challenge with the Lazio Regional Administrative Court against INPS and Poste Italiane, seeking cancellation of the tender process awarding the contract for non-automated mail delivery services for INPS’s head office and regional offices. In a ruling in May 2016, the Regional Administrative Court rejected the challenge, thus confirming the legitimacy of the INPS tender. Subsequently, the AGCM notified the appeal against the above-mentioned ruling and the Council of State, with a ruling of 5 September 2017, rejected the appeal.
Italian National Anti-Corruption Authority (ANAC) On 28 September 2015, the Italian National Anti-Corruption Authority (ANAC) notified Poste Italiane that it was launching an investigation to verify the administrative procedures carried out regarding upgrade and restyling work at the Sesto Fiorentino sorting centre (FI). The Authority asked Poste Italiane to submit an explanatory report on the contract, together with the related documentation. On 17 November 2015, the person responsible for the procedure sent the documented report to ANAC and asked to testify before the Authority. The hearing was held on 27 January 2016, when the Company provided clarification and details regarding the contract in question. A further hearing was held on 8 February 2017 and the Authority’s conclusions are awaited.
CONSOB In 2017, in line with the roll-out plan launched in December 2016, IT releases were completed for the new guided consultancy platform, which was gradually extended to the entire Poste Italiane network during the year. In parallel, during the second half of 2017, the segment was subject to further compliance initiatives aimed at implementing the MiFID 2 Directive, which came into force on 3 January 2018. The innovations made to procedural and IT structures, and the further initiatives planned in 2018 to consolidate the Company’s oversight of them, were the subject of specific reporting to the CONSOB.
At the end of the investigation, the Data Protection Authority found that the arrangements regarding the queue management system “were, for certain roles, not in compliance with personal data protection rules”, and therefore ordered the prohibition of such an arrangement, requesting Poste Italiane to report the initiatives it has undertaken to implement the Authority’s prohibitions and requirements. The Company has reported the changes made to the system in compliance with the requirements and prohibitions, supplemented the information pursuant to art. 13 of Legislative Decree 196/2003 for employees, and suspended the relevant arrangement.
European Commission The Court of the European Union’s sentence of 13 September 2013 upheld Poste Italiane SpA’s appeal against the European Commission’s decision of 16 July 2008 regarding state aid (Decision C42/2006), ordering the latter to pay the related costs. In compliance with the Decision, and as requested by the Ministry of the Economy and Finance, in November 2008 the Company returned the related amounts (€443 million, plus interest of €41 million). Under the 2015 Stability Law, in order to implement the Court of the European Union’s sentence of 13 September 2013, €535 million has been set aside for payment to Poste Italiane for 2014. These amounts were collected from the Central Treasury on 13 May 2015.
The European Commission subsequently reopened the enquiry, appointing an external expert to check that the levels of interest paid to the Company from 1 January 2005 to 31 December 2007 on deposits held at the Ministry of the Economy and Finance (as per art. 1, paragraph 31, of Law 266 of 23 December 2005 “2006 Budget Law”) were in line with the market. To date, the expert has submitted to the Commission a preliminary revised version of the assessment originally carried out by the Commission. Poste Italiane intends to actively collaborate with the national authorities to demonstrate the consistency of the returns it received during the relevant period.
On 6 March 2018, the Supreme Court of Cassation, in a dispute between Poste Italiane and Equitalia Centro SpA regarding fees for the collection of local property taxes, ruled that certain areas of interpretation of European law were prejudicial and ordered suspension of the proceedings and transmission of the documents to the Court of Justice.
Litigation On 27 February 2015, the tax authorities notified Poste Italiane SpA of an indictment for accounting irregularities before the Court of Auditors for the Lazio region, regarding a number of accounting records for the handling and distribution of revenue stamps in the years between 2007 and 2010. With a ruling of 9 July 2015, the Court of Auditors for the Lazio region, ordered the Company at first instance to pay the sum of €8 million plus an adjustment for inflation and statutory interest. Poste Italiane appealed against this decision, which was upheld by the Court of Auditors on 15 November 2017, limiting the initial sentence to the amount already recognised as due by Poste Italiane, namely €4 million.
Event after 31 December 2017 Events after the end of the reporting period to which the Annual Report for 2017 refers are described in other sections of this document. Further information is provided in Poste Italiane Financial Statements for the year ended 31 December 2017.
Related party transactions Internal related parties include subsidiaries and associates directly or indirectly managed by Poste Italiane SpA. External related parties include the majority shareholder, the Ministry of the Economy and Finance, entities controlled, also jointly, by the Ministry of the Economy and Finance, and companies associated with them. The Group’s key management personnel and pension funds providing post-employment benefits for staff employed by the Group and related entities are also related parties. The state and public bodies, other than the Ministry of the Economy and Finance, are not deemed to be related parties. Transactions involving financial assets and liabilities represented by instruments traded on organised markets are not deemed to be related party transactions.
The scope of application of the Guidelines differs depending on the applicable regulations. This means that the CONSOB’s requirements apply to Poste Italiane (in carrying out both its postal activities and those of BancoPosta and in the conduct of transactions with Poste Italiane’s related parties through subsidiaries), whilst the standards issued by the Bank of Italy apply solely to BancoPosta’s transactions with Poste Italiane’s connected parties. The updated version of the Guidelines is published on Poste Italiane’s website at The document is also available in the section dedicated to BancoPosta at
At a meeting on 20 September 2017, Poste Italiane’s Board of Directors, having obtained the consent of the Related and Connected Parties Committee, authorised the spot and forward purchase and sale of securities issued and/or guaranteed by the Italian government and the execution of repurchase agreements and reverse repos and of hedging derivatives by BancoPosta RFC, with Monte Paschi Capital Services Banca per le Imprese SpA acting as counterparty.
This company qualifies as a related party of Poste Italiane as it is also controlled by the Ministry of the Economy and Finance through Banca Monte dei Paschi di Siena SpA28. The operations regard a range of transactions, with the amount and duration of each transaction not known in advance, but defined over time.
Given the size of BancoPosta RFC’s portfolio of financial instruments in which it invests the funds deposited by private account holders and in view of the average amount involved in this type of transaction, which are carried out under standard terms and conditions and form part of BancoPosta’s ordinary financial management, the transaction has been prudently classified as an ordinary transaction of greater significance, in accordance with CONSOB Resolution 17221 of 2010, as amended.
From October 2017, five repurchase agreements and 23 buy & sell back transactions, which expired during the period, have been entered into, in addition to two Interest rate Swaps for hedging purposes and two forward sales of securities.
The agreement was signed on 14 December 2017 and the related information document was made available for inspection at the Company’s registered office, at Borsa Italiana SpA, on the Company’s website and on the authorised “eMarket Storage” system.
Details of the impact of related party transactions on the financial position and profit or loss are provided in Poste Italiane Financial Statements for the year ended 31 December 2017 (Notes to the Poste Italiane Group’s financial statements – Additional information; Notes to Poste Italiane SpA’s financial statements – Related party transactions).
Exceptional and/or unusual transactions Under the definition provided by the CONSOB ruling of 28 July 2006, the Poste Italiane Group did not conduct any exceptional and/or unusual transactions29 in 2017.
29. Such transactions are defined as transactions that due to their significance/materiality, the nature of the counterparties, the purpose of the transaction, the manner of determining the transfer price and timing of the transaction may give rise to doubts over the correctness and/or completeness of the disclosures in the financial statements, over a conflict of interest, safeguards for the Company’s financial position and protections for non-controlling shareholders.
The extraordinary session: 1. approved removal of the ring-fence from (i) the assets, contractual rights and authorisations that make up BancoPosta RFC’s e-money and payment services unit, and (ii) the contractual rights and authorisations relating to back-office and anti-money laundering activities; 2. approved Poste Italiane SpA’s contribution of fresh capital – amounting to €210 million - to BancoPosta RFC to restore the leverage ratio to the target level established in the Risk Appetite Framework.
Directors’ report on operations for the year ended 31 December 2017 12. Summary of the resolutions passed by the Annual General Meeting held in ordinary and extraordinary session
In addition, the method of presenting the revenue and cost components relating to the insurance business in the statement of profit or loss has been revised, with the inclusion of a new item: Revenue from insurance services after movements in technical provisions and other claims expenses, providing a synthetic indication of the Insurance Services segment’s contribution to the Group’s result. This item is defined as the sum of premium revenue net of outward reinsurance premiums, income and losses from financial instruments attributable to insurance activities and movements in technical provisions and other claims expenses.
The above changes are reflected in the reclassification of the statements of profit and loss of the operating segments which, in addition to the disclosures required by IFRS 8, have been prepared by management solely in order to provide additional, more extensive analysis of the operating performances of the Group’s specific areas of business.
EBIT margin – this is an indicator of the operating performance and is calculated as the ratio of operating profit (EBIT) to total revenue before non-operating financial expenses and taxation. This indicator is also presented separately for each operating segment.
Net ROE (Return On Equity) – from this Report, this is calculated as the ratio of net profit to the average value of equity (net of the fair value reserves) at the beginning and end of the reporting period. In previous years, the indicator was calculated as the ratio of pre-tax profit to the average value of equity (including the fair value reserves).
NET WORKING CAPITAL – the sum of inventories, trade receivables and other receivables and assets, current tax assets, trade payables and other liabilities, and current tax liabilities.
NET INVESTED CAPITAL – the sum of non-current assets and net working capital, deferred tax assets, deferred tax liabilities, provisions for risks and charges and provisions for employee termination benefits and pension plans and non-current assets and disposal groups held for sale and liabilities related to assets held for sale.
NET (DEBT)/FUNDS OF THE MAIL, PARCELS AND DISTRIBUTION SEGMENT (ESMA) – this is the sum of the following items, shown according to the format recommended by ESMA, the European Securities and Markets Authority (document 319 of 2013): financial liabilities after adjusting for intersegment transactions, current financial assets after adjusting for intersegment transactions and cash and cash equivalents.
(*) The company’s equity includes the recapitalisation of €4 million carried out in 2017. n/s: not significant
(*) The figures shown have been prepared in accordance with IFRS and therefore may not coincide with those in the financial statements prepared in accordance with the Italian Civil Code and under Italian GAAP.
(**) Insurance premium revenue is reported gross of outward reinsurance premiums. n/s: not significant
5. Poste Italiane SpA for the year ended 31 december 2017 260 5.1 Financial statements 262 5.2 Information on bancoposta rfc 273 5.3 Notes to the statement of financial position 279 5.4 Notes to the statement of profit or loss 322 5.5 Related party transactions 338 6. Risk management 348 7. Proceedings pending and principal relations with the authorities 380 8. Material non-recurring events and/or transactions 387 9. Exceptional and/or unusual transactions 387 10. Events after the end of the reporting period 388 11. Additional information 389 12. Annex – BancoPosta rfc separate report for the year ended 31 december 2017 414
Poste Italiane’s shares have been listed on the Mercato Telematico Azionario (the MTA, an electronic stock exchange) since 27 October 2015. At 31 December 2017, the Company is 35% owned by CDP and 29.3% owned by the MEF, with the remaining shares held by institutional and retail investors. Poste Italiane SpA continues to be under the control of the MEF.
This section of the Annual Report for the year ended 31 December 2017 includes the consolidated financial statements of the Poste Italiane Group, the separate financial statements of Poste Italiane SpA and BancoPosta RFC’s Separate Report (also, the annual accounts). The Report has prepared in euros, the currency of the economy in which the Group operates.
The Group’s consolidated financial statements consist of the statement of financial position, the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the notes to the financial statements. All amounts in the consolidated financial statements and the notes are shown in millions of euros, unless otherwise stated.
�� The consolidated and separate financial statements form part of a single, integrated document, containing sections and notes applicable to both sets of financial statements, which provide information on matters common to both the Group and Poste Italiane SpA. Unless otherwise indicated, the information provided in these sections is, therefore, to be considered as applicable to both the consolidated and separate financial statements. The relevant matters specifically regard: • the basis of presentation used and accounting standards adopted; • disclosure of the sources and the procedures used in determining fair value; • financial risk disclosures; • a summary of the principal proceedings pending and relations with the authorities at 31 December 2017; • and, in general, certain additional disclosures required by accounting standards, whose presentation in a single section is designed to provide the reader with better information (e.g. the analysis of net debt, key performance indicators for investee companies, etc.).
�� The method of presenting the revenue and cost components relating to the life and non-life insurance businesses in the consolidated statement of profit or loss for the year has been revised, in line with the new management view. Specifically, and in compliance with IAS 1, the consolidated statement of profit or loss for the year ended 31 December 2017 includes a new item, Revenue from insurance services after movements in technical provisions and other claims expenses, providing a synthetic indication (in just one line of the statement) of the Insurance Services segment’s contribution to the Group’s operating result30. This item is defined as the sum of premium revenue net of outward reinsurance premiums, income and losses from financial instruments attributable to insurance activities and movements in technical provisions and other claims expenses31. In order to ensure comparability with prior year financial statements, the item is accompanied by disclosure of each individual revenue and cost component contributing to the result.
�� As stated above, presentation of the notes for each item and the degree of disclosure provided result from a preliminary analysis of the materiality of the information, to be repeated at the end of each reporting period in compliance with international accounting standards. The general approach adopted envisages a specific note for certain items deemed to be of qualitative significance, regardless of the materiality of the amounts at the reporting date and/or movements during the period (as an example, financial assets, personnel expenses, relations with the Public Administration, etc.). In all other cases, the materiality of the amount and movements during the period are taken into account and, therefore, disclosure is only provided to the extent that it will provide the reader with information that is useful or necessary in understanding the results of operations and financial position of Poste Italiane SpA and of the Group.
Poste Italiane Financial statements for the year ended 31 December 2017 1. Introduction
The term IFRS includes all the International Financial Reporting Standards, International Accounting Standards (“IAS”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”, previously known as the Standing Interpretations Committee or “SIC”), adopted by the European Union and contained in the EU regulations published as of 29 March 2018, the date on which the Board of Directors of Poste Italiane SpA approved the annual accounts.
2.2 Basis of preparation The accounting policies described below reflect the fact that the Group and Poste Italiane SpA will remain fully operational in the foreseeable future, in accordance with the going concern assumption, and are consistent with those applied in the preparation of the annuals accounts for the previous year. Amendments to accounting standards applicable from the accounting period under review have not had an impact on these financial statements (note 2.7 – New accounting standards and interpretations and those soon to be effective).
With regard to the interpretation and application of newly published, or revised, international accounting standards, and to certain aspects of taxation34, where the related interpretations are based on examples of best practice or case-law that cannot yet be regarded as exhaustive, the financial statements been prepared on the basis of the relevant best practices. Any future changes or updated interpretations will be reflected in subsequent reporting periods, in accordance with the specific procedures provided for by the related standards.
Property, plant and equipment Property, plant and equipment is stated at acquisition or construction cost, less accumulated depreciation and any accumulated impairment losses. Cost includes any directly attributable costs incurred to prepare the asset for its intended use, and the cost of dismantling and removing the asset to be incurred as a result of legal obligations requiring the asset to be restored to its original condition. Borrowing costs incurred for the acquisition or construction of property, plant and equipment are recognised as an expense in the period in which they are incurred (with the exception of borrowing costs directly attributable to the acquisition or construction of a qualifying asset, which are capitalised as part of the cost of the asset in question). Costs incurred for routine and/or cyclical maintenance and repairs are recognised directly in profit or loss in the year in which they are incurred. The capitalisation of costs attributable to the extension, modernisation or improvement of assets owned by Group companies or held under lease is carried out to the extent that they qualify for separate recognition as an asset or as a component of an asset, applying the component approach, which requires each component with a different useful life and value to be recognised separately. The original cost is depreciated on a straight-line basis from the date the asset is available and ready for use, based on the asset’s expected useful life.
The useful life and residual value of property, plant and equipment are reviewed annually and adjusted, where necessary, at the end of each year. Land is not depreciated. When a depreciable asset consists of separately identifiable components, with useful lives that are significantly different from those of the other components of the asset, each component is depreciated separately, in accordance with the component approach, over a period that does not exceed the life of the principal asset.
The Poste Italiane Group has estimated the following useful lives for the various categories of property, plant and equipment: Category Years
(*) Or the useful life of the improvement if shorter than the estimated lease term.
Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets and liabilities of the company or business acquired, at the date of acquisition. Goodwill attributable to investments accounted for using the equity method is included in the carrying amount of the equity investment. Goodwill is not amortised on a systematic basis, but is tested periodically for impairment in accordance with IAS 36. This test is performed with reference to the cash generating unit (“CGU”) to which the goodwill is attributable. The method applied in conducting impairment tests and the impact on the accounts of any impairment losses are described in the paragraph, “Impairment of assets”.
Leased assets Assets held under finance leases, where the risks and rewards of ownership are substantially transferred to the lessee, are recognised at fair value or, if lower, at the present value of the minimum lease payments. The corresponding obligation toward the lessor, which is equal to the principal amount of future lease payments, is recognised as a financial liability. Depreciation is calculated on a straight-line basis, based on the useful lives of the various categories of asset previously described for property, plant and equipment and intangible assets.
Impairment of assets At the end of each reporting period, property, plant, equipment and intangible assets with finite lives are analysed to assess whether there is any indication that an asset may be impaired (as defined by IAS 36). If any such indication exists, the recoverable amount of the asset is estimated in order to determine the impairment loss to be recognised in profit or loss. The recoverable amount is the higher of an asset’s fair value less costs to sell, and its value in use, represented by the present value of the future cash flows expected to be derived from the asset. In calculating value in use, future cash flow estimates are discounted using a rate that reflects current market assessments of the time value of money, the period of the investment and the risks specific to the asset. The realisable value of assets that do not generate separate cash flows is determined with reference to the cash generating unit (CGU) to which the asset belongs.
Regardless of any impairment indicator, the assets listed below are tested for impairment every year: �� intangible assets with an indefinite useful life or that are not yet available; the impairment test can take place at any time during the year, provided that it is performed at the same time in each of the following years; �� goodwill acquired in a business combination.
Investments In the Poste Italiane Group’s consolidated financial statements, investments in subsidiaries that are not significant (individually or in the aggregate) and are not consolidated, and those in companies over which the Group exerts significant influence (“associates ”) and in joint ventures, are accounted for using the equity method. See the note 2.4 – Basis of consolidation
Financial instruments Financial instruments include financial assets and liabilities that are classified on initial recognition at fair value based on the business purpose for which they were acquired. The purchase and sale of financial instruments are recognised by category, either on the date on which the Group commits to purchase or sell the asset (trade date or transaction date), or, in the case of the insurance transactions and BancoPosta’s operations, at the settlement date36. For BancoPosta operations, the settlement date almost always coincides with the transaction date. Any changes in fair value between the transaction date and the settlement date are recognised in the financial statements.
38. A hedge of the exposure to a change in fair value of a recognised asset or liability or of an unrecognised firm commitment attributable to a particular risk, and that could have an impact on profit or loss.
39. A hedge of the exposure to the variability of cash flows attributable to a particular risk associated with an asset or liability or with a highly probable forecast transaction, and that could have an impact on profit or loss.
This exemption applies to the recognition and measurement of forward electricity contracts entered into by the subsidiary EGI SpA if the following conditions have been met: �� the contract involves the physical supply of a commodity; �� the entity has not entered into an offsetting contract; �� the transaction must be entered into in accordance with expected purchase and/or sale or usage requirements.
The Group’s tax expense and related accounting treatment reflect the effects of the election to adopt a tax consolidation arrangement, in accordance with relevant legislation, by Poste Italiane SpA, together with the subsidiaries, Poste Vita SpA, SDA Express Courier SpA, Mistral Air Srl, Postel SpA and, from 1 January 2017, Risparmio Holding SpA. The tax consolidation arrangement is governed by Group regulations based on the principles of neutrality and equality of treatment, which are intended to ensure that the companies included in the tax consolidation are in no way penalised as a result. Following adoption of the tax consolidation arrangement, the Parent Company’s tax expense is determined at consolidated level on the basis of
Green Certificates (Emission Allowances) With reference to Group companies subject to these rules42, Green Certificates (or Emission Allowances) are a means of reducing greenhouse gas emissions, introduced into Italian and European legislation by the Kyoto Protocol with the aim of improving the technologies used in the production of energy and in industrial processes.
BancoPosta cash and deposits Cash and securities held at post offices, and bank deposits attributable to the operations of BancoPosta RFC, are accounted for separately from cash and cash equivalents as they derive from deposits subject to investment restrictions, or from advances from the Italian Treasury to ensure that post offices can operate. This cash cannot be used for purposes other than those relating to the aforementioned operations.
If, after the date of preparation of the financial statements, an asset (or disposal group) no longer meets the conditions for classification as held for sale, it must be reclassified following measurement at the lower of
�� the carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation, impairments or reversals of impairments that would have been recognised if the asset (or disposal group) had not been classified as held for sale; �� the recoverable amount, calculated at the date on which the decision not to sell was made.
Reserves Reserves include capital and revenue reserves. They include, the BancoPosta ring fenced capital reserve (hereafter “BancoPosta RFC”), representing the dedicated assets attributed to BancoPosta RFC, the Parent Company’s legal reserve, the fair value reserve, relating to items recognised at fair value through equity, and the cash flow hedge reserve, reflecting the effective portion of hedging instruments outstanding at the end of the reporting period.
Retained earnings This relates to the portion of profit for the period and for previous periods which has not been distributed or taken to reserves or used to cover losses and actuarial gains and losses deriving from the calculation of the liability for employee termination benefits. This item also includes transfers from other equity reserves, when they have been released from the restrictions to which they were subjected.
Insurance contracts The following policies and classification and measurement criteria refer specifically to the operations of the Poste Italiane Group’s insurance companies.
Insurance contracts Contracts classified as insurance contracts in accordance with IFRS 4 include Class I and Class V life insurance policies, Class III policies that qualify as insurance contracts and non-life insurance contracts. These products are accounted for as follows: �� insurance premiums are accounted for when the policies are written, recognised as income and classified in revenue (shown net of outward reinsurance premiums); they include annual or single premiums accruing during the period and deriving from insurance contracts outstanding at the end of the reporting period, net of cancellations; �� technical provisions are made in respect of earned premiums to cover obligations to policyholders; such provisions are calculated on an analytical basis for each contract using the prospective method, based on actuarial assumptions appropriate to cover all outstanding obligations. An increase in technical provisions and the cost of claims are recognised as expenses in profit or loss, whilst a reduction in technical provisions, compared with the previous period, is recognised in income.
44. Where, following entry into effect of the new legislation, the employee has not exercised any option regarding the investment of vested employee termination benefits, the Group has remained liable to pay the benefits until 30 June 2007, or until the date, between 1 January 2007 and 30 June 2007, on which the employee exercised a specific option. Where no option was exercised, from 1 July 2007 vested employee termination benefits have been paid into a supplementary pension fund.
�� Defined contribution plans TFR falls within the scope of defined contribution plans provided the benefits vested subsequent to 1 January 2007 and were paid into a Supplementary Pension Fund or a Treasury Fund at INPS. Contributions to defined contribution plans are recognised in profit or loss when incurred, based on their nominal value.
Earnings per share In the Poste Italiane Group’s consolidated financial statements, earnings per share is determined as follows: Basic: basic earnings per share is calculated by dividing the Group’s profit for the year by the weighted average number of Poste Italiane SpA’s ordinary shares in issue during the period.
Diluted: At the date of preparation of these financial statements no financial instruments have been issued which have potentially dilutive characteristics45.
The consolidated financial statements have been specifically prepared at 31 December 2017, after appropriate adjustment, where necessary, to align accounting policies with those of the Parent Company.
Investments in subsidiaries that are not significant and are not consolidated, and those in companies over which the Group exerts significant influence (assumed when the Group holds an interest of between 20% and 50%), hereinafter “associates”, and joint ventures are accounted for using the equity method.
A list of companies consolidated on a line-by-line basis and using the equity method is provided in note 11 Additional information – Information on investments.
2.5 Use of estimates Preparation of the annual accounts requires the application of accounting standards and methods that are at times based on complex subjective judgments and estimates based on historical experience, and assumptions that are considered reasonable and realistic under the circumstances. Use of such estimates and assumptions affects the amounts reported in the financial statements and related disclosures. The actual amounts of items for which the above estimates and assumptions have been applied may differ from those reported in previous financial statements, due to uncertainties regarding the assumptions themselves and the conditions on which estimates are based. Estimates and assumptions are periodically reviewed and the impact of any changes is reflected in the financial statements for the period in which the estimate is revised if the revision only influences the current period, or also in future periods if the revision influences both current and future periods.
Revenue and receivables due from the State The Group has substantial receivables due from the State, though the amount is much lower than in the past. Revenue from activities carried out in favour of or on behalf of the State and Public Administration entities is recognised on the basis of the amount effectively accrued, with reference to the laws and agreements in force, taking account, in any event, of the instructions contained in legislation regarding the public finance. The legal framework of reference is still subject to change and, as has at times been the case, circumstances were such that estimates made in relations to previous financial statements, with effects on the statement of profit and loss, had to be changed. The complex process associated with the determination of receivables, which has not been completed yet, may result in changes in the results for the years after that ended 31 December 2017 to reflect variations in estimates, due to future regulatory enactments or following the finalisation of expired agreements to be renewed.
At 31 December 2017, Poste Italiane Group’s receivables outstanding with central and local authorities amounted to €969 million (€1,010 million at 31 December 2016), gross of provisions for doubtful debts. The significant decrease in the amounts outstanding at 31 December 2017 and 31 December 2016, with respect to the past, reflects the effects of the review of the main exposures conducted by a joint working group with the MEF – Treasury and General Accounting Department, which ended in August 2015.
Receivables due from Ministries and Public Administration entities: Ministry for Econ. Dev. (vi) 77 75
Total amounts due from the MEF and Public Administration entities 969 1,010
i. Receivables related to Universal Service compensation, totalling €31 million and relating to compensation for previous years not funded in the state budget. In 2017, the Group received €262 million in accrued compensation for the period and €108 million related to compensation for 2015 and 2014 (see note 5.3 - A7 Trade receivables).
ii. Receivables related to electoral tariff subsidies, totalling €83 million, a sum acknowledged in the MEF Letter, fully funded in the state budget for 2017 and for prior years, and awaiting approval by the European Commission. These receivables are shown gross of collection of the amount of €55 million deposited in an escrow account with the MEF in December 2017. For this reason, the account, which is non-interest bearing and held with the Treasury, is accounted for in “Prepayments received”. The release of the amount deposited with the MEF and derecognition of the receivables in question will occur once the European Commission has given the related consent.
vi. Receivables due from the Ministry for Economic Development, amounting to €77 million, including receivables of €62 million that are the subject of legal proceedings following the decision by the State Attorney’s Office not to clear a negotiated settlement worth approximately €50 million; with regard to the remaining amount, a joint working group has been set up with the debtor to agree on the amount of the services to be billed, partly on the basis of the results of the expert appraisal conducted as part of the above legal action.
46. Publisher tariff subsidies were reinstated by Law Decree 244/2016 (the so-called “Mille Proroghe” decree), in effect from 1 January 2017 and converted with amendments into Law 19 of 27 February 2017.
47. The principal agreements that have expired regard those governing relations with INPS in relation to the payment of vouchers on the institution’s behalf (see note 5.3 – A7 Trade receivables) and with the tax authorities in relation to the collection and reporting of road tax, the payment of tax refunds and the notification of fines.
In the Parent Company’s case, the Mail, Parcels and Distribution segment, to which goodwill has been allocated, was tested for impairment. Each of the other Group companies is considered a separate CGU. Details of goodwill are provided in table A3.2.
The impairment tests at 31 December 2017 were performed on the basis of the five-year business plans of the units concerned or the latest available projections. Data from the last year of the plan have been used to project cash flows for subsequent years over an indefinite time, and the resulting value was then discounted using the Discounted Cash Flow (DCF) method. For the determination of value in use, NOPLAT (net operating profit less adjusted taxes) was capitalised using an appropriate growth rate and discounted using the related WACC (Weighted Average Cost of Capital)48.
With regard to Poste Italiane SpA alone, impairment tests were carried out on investments. The methods and criteria used to carry out the tests are in line with those described in relation to goodwill and other intangible assets. The results of the tests are described in note 5.3 – A4 Investments.
Measurement of other non-current assets The current economic and financial crisis - which has resulted in highly volatile markets and great uncertainty with regard to economic projections - and the decline of the postal market in which the Group operates make it difficult to produce forecasts that can, with certainty, be defined as reliable. In this context, as at 31 December 2017, in part in view of the content of the Group’s Strategic Plan for 2018-2022, approved by the Parent Company’s Board of Directors on 26 February 2018, and the ongoing crisis in the postal and real estate sectors, the Parent Company’s Mail, Parcels and Distribution segment was tested for impairment in order to determine a value in use to compare with the total carrying amount of net invested capital. In estimating the value in use of the segment, in accordance with generally accepted valuation techniques, reference was made to revenue and cost projections in the Strategic Plan for 2018-2022, whilst the terminal value, calculated on the basis of data for the latest explicit projection period, was based on normalised earnings, taking into account the existence of potential positive elements whose value was not reflected in the explicit projections over the life of the plan. Reference was also made to the transfer prices that BancoPosta RFC is expected to pay for the services provided by Poste Italiane’s distribution network, as determined in the new Strategic Plan. A WACC of 6.12% was used. The impairment test determined that the related carrying amounts are fair.
In addition, in assessing the value of non-current assets of the Mail, Parcels and Distribution segment, account was taken of any effect on the value in use of certain properties, should such properties no longer be used in operations in future, making adjustments to certain impairment losses taken in the past in the light of new evidence available at 31 December 2017. The fair value of the Parent Company’s properties used in operations continued to be significantly higher than their carrying amount, as confirmed by the progressive updates of the property valuations carried out by a leading independent expert. As in the past, in determining the value of properties used as post offices and sorting centres, Poste Italiane SpA’s universal service obligation was taken into account, as was the inseparability of the cash flows generated from the properties that provide this service, (which the Parent Company is required to operate throughout the country regardless of the expected profitability of each location); the unique nature of the operating processes involved and the substantial overlap between postal and financial activities within the same outlets, represented by post offices, were also considered. On this basis, the value in use of the Parent Company’s land and buildings used in operations is relatively unaffected by changes in the commercial value of the properties concerned and, in certain critical market conditions, certain properties may have values that are significantly higher than their market value, without this having any impact on the cash flows or results of the Mail, Parcels and Distribution segment.
Fair value of unquoted financial instruments The fair value of financial instruments that are not traded on an active market is based on prices quoted by external dealers or on internal valuation techniques which estimate the transaction price on the measurement date in an arm’s length exchange motivated by normal business considerations. The valuation models are primarily based on market variables, considering where possible, the prices in recent transactions and quoted market prices for substantially similar instruments, and of any related credit risk.
Technical provisions for insurance business The measurement of technical provisions for the insurance business is based on the calculations performed by actuaries employed by Poste Vita SpA, based on a series of material assumptions, including technical, actuarial, demographic and financial assumptions, as well as on projections of future cash flows from the insurance contracts entered into by Poste Vita and Poste Assicura and effective at the end of the year. In order to verify the adequacy of the provisions, liability adequacy tests (LATs), (which measure the ability of future cash flows from the insurance contracts to cover liabilities towards the policyholders ), are periodically performed. The LAT is conducted on the basis of the present value of future cash flows, obtained by projecting expected future cash flows from the existing portfolio to the end of the reporting period, based on appropriate assumptions regarding the cause of termination (death, surrender, redemption, reduction) and the performance of claims expenses. If necessary, technical provisions are topped up and the related cost charged to profit or loss.
Share-based payment As more fully described in note 11 Additional information – Share-based payment arrangements, measurement of the fair value of the “Long-term Incentive Plan for 2016-2018 (LTIP) – Phantom Stock Plan”, the “Long-term Incentive Plan for 2017-2019 (LTIP) –Phantom Stock Plan” (both approved by Poste Italiane SpA’s shareholders on 24 May 2016) and the short-term incentive plan (MBO) for BancoPosta RFC’s material risk takers (approved by Poste Italiane SpA’s shareholders on 27 April 2017), with the related impact following the termination of employment, was based on the conclusions of independent actuaries. The plan terms and conditions link the award of the related options to the occurrence of certain events, such as the achievement of performance targets and performance hurdles and, in certain areas of operation, compliance with certain capital adequacy and short-term liquidity requirements. For these reasons, measurement of the liability, based on the outcome of an appraisal by external actuaries, involves the use of estimates based on current knowledge of factors that may change over time, potentially resulting in outcomes that may be significantly different from those taken into account in preparing these financial statements.
49. For technical reasons, at 31 December 2017, the measurement of bonds issued by EU governments was based on this latter source.
2.6 Determination of fair value The Poste Italiane Group has adopted a fair value policy, setting out the general principles and rules to be applied in determining fair value for the purposes of preparing the financial statements, conducting risk management assessments and supporting the market transactions carried out by the Finance departments of the various Group entities. The principles and rules to be applied in measuring the fair value of financial instruments are unchanged with respect to 31 December 2016 and have been defined in compliance with indications from the various (banking and insurance) regulators and the relevant accounting standards, ensuring consistent application of the valuation techniques adopted at Group level. The methods used have been revised, where necessary, to take into account developments in operational procedures and in market practices during the year, and the guidelines for the Group’s financial management reviewed and approved by Poste Italiane SpA’s Board of Directors in December 2017.
Level 2: this level is comprised of fair values based on inputs other than Level 1 quoted market prices that are either directly or indirectly observable for the asset or liability. Given the nature of Poste Italiane Group’s operations, the observable data used as input to determine the fair value of the various instruments include yield curves and projected inflation rates, exchange rates provided by the European Central Bank, ranges of rate volatility, inflation option premiums, asset swap spreads or credit default spreads which represent the creditworthiness of specific counterparties and any liquidity adjustments quoted by primary market counterparties.
�� Structured bonds: measurement is based on a building blocks approach, where the structured bond is broken down into its basic components: the bond component and the option component. The bond component is measured by discounting cash flows to present value in line with the approach applicable to straight bonds, as defined above. The option component - which considering the features of the bonds included in the portfolio of the Poste Italiane Group relates to interest rate risk - is measured in accordance with a standard closed form expression as with classical option valuation models with underlyings exposed to such risks. In the case of structured bonds used to hedge index-linked policies (before ISVAP regulation no. 32), measurement is based on the bid price provided by the financial counterparties with which buyback agreements have been struck.
Derivative financial instruments: �� Interest rate swaps: Plain vanilla interest rate swaps: valued using discounted cash flow techniques, involving the computation of the present value of future differentials between the receiver and payer legs of the swap. The construction of yield curves to estimate future cash flows indexed to market parameters (money market rates and/or inflation) and computation of the present value of future differentials are carried out using techniques commonly used in capital markets.
�� Bond forwards: valuation is based on the present value of the differential between the forward price of the underlying instrument as of the measurement date and the settlement price.
In the rare instances where collateral agreements do not substantially reduce counterparty risk, measurement takes place by discounting to present value the cash flows generated by the securities held as collateral, using as the input a yield curve that reflects the spread applicable to the issuer’s credit risk. Alternatively, use is made of fair value to calculate the CVA/DVA (Credit Valuation Adjustment / Debit Valuation Adjustment), in relation to the main technical and financial characteristics of the agreements and the counterparty’s probability of default.
Financial liabilities either quoted on inactive markets or not at all: �� Straight bonds: these are measured by discounting their future cash flows using as input a yield curve reflecting the spread applicable to the issuer’s credit risk.
�� Repurchase agreements: are valued using discounted cash flow techniques involving the computation of future contractual cash flows. Repos may also be used for collateral and in such cases fair value need not be adjusted for the counterparty ’s credit risk.
Investment property (excluding former service accommodation) and inventories of properties held for sale: The fair value of both investment property and inventories has been determined mainly by discounting to present value the cash flows expected to be generated by the rental agreements and/or proceeds from sales, net of related costs. The process uses a discount rate that considers analytically the risks typical of the property.
Accounting standards and interpretations applicable from 1 January 2017 �� Amendments to IAS 12 – Income taxes - Recognition of Deferred Tax Assets for Unrealised Losses, adopted with Regulation (EU) no. 1989/2017. The amendments to this standard have clarified how to account for deferred tax assets on debt instruments measured at fair value.
�� Annual Improvements Cycle to IFRSs 2014 - 2016, adopted with Regulation (EU) no. 182/2018 in connection with the annual projects to improve and revise international accounting standards. The accounting standard affected by the amendments introduced by this Regulation, applicable from 1 January 2017, is IFRS 12 - Disclosure of Interests in Other Entities.
Every single performance obligation of the supplier with the customer must be estimated, measured and recognised separately.
This approach assumes an accurate preliminary analysis of the contract, to identity every “single good/service”, or every “single component” of a good/service that the supplier undertakes to provide50, allocating to each the relevant transaction price, and to monitor it throughout its duration (in terms manner and timing of fulfilment and customer satisfaction).
In the case of obligation fulfilled at a point in time, revenue is recognised only when the total “control” over the underlying goods or services is transferred to the customer. In this respect, attention is paid not only to the significant exposure to the risks and benefits related to the good or service but also to physical possession, customer acceptance, the existence of legal rights, etc.
If the performance obligation is fulfilled over time, revenue measurement and recognition reflect, virtually, the progress of the customer’s level of satisfaction. The standard provides specific guidance to help the entity to select the most appropriate accounting treatment.
ii. Impairment; under the new model, Expected Losses, credit losses are recognised on an expected basis over the life of the financial instrument, requiring immediate recognition, rather than the occurrence of a trigger event, as under the existing Incurred Losses model. IFRS 9 requires entities to account for 12-month expected credit losses (stage 1) from the moment of initial recognition of the financial instrument. Expected credit losses must, instead, be measured over the remaining life of the asset being measured, when there has been a significant deterioration in the credit quality of the financial instrument since initial recognition (stage 2) or in the case of credit-impaired assets (stage 3).
iii. General Hedge accounting; partially amended with respect to IAS 39. Key aspects of the main changes introduced regard: an expanded scope of application of hedge accounting; the testing of hedge effectiveness is only prospective; the introduction of the option of rebalancing without interrupting the pre-existing hedge.
50. By “single good/service” or “single components” of a good/service, reference is made to the minimum unit provided to the customer, identifiable and individually/potentially saleable in the market.
In particular, the amendments permit insurance companies: a. to defer the effective date of IFRS 9, and continue to apply IAS 39 until 1 January 2021. This option is available only to entities that predominantly undertake insurance activities; or b. to apply the overlay approach, whereby the difference between the profit/(loss) for the “Financial assets designated at fair value through profit or loss” applying IFRS 9 and the profit/(loss) for the same financial assets applying IFRS 39 is reclassified to other comprehensive income. This reclassification would ensure the consistency of the effect on profit or loss of the financial assets in question, regardless of the accounting treatment.
The following amendments apply as of 1 January 2019: �� IFRS 16 - Leases, adopted with Regulation (EU) no. 1986/2017. The new standard intends to improve the accounting treatment of lease contracts, giving a basis for users of financial statements to assess the effect that leases have on the financial position, operating performance and cash flows of an entity. These provisions entail a substantial revision of the current accounting treatment of lease contracts by lessees, introducing for lessors a unified model for the different types of lease (finance and operating).
The scope of the standard does not include short-term contracts (for up to 12 months) and low-value contracts (where the underlying asset does not exceed US$5,000). For these contracts, the lessor may elect not to apply IFRS 16, and to continue with the current accounting treatment.
�� Amendments to IFRS 9 – Financial Instruments – Prepayment Features with Negative Compensation adopted with Regulation (EU) no. 498/2018. The amendments to this standard aim to clarify the classification of certain financial assets with prepayment features when IFRS 9 applies.
Specifically, such disclosures refer to: 1. The expected impact of the upcoming implementation of IFRS 9 – Financial Instruments, IFRS 15 – Revenue from Contracts with Customers, and IFRS 16 – Leases; 2. Specific issues on application of IFRS 3 – Business Combinations; 3. Specific issue on application of IAS 7 – Statement of Cash Flows.
IFRS 9 – Financial Instruments The Poste Italiane Group’s project to implement IFRS 9 – Financial Instruments (hereinafter the “IFRS 9 Project” or just the “Project”) has been led by the Parent Company, with the involvement of all the direct and indirect subsidiaries, and support from a consultant with proven expertise and qualifications. The Project’s objectives were: i) identification of the main areas impacted by the standard (classification and measurement of financial instruments, impairment procedures and hedge accounting on the basis of the new provisions); ii) determination of the quantitative and qualitative effects of the transition; iii) identification and implementation of the application and organisational solutions, following full adoption, for comprehensive, effective and consistent management within the Group. Accordingly, the Project, which delved into the areas identified by the standard (Classification & Measurement, Impairment and Hedge Accounting), unfolded along three successive stages: Assessment (which was completed on 30 June 2017); ii) Design (completed on 30 September 2017) and iii) Implementation (completed, for the main aspects, on 31 December 2017 with the adoption of IFRS 9 Guidelines). The activities to upgrade the information systems were carried out in accordance with the processes and procedures implemented by Poste Italiane’s IT function.
IFRS 9 Guidelines In the final part of the Project’s third stage, on 13 December 2017, Poste Italiane’s Board of Directors approved specific IFRS 9 Guidelines, which set out to define the following “high-level” policies: �� the Business Model choices to be adopted at Group level; �� the methodological approach to estimate the impairment of financial instruments, in relation to the trading book and the banking book (thus, the way expected losses are assessed); �� stage allocation criteria, to allocate financial instruments to the applicable stages on the basis of their downgrading; �� hedge accounting choices.
�� Other: this is a residual category which includes financial assets with a business model other than the previous ones, including held-for-trading financial assets.
For trade receivables the simplified approach was applied, on the basis of the matrix generated for the historical losses observed.
The Group implemented a stage allocation application model to evaluate the downgrade of financial instruments on the basis of the issuer’s rating and other technical and statistical standards of reference, as well as all the other forward-looking qualitative and quantitative information52 available at the measurement date. The model is defined in keeping with the risk parameters adopted to determine impairment criteria.
A financial instrument is transferred to stage 2 only if the downgrade of its credit rating exceeds a pre-established threshold, taking into account the initial rating and the vintage of the position.
Given the current asset conditions, and according to the staging model adopted by the Group, financial instruments are allocated nearly entirely to stage 1. In accordance with IFRS 9, the impairment of instruments classified in this stage is measured as the expected loss over a maximum time horizon of 12 months.
Moreover, regarding the definition of default, the following approach was adopted for the issuers of debt securities: �� 90-day overdue payments for corporates and banks; �� overdue payments, even by just one day, or renegotiation of debt for sovereigns.
In the assessment phase of the project for the adoption of IFRS 9, the Poste Italiane Group – considering the prevailing nature of Poste Vita SpA’s business and the stabilising effect of the shadow accounting mechanism – considered that the adoption of IFRS 9 by its insurance subsidiaries would not give rise to significant volatility effects on the income statements, or any mismatches. Also considering the need for consistency in the application of accounting rules, and in the preparation of any type of internal and external reporting, given that insurance companies are permitted to postpone the adoption of IFRS 9, the Poste Italiane Group, in agreement with its Poste Vita SpA and Poste Assicura SpA subsidiaries, has decided that the Group’s consolidated financial statements and the Poste Vita Group’s consolidated financial statements would be fully compliant with IFRS 9 as of 1 January 2018.
�� €57 million on financial instruments classified as HTCS; of this amount, €42 million is attributable to policyholders under the shadow accounting method.
�� A reduction of approximately €23 million in retained earnings: • a reduction of €39 million resulting from the new method of determining ECLs; • an increase of €16 million, resulting primarily from the reclassification of non-qualifying investments to FVPL.
IFRS 15 - Revenue from Contracts with Customers The Poste Italiane Group has opted to apply IFRS 15 from its effective date (1 January 2018). The Group has not opted for early application and adopted the simplified transition method (the cumulative effect of the change of accounting standard is recognised as of 1 January 2018 in retained earnings, without any restatement of the comparative year-earlier accounts). It also opted not to take into account the so-called “completed contracts” at the transition date, which continue to be recognised in accordance with IAS 18 and related interpretations.
For the assessment phase, the only one where an external consultant with proven expertise and qualifications was retained, the Group adopted a methodology that follows in the logical footsteps in which the revenue measurement and identification process unfolds under IFRS 15. In this context, use was made of an IT tool developed internally, which made it possible to assess sales contracts, grouped by type of activity, to identify the individual performance obligations in place, and to spot any difference between the previous and the new accounting standard. In this phase, the administrative and accounting systems, the available IT systems and the procedures in place to evaluate compliance with the new standard were analysed.
Regarding administrative management of the elements of variable consideration (including the above-mentioned penalties), the underlying processes, the responsibilities and the activities, including control activities, to perform the calculations underlying the accounting entries have been revised.
In the second half of 2018, all analyses and assessments should be finalised and an IFRS 16 compliant accounting system should be finally put in place, with the redesign of the administrative and accounting processes and the relevant control system, and implementation of the most appropriate IT strategy.
At the date of preparation of these financial statements, there is no exhaustive or reliable, general qualitative and quantitative overview of the impacts determined by IFRS 16. However, early evidence suggests that it is reasonable to suppose that the impacts will be significant in terms of the accounts and the management and control of lease contracts, considering also the substantial number of operating leases entered into as lessee by Post Italiane SpA alone, on the strength of its more than 10,000 capital leases.
� Poste Italiane and FSI Investimenti SpA sign an agreement for the Company’s acquisition of an investment in FSIA Investimenti Srl
The following table shows a comparison of the consideration paid and the net assets of the acquired company at 1 January 2017.
The difference between the transaction consideration and the net assets acquired, totalling €339.5 million has been allocated, partly on the basis of an appraisal conducted by an external expert, as follows: €115.8 million to the fair value of certain intangible assets; and the remaining €254.1 million to goodwill included in the carrying amount of the investment at 31 December 2017.
On 6 March 2018, Poste Italiane SpA and Anima Holding SpA, together with Poste Vita SpA, BancoPosta Fondi SpA SGR and Anima SpA SGR, to the extent of their respective responsibilities, signed implementing agreements designed to strengthen their partnership in the asset management sector, in accordance with the terms and conditions announced on 21 December 2017. In particular, with regard to the spin-off and sale, determination of the final price will be subject to an earnout in Poste Italiane’s favour, in the event of an increase in income from the management mandates/delegations assigned to Anima SGR, in addition to certain thresholds and a price adjustment mechanism in Anima Holding’s favour, which is of marginal importance. The consideration will be paid in full on completion of the transaction by 31 December 2018, subject to suspensive conditions relating to receipt of the necessary consents from the competent authorities and following the subscription for and redemption of one or more share issues by Anima Holding SpA, with a value of at least €250 million.
In the light of the above agreements, in the Poste Italiane Group’s consolidated financial statements for the year ended 31 December 2017, the assets and liabilities of BancoPosta Fondi SpA SGR have been reclassified. As a result, they are no longer recognised in “Non-current assets and disposal groups held for sale” and “Liabilities related to assets held for sale”, and have been reallocated to the respective items under assets and liabilities, with the exception of items closely related to the activities included in the spin-off, which will continue to be classified in the items provided for in IFRS 5.
The following corporate actions also took place in 2017: �� On 24 January 2017, the appointment and powers of the liquidator to take charge of Poste Tributi ScpA, whose liquidation was approved by the extraordinary general meeting of the company’s shareholders held on 30 December 2016, was published in the Companies’ Register. On 26 October 2017, the extraordinary general meeting of Poste Tributi SCpA’s shareholders voted to reduce the share capital by €258,300 following the exclusion of the shareholder, AIPA SpA.
�� On 28 April 2017, the ordinary general meeting of Programma Dinamico SpA’s shareholders approved the company’s financial statements and the summary schedules showing the securitised assets and the securities issued (in accordance with the Bank of Italy’s Order of 29 March 2000) at 31 December 2016. The meeting also approved the final liquidation financial statements, at the level of both individual items and as a whole, and the plan for distribution, at the same time authorising the 53. Specifically, on 10 November 2016, Poste Italiane SpA, Cassa Depositi e Prestiti and Anima Holding SpA signed a Framework Agreement for a joint project involving the creation of a leading asset management company. Under the agreement, Poste Italiane and Anima Holding have committed, at the earliest opportunity, to complete the transfer of Poste Italiane’s 100% interest in the subsidiary, BancoPosta Fondi SpA SGR, to Anima Holding. On the above terms, for the purposes of the Poste Italiane Group’s consolidated financial statements, the transaction qualified for application of IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. This resulted in recognition of the subsidiary’s assets and liabilities in “Non-current assets and disposal groups held for sale” and “Liabilities related to assets held for sale”.
liquidator to request that the company struck off the register held at the relevant Chamber of Commerce, without waiting for the end of the term of ninety days provided for in art. 2493 of the Italian Civil Code. On 18 May 2017, Programma Dinamico SpA was struck off the Companies Register.
�� On 8 May 2017, Anima Holding SpA proceeded to increase its capital via the issue of 8,333,947 new shares following exercise of all the options under the LTIP plan for 2014-2016. As a result, Poste Italiane SpA’s interest in Anima Holding SpA was diluted from 10.32% to 10.04%.
�� On 27 July 2017, the Board of Directors of Equam SpA called an extraordinary general meeting of the company’s shareholders to approve the winding up and liquidation of the company. On 29 September 2017, a general meeting of the company’s shareholders approved the final liquidation financial statements, the liquidator’s report and the plan for distribution. The company was struck off the Companies Register on 2 October 2017.
�� Following issue of the relevant consents by the Ministry for Economic Development, the European Central Bank and the Bank of Italy, on 7 August 2017, Poste Italiane SpA and Invitalia SpA, Agenzia nazionale per l’attrazione degli investimenti e lo sviluppo d’impresa, completed the sale to the latter of Poste Italiane SpA’s 100% interest in Banca del MezzogiornoMedio Credito Centrale54. The transaction, between related parties (given that Poste Italiane SpA and Invitalia SpA are under the common control of the Ministry of the Economy and Finance), in accordance with the law and the related regulations, was approved by Poste Italiane SpA’s Board of Directors, with the prior consent of the Board’s Related and Connected Parties Committee. Under the related contract of sale, €158 million of the total consideration of €387 million55 was collected during the year under review, with the balance accounted for in “Other financial receivables”, after the effect of discounting to present value. €159 million was collected in early 2018, with the remainder to be collected in tranches, the last of which after five years (€30 million).
�� On 9 November 2017, the respective boards of directors approved the merger of Poste Tutela SpA (a wholly owned subsidiary of Poste Italiane SpA) with and into Poste Italiane. On 13 February 2018, the merger deed for PosteTutela SpA’s merger with and into Poste Italiane SpA was executed. The transaction will be effective for legal purposes from 1 March 2018, and for accounting and tax purposes from 1 January 2018.
� Launch of the process of establishing an e-money institution within the Group
On 25 January 2018, Poste Italiane SpA’s Board of Directors approved the separation and transfer of certain assets, contractual rights and authorisations from BancoPosta RFC to a new ring-fenced e-money and payment services unit to be set up within PosteMobile SpA, as well as the separation of the contractual rights and authorisations relating to back-office and anti-money laundering activities. These corporate actions are subject to approval by Extraordinary General Meeting, following prior receipt of all the consents needed to comply with existing statutory and regulatory requirements.
Following submission to the Bank of Italy of a request for authorisation and receipt of the necessary consents, the Board of Directors approved: a) submission of a proposal to an Extraordinary General Meeting of shareholders for removal of the ringfence that applies to BancoPosta RFC from the assets, contractual rights and authorisations that make up the e-money and payment services unit, which will form part of a contribution in kind to PosteMobile SpA; b) PosteMobile SpA’s establishment of a separate entity – to include the above unit – to specialise in e-money and payment services, and through which PosteMobile SpA will be able to operate as an electronic money institution, whilst also continuing to operate as a mobile virtual network operator.
55. The transaction consideration of €390 million was adjusted by approximately €3 million to take into account certain adjustments provided for in the contract on the occurrence of certain conditions.
The restructuring taking place within Poste Italiane SpA since 2017 shares the same goal. Specifically, in July 2017, the Company set up the Payments, Mobile and Digital function with the aim of carefully assessing future growth scenarios, including from the viewpoint of compliance with the related statutory requirements.
3.2 Other material events The following material events also occurred in 2017: �� Allocation of the price paid by Poste Italiane SpA in order to acquire Indabox SpA for a consideration of €650 thousand, on 7 November 2016, was completed. The resulting difference between the transaction consideration and the net assets acquired amounts to €610 thousand, which has been allocated to goodwill and included in the carrying amount of the investment, which was valued using the equity method at 31 December 2017.