97 Parent Company Financial Statements 99 Parent Company Balance sheet and the Profit and loss account 101 Balance sheet 115 Profit and loss account 125 Notes to the Parent Company Financial Statements 127 Foreword 128 Part A - Summary of significant accounting policies 135 Part B - Information on the Balance Sheet and the Profit and loss account 193 Part C – Other information 197 Cash Flow Statement 203 Appendices to the Notes 275 Securities and urban real estate on which revaluations have been 281 Attestation and Reports 283 Attestation to the Financial Statements pursuant to art. 154-bis of legislative decree of 24 February 1998, no. 58 and art. 81-ter of Consob regulation of 14 May 1999, no. 11971 as amended 287 Board of Statutory Auditors’ Report 301 Independent Auditor’s Report 310 Contacts
Index 4 The integrated overview of our reports 5 About Management Report and Parent Company Financial Statements 6 Letter from the Chairman and the Group CEO
9 We, Generali 10 Company highlights 12 2018 key facts 14 Significant events after 31 December 2018 and 2019 corporate event calendar 16 The Generali 2021 strategy 26 Our rules for running business with integrity 28 Our purpose and the value creation 30 Challenges and opportunities of the market context 36 Our governance and remuneration policy 43 Management Report 44 Part A – Result of operations 75 Part B – Risk report 89 Appendix to the Management Report
The Group reporting approach is based on the integrated thinking and Core&More1 concept also this year: the Annual Integrated Report is our Core report, centred on material financial and non-financial information while other reports and channels of communication (More) present more detailed information, some of which targets a specialized audience.
Group Annual Integrated Report 2018 generali.com 187th year generali.com 187th year
Remuneration Report It provides specific information on the remuneration policy adopted by the Group and its implementation.
Annual Integrated Report and Consolidated Financial Statements 2018 generali.com 187th year
The Report starts with a foreword, that contains a summary of economics, managerial and governance characteristics of our Group and Assicurazioni Generali S.p.A., with reference to 2018.
We, Generali 10 Company highlights 12 2018 key facts 14 Significant events after 31 December 2018 and 2019 corporate event calendar 16 The Generali 2021 strategy 26 Our rules for running business with integrity 28 Our purpose and the value creation 30 Challenges and opportunities of the market context 36 Our governance and remuneration policy
The Net Promoter Score programme of Generali was recognized as the world’s best one by Medallia during the Experience Europe 2017 event held in London. The programme enables to listen to client feedback in real time and act on that feedback in order to resolve issues and improve services. It covers retail and corporate customers as well as distributors.
meeting on 21 February, Generali approved its climate change strategy including actions in its core activities, i.e. investments and underwriting.
The investment selection approach is rigorous both from a credit quality and ESG (Environmental, Social, and
Slovenica and its subsidiaries providing a full suite of P&C, health, life and pension products. The former transaction was approved in November and the latter was completed in February 2019.
Viridium Gruppe, with which Generali established a broader industrial partnership in the German insurance market. The transaction is subject to the approval by the German Federal
(BaFin) and to the clearance by the competent German antitrust authorities.
Cristiano Borean was appointed to the position of Group CFO and joined the Group Management Committee
A new innovative asset management company headquartered in New York launched with Aperture Investors, aligning client and manager interests through an innovative performancelinked fee model.
Insurance launched along with a start-up to satisfy client needs in the field of cyber risks. The new function will combine broad-scale insurance offerings in the IT realm with the support of a tech start-up,
(IVASS) and will take place with respect to all notes outstanding, in compliance with the respective terms and conditions. Another early redemption relating to notes belonging to ISIN XS0406159623 was exercised in December.
Agreement signed for the acquisition of 100% of the Polish asset management company Union
Investments TFI S.A., that will significantly strengthen Generali’s position in asset management in central and eastern Europe. The transaction is subject to the approval of the regulatory authorities.
The Generali Group’s new strategy presented to investors, in line with the Group’s desire to become a life-time partner for its customers, offering innovative and customized solutions relying on its unequalled distribution network; and to be a leader in the European insurance market for private individuals, professionals and SMEs, while also creating a global and focused asset management platform and pursuing opportunities in high-potential markets.
Completion of the process of transferring the P&C portfolio of the
Generali was amongst the main investors in the project for the construction of the new
Group remains present in Belgium through its Global Business Lines, continuing to provide insurance and assistance solutions.
to “a+”. The Long-Term ICR outlook was modified from positive to stable, while the FSR outlook is stable.
A € 500 million subordinated bond issue was successfully placed with institutional investors, for the partial refinancing of € 750 million in subordinated debt of the Group, with the first call date in 2019. The issue received orders from roughly 450 investors for a total in excess of € 6.5 billion, 13 times the amount offered.
The rating agencies Fitch, Moody’s and AM Best rated that issue “BBB”,
Europ Assistance acquired Trip Mate, the leading company in the market of travel insurance for tour operators in the United States.
Closed the acquisition of the majority stake in Sycomore Factory SAS, started in September. The strategic partnership, that is another step forward in the execution of Generali’s asset management strategy, will allow to enrich the offering with innovative investment solutions and to strengthen focus and capabilities on sustainability and responsible investments for clients.
INCREASE CAPITAL GENERATION: > € 10,5 billion cumulative capital generation 2019-2021
Being a life-time partner to customers, offering innovative, personalized solutions thanks to an unmatched distribution network
ENHANCE CASH REMITTANCE: +35% cumulative cash remitted to holding 2019-2021 compared to period 2016-2018
REDUCE DEBT LEVEL AND COST: € 1,5-2,0 billion debt reduction by 2021; € 70-140 million reduction in annual gross interest expense by 2021 vs 2017
GROWING EARNINGS PER SHARE: HIGHER RETURN FOR SHAREHOLDERS: average return on equity5 >11,5%
Three key enablers which will drive the execution of the strategy: Innovation and Digital Transformation
2 Based on IAS-IFRS gross written premiums in Europe at year-end 2017. 3 3 year CAGR; adjusted for impact of gains and losses related to disposals. 4 Adjusted for impact of gains and losses related to disposals. 5 Based on IFRS Equity excluding OCI and on total net result.
The Generali People Strategy, based on four priorities, ensures the execution of the business strategy while respecting our values.
Each priority is supported by specific Group initiatives, the results of which are measured and monitored over time to ensure continuous improvement.
Since January 2018, more than 390 local actions were planned, initiated and communicated. At the end of December 2018, 92% of these were already implemented, with a view to launching 100% of the actions by the end of June 2019, coinciding with the third edition of the Generali Global Engagement Survey.
To create and spread a culture focusing on the empowerment of our people, in 2017 we designed and rolled out the Managerial Acceleration Program (MAP). MAP fosters and strengthens a managerial culture capable of engaging and boosting the accountability of our people in line with the eight key managerial behaviours of the Generali Empowerment Manifesto (GEM). MAP is dedicated to the management population and fully facilitated by Group managers who have participated in special training and coaching initiatives (189 trainers trained in 2018). In 2018, 4,218 managers participated in the MAP. The goal is to train 8,900 of them by the end of 2019.
Increasing the accountability of our people also means boosting a performance culture. Through Group Performance Management we focus our efforts on spreading this culture while also strengthening transparency and meritocracy in line with what our people asked in the Generali Global Engagement Survey. In 2018, 99%13 of our people participated in a programme involving: defining objectives, assessing performance, feedback and individual development plans.
Shift mindset tow ards Customer Centri ci ty employees 50.8% (+1 pps)
6 The data exclusively refer to Group companies, equal to 54,743 employees (77.4% of the total), within the scope of the Group Performance Management process.
We develop the managerial skills of our leaders and talents to favour their development and internal growth. To achieve this objective, we offer mentoring and international training programmes in partnership with the best business schools in the world. To enhance strategic thinking and leadership skills, a number of ad hoc training programmes were launched in 2018, including: – Step Up, a 4-day residential programme at the Lausanne campus in collaboration with
The assessment is satisfactory also in light of the initiatives implemented within the Generali People Strategy described and the centrality of our people within the Group strategy.
These lines of transformation will be supported by specific global and local initiatives and targets defined and monitored in line with the Generali 2021 strategic plan.
* Data and related changes also refer to companies non-consolidated line-by-line.
Generali strives to create a brand experience aligned with the Group’s goal of becoming a life-time partner to its customers. We strive to be proactive and focused on customer relationships and integrate protection, prevention and assistance, creating tailor-made products and services that meet our clients’ needs. Our agents are at the very heart of this transformation. Data and technology are the crucial levers that give our distribution networks the opportunity to customize and adapt our products and services. Continuous connectivity and real-time support will enable us to create faster and more consistent experiences that will delight our clients. Being a life-time partner to customers allows us to transform our role from a mere product vendor to a provider of integrated solutions that add genuine value to people’s lives, their health, their home, their mobility and their work. We are committed to strengthening our brand14 to become 1st choice in the Relationship Net Promoter Score among our European international peers by the end of 2021, to foster new business development. We thus must get consumers to consider, prefer and acquire Generali, and connect them with our agents. Our goal is to have a higher brand preference than our market share.
Challenges and opportunities of the market context, p. 33 Glossary available at the end of Annual Integrated Report and Consolidated Financial Statement 2018 www.generali.com/our-responsibilities/our-commitment-to-theenvironment -and-climate
As regards the process of engagement of counterparties associated with the coal sector in countries which are highly dependent on coal, in line with the Just Transition principles, we involved the 6 companies to which the Group has exposure, which are part of the 120 companies identified as Top Coal Plant Developers by the Urgewald organization and currently taken as a reference. We are evaluating their transition plans to decide whether to continue or suspend the business.
Insofar as our public commitment goes, in 2018 we declared our support for the Task Force on Climate-related Financial Disclosure (TCFD) and launched an internal process for the management of key aspects and the development of a reporting framework. We also participate in the UNEP FI Principles for Sustainable Insurance (PSI) work group on the implementation of the TCFD Recommendations by insurers and the Investor Leadership Network, promoted as part of the G7 Investor Global Initiatives, in which we also dig deep into the topic of climate change with the main financial sector operators.
The Group’s new strategy features a considerable sustainability component amongst its key initiatives: t 107,394 CO2e
8 Total emissions refer to 42% of the total Group employees in the following countries: Austria, France, Germany, Italy, Czech Republic, Spain and Switzerland. They are calculated according to the location-based method; they are also disclosed according to the market-based method on our website.
Glossary available at the end of Annual Integrated Report and Consolidated Financial Statement 2018
For Refugee Start-ups Offering to those who have received refugee status - more than 2.3 million have arrived in Europe since 2015 - the tools they need to launch independent businesses enabling them and their families to create new livelihoods, contribute to the local economy and thus regain their dignity as well as encourage social integration.
The Human Safety Net is active through three programmes with the shared mission of freeing the potential of disadvantaged people to enable them to improve the living conditions of their families and communities, by working alongside partners, like local social businesses and non-governmental organizations. Every country and business unit of the Group can choose to participate in one of these three programmes, identifying, conducting due diligence on and selecting one or more partners to directly manage activities with beneficiaries. All of the activities and the results achieved are monitored through a measurement system based on the London Benchmarking Group’s international standard.
The parent company coordinates and manages all activities aimed at capital optimization, via the balance between the strengthening of capital, profits and cash flow.
We have a collection of Group public policies and guidelines which support our operations in a sustainable and responsible manner, such as: Together, these Group policies and guidelines contribute to ensuring respect for human rights, a topic which we began to focus on in 2017. The goal is to identify, prevent and mitigate the main direct risks of human rights violations to which the Group is exposed, while also identifying areas and activities for improvement. In line with the principles and instruments in place at international level, a due diligence process was initiated to evaluate human rights on the basis of direct business risk and country risk, and also allowed for an initial assessment in countries with potentially greater exposure. The Group is defining a long-term action plan based on these results.
Approved by BoD of Assicurazioni Generali S.p.A. on 15 March 2017 www.generali.com/info/download-center/policies
Code of Conduct that defines the basic behavioural principles which all the personnel of the Group are required to comply with: these principles are outlined in specific guidelines that refer, for example, to the promotion of diversity and inclusion as well as the management of conflicts of interest, personal data protection and corruption prevention
Responsible Investment Guideline that codifies the responsible investment activities at Group level
Ethical Code for suppliers that highlights the general principles for the correct and profitable management of relations with contractual partners
We are committing to rendering our HR training system increasingly effective. We continue to work in activities for creating awareness and training on the different themes of the Code. The implementation of specific training programs - both online as well as in the classroom - combined with a global communication program aims to create full awareness within all employees of the importance of the Code and their responsibility to report each violation that one becomes aware of. Everybody is encouraged to voice their concerns or request clarifications on any topic handled by the Code.
www.generali.com/our-responsibilities/responsible-business/ code-of-conduct for further information on the Code of Conduct and communication channels * The employees trained, also belonging to companies non-consolidated line-by-line, represent 80.3% of the total. The change is calculated at constant scope pursuant to IFRS 5.
Value our people We value our people, encourage diversity and invest in continuous learning and growth by creating a transparent, cohesive and accessible working environment. Developing our people will ensure our company’s long-term future.
In de�ning its new strategic plan, Generali has identi�ed a new purpose representing an evolution of its previous vision and mission: It is the essence of what Generali does for its clients every day.
Ownership Simplification Human touch Innovation www.generali.com/ourresponsibilities /our-commitmentto -the-environment-and-climate/ real-estate-investments for further information on sustainable real estate investments www.generali.com/investors/ investing-in-generali/goals-andresults for further details on the achievement of 2015-2018 strategic objectives
We are an international player of the insurance sector and the centre of interest and expectations for a large number of stakeholders. The factors of the context in which we operate represent challenges and opportunities that we continuously assess in order to guarantee adequate monitoring of the risks that can arise from them. We manage our business in an integrated manner, taking it into account in our strategy and pursuing the value creation over time.
Market expectations, the Group’s profitability targets and the expectations of policyholders’ returns are the main factors influencing the formulation of the investment allocation strategy, in line with the Solvency II principles. The regulatory system and the continued low interest in a global context of growing uncertainty render it essential to manage assets in a rigorous and careful manner that is consistent with liabilities. Geographical diversification and selective focus on alternative investments (private equity and private debt) and real assets (real estate assets and/or infrastructural assets, both direct and indirect) are important factors in current investment activities which aim to contain portfolio risks and sustain current profitability. The creation of a multi-boutique insurance asset manager platform is part of the strategy to enhance the investment capacity in these market sectors. We are exposed to the market risks arising from the value fluctuations of the investments and to the credit risks linked to the risk of counterparties’ non-fulfilment as well as to expansion of the credit spread. We are handling these risks by following principles of sound and prudent management, in line with the Prudent Person Principle and with the Group Investment Governance Policy and risk guidelines. We measure financial and credit risks using the Group’s internal model, which offers us a better representation of our risk profile.
The insurance sector continues to be affected by continuous changes in the national and international regulatory system. IVASS Regulation, no. 38 was issued in 2018, and it entails an in-depth revision of the Group’s corporate system and a few important corporate processes. The IDD, the insurance intermediation directive, was also applied in 2018. Other important Regulation proposals completing the regulatory framework introduced by the General Personal Data Protection Regulation (GDPR) are presently being discussed. They touch on themes such as the protection of electronic communications (ePrivacy) and the free circulation of non-personal data. In a perspective of growth and creation of a true single European market, discussions focused on defining rules governing the PEPPs, the European voluntary pension products that will join the already existing national pension instruments, continue. The European Commission also launched several packages of measures: the sustainable finance action plan (including the obligation for asset managers to take into account sustainability factors in the investment processes), the one on opportunities that technological innovation in the financial services (Fintech) offers and lastly, a number of measures aimed at bolstering consumer protection (New Deal for Consumers). The revision of the Solvency II Directive and the Key Information Document (KID) for the PRIIPS, the insurance investment products, is currently in progress. At the global level, the Common Framework (ComFrame) works launched by the International Association of Insurance Supervisors (IAIS) in order to develop standard capital requirements for insurance groups operating globally are continuing. Lastly, as regards the new international accounting standards, the International Accounting Standards Board (IASB) has decided to postpone the entry into force of the new accounting standard IFRS 17 (insurance contracts) by one year, from 2021 to 2022, and to postpone also exemption from applying the standard IFRS 9 (financial instruments) for insurance companies until 2022.
We are implementing the requirements set out in the new IVASS Regulation, no. 38, on the subject of corporate governance, and we have adapted our business model to the IDD and GDPR rules. We are closing following developments in the proposals put forward by the various institutions in order to assess their possible risks and impacts, and also the opening of new business scenarios and opportunities.
We are facing a profound change caused by the interaction and the cumulative effects of various developments in technology: Internet of Things, cloud services, cognitive computing, advanced analytics, Robotic Process Automation (RPA), artificial intelligence and the development of mobile networks are elements that contribute to creating a renewed environment in which to operate in order to optimise efficiency, operations and proximity with our customers. The spread of public and context data, the progressive digitalisation of customers, the growing appetite for personalised products, the computing power available at low prices that doubles one year after the next allow insurance companies to transform their way of doing business and to step into the so-called world of ecosystems, where the borderlines between businesses at one time different and distinct are becoming fainter and fainter in order to offer customers a service in addition to a product. Technological evolution also involves exponential growth in cyber threats, such as attacks aimed at stealing information or blocking operational processes. Adequate management of this risk is therefore fundamental in order to limit potential effects of economic and operational nature but also to preserve, in particular, the confidence of customers in the processing of their data which are frequently sensitive. The issue is also increasingly relevant for regulators which have introduced specific safety measures as well as reporting processes in the case of violation of the personal data (General Personal Data Protection Regulation).
Data analysis is increasingly part of the DNA of the Group’s production processes, from the systems for improving fraud identification to personalisation of the offer, from the automation of processes to anticipating customers’ needs. The formulations and analyses necessary for this new era of customer relations are carried out - while guaranteeing anonymity - both by the single business units on their own and with the Group’s support through an analytical platform. Consolidated in 2018, the platform now lets us leverage synergies coming from the RPA and the cognitive technologies, thus allowing increasingly complex processes to be automated which increases quality and efficiency. Nevertheless, in the perspective of ongoing improvement we are continuing to scout platforms both based on traditional integration technologies (API) and the Blockchain/Distributed Ledger type that lead the way to new digital ecosystems. We are in step with the new technologies and are protecting ourselves from the new threats. We are continuing to enhance our ability to prevent, detect and respond to potential cyber attacks while implementing the most innovative security solutions and constantly improving our response processes. More specifically, we have set up a Security Operation Center (SOC) to monitor all events recorded by our security solutions 24/7, detect potential incidents and step in with containment and restoration actions. SOC’s performance are monitored in a structured manner through specific indicators, that are not reported due to security reasons. In agreement with the operational risk management model, we have introduced an intervention assessment and prioritisation framework supported by an IT tool available to our countries. The Group governance model has also been reinforced by defining a regulatory corpus concerning the security of the information, in line with the major reference standards (NIST, ISO 27001, etc.) and with the sector’s best practices. Lastly, we are busy consolidating the security ethos in the Group via many communication and training initiatives, such as the publication of practical advice for managing information security during one’s work activity. We are measuring operational risk following the regulatory standards and with qualitative and quantitative models that allow us to grasp our most important exposures and to define the adequacy of the existing controls.
9 The number of customers refers to all entities with core insurance business, banks and pension funds (line-by-line consolidated entities, few insurance entities in Asia measured with the equity method where Generali has relevant shareholdings and specific Europ Assistance entities with relevant direct BTC business in Belgium, Italy, France, Spain and USA).
10 The methodology to calculate the KPI has been improved including country split for the following business units: Generali Corporate & Commercial and Europ Assistance. 12 Scope: Generali in Europa, Asia, Argentina and Turkey.
Considering our social role as insurer and institutional investor and the underwriting risks to which we are exposed, climate change is one of the major trends under way for us, and is singled out as one of the emerging risks for the insurance sector. In order to cope with this situation, we constantly monitor the main perils and territories to which the Group is exposed, using actuarial models to estimate the damage that could result from natural phenomena and thereby optimize our underwriting strategy. We also measure the underwriting risks and the risk arising from catastrophes using the Group’s internal model, which allows us to better capture our risk profile. We also adopt sustainability criteria for selecting our investments and for the underwriting of new insurance policies that are in line with the best and universally recognized standards, even through the use of specific third-party tools while analysing in detail and potentially excluding business opportunities that are not consistent with principles of environmental, social and governance sustainability. We then utilize internal and external monitoring processes of greenhouse gas emissions associated with the activities in our investment portfolios and of the insurance exposure to high carbon intensity sectors. We have published our climate change strategy that includes concrete actions on our core business and that explains our stance on coal and identifies ‘green’ opportunities in the investment and insurance activities. We also take part in multi-stakeholder initiatives and in technical round table discussions that facilitates the analysis of the climate change’s impact in the insurance sector and that undertake to promote the transition to a low environmental impact society.
Modern communities continue to be influenced by distinct demographic and social phenomena with a strong impact on their socio-economic balances. In Europe, we are witnessing a continual process of population aging, driven by an increase in life expectancy and a decrease in birth rates. The international migration phenomena only partially counter-balance this trend, which is in any case otherwise influenced by sociopolitical initiatives adopted locally. Outside of Europe, we are noticing similar phenomena, though of a lower scope compared to the European situation and in any case significant on a broader time horizon. In the more mature economies, the younger age groups are affected by a reduced and often discontinuous capacity to generate average income; this is strongly influenced by a flexible but precarious labour market that does not ensure reasonable certainty for financing the public welfare system. The result is increasingly unbalanced communities where higher post-retirement pension and healthcare requirements are no longer properly financed and covered by the public system, in addition, the limited economic and financial resources produced by the younger categories of the population, or from private savings in general, have to be directed and valued more carefully. In this context of profound changes, the matter of human rights grows in importance, especially in the less mature economies, where labour law is under development.
Life products, including pension and welfare products, imply Generali’s acceptance of biometric underwriting risks, typically mortality, longevity and health. We therefore need to manage them through the underwriting processes that currently exist, which are based on an updated assessment of the socio-demographic conditions of the population whose purpose is to understand their relative trends. We also have pricing and product approval processes that offer a preliminary analysis of the cases regarding the biometric factors and a structured governance defined in the Life underwriting policy, which is applied at Group level. Lastly, we measure the mortality, longevity and health risks using the Group’s internal risk model. We also commit ourselves to and monitor the respect of human rights thanks to the Group's guidelines and policies, including the Code of Conduct, the Responsible Investment Guideline and the Responsible Underwriting Guideline.
0.03% of the share capital Non-identifiable shareholders 8.74% of the share capital Other investors*
24.04% of the share capital Retail shareholders * The category takes account of legal entities including foundations, trust companies, religious institutions. ** The category includes asset managers, sovereign funds, pension funds, Life insurers.
Percentage of share capital represented in the Shareholders’ Meeting over the last five years 25.96% of the share capital Main shareholders (> 3%) 13.04% Mediobanca Group 5.01% Caltagirone Group 4.87% Del Vecchio Group 3.04% Benetton Group
Surveillance Body having duties and powers with respect to the oversight, development and promotion of the continuous updating of our Organization and
The Company maintains continuing relations with all external stakeholders: institutional investors, proxy advisors, financial analysts and retail shareholders. Its intense relationship activities consist of various types of interaction with individual stakeholders or groups, as part of roadshows and sector conferences, as well as ad hoc occasions for the discussion of specific topics, ranging from business, financial and performance matters to corporate governance, remuneration and sustainability topics relevant to the various financial community representatives. Some of the main recurring occasions for interaction with the Company’s top management are the annual Shareholders’ Meeting and the Investor Day.
Group Management Committee aiming at ensuring both greater alignment on strategic priorities among business units and a more effective, shared decision-making process www.generali.com/governance for further information on governance and the Corporate Governance and Share Ownership Report 2018
Focus on the Board of Directors in office until the 2019 annual Shareholders’ Meeting
Skills and experiences international experience managerial experience entrepreneurial skills academic experience knowledge of legal context and regulatory requirements financial and accounting skills insurance experience industrial experience experience in large cap companies average age female directors independence level executive director average attendance at meetings meetings
Corporate Governance and Share Ownership Report 2018, p. 59-60 for further information on the diversity of administration, management and control bodies
The Board of Statutory Auditors attended the same induction sessions held for the Board.
Our remuneration policy is designed to attract, motivate and retain the people who - due to their technical and managerial skills and their different profiles in terms of origin, gender and experience - are key to the success of the Group, as reflected in our values. Our remuneration policy reflects and supports both our strategy and values: to be a global insurance Group aiming at creating value and sustainable results, while valuing our people and maintaining commitments to all stakeholders
The annual variable remuneration is based on an incentive system, whereby a cash bonus ranging from 0% to 200% of the individual target baseline can be accrued depending on: – the Group funding, connected with results achieved in terms of Group operating result and adjusted net profit as well as the surpassing of a minimum Regulatory Solvency Ratio level; – the achievement of the objectives defined in the individual balanced scorecards, which establish from 5 to 7 objectives at Group, Region, country, business/function and individual level - as appropriate - based on the following perspectives: An internal path valuing and focusing on sustainability topics has been enhanced since 2018 with the aim of embedding key environmental, social and governance (ESG) drivers in the balanced scorecards of the Group’s top management. Specifically, the balanced scorecards of the top managers in Investment and Insurance functions include specific sustainability KPIs, focused on updating the responsible investment strategy on the most relevant topics (e.g. fossil fuels and tobacco) and implementing a responsible underwriting policy, respectively.
The deferred variable remuneration is built on a multi-year plan based on Assicurazioni Generali shares and annually approved by the Shareholders’ Meeting. The maximum potential bonus to be disbursed in shares amounts to 175% of the fixed remuneration of the participants (this percentage is 250% for the Managing Director/Group CEO). Here the features of the plan are: – it is paid out over a period of 6 years and is linked with specific Group performance targets (Return on Equity and relative total shareholder return) and the surpassing of a minimum Regulatory Solvency Ratio level; – it is based on a three-year performance period and additional sale-restriction periods (i.e. minimum holding) on granted shares up to two years.
www.generali.com/governance/remuneration for further information on remuneration policy and the Remuneration Report, also including information about remuneration 2018 PERSPECTIVES
Efficiency KPIs & Customer KPIs and acceleration initiatives (e.g. customer retention, brand preference)
(e.g. talent retention and balance, internal growth and succession planning, people strategy implementation, diversity & inclusion)
44 Part A – Result of operations 75 Part B – Risk report Company 89 Appendix to the Management Report
This report was prepared in accordance with the provisions of Italian Legislative Decree 209/2005, Consob communications and other regulatory provisions. This report has been reviewed for consistency with the financial statements by the auditing firm EY S.p.A., appointed for reviewing the period from 2012-2020. This report contains a reference to Italian direct business, which includes Italian insurance contracts underwritten by the Company in Italy as well as those underwritten by branches in other European Union (EU) member states, in accordance with Italian Legislative Decree 209/2005.
Information on operations contained in the following Part A) and referring to the technical results are net of outwards reinsurance, unless otherwise indicated.
— During the month of February, the Generali Group completed the sale of assets in the Netherlands through the holding company Participatie Maatschappij Graafschap Holland N.V. As part of the transaction, the Parent Company reinsurance ceased its reinsurance support provided to the insurance subsidiaries of Generali Nederland, with a consequent outlay of technical reserves amounting to about 1.6 billion and the same amount in deposits with assignor companies (of which about 0.4 billion pertaining to portfolios referring to products for which the investment risk is supported by the policyholders ).
— On 19 April 2018, Assicurazioni Generali S.p.A. completed the share capital increase to 1,565,165,364, in execution of the Long Term Incentive Plan adopted by the Shareholders’ Meeting of the Company on 30 April 2015.
— In April, Assicurazioni Generali S.p.A. finalised transfer of the assets and liabilities of the Panama branch, including the insurance portfolio. The transaction generated a gross capital gain of 77 million against a transfer price stated in US $ 172 million.
— Also in the month of June, the Generali Group finalised the transfer of its subsidiary Generali PanEurope dac, in which Assicurazioni Generali S.p.A. held 69.5% of the share capital. The transaction generated 121 million in gross total capital gain. As part of the transaction, withdrawal of several accepted portfolios relating to the major reinsurance treaties was finalised, involving the outlay of technical reserves amounting to about 2.6 billion and the same amount in deposits with assignor companies, almost totally pertaining to portfolios referring to products for which the investment risk is supported by the policyholders.
— The new Group organisational structure came into force on 1 September and it will increase the Group’s ability to pursue the important challenges of the 2019-2021 Strategic Plan. One of the organisation-
al changes was creation of the position of General Manager, who reports directly to the Group CEO. This position was assigned to Frédéric de Courtois. Cristiano Borean was appointed Group CFO, and he joins the Group Management Committee (GMC). Luigi Lubelli left the Group at the end of the year.
— In October, Assicurazioni Generali S.p.A. announced that it will exercise the option of early repayment of the 7.678% Perpetual Fixed/Floating Rate Notes for the amount of 150 million (option exercise date 19 November 2018).
— In November, investors were presented the new Generali Group strategy called Generali 2021, in line with the Group’s ambition to be a “lifetime partner” for its customers by offering innovative and personalised solutions thanks to its unequalled distribution network; and to be the European insurance market leader for private customers, professionals and the
SMEs while at the same time creating a global and focused asset management platform and pursuing high potential opportunities in the markets.
— The legal transfer of the Non-Life portfolio in run-off of the London branch was completed in December following the favourable opinion given by IVASS. This portfolio transfer came after a reinsurance transfer to the transferee Company in the previous year and relevant surfacing of 196 million in gross capital gain. The legal transfer of the portfolio led to a reduction in the Company’s gross technical reserves in 2018 that amounted to 322 million.
Net profit for the period amounted to 1,473,283 thousand, an increase compared to 1,404,459 thousand versus the previous year. The increase is characterized by: — An increase in the profit from ordinary operations of 63,853 thousand, impacted by: • an increase in ordinary financial operations, net of technical interest attributed to the net Life underwriting balance, of 213,870 thousand. This increase is primarily due to greater dividends coming from the subsidiaries, and, to a lesser extent, to higher interest receivable from subsidiaries following the incorporation of the Generali Finance B.V. loans receivable.
• a decrease in ordinary net costs of 5,095 thousand. Particularly impacting this trend is the improved exchange difference, offset by greater costs tied to provisions for risks and charges and greater interest on debt payable.
Overall economic performance 46 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
The branches of the Company contributed with 13,377 thousand (751 thousand in the previous year). Almost all of the production was concentrated in line of business I (Life) of the Hong Kong branch (13,186 thousand, compared to 86 thousand of the previous year), which over
Gross written premiums amounted to 3,310,676 thousand, a decline from the 3,369,394 thousand of the previous year. In detail, the premium income from the Life segment amounted to 1,630,876 thousand (1,708,336 thousand in the previous year) while that of the Non-Life segment totaled 1,679,800 thousand (1,661,058 thousand in the previous year).
the year launched a new considerable reinsurance acceptance in the Employee Benefits segment.
The lower number of gross premiums accepted directly by the Parent Company was significantly affected by the termination of the reinsurance relationship with the subsidiary Generali Levensverzekering Maatschappij N.V. (-38,383 thousand) following its transfer to third parties, and by the automatic contraction of the volumes of the reinsurance acceptances in run-off treaties by the subsidiary Alleanza Assicurazioni S.p.A. (-35,833 thousand).
With reference to the premiums from the direct business, about half of the premiums collected in the year is concentrated in the London branch (109,177 thousand compared with 95,245 thousand of the previous year) under the collective policies for the cases of death and permanent disability of the Employee Benefits segment. The other branches active in the direct business are: Dubai, Hong Kong, Panama until the month of April, to which the Head Office’s direct portfolio must be added.
The decline in the total collection from direct business of 19,462 thousand (from 225,180 thousand to 205,718 thousand) was particularly affected by the divestment of the Panama branch last April (-27,500 thousand), which was only partly offset by the growth of production in the Employee Benefits segment of the London branch (+13,932 thousand) mentioned above.
As far as the decline in premiums collected by the London branch is concerned, fewer premiums accepted by other Group Companies were recorded: in the Group Corporate & Commercial segment for 35,258 thousand, partially offset by greater premiums accepted in the health segment Generali Global Health for 24,423 thousand.
The premium collection from direct business is distributed between the various branches of the Company, to which the Head Office’s direct portfolio should be added.
The branches that mostly impacted the total of the collection are the London branch (174,273 thousand versus 131,608 thousand in the previous year), the New York branch (125,847 thousand compared to 95,290 in the previous year) and the Hong Kong branch (80,239 thousand versus 64,443 thousand in the previous year). The growth in the London branch’s premiums volume was driven by the General liability line of business and by the health line of business as regards the Generali Global Health segment. The growth in premiums collected by the New York and Hong Kong branches was mostly concentrated on the Global, Corporate & Commercial segment, which affected several businesses.
50 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
The reinsurance acceptances that significantly affected these performances refer to the Companies Generali Levensverzekering Maatschappij N.V. and Alleanza Assicurazioni S.p.A..
With reference to the Generali Employee Benefits unit, the reinsurance contribution from both the companies of the Group and outside of the group showed an underwriting result falling by 44,298 thousand (from 25,767 thousand of the previous year to -18,532 thousand) against a rise in gross collection (from 1,034,003 thousand in the previous year to 1,042,671 thousand). The worsening of the transferred reinsurance results (from 3,587 thousand of the previous year to 49,097 thousand) particularly made an impact on the decline in the result. The gross result instead went up by 1,212 thousand (from 29,354 thousand to 30,565 thousand).
Administration costs of the Generali Employee Benefits unit rose by 6,464 thousand (from 22,166 thousand of the previous year to 28,630 thousand) in connection with the unit’s reorganisation plan. This increase significantly affected growth in the incidence of administration costs on the premiums of the entire Life segment of the Company.
As regards the London branch, the Life segment is represented by the following portfolios of direct insurance: employee benefits, individual income and unit linked. The overall net underwriting balance went down by 27,793 thousand to 6,804 thousand. Both portfolios affected the decline. The Employee Benefits segment showed lower net underwriting balance, from 13,087 thousand to 5,305 thousand, due to the worsening of the transferred reinsurance result. The individual annuities and unit linked in run off segment fell by 14,707 thousand to 1,499 thousand because of a lower mortality profit in the individual annuities segment.
The remaining part of the underwriting result, which stood at 13,664 thousand (10,223 thousand in the previous year) was generated by the Hong Kong, Dubai, Panama (until divestment) branches, to which the Head Office portfolio is added.
Not including the former Panama branch, which left the Company’s scope in April, the other portfolios showed an underwriting result considerably on the rise compared to the previous year (from 5,654 thousand to 12,920 thousand ), supported by growth in the premium collection (from 90,716 thousand to 97,924 thousand).
Net technical result amounted to 206,581 thousand, down by 16,343 thousand compared with the previous year (222,924 thousand). The result is comprised of the net underwriting balance, down by 17,575 thousand (from 85,295 thousand to 67,720 thousand), and of the allocated financial income transferred to the technical account, slightly up by 1,232 thousand (from 137,629 thousand to 138,861 thousand).
52 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
The previous table shows separately the underwriting results from the reinsurance accepted directly by the Parent Company, of the Generali Employees Benefits and of the London branch which for premium collection and technical commitments, individually represent the most significant items in the technical underwriting of the NonLife segment of the Company. The item “Other branches” includes the underwriting results from the Hong Kong, Japan, Dubai, USA and Panama (until the divestment date) branches as well as the Head Office’s portfolio.
Claims, maturities and surrenders for the year, marked by a higher rate of Man Made claims and by a limited impact of Natural Catastrophe claims, are compared against an exceptionally favourable 2017.
The claims ratio stood at 61.2% compared with 35.5% of the previous year.
Operating costs total 29,633 thousand (30,562 thousand in 2017), and the ratio on net premiums stands at 10.1% (9.9% in the previous year).
Overall, the combined ratio of the reinsurance directly accepted by the Parent Company stood at 71.3% versus the 45.3% of the previous year.
With reference to the Generali Employee Benefits unit, the reinsurance contribution from both the companies of the Group and outside of the group in the occupational accidents and health segments showed an underwriting result increasing from 6,761 thousand in the previous year to 7,017 thousand, with gross premiums down from 198,623 thousand to 180,392 thousand.
Overall, the combined ratio of the Generali Employee Benefits unit stood at 95.8% (95% the previous year).
As regards the London branch, the underwriting result stood at -12,661 thousand, showing a healthy improvement compared to the previous year (-100,355 thousand ), with a gross premium collection up from 566,132 thousand to 597,962 thousand.
The improved underwriting result concerned the Global Corporate & Commercial segment, including the reinsurance acceptances by other companies of the Group, particularly affected by claims related to catastrophic events in the previous year. The result of the segment improved from -97,870 thousand to -8,729 thousand, with a premium collection standing at 455,385 thousand (468,816 thousand in the previous year).
The “Other branches” item showed a decline of 4,528 thousand (from 7,438 thousand of the previous year to 2,910 thousand). The reduction is mainly due to the transfer of the Panama branch (-13,713 thousand), only partly offset by the growth in the result of the New York branch and of the Head Office portfolio in the Global Corporate & Commercial segment (+8,339 thousand, overall).
Investment adjustments, net of the gains and losses for the year, amounted to 60,790 thousand compared with 28,607 thousand in 2017. The amount mainly comes from value adjustments of bonds recognised in the short-term segment for 18,189 thousand (2,604 thousand in 2017) and in the equity segment for 16,433 thousand (3,165 thousand in 2017). The equity value adjustment concerns the company GLL GmbH & Co. Retail for a value of 9,537 thousand. The value adjustments of derivative financial instruments also contribute for 23,364 thousand (17,884 thousand in 2017), mainly regarding greater value adjustments on options and domestic currency swaps. Of note inside this time is the value adjustment of 19,175 thousand regarding the coverage of Motor TPL loss ratio on 12 Group companies (insurance linked security Horse) classified in this category because the risk subjected to the coverage is not in the insurance portfolio of Assicurazioni Generali S.p.A.
Net interest on reinsurance deposits amounted to 120,065 thousand, decreasing compared with the previous year (237,437 thousand). The decrease is to be attributed primarily to the sale of the subsidiary Generali Levensverzekering Maatschappij N.V. (negative change of 54,003 thousand) and the acceptance of reinsurance in run-off by the subsidiary Alleanza Assicurazioni S.p.A. (negative change of 58,780 thousand), which also showed lower financial returns.
Other income net of other expense rose from 59,137 thousand to 161,073 thousand. The increase is mainly attributable to greater interest on loans with companies of the Group (change of 78,468 thousand) against incorporated loans following the above-mentioned merger of Generali Finance B.V. and, in particular, with the counterparties Generali Beteiligungs Gmbh and Generali Deutschland AG. The increase is also due to lower costs on derivative financial instruments (change of 6,022 thousand) and to lower tax costs on property transfers tied to the repurchase of the minority interests in the subsidiary Generali Deutschland AG, which took place in 2015 (change of 16,310 thousand).
Ordinary return on investments , determined on the basis of the average rate of return, therefore stands at 6.1% (5.8% in 2017).
The net expense resulting from the allocations to provisions for other future risks and charges amounted to 30,003 thousand, compared to the net income of 10,878 thousand of the previous year. This change is to be attributed to: — net expense tied to the allocation of the solidarity provision (INPS Circular number 56 of 10 March 2015) for 13,469 thousand (expense of 773 thousand in 2017); — net expense relating to allocations to the provision for other future risks and charges, which amounted to 20,203 thousand (31,259 thousand in 2017). The most significant changes concerned allocations for the transfer of the insurance portfolio of the Japanese branch (10,773 thousand) and the opening of the Luxembourg branch (10,928 thousand).
The expense borne by the Company for the direction and coordination of the companies belonging to the Group, net of the income from brand royalties, amounted to 365,212 thousand, up versus the same figure of the previous year (351,705 thousand). The increase is mainly due to costs borne for the M&A activities carried out during the year.
As for the remaining items of the table, the item Other improved by 109,057 thousand. Please note that the exchange rate trend led to a charge of 7,548 thousand (charge of 111,164 thousand in 2017). This impact is intrinsic in the business model of the Company, which operates in foreign currencies in both managing shareholdings and in the insurance and reinsurance business carried out by the Head Office structure and the foreign branches. The negative impact of the previous year was primarily linked to the net exposure in Chinese Renminbi, Swiss Francs and Brazilian Reals which were depreciated against the Euro respectively by 6.7%, 9.2% and 16%.
Interest expense on the financial debt of the Company amounted to a total of 768,591 thousand, an increase from 714,768 thousand in 2017.
As a partial offset, a decrease of the interest on debenture loans was recorded (from 149,565 thousand in 2017 to 140,613 thousand) due to a partial early repayment of the principal of the debenture loan falling due in Decem-
58 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Income taxes for the year show an overall income of 146,798 thousand (121,491 thousand in the previous year). The increase is primarily due to deferred IRES taxes, which was up from 161,760 thousand in the previous year to 189,612 thousand.
What primarily affected the result of the previous year were the realized gains deriving from the transfer of the Non-Life portfolio in run-off of the London and New York branches for 195,625 thousand.
Asset and financial management 60 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Investments Total amounted to 41,239,117 thousand, compared to 43,912,896 thousand of the previous year.
Following are the changes, with comments, from the previous year in the components of the class C and D investments.
Shareholdings in Group companies decreased from 29,731,819 thousand to 29,533,448 thousand. This change is primarily to be attributed to: — merger by incorporation of the Dutch subsidiary Generali Finance B.V. (-264,282 thousand); — sale of the subsidiary Generali PanEurope dac (-42,500 thousand), of the shareholdings in Generali Colombia Seguros Generales S.A. and Generali Colombia Vida - Compañia de Seguros S.A. (-9,666 thousand) and in Assurances Maghrebia S.A. and Assurances Maghrebia Vie S.A. (-5,403 thousand); — increase in the value of the shareholding interest in Europe Assistance Holding (+60,576 thousand) and in Generali Vietnam Life Insurance (+54,289 thousand), primarily for increases in the share capital carried out during the year.
Class D investments declined from 3,268,077 thousand to 228,850 thousand, primarily as a result of the reduction in reinsurance deposits received from Generali Levensverzekering Maatschappij N.V. and Generali PanEurope following the above-mentioned sale.
Provisions relating to contracts linked to investments funds and market index and relating to the administration of pension funds 225,895 3,265,804 −93.1 2.8 25.8
During the year, the subscribed share capital rose by 3,357 thousand following the assignment of Generali shares in favour of Group management on 19 April 2018, in implementation of the Long Term Incentive Plan 2015. The increase took place by drawing from the other reserve.
Social responsibility is an integral part of our strategy: being leaders implies looking to long term prospects, listening to the stakeholders and committing to concrete areas of intervention through projects and activities capable of mobilizing resources, the know-how, and the relationships which a Group like Generali fosters.
With the objective of fostering the growth of leaders and talents and investing in the improvement of their skills and expertise, in 2018 a training programme, namely Global Leadership Programs, has been redeveloped at the Group Level, with the purpose of enhancing strategic thinking and leadership capacities, providing management tools and accelerating the shift from manager to leader. The 2018 Strategic Study Tour initiatives took place during the year under review: Singapore, reserved to the GLG (Generali Leadership Group) and Step Up 2.0, reserved to the Group Talent managers.
In 2018, the average gross salary of administrative personnel amounted to 111,000 euro, (106,052 euro in 2017). The average cost amounted to 158,800 euro (152,002 euro in 2017).
The employees are guaranteed, inter alias, a working environment that is discrimination- and harassment-free, as well as working conditions compliant with the current regulations in terms of health and safety in the workplace, with particular attention given to pregnant women, mothers and disabled employees. We organize meetings with experts and seminars to sensitize the employees in areas such as health and mental welfare in order to avoid work related stress.
In the environmental field, we plan to play an active role in order to support the transition toward a more sustainable economy and society. Consistent with what is declared in our Group Policy regarding Environment and Climate, we continue to monitor and reduce our direct and indirect impacts through our products, services and investments, by dialoguing and cooperating with Governments and Associations.
As for our public commitment, we have supported several important international initiatives for years (Paris Pledge for Action, The Geneva Association - Climate Risk Statement, European Financial Services Round Table), and in 2018 we declared our support to the Task Force on Climate-related Financial Disclosure (TCFD), starting up an internal process for handling key aspects and the definition of a reporting framework. We actively participate in international work round tables, including the UNEP FI work group Principles for Sustainable Insurance (PSI) on implementation of the TCFD Recommendations by insurers and the Investor Leadership Network, promoted in G7 Investor Global Initiatives, in which we also study climate change in depth with the leading actors of the financial sector.
companies. It also identifies dialogue and involvement of our interlocutors as the tool for fostering the transition.
As regards direct impacts, for years we have been committed to reducing our energy, water and paper consumption and making waste management more efficient as well as improving corporate mobility. For instance, we often intervene in our real estate assets, according to eco-efficiency criteria, using state of the art equipment and technologies. We give priority to the use of eco-sustainable resources, such as power provided by renewable energy sources, as well as the use of certified paper. All the electric power provided to our offices is certified with the guarantee of the renewable origins of the sources. We try to reduce travelling and to enhance further the tools used for remote communication, and to encourage smart working. All our initiatives are focused on minimizing our greenhouse gas emissions and reaching our objective of a further 20% reduction by 2020 (base year 2013).
The reinsurance disposals are structured on the basis of a detailed risk analysis which allows for the definition, for each class of business, of the type of structure, the retention level and the reinsurance capacity necessary to mitigate the exposure to risks and events, the latter intended as arising from the accumulation of a number of insurance contracts in the portfolio.
Contractual reinsurance provides the transfer of risk for a large part of the portfolio, while optional reinsurance provides an additional instrument for mitigating the remaining exposures. Contractual reinsurance is preferred in risk management and for this reason it is adjusted annually to reflect any developments or new requirements of the portfolio thereby limiting recourse to optional reinsurance to a small number of cases.
(a) Included trains, air, sea, lake and river craft, cargo, t.p.l. for air, sea, lake and river craft
The disputes in which the Company is involved, whose risk of losing is probable and for which a reliable estimate of the amount of the obligation was made, are described in detail in the Explanatory Notes, section 12 - Provisions for other risks and charges.
With reference to the main outstanding litigation proceedings, it should be noted that during 2016 Generali received from Banco BTG Pactual S.A. requests for damages, by means of a notice arbitration, as provided by the Share and Purchase Agreement of BSI S.A.. In this regard, the following main developments are summarised with respect to those already reported in previous financial statements.
On 5 October 2018, Banco BTG Pactual SA filed a further brief in which it reiterated its claims for damages arising, according to the counterparty, on the alleged violation of the representations, warranties and covenants assumed by the seller in the context of the sale of BSI S.A..
The trade price of the security Generali as at 31 December 2018 was 14.6 euro. The security has recorded, from early 2018, a minimum of 13.75 euro on 24 October 2018 and a maximum of 17.06 euro on 24 April 2018. Market capitalisation as at 31 December 2018, was 22,851,414 thousand euro.
70 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Dividend per share and payout ratio2 2 The payout ratio for 2012 is not shown in the graph as it is insignificant and not in proportion to the Group’s result for the period and it is impacted by the specific dividend payments policy applied by the Group.
Significant intra-Group transactions are discussed in the relevant sections of the Explanatory Notes. The balance sheet and annexes 5, 16, 17, 30 and Part C of the Explanatory Notes provide details on the financial and economic aspects of these transactions.
As at 31 December 2018, the Company held 107,256 own shares with a nominal value of 1 euro each, the same as the previous year.
Assicurazioni Generali said that it had decided to take up the option allowed under article 70, paragraph 8, and article 71, paragraph 1-bis of the Issuers Regulation, exempting it from the obligation to publish the prospectuses required in connection with major mergers, splits, capital increases through the transfer of goods in kind, acquisitions and sales.
Pursuant to Italian Legislative Decree no. 254/2016, article 6, paragraph 1, the Company is not subject to the obligation of preparing an Individual Statement of a NonFinancial Nature, under article 3 of the Decree itself, since the Company is included in the Consolidated NonFinancial Statement, prepared by the Generali Group pursuant to article 4.
Please also note that, taking into account the results of the referendum held in the United Kingdom in 2017, after which the procedure for this country to quit the European Union began, Assicurazioni Generali S.p.A. started, from September of that same year, an activity with the topmost purpose being that of taking all actions necessary so that the operations of the company in the United Kingdom carried forward under the right of establishment through its branch located in London would not be impaired, even in the case of withdrawal without an agreement. The results of this activity in terms of solutions singled out to meet the capital, governance and structural needs were approved by the Board of Directors on 7 November 2018. Following this resolution, the necessary authorisation petitions were submitted in 2019. Among other things, they include the establishment of two branches, one for the Life segment and one for the Non-Life segment, in place of the current mixed branch.
on 11 March 2014, in a letter, provided stringent and unique calculation rules to the entire market, including the obligation to publish the estimated savings in a report attached to the financial statements. Based on the above and on the calculations made by the Company, no amounts are to be disclosed for 2018.
The Generali Group’s consolidated financial statements as at 31 December 2018 were prepared taking into account the IAS/IFRS issued by the IASB and endorsed by the European Union, in accordance with the Regulation (EC) No. 1606/2002, Italian Legislative Decree No. 58/1998 and Italian Legislative Decree No. 209/2005, as amended by Italian Legislative Decree No. 32/2007.
More complete information of the Group’s data and significant indices is provided in the 2018 Integrated Annual Report and Consolidated Financial Statements.
are still pending. Instead, the authorisations petition submitted to IVASS was approved on 1 April 2019, but such approval is subordinated to the effective exit by United Kingdom from European Union and to the submission by the Company of a declaration, at the occasion of the effective exit date, on the persistence of the requirements assessed by IVASS.
An overall slowdown in the current economic growth dynamics is forecast in 2019. GDP growth should drop to 1.0% from 1.9% in 2018 in the Eurozone. Several critical issues might in any case impact this trend to a considerable extent: Brexit, the renewed tensions on the Italian government spread, trade relations between the USA and China, and the US tariffs on European cars. In this setting, we expect that the European Central Bank will carefully monitor inflation in order to decide the timing for the first rate hike, which might take place toward not before mid-2020.
The international insurance market recorded a certain frequency of significant natural catastrophe claims in 2018 as well. They also considerably affected the reinsurance segment, particularly in the second half of the year: the hurricanes in the US-Caribbean area, the typhoons in Asia and the devastating forest fires in California.
The reinsurance segment proved itself able to absorb this new wave of claims recording moderate increases in the retrocession market, although selectively and tied to the results attained. The Group was able to benefit from favourable conditions by virtue of a centralised reinsurance structure that permits increased control of the risk retention levels and good diversification in the portfolios of reinsurers. Minimum increases were encountered or will be seen in 2019 only on treaties characterised by a higher frequency of claims, in addition to a higher cost to reinsure corporate risks, even if with broader coverage aimed at enhanced control of the result’s volatility.
Within this context, the results for the year of the Parent Company will be mainly influenced by the ability of the subsidiaries to distribute dividends, against limited growth of total costs for management and coordination and financial charges. The net underwriting result is expected to show growth, both in the Life and Non-Life segments.
The purpose of this section is to provide an overview on the Company’s solvency position and risk profile.
The Solvency Ratio, estimated on the basis of preliminary data, is equal to 256.9% , in line with the previous year (257.0% as at 31 December 2017).
Risk management processes and risk governance are regulated through a set of risk policies, which define the identification, measurement, management, monitoring and reporting processes for each risk category on the basis of the risk strategy.
The Risk Report sections are structured as follows: — section B provides a brief description of the risk management system; — section C presents the Company’s solvency position and the key elements of the capital management; — section D provides an overview of the Company’s risk profile.
The key elements of the system are: — internal control environment; — internal control activities; — awareness; — monitoring and reporting.
ordination and control duties on the calculation of technical provisions in line with Solvency II, on the valuation of the underwriting policies and of the reinsurance agreements, as well as contributing to the effective implementation of the risk management system; • the Internal Audit Function supports the BoD by ensuring an independent evaluation of the adequacy and effectiveness of the internal control system and of other elements of the system of governance, the need for adaptation, by providing support and consulting activities to other business Functions, and therefore the effective functioning of the controls designed to ensure the proper conduct of the processes, taking into account the levels of risk appetite.
The heads of the Key Functions report functionally to the BoD except for the heads of the Group Internal Audit who report hierarchically and functionally to the BoD.
The capital requirement is calculated by means of the Group’s Partial Internal Model (PIM) for financial, credit, life and non-life underwriting risks. Operational risks are measured by means of standard formula, complemented by quantitative and qualitative risk assessments. The PIM provides an accurate representation of the main risks, measuring not only the impact of each risk taken individually but also their combined impact on the Company’s own funds.
The purpose of risk reporting process is to keep Senior Management, BoD and the Supervisory Authority informed on an ongoing basis on the development of the risk profile, the trends of the single risks and about the breaches of risk tolerances.
The ORSA process is coordinated by the Risk Management, supported by other Functions for what concerns the own funds, technical provisions and other risks.
The ORSA Report is produced on an annual basis. The results of the ORSA, together with the indication of the methods used, are submitted once a year to the BoD for discussion and approval.
The solvency position, as presented below, remains stable from 257.0% at 31 December 2017 to 256.9% at 31 December 2018.
The solvency position is defined as the ratio between Eligible Own Funds (EOF) and the Solvency Capital Requirement (SCR).
Solvency II rules, as a sum of best estimate of liabilities and risk margin ; — revaluation of non-technical provisions at fair value (e.g. financial and subordinated debt); — net deferred taxes on the above evaluations; — deduction of foreseeable dividends and Company’s own shares.
5 Preliminary figures, estimated based on proposed dividends of € 0.90. 6 Solvency II technical provisions reliability and adequacy are assessed by the Actuarial Function. 7 To grant a high quality of capital available, the amounts of Tier 2 and Tier 3 items eligible to cover the SCR are subject to the following limits. The eligible amount of Tier 1 items shall be at least one-half of the SCR; in case of admissible subordinated liabilities and preference shares, exceeding 20% of total Tier 1, it is downgraded towards Tier 2. The eligible amount of Tier 3 items shall be less than 15% of the SCR. The sum of the eligible amounts of Tier 2 and Tier 3 items shall not exceed 50% of the SCR.
78 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
(in thousand euro) 2018 2017 8 To cover the MCR, the eligible amount of Tier 1 items shall be at least 80% of the MCR; the same limitation on subordinated liabilities and preference shares is set. The eligible amount of Tier 2 items shall not exceed 20% of the MCR. No Tier 3 items are allowed to cover the MCR.
The PIM is structured around a specific risk map, which contains all quantifiable risks that the Group has identified as relevant to its business, allowing for the calculation of the SCR both at single risk level and at aggregated level.
In implementing the PIM, the Company has adopted the so-called Monte-Carlo approach with “proxy functions” to determine the Probability Distribution Forecast (PDF) of the change in the basic own funds over a 1-year horizon.
The own funds probability distribution allows to determine the potential losses at any percentile for risks in scope and, in particular, the SCR corresponding to the 99.5th percentile. Monte-Carlo methods are used in the industry to obtain sound numerical results using the embedded characteristics of repeated random sampling to simulate the more complex real-world events. Proxy functions are mathematical functions that mimic the interaction between risk drivers and insurance portfolios to obtain the most reliable results. The aggregation process uses advanced mathematical techniques following market best practices. The calibration procedure involves quantitative and qualitative aspects.
Governance and processes regarding the PIM are defined in the Group Internal Model Governance Policy to ensure that: — models and components are appropriate for their purpose; — procedures are in place to design, implement, use and validate new models and model changes; — the appropriateness of the model on an ongoing basis is confirmed.
To rule the activities related to the Internal Model developments necessary to ensure its appropriateness over time, and more in general to support the Internal Model change process, the Group Internal Model Change Policy has been also defined with the aim to specify roles and responsibilities in the implementation of major and minor changes.
A dedicated committee, the Internal Model Committee, has been established to approve PIM calibrations, to support the Chief Risk Officer (CRO) in the decisionmaking process on PIM developments or model changes and to control the full model lifecycle, assuring proper compliance with the Group Internal Model Governance Policy. This Committee is chaired by the Model Design Authority, responsible for ensuring the overall consistency and reliability of the PIM.
The CRO defines the processes and controls to ensure the ongoing appropriateness of the design and operations of the PIM, so that it continues to appropriately reflect the risk profile. The CRO is also responsible for defining the methodology of each model component, on the basis of the Internal Model Committee’s proposals, as well as for the results production, and ultimately for submitting the relevant Internal Model supporting documentation to the BoD of Assicurazioni Generali S.p.A..
No material changes have occurred during the period with reference to the PIM governance.
The validation process follows the principles and procedures defined in the Group Internal Model Validation Policy and related guidelines, defined in accordance with Art. 124 of the Solvency II Directive.
80 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
To ensure an adequate level of independence, the resources performing the validation activities are not involved in the development and operation of the Internal Model.
Within the validation activities, the results obtained during previous validation cycles are also taken into account, as well as developments within internal and external business environment, financial market trends and PIM changes. The Internal Model validation process excludes those aspects already covered by the assurance work of the Actuarial Function (i.e. technical provisions and related IT systems, actuarial platforms and their governance).
In order to warrant the appropriateness of the array of elements contained within the PIM, the validation covers both the quantitative and qualitative aspects of the Internal Model, and is therefore not limited to the calculation engine and methodology.
The life portfolio is given by traditional products, including mainly savings products, pure risk and health covers, and annuity portfolios.
The main life and health underwriting risks of the Company are the following: — mortality risk, defined as the risk of loss, or of adverse changes in the value of insurance liabilities, resulting from changes in mortality rates, where an increase in mortality rates leads to an increase in the value of insurance liabilities. Mortality risk also includes mortality catastrophe risk, resulting from the uncertainty of pricing and provisioning assumptions related to extreme or irregular events; — longevity risk that, similarly to mortality, is defined as the risk resulting from changes in mortality rates, where a decrease in mortality rates leads to an increase in the value of insurance liabilities; — disability and morbidity risk derives from changes in disability, sickness, morbidity and recovery rates ; — lapse risk is linked to the loss or adverse change in liabilities due to a change in the expected exercise rates of policyholder options. The relevant options are all legal or contractual policyholder rights to fully or partly terminate, surrender, decrease, restrict or suspend insurance cover or permit the insurance policy to lapse. Mass lapse events are also considered; — expense risk derives from changes in expenses incurred in servicing insurance or reinsurance contracts.
The Company reinsures part of its business with external reinsurers. The reinsurance program is updated on an annual basis and is subject to the Life Actuarial Function opinion regarding its adequacy in accordance with the Actuarial Function Group Policy and related guidelines.
Given the Company acts as the main reinsurer of Generali Group companies, the non-life underwriting risks mainly derive from its indirect business and from the direct business underwritten by foreign branches (mainly UK, Hong Kong and United States) in corporate & commercial and employee benefits segments.
Underwriting risks embedded in the non-life insurance policies are pricing and reserving risks: — pricing risk (i.e. pricing and catastrophe risks) arising from the uncertainty related to the assumptions on frequency and severity used in the definition of insurance premiums; the distinction between pricing and catastrophe risks is only related to the nature of risks (i.e. extreme or exceptional events in case of catastrophic risks and other risks in case of pricing risks); — reserving risk relates to the uncertainty of the assumptions for future payments used when defining the claims reserves posted in the financial statements.
Reinsurance is the key risk mitigation technique for nonlife portfolio. It aims at optimizing the use of risk capital by ceding part of the underwriting risk to selected counterparties simultaneously minimizing the credit risk associated with such operation. The Company’s nonlife reinsurance strategy is embedded into the broader Group strategy and it is developed consistently with the risk appetite and the risk preferences defined in the RAF, taking into account the reinsura e Company has historically preferred traditional reinsurance as the main nonlife catastrophe risk mitigating technique.
However, with the purpose to optimize the reinsurance purchases and to continuously develop know-how in the most innovative risk transfer techniques, part of the Italian earthquake and European windstorms / floods exposures were placed in the more competitive InsuranceLinked Securities (ILS) market with a consequent optimization of the overall pricing.
Alternative risk transfer solutions are continuously analyzed. As an example, in addition to traditional reinsurance, a protection is in place to reduce the impact of an unexpected high Loss Ratio for the Group Motor liability portfolio. Such transfer represents a partial transfer of pricing risk to the special purpose vehicle called Horse.
The process described and the regular assessment performed on an annual basis enable to confirm the adequacy of the risk mitigation techniques. The operational limits proposed by the Underwriting Function are validated by the Risk Management Function which is also responsible for measuring, monitoring and preparing the risk profile reporting.
82 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
To ensure a comprehensive management of the impact of financial risks on assets and liabilities, the Strategic Asset Allocation (SAA) process needs to be liability-driven and strongly interdependent with the underwriting process. For this reason, the Company has integrated the
Strategic Asset Allocation (SAA) and the Asset Liability Management (ALM) within the same process.
The aim of the SAA&ALM process is to define the most efficient combination of asset classes which, according to the ”Prudent Person Principle” and related regulations, maximizes the investment contribution to value creation, taking into account solvency, actuarial and accounting indicators.
The main risk mitigation technique consists in the rebalancing of the assets portfolio by redefining the target weights for the different assets classes, duration and the related tolerance ranges, expressed in terms of investment limits. This technique contributes to an appropriate mitigation of financial risks.
Monitoring on assets and liabilities matching and compliance with the limits defined in the ALM&SAA, as well as on risk limits, is performed on a regular basis.
Regarding the investments, a reporting process is foreseen in order to allow the timely adoption of potential remedial measures. The content and frequency of this reporting is defined in the Company Investment Policy (so-called ‘Delibera Quadro sugli investimenti’). Based on it, Risk Management coordinates the reporting on compliance with limits set and on the derivatives exposure.
The Company also uses derivatives with the aim of mitigating the risk of the asset and liability portfolios. The derivatives help the Company to improve the quality, liquidity and profitability of the portfolio, according to the Strategic Plan. Operations in derivatives are subject to a regular monitoring and reporting process, and in terms of governance specific authorization before entering into derivatives transactions is required.
The most important strategy for the mitigation of credit risk used by the Company is, as for financial risks, the application of a liability-driven SAA, which can limit the impact of the market spread volatility. The Company actively manages the counterparty default risk also by using collateralisation strategies in order to mitigate the losses that the Company might suffer as a result of the default of one or more of its counterparties.
Further limits, related to the management of risk concentrations in investments and exposures to reinsurance counterparties, have been defined in the Risk Concentration Management Group Policy – Investment Exposures.
Credit risk includes: — spread widening risk, defined as the risk of adverse changes in the market value of debt securities assets.
Spread widening can be linked either to the market’s assessment of the creditworthiness of the specific obligor (often implying a decrease in rating), or to a market-wide systemic reduction in the price of credit assets; — default risk, defined as the risk of incurring in losses because of the inability of a counterparty to honor its financial obligations. This risk includes default on bond portfolio and default of counterparties in cash deposits, risk mitigation contracts, such as reinsurance, and other types of exposures subject to credit risk.
Based on the last assessments, the most relevant scenarios at Company level are related to IT (cyber risk) and the risk of non-compliance with sectorial regulatory developments. These risks are currently managed through specific Group projects.
Operational risk is measured by means of standard formula and it is also assessed using a quanti-qualitative approach defined in a structured framework that identifies the main operational risk scenarios. Through this process the priorities of the actions to be undertaken and the allocation of resources to critical areas are established. To further strengthen the risk management system and in addition to the usual risk owners’ responsibilities, the Company established specialized units within the first line of defence with the scope of dealing with specific threats (e.g. IT risk, fraud risk, risk of financial reporting) and that act as a key partner for the Risk Management Function.
An example is the creation of a dedicated unit for the management and coordination of the IT Security (cyber risk) that steers the evolution of the IT security strategy and operating model, ensuring a timely detection and fixing of the vulnerabilities that occasionally affect the business.
Main liquidity uses, not arising from operating activity, are represented by the payment of dividends to shareholders, investments, repayments of loans and payment of interest expenses.
In addition to the financial flows above mentioned, the Company bears the implicit liquidity risk arising from the issuance of guarantees and commitments in favor of its subsidiaries.
Finally, the investment limits set allow for the control of risk concentrations, taking into account a number of dimensions, including asset class, counterparty, rating, commodity sector and geographic area, given that significant concentrations of liquidity risk could derive from large exposures to individual counterparties and/or groups.
Generally, within the liquidity risk monitoring and management the broader Group’s perimeter is considered, in order to identify potential liquidity risks at Group companies ’ level. In case of potential critical issues, Group companies promptly inform the relevant Company’s Functions.
Assicurazioni Generali S.p.A., being the Group Parent Company, coordinates and monitors the centralized management of the Group liquidity through the Group treasury. In particular, the centralized cash pooling allows increased flexibility in transferring cash and reduces the potential risks related to short-term liquidity needs, both at company level and at Group level.
86 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
The amount of the dividend to the shares currently in the market is 1,408,552,297 euro with an additional amount of 3,981,978 euro relevant to the shares to be issued, after the authorization of IVASS pursuant to art. 5 of ISVAP Regulation No.14 dated 18 February 2008 and according to the above mentioned Board of Directors resolution of March 13, 2019.
The total amount of the dividend will be taken from the distributable profit for the year.
(in euro) 2018 profit for the year 1,473,283,234 to legal reserve 887,106 to dividend 1,412,640,806 to extraordinary reserve 59,755,322
The dividend will be paid, net of applicable withholding taxes, as from 22 May 2019 at the appointed intermediaries by means of the Monte Titoli S.p.A. central depository system. The ordinary shares of the Company will be negotiated, without the right to dividend and the allocation of earnings in kind, from 20 May, 2019.
In addition to the income statement and balance sheet formats required by regulations of the sector, the Company also prepares statements representing the economic performance and financial position of the years, on the basis of which the comments and comparison indexes of the Management Report are drawn up. The income statement is reclassified since it aggregates the balances of many balance sheet items and divides the result of extraordinary operations into its main components. A “net underwriting balance” is also shown, and is to be considered an alternative performance indicator in so far as it is not expressly required by the official financial statement formats. This indicator shows the balance of the purely technical items, including operating costs and technical interest contractually paid to the life policyholders, and is deemed more representative of the actual technical results of the sector since unlike the “net technical result” required in the official formats, it is not affected by the performance of financial operations.
The structure of the financial position statement is briefer than that of the mandatory format since it is based on showing balance sheet figures grouped by “macro class” rather than by single “items”, and so it provides an immediate analysis of the data that are not reclassified.
Total - - - 433, 915 Change in technical provisions 433,915
Profits and losses on the realisation of other durable investments 159,435
(*) Investment profit contractually acknowledged to the policyholders included in the items 042, 043, 076 and 077.
This represents the ratio, expressed as a percentage, between total operating expenses and written premiums for the period. This ratio can be subdivided into two principal components: the acquisition cost ratio (including commissions ) to premiums and administrative expenses to premiums.
94 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Numerator 017 Claims incurred, net of recoveries and reinsurance 799,384 019 Premium refunds and profit sharing, net of reinsurance 41
The average rate of return on investments is the ratio of income for the period to half the sum of investments at book value for the year and that of the previous year.
99 Parent Company Balance sheet and the Profit and loss account 101 Balance sheet 115 Profit and loss account 125 Notes to the Parent Company Financial Statements 127 Foreword 128 Part A – Summary of significant accounting policies 135 Part B – Information on the Balance Sheet and the Profit and loss account 193 Part C – Other information 197 Cash Flow Statement 203 Appendices to the Notes 275 Securities and urban real estate on which revaluations have been
II - Investments in affiliated companies and other shareholdings 1. Interests in: a) parent companies 17 0 b) affiliated companies 18 29,302,963,046 c) affiliates of parent companies d) associated companies 20 213,246,727 2. Debt securities issued by: a) parent companies 23 0 b) affiliated companies 24 0 c) affiliates of parent companies d) associated companies 26 0 3. Loans to: a) parent companies 29 0 b) affiliated companies 30 3,131,928,635 c) affiliates of parent companies d) associated companies 32 0 carried forward 39,193,311 102 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
I - Investiments relating to contracts linked to investments funds and market index 55 228,849,741
REINSURANCE AMOUNTS OF TECHNICAL PROVISIONS I - NON-LIFE INSURANCE BUSINESS 1. Provision for unearned premiums 58 131,011,356 2. Provision for claims outstanding 59 408,834,248 3. Provision for profit sharing and premium refunds 60 0 4. Other technical provisions 61 0 62 539,845,604 II - LIFE INSURANCE BUSINESS 1. Mathematical provision 63 163,629,377 2. Unearned premium provision for supplementary coverage 64 25,293,839 3. Provision for claims outstanding 65 362,126,743 4. Provision for profit sharing and premium refunds 66 751,173 5. Other provisions 67 0 6. Provisions for policies where the investment risk is borne by the policyholders and relating to the administration of pension funds 68 0 69 551,801,132 70 1,091,646,736 carried forward 42,369,957,134 104 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
II - Investiments relating to the administration of pension funds 56 0 57 228,849,741
REINSURANCE AMOUNTS OF TECHNICAL PROVISIONS I - NON-LIFE INSURANCE BUSINESS 1. Provision for unearned premiums 58 131,011,356 2. Provision for claims outstanding 59 408,834,248 3. Provision for profit sharing and premium refunds 60 0 4. Other technical provisions 61 0 62 539,845,604 II - LIFE INSURANCE BUSINESS 1. Mathematical provision 63 163,629,377 2. Unearned premium provision for supplementary coverage 64 25,293,839 3. Provision for claims outstanding 65 362,126,743 4. Provision for profit sharing and premium refunds 66 751,173 5. Other provisions 67 0 6. Provisions for policies where the investment risk is borne by the policyholders and relating to the administration of pension funds 68 0 69 551,801,132 70 1,091,646,736 carried forward 42,369,957,134 105 We, Generali
E. DEBTORS I - Debtors arising out of direct insurance operations 1. Policyholders a) for premiums - current year 130,068,519 b) for premiums - previous years 16,807,304 73 146,875,823 3. Current accounts with insurance companies 75 1,920,601 4. Policyholders and third parties for recoveries 76 3,764,881 77 158,686,685
F. OTHER ASSETS I - Tangible assets and stocks 1. Furniture, office equipment, internal transport vehicles 83 2,113,054 2. Vehicles listed in public registers 84 1,169,148 3. Equipment and appliances 85 0
II - Cash at bank and in hand 1. Bank and postal deposits 88 757,284,595 2. Cheques and cash in hand 89 67,808 90 757,352,403 IV - Other 1. Deferred reinsurance items 92 5,640,425
TOTAL ASSETS 100 45,354,471,357 106 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
- Subscribed capital or equivalent funds 101 1,565,165,364 - Share premium account 102 3,568,250,216 - Revaluation reserve 103 2,010,834,652 - Legal reserve 104 313,033,073 - Statutory reserve 105 0 - Reserve for parent company shares 400 0 - Other reserve 107 6,049,294,314 - Profit or loss brought forward 108 0 - Profit or loss for the financial year 109 1,473,283,235 - Negative reserve for own shares held 401 3,040,355 110 14,976,820,499
II - Provisions relating to the administration of pension funds 126 0 127 225,895,413 carried forward 32,413,281,249
E. PROVISIONS FOR OTHER RISKS AND CHARGES 1. Provision for pensions and similar obligations 128 0 2. Provisions for taxation 129 34,656,456
III - Debenture loans 141 3,127,769,573 IV - Amounts owed to credit institutions 142 989,805,519 V - Loans guaranteed by mortgages 143 0 VI - Other financial liabilities 144 4,780,159,166 VII - Provisions for severance pay 145 2,394,948 VIII - Other creditors 2. Other tax liabilities 147 27,816,234
IX - Other liabilities 1. Deferred reinsurance items 151 3,640,554 2. Commissions for premiums in course of collection 152 19,668,013 carried forward 45,037,132,281 110 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
H. ACCRUALS AND DEFERRED INCOME 1. Interests 156 271,979,583 2. Rents 157 1,911,237 3. Other accruals and deferred income 158 43,448,256 159 317,339,076 TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 160 45,354,471,357 112 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
c) Value re-adjustments on investment 39 2,277,638 d) Gains on the realisationof investments 40 1,587,387
(of which, income from Group companies 151 0 ) 152 1,339,406,272 162 −478,603,710 171 −169,801,698 119 We, Generali
1. BALANCE ON THE TECHNICAL ACCOUNT FOR NON-LIFE BUSINESS (Item I.10) 81 206,580,609 2. RESULT OF THE TECHNICAL ACCOUNT FOR LIFE BUSINESS (ITEM II.13) 82 346,585,739 3. PROFIT FROM INVESTMENTS FROM THE NON-LIFE BUSINESS: a) From partecipating interests 83 1,143,261,343
c) Value re-adjustments on investment 89 1,989,100 d) Gains on the realisationof investments 90 14,261,777
(of which, income from Group companies 91 0 ) 92 1,248,898,346 120 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
PROFIT AND LOSS ACCOUNT Current Year 4. (+) ALLOCATED INVESTMENT RETURN TRANSFERRED FROM THE LIFE TECHNICAL ACCOUNT (item iI. 2) 93 759,760,999 5. INVESTMENT CHARGES FOR NON-LIFE BUSINESS a) Investment administration charges, including interest 94 16,737,051 b) Value adjustments on investments 95 38,277,029 c) Losses on the realisation of investments 96 4,500,562 97 59,514,642 6. (-) ALLOCATED INVESTMENT RETURN TRANSFERRED TO THE NON-LIFE TECHNICAL ACCOUNT (item I. 2)
The financial statements of Assicurazioni Generali at 31 December 2018 comprise the Balance Sheet, the Profit and Loss Account and the Notes to the Accounts and relative attachments, in addition to the Board of Directors’ Report on the Company about the performance of the Company in its entirety.
The financial statements have been drawn up in compliance with Legislative Decree No. 209 dated September 7th 2005 (Code of the Private Insurance), in force at the reference date as well as with Legislative Decree No. 173 dated 26 May 1997, as amended by the Legislative Decree No. 139 dated 18 August 2015 and by the Legislative Decree No. 58 dated 24 February 1998 of the Italian Finance Consolidation Act (TUF), amended and integrated.
The Company’s administrative body report and the directors report is enclosed in the financial statements, according to Art. 154-bis of the Italian Finance Consolidation Act (TUF).
Goodwill and other multi-year costs are amortised on the basis of their residual useful life over a period not exceeding five years.
Land and buildings are recognized on the basis of purchase or construction cost and additional acquisition costs, net of accumulated depreciation and impairment losses.
The costs of improvements and renovations with the aim of increasing the value of the assets and extending the remaining useful life are also capitalised. The cost is also increased on the basis of revaluations made in accordance with legislation introduced by special laws.
If at closing date, the value of fixed assets is deemed permanently lower than the book value, as determined above, appropriate adjustments are made. Write- downs are maintained in subsequent years until they remain justified.
The marketable securities are valued at the lower between the acquisition cost and the realisable value estimated from market trends, which, for listed securities is the price quoted on the last trading day of the financial year and for unlisted securities is the estimated realisable value. The acquisition cost of fixed interest securities is adjusted for the share accrued in the year of the trading spread, i.e. the positive or negative difference between the acquisition cost and the reimbursement amount at maturity.
The acquisition cost includes ancillary costs, usually consisting of banking and financial intermediation costs, directly attributable consulting fees, or fees and stamp duties (Tobin Tax on Italian securities excluded).
If, in situations of exceptional nature, it is necessary to make a transfer of securities from one category to another, the value of the securities transferred is the amount resulting from the application of the assessment criteria of the portfolio of origin.
For investments in subsidiaries and associates whose book value is higher than that resulting from the corresponding quota of shareholders’ equity, a recoverability test is carried out in order to determine the durability or otherwise of the loss.
In the case a transaction may not be classifiable as hedging transactions, only the fair value losses of the derivative are recognized in the income statement.
Loans are recognized at nominal value which, given their characteristics, corresponds to their estimated realizable value
Current accounts with insurance companies include receivables from co-insurance relationships and relationships with insurance companies for services.
Receivables arising out of reinsurance transactions include the amounts resulting from the current account balances opened with respect to insurance and reinsurance companies in relation to the ceded or indirect business. The item also includes receivables from reinsurance intermediaries.
Other receivables are recognised at their nominal value which, given their characteristics, corresponds to their e realizable value.
All tangible assets are recognized at their acquisition cost net of accumulated depreciation.
New purchased electronic equipment is depreciated over their remaining useful life.
The item holds assets that are not included in the previous items. This includes the algebraic sum of the differences deriving from rounding up the additions of the Balance Sheet as well as the counterpart of the unrealized gains on options and hedging swaps.
The Company has classified its Italian and foreign portfolio based on the rules set by the Legislative Decree No. 209/2005 Art. 1, paragraph 1, letters pp) and qq), as modified by Legislative Decree No. 56/2008.
Technical items relating to acceptances and retrocessions are accounted for in the year in which they accrue, following the ceding company agreements and on the basis of timely communications.
In the current financial statements, such technical items are included in the reinsurance suspense accounts as a counterpart of the transactions occurred on the ceding companies current accounts. Further information is provided in Part B, paragraphs 6.3 and 13.7.
The calculation principles, the valuations made and the declaration that technical provisions are sufficient to guarantee the obligations undertaken by the Company for the motor and marine third-party liability, are presented, for the Italian portfolio, in the report of the appointed Actuary, pursuant to paragraph 3 of Art. 23-ter of Regulation No. 22 dated 4 April 2008.
The provision for outstanding claims is determined beginning from the information given by the ceding companies.
The methods of determination and the results of the analysis on the technical provisions of the reinsurance business are the subject of a technical report of the Actuarial Function, as provided by Par. 4 of Art. 23-quarter of the Regulation No. 22 dated 4 April 2008.
The provisions for outstanding claims related to cessions and retrocessions are computed in accordance to the reinsurance contractual agreement; the provisions for unearned premiums are calculated consistently to the methods adopted for the gross business.
The technical provisions of the life segment, related to the Italian direct business, are determined according to the provisions set by Art. 23-bis and 23-quarter of ISVAP (now IVASS) Regulations No. 22 dated 4 April 2008, amended and integrated (hereinafter Regulation No. 22 dated 4 April 2008). The provisions are set up, gross of reinsurance, in respect of the application rules identified in Annexes 14 and 16 of Regulation No. 22 dated 4 April 2008; they are analytically calculated on a contract by contract basis and on the basis of the prudent actuarial assumptions appropriate with each type of signed contract, with the aim to guarantee the obligations accepted by the Company.
With specific reference to the technical provisions of the unit linked and index linked contracts, the following provisions have been set up where applicable: — mathematical provisions for “unit-linked” contracts, calculated according to the principles set by paragraph 39 of Annex 14 to Regulation No. 22 dated 4 April 2008 and represented, with the maximum approximation, by the value of the units of Undertakings for Collective Investments (UCI, OICR) or by the value of assets included in the Company’s internal funds at year’s end; — mathematical provisions for “index-linked” contracts, calculated according to the principles set by paragraph 40 of Annex 14 to Regulation No. 22 dated 4 April 2008 and represented, with the maximum approximation, by the quota representing the reference value at year end; the provisions take into account all risk factors that might affect the level of security and marketability of the assets intended for their coverage.
The provisions related to accepted business are determined, in principle, on the basis of the information given by the ceding companies, and can be supplemented as result of the adequacy evaluations performed taking into account the commitments made, pursuant to Annex 16 of the Regulation No. 22 dated 4 April 2008.
The provisions for cessions and retrocessions are set up in accordance to the underlying reinsurance contract agreement and are calculated consistently with the methods adopted for gross business, pursuant to Art. 36 paragraph 6 of the Legislative Decree No. 209/2005 and pursuant to Annex 16 of the Regulation No. 22 dated 4 April 2008.
Costs and income are accounted in the year on an accrual basis. In particular, for items relating to insurance operations, the principle applied is that of “the regulations applicable to the profit and loss account” pursuant to Legislative Decree No. 173/1997 and in compliance with ISVAP (now IVASS) ruling No. 22/2008, modified and completed.
Deferred tax assets and liabilities express taxation related to costs and incomes that contribute to taxable income in a tax period other than that in which they are recognized in profit and loss account; they are determined based on the rates that are expected to be in force in the year in which such components will constitute taxable income; activities for deferred taxes are recognized, in accordance with the principle of prudence, when there is a reasonable certainty of their future recovery.
The Company is authorised to operate insurance and reinsurance business both in the Life and Non-life segments.
136 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Increase for the year for: acquisitions or increases 25,002 reversal value 0 revaluation 0 other changes 34
Increases for the year for: reversal value 18,244 revaluation 0 other changes 0
Book value (a - b) 99,866 138 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
2.1.2 Leased properties and operations carried out with Group companies and companies in which a significant interest is held
There are no leased assets and there are not financial leasing operations implemented with regards to real estate or other assets.
2.2 investments in Group companies and other companies in which a significant interest is held – Item C.II
Certain investments in Group companies and other companies in which a significant interest is held for a total amount of 170,991 thousand are considered non-durable since there is no permanent intention to hold these investments. The most significant are: Quantity (thousand euro)
The decreases mainly refer to the sale of the subsidiary Generali PanEurope dac (-42,500 thousand), of the equity investments in Generali Colombia Seguros Generales
S.A. and Generali Colombia Vida - Compañia de Seguros S.A. (-9,666 thousand) and in Assurances Maghrebia S.A. and Assurances Maghrebia Vie S.A (-5.403 thousand).
The decrease refers to the bonds issued by Generali Finance B.V., which has been incorporated during the exercise.
2.2.2 Changes in bonds issued by companies over the year – Item C.II.2 – Item C.II.2 (attachment 5)
Decreases for the year for: sales or redemptions 0 devaluations 0 other changes 650
Total devaluations Section C.II.2 includes: listed bonds 0 non listed bonds 0 book value 0 of which convertible bonds 0
Apart from the investments in Group companies and other companies in which a significant interest is held, durable investments are those aimed to remain permanently held by the Company, namely: — shares, listed and non-listed, that are considered related to the insurance operations; — other debt securities, listed and non-listed, which are designed for medium/long-term commitments.
Total 2) C.III.2 Units in common investment funds 0 0 890,425 891,821 890,425 891,821 3) C.III.3 Bonds and other fixed-interest securities 650,024 666,614 1,174,437 1,224,243 1,824,461 1,890,857 4) C.III.5 Participation in investment pools 0 0 0 0 0 0
The issue and trading differences inherent to the bonds and other fixed interest securities in items C.II.2 and C.III.3 are as follows: (in thousand euro) Positive Negative Balance
Variations over the year to durable assets included in the items as in point 2.3.1 (attachment 9)
The increases in the non-Group shareholdings of the durable segment are mainly due to the purchase of B3i Sevices AG shares for 200 thousand. Among the decreases we highlight the sale of Sara Assicurazioni shares for 269 thousand and the value adjustment of the equity investment in “Istituto dell’Enciclopedia Italiana Treccani S.p.A.” for 909 thousand.
Book value 743 142,060 2.3.3 Changes in loans over the year – Item C.III.4 and in deposits with credit institutions – Item C.III.6 (attachment 10)
The item refers to loans granted by the Hong Kong branch for a total amount of 743 thousand, of which 350 thousand loans on policies.
The item includes options on indexes for a counter value of 9,337 thousand.
Other financial investments: Bonds and other fixed-interest securities 39,821 45,962 31,579 34,705
The investments relative to the various types of managed products are described in detail in attachments 11.
The most significant change relates to deposits with ceding companies, with reference to Generali Levensverzekering Maatschappij N.V. and to Generali PanEurope following the mentioned sale.
Section 4 – Reinsurers’ share of technical provisions – Item D bis 4.1 a) Breakdown of Other technical provisions – non-life business – Item D bis I.4
4.1 b) Breakdown of Other technical provisions – Life business – Item D bis II.5
No other life business technical provisions were written in the financial statements to be charged to reinsurers.
Receivables for securities and coupons sold or purchased to be settled 45,896
Tax credits mainly include receivables for IRES for 260,340 thousand, credit for the insurance tax advance of 60,602 thousand and receivables for IRAP credit for 21,414 thousand.
Deferred reinsurance items, amounting to 5,641 thousand, include the negative income values of a technical nature that are to be entered in the profit and loss accounts in the following year.
Credits for deferred tax assets refer to items that, under the tax profile, are considered in financial years other than that in which they are recognized in the income statement, and are recognized net of the provision for deferred taxes.
7.3 Breakdown of multi-year accruals and deferrals and those with a duration of over five years
— derivative hedging the interest rate changes relating to loans issued in previous years, for 993 thousand.
The deferred charges with a residual duration of over one year are: — discount on bond issued, subordinated liabilities and loans for 35,789 thousand; — derivatives hedging the exchange rate changes on loans issued in previous years, for 20,232 thousand; — derivatives hedging the interest rate changes relating to loans issued in previous years, for 22,877 thousand.
Bank of America Corp 612 USD fixed 29/01/37 yes Other clauses
Haven Funding (32) Plc 3,342 GBP fixed 30/11/32 yes Other clauses
Wells Fargo & Co 8,857 GBP fixed 29/11/35 no Tier II
Wells Fargo & Co 1,575 USD fixed 02/11/43 no Other clauses
Profit/Loss for the year 0 1,473,283 0 1,473,283 8.2 Share capital – Item A.I
The share capital at 31 December 2018 is equal to 1,565,165 thousand, divided into ordinary shares with a nominal value of 1 euro each.The item shows an increase of 3,357 thousand as a consequence of the allocation of shares to the management of the Group, as required by the long-term incentive plan “Long Term Incentive Plan 2015”.
Attestation and Reports 8.4 a) Reserves for own shares and those of the Parent Company – Item A.VI and detail of the other reserves – Item A.VII and the negative reserve for own shares – Item A.X
The negative reserve for own shares, constituted as provided by the amended and integrated Regulation No. 22/2008 amounted to 3,040 thousand. Pursuant to the new OIC 28, own shares are recorded at a value corresponding to their cost of purchase and possible effects are applied retroactively.
Final amount of the 2018 financial year 1,565,165 3,568,250 −3,040 793,055 92,676 802,313 30,425 118,769 20,123 153,474 4,155,965 1,893,328 313,033 1,473,283 14,976,820 8.4 c) Outline of changes to shareholders’ funds over the last three years
Final amount of the 2017 financial year and initial amount of the 2018 financial year 1,561,808 3,568,250 −3,040 793,055 92,676 802,313 30,425 118,769 20,123 153,474 4,147,612 1,823,197 312,362 1,404,459 14,825,483
8.4 d) Breakdown, opportunities for use and actual use of shareholders’ funds over the last three years
December 2022; • fixed interest rate until 12 December 2022, first date of the early repayment option; • variable interest after 12 December 2022, until due date; • subordinated towards all the non-subordinated debtors, including policyholders; • suitable to cover the solvency requirements of
Subordinated liabilities amount to 8,290,801 thousand and consist of: — hybrid bonds denominated in pound sterling, worth 389,950 thousand Euro, with the following characteristics: • maturity equal to the duration of the company; • early repayment option for the Company from the 16 June 2026; • fixed interest rate until 16 June 2026, first date of the early repayment option; • variable interest rate after 16 June 2026; • subordinated with respect to all the non-subordinated creditors, including policyholders, and to all the lower grade subordinated debtors; • suitable to cover the solvency requirements of Solvency II; — hybrid bonds denominated in pound sterling, worth 551,501 thousand Euro, with the following characteristics: • maturity equal to the duration of the company; • early repayment option for the Company from the 8 February 2022; • fixed interest rate until 8 February 2022, first date of the early repayment option; • variable interest after 8 February 2022; • subordinated towards all the non-subordinated debtors, including policyholders, and to all the lower grade subordinate debtors; • suitable to cover the solvency requirements of Solvency II; — hybrid bonds “private placement”, for a total of 750,000 thousand Euro, with the following characteristics in common: • maturity equal to the duration of the company; • early repayment option for the Company starting from the tenth year of issue; • fixed interest rate until the first date of the early re-payment option; • variable interest rate after the first date of the early repayment option; • subordinated towards all the non-subordinated debtors, including policyholders, and to all the lower grade subordinate debtors; • suitable to cover the solvency requirements of Solvency II; 155 We, Generali
— bonds for 850,000 thousand Euro with the following characteristics: • maturity 8 June 2048; • early repayment option for the Company from 8
— bonds for 1,499,350 thousand Euro with the following characteristics: • maturity equal to the duration of the company; • early repayment option for the Company from 21
In detail: — Suretyship risks: integrations are allocated by applying different rates to premiums issued over the past five years, separately for the various classes of risk.
During the year, the provision for unexpired risks has not been set up in the direct business since the hedging was sufficient in all the line of business, as shown in the following table.
Attestation and Reports 3. Bornhütter-Ferguson method. This method is substantially based on the Link Ratio method (on “paid” or “incurred”), but also uses a series of loss ratios per generation, which is used as an “advance hypothesis ” of the last generation cost, so that the estimated reserve is a weighted average between this “advance hypothesis” and the estimate obtained using the link ratio method. Amongst the input data, it is necessary to specify a series of factors (premiums or risk exposure ) to be associated with each generation of claims.
The actuarial statistical methods adopted in the analytical valuation of the provisions for outstanding claims in the main lines of business can be classified into the following types: 1. Chain Ladder on paid amount (or “chain“method).
The decrease in the mathematical reserves for pure premiums is significantly influenced by the termination of the reinsurance agreements with the company Generali Levensverzekering Maatschappij N.V. and by the physiological contraction of the portfolio in run-off by the subsidiary Alleanza Assicurazioni S.p.A..
11.1 Overview of provisions relative to contracts linked to investment funds or market indexes – Item D.I
12.1 Variazioni nell’esercizio dei fondi per rischi e oneri (attachment 15)
Sums set aside for the year 0 12,000 76,983 future costs set according to paragraph 17 of the Annex 14 of the Regulation No. 22 dated 4 April 2008 amended and integrated. It refers for 16,675 thousand to Line of business I, for 1,957 thousand to Line of business III, for 1,036 thousand to Line of business IV and for 3 thousand to Line of business V.
Guaranteed loans are not accounted for in the financial statements 13.4 Breakdown of other loans and other financial liabilities – Item G.VI
Not convertible bonds issued, amounting to 3,127,770 thousand, comprise “Senior September 2024” bonds for 1,750,000 thousand, “Senior 2014-2020” bonds for 1,250,000 thousand and “Senior 2020” bonds for 127,770 thousand.
The total of the account, amounting to 4,780,159 thousand, refer to loans granted by: (in thousand euro) 2018
Book value 4,780,159 sand), to legal disputes (for € 15,175 thousand) and to the solidarity fund (for 13,469 thousand).
The uses mainly relate to the liquidation of outgoing personnel, prudently set aside in previous years.
Debts for direct cash pooling are mainly due towards the subsidiary Generali Beteiligungs-GmbH, for an amount of 1,364,812 thousand.
Profit portfolio on provisions and other technical items 0 0 0
14.3 Breakdown of accrued expenses and deferred income and those with a duration of over five years
Deferred income for trading spread on bond issued 0 0 0
Deferred income that has a residual duration of over one year relates to: — derivatives hedging changes in exchange rates, relative to loans issued in previous years, for 1,673 thousand; — derivatives hedging changes in interest rates, relative to loans issued in previous years, for 15,552 thousand
Section 15 – Assets and liabilities relating to Group companies and other companies in which a significant interest is held 15.1 Details of the assets and liabilities relating to Group companies and other companies in which a significant interest is held – (attachment 16)
Credits arising from direct insurance operations 0 1,900 0 0 0 1,900
Creditors arising from direct insurance operations 0 7,049 0 0 0 7,049
Other loans and financial debts 0 4,779,159 0 0 0 4,779,159
Moreover, the following bond loans also have a residual duration of more than one year: — “Senior 2020” for 63,885 thousand; — “Senior 2014-2020” for 1,250,000 thousand.
Furthermore, the Company issued the following bond loan with collectability over five years: Section 16 bis – individual pension funds
II. Guarantees received a) from Group Companies, associates and other companies in which a significant interest is held 0 0 b) from third parties 598,596 549,871
IV. Commitments a) Commitments for purchases which must be resold 0 0 b) Commitments for sales which must be repurchased 0 197,898 c) Other commitments 2,968,196 2,889,024
The other outstanding positions, provided from third parties in the interest of the Company, consist mainly of sureties provided to CONSAP, to government authorities and foreign insurance regulators as required for Company operations in non-European Union countries.
Price Fair value Price Fair value Price Fair value Price Fair value 17.2 Evolution of guarantees issued
The securities owned by the Company, deposited in custody in various brokers, are recorded in the memorandum accounts at the nominal value of 13,579,165 thousand.
Additional information about the criteria of evaluation, as well as changes in value recognized directly in the income statement, is shown in Part A - Foreword.
The overall value of outstanding contracts at year end, in terms of the nominal value of the reference capital (notional reference value), was 2,715,006 thousand.
17.8 Disclosure regarding to the amount of the securities held on deposit with a ceding company or third parties which remain property of the company accepting reinsurance
The amount of the securities held on deposit with a ceding company or third parties which remain property of the company accepting reinsurance, is equal to 170,767 thousand.
Income and charges from life investments 0 1,250,409 1,250,409 1,317,841 −67,432
Allocated investment return transferred to/from the technical account 138,861 −759,761 −620,900 −591,941 −28,959
Income and charges from class D 0 −17,556 −17,556 90,484 −108,040
(in thousand euro) Gross premiums Gross premiums Gross cost Operating (*) Reinsurers'
(*) The reinsurers’ share refers to the technical balance of cessions and retrocessions.
The percentage to be allocated to the technical account – in compliance with ISVAP (now IVASS) Regulation No. 22/2008 amended and supplemented– is calculated by applying to the net investment return, the ratio resulting between the average of (current and prior year) technical provisions, net of reinsurance and this same aver18. 4 Other technical income net of reinsurance – Item I.3
In 2018 the ratio was 11.675%, applied to the investment profit of 1,189,384 thousand, the sum allocated to the technical account was 138,861 thousand (137,629 thousand in 2017).
Total 58,799 18.8 Other technical charges net of reinsurance – Item I.8
The item “other technical charges“mainly consists of reversed commissions related to canceled reinsurance premiums.
(in thousand euro) Direct business Reinsurance Total c) 1. for non-profit-sharing contracts 155,825 1,413,647 1,569,472 2. for profit-sharing contracts 0 0 0 3. for contracts in which the investment risk is borne by policyholders and for contracts linked to pension funds 49,894 11,510 61,404
(in thousand euro) 2018 from equities: Dividends and other income from equities of Group companies 1,006,300
Attestation and Reports 19.3 Details of income and unrealized gains on investments for the benefit of policyholders who bear the investment risk and on investments relating to the administration of pension funds – Item II.3 (attachment 22)
Gains from other financial investments 8 - of which, from bonds 1
Grand total 3,095 19.4 Other technical income net of reinsurance – Item II.4
The item “Other technical income” consists, in particular, of commissions collected from the internal funds of the Dubai Branch.
The item “Change in profit-sharing” regards the payments, net of reinsurance, of the Generali Employee Benefits unit to multinational customers.
If the investment return that remains allocated to the life technical account is lower than the investment profits contractually recognised to the policyholders during the year, the quota to be transferred to the non- technical account must be similarly reduced in the pro- portion of this lower value, and may even be cancelled if necessary.
The division into single portfolios and lines of business of the investment return quota relative to the technical account was calculated on the basis of their origin.
Section 20 – Development of technical items by line of business 20.1 Non-life insurance 20.1.1. Summary of technical accounts by line of business – Italian portfolio – (attachment 25)
(–) Change in unearned premium provision 484 −2,538 −168 253 −218 16
(–) Charges relating to claims 2,879 20,175 3,573 310 −958 −2,970
(+) Positive share of investments allocated from the non-technical account 5,518 3,614 1,206 44 158 763
(in thousand euro) Isvap Class 07 Isvap Class 08 Isvap Class 09 Isvap Class 10 Isvap Class 11 Isvap Class 12
(–) Change in unearned premium provision 676 7,654 2,763 −2 −49 0
(+) Balance of other technical items 0 −64 −13 −8 0 0
(–) Change in unearned premium provision 12,120 0 11 1,713 0 −31
(+) Balance of other technical items −1,151 0 0 10 0 0
Technical balance of direct business 48,355 11 939 7,479 −237 91
Whenever possible, costs have been charged to each specific line of business from the outset; common expenses are shared proportionally according to parameters (gross premiums, number of policies managed, commissions and claims paid) suitable for the different types of costs.
Attestation and Reports 20.1.2. Summary of non-life business technical accounts – Italian portfolio – (attachment 26)
(–) Change in unearned premium provision 22,684 −765 −7,403 −8,817 24,863
(–) Change in mathematical and other provisions −3,532 −6,478 2,004 −1,200 0
20.2.2. Summary of life technical accounts – Italian portfolio – (attachment 28)
(–) Change in mathematical and other provisions −9,206 −352 −511,175 0 −520,029
(+) Balance of other technical items −2 0 166 0 164
(–) Change in mathematical and other provisions in life branches 17,365
21.1 Details of investment income – Item III.3 (attachment 21 – non-life)
(in thousand euro) 2018 from equities: Dividends and other income from equities of Group companies 1,141,954
Grand total 59,515 21.3 Details of other income – Item III.7
Extraordinary income mainly consists of realized profits from the sale of the Panama Branch (77,459 thousand) and of the equity investments in the following companies: Generali PanEurope dac (120,667 thousand), Generali Colombia Seguros Generales S.A. and Gener-
Effect of permanent differences (increases and decreases) compared to the ordinary rate
capital gains on exempt participations or subject to substitute tax −10.52%
The movements of pre-paid and deferred taxes are determined using the IRES rate of 24% and the IRAP rate of 3.54%; These refer to the items that contribute to forming the taxable profit in a fiscal period different from that in which they are recognized in the income statement.
Assets for pre-paid taxes - IRES 0 0 0 0 0 0
Other sums set aside and not deductible in the year 56,439 13,545 −8,353 −2,004 48,086 11,541
Balances account of foreign branches organization 17,100 4,103 −13,362 −3,206 3,738 897
Section 22 – Other information on the profit and loss account 22.1 Outline of relations with Group companies and other companies in which a shareholding is held – (attachment 30)
Investment income: Income from land and buildings 0 77 0 0 0 77
Dividends and other income from equities 0 2,133,426 0 3,822 11,005 2,148,253
Gains on the realisation of investments 0 0 0 0 0 0
Charges on investments administration and paid interest: Interest on deposits from reinsurers 0 0 0 0 0 0
Interest on sums due to banks and financial institutions 0 8 0 0 0 8
Administration charges and expenses for third parties 0 32,026 0 0 0 32,026
Unrealised charges and losses on investments for the benefit of policyholders 0 2,846 0 0 0 2,846
These transactions have been carried out in line with the guidelines and restrictions contained in the framework resolution relating to investments adopted by the company administrative body, as required by IVASS Regulation No. 24.
The positive results on options has been determined by trading transactions.
Part C – Other information 1. Shareholders’ funds updated based on the profit distribution proposal
Negative reserves for own shares 3,040 0 3,040 6. Information according to the Consob circular No. 6064293 dated 28 July 2006 a) Transactions with related parties
The Company has not allocated assets exclusively to a specific transaction, pursuant to Art. 2447 bis of the Civil Code.
(in thousand euro) Classification of related parties is based on IAS 24 Impact on financial statements Parent company Subsidiaries Joint ventures Other Total
Other incomes and charges −56,866 0 0 0 −56,866 4.63 1) The interests from deposits with ceding companies are include in the item “Incomes and charges from transactions with ceding companies” instead of item “net”
Transactions with the Group companies are part of the usual activities of management of investments and management and coordination, management of the capital structure and Group reinsurance and are subject to the specific control discipline by the Supervisory Authority (IVASS). No atypical transactions have been carried out with respect to the normal business of the company.
With regard to the management of the capital structure and liquidity, the main balances can be found between: — receivables and payables and other income and charges with regard to the centralized liquidity management: the direct pooling agreements allowed the deposit, as of 31 December 2018, in Assicurazioni Generali SpA of 1,846,957 thousand. The main counterparties are Generali Beteiligungs GmbH for 1,364,812 thousand, XXX for 118,981 thousand, Generali Versicherung AG for 100,040 thousand, Generali France SA for 70,070 thousand, Generali España, S.A. de Seguros y Reaseguros for 66,170 thousand, GSS – Generali Shared Services Scarl for 34,484 thousand, Lion River I NV for 27,070 thousand, Generali Real Estate SGR S.p.A. for 27,040 thousand, Generali Real Estate S.p.A. for 15,705 thousand, Generali Italia S.p.A. for 10,659 thousand, Participatie Maatschappij Graafschap Holland NV for 9,448 thousand, Generali CEE Holding B.V. for 2,156 thousand and Generali Asia N.V. for 312 thousand. On the other hand, the Company has a credit position of 118,617 thousand, of which 99,998 thousand towards Generali VIE S.A. and 18,619 towards MyDrive Solutions Ltd. Interests due amount to 3,101 thousand, while interests income amount to 57 thousand; — financial investments and liabilities, net investment income and other charges in relation to the manage-
Attestation and Reports ment of loans received and granted: at 31.12.2018 the Company has outstanding loans to Group companies for 1,556,903 thousand towards Generali Beteiligungs GmbH., for 1,187,500 thousand towards Generali Italia SpA, for 313,997 thousand towards Generali Deutschland AG, for 37,500 towards Generali Schweiz Holding AG, for 26,243 thousand towards Europ Assistance Holding SA, for 7,000 thousand Generali Vitality Gmbh and for 2,785 towards CNM Global INC. On the liabilities side, there are loans from group companies to the following counterparties: Participatie Maatschappij Graafschap Holland N.V. for 3,678,778 thousand, Generali Versicherung Ag for 652,581 thousand, Generali Deutschland Holding for 128,800 thousand, Cosmos Leben for 110,000 thousand, AachenMünchener Leben for 59,000 thousand, Generali Investments SpA for 55,000 thousand, Transocean Holding Corporation for 40,000 thousand, Redoze Holding for 28,000 thousand, UMS Immobiliare Genova SpA for 27,000 thousand and Verorgungskasse AM GD for 1 thousand. Interests income has been recognized for 158,113 thousand, mainly attributable to Generali Italia S.p.A. (62,334 thousand) and Generali Beteiliguns GmbH (77,525 thousand) and interest exenses for 67,045 thousand, mainly related to Participatie Maatschappij Graafschap Holland N.V. (54,551)
The expenses deriving from the payments to pension funds of the Company’s employees and managers amount to 10,898 thousand.
During the year the income deriving from the remuneration of the use of the trademark by companies belonging to the Group, recorded under other income, amounted to 57,789 thousand.
With regard to Art. 18 of the Procedures on transactions with related parties approved by the Board of Directors in 2018, it should be noted that, beyond the aforementioned operations (i), no transactions of major significance have been completed in the period of reference (ii) no Transactions with related parties that have had a significant impact on the financial position or results of the Group have been completed (iii) there are no changes or developments of the Transactions described in the previous annual report that have had a significant effect on the situation balance sheet or results of the Company.
Changes in working capital Decreases (+) / (increases) (-) in receivables 534,633 361,782 Decreases (+) / increases (-) in payables -102,926 232,891 Decreases (+) / (increases) (-) in prepaids and accrued income 8,264 -27,292 Decreases (+) / increases (-) in accrual and deferred income 2,476 -26,069 Decreases (+) / (increases) (-) in other assets 9,843 -2,536 Decreases (+) / increases (-) in other liabilities -54,799 19,805 3. Cash flow after changes of the net current assets -55,333 -151,227
Deposits with banks -8,263 -14,549 Investments and pension funds 2,158 -30,163 Other investments -865,065 445,825 Transfer of business 139,639 0 1. Cash flows from investing activities -334,131 -676,439 200 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Liquidity used for (-) / generated by (+) other items Intangible assets -25,166 -17,230 Acquisition of furniture and transport vehicles 5,681 -3,506 2. Cash flows from other items -19,485 -20,736
Loan capitals Increases (+) / (decreases) (-) in subordinated liabilities -250,000 0 Increases (+) / (decreases) (-) in bonds -63,885 -63,885 Increases (+) / (decreases) (-) in payables to banks and financial institutions -212,077 375,886 Increases (+) / (decreases) (-) in net payables for central treasury activity 581,800 171,015 Increases (+) / (decreases) (-) in collateralised loans 0 0 Increases (+) / (decreases) (-) in other loans and financial payables 320,000 218,000 1. Cash flows from loan capitals 375,838 701,016
Informations related to transfer of the Panama Branch a) Considerations received 139,639 b) Considerations which consists of cash at bank and in hand ceded 139,639 c) Amount of cash at bank and in hand ceded 0 d) Book value of ceded net assets 62.180 202 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
1 Balance sheet - Non life business 1 2 Balance sheet - Life business 1 3 Breakdown of non-life and life result 1 4 Assets - changes in intangibles assets (item B) land and changes in land and buildings (Item C.I) 1 5 Assets - changes during the year of investments in Group companies and other companies where a significant 1 interest is held: equities (item C.II.1). Bonds (item C.II.2) and loans (item C.II.3)
9 Assets - changes for the year of other durable financial investments: equities and shares, shares 1 in common investment funds, debt securities and other fixed-income securities, participation in investment pools e other financial investments (items C.III.1, 2, 3, 5, 7)
(item C.I.1) and those of the provision for claims outstanding (item C.I.2) of non-life lines of business 14 Liabilities - changes in the components of the mathematical provision for the year (item C.II.1) 1 and in the components of the provision for profit sharing and premium refunds (item C.II.4) 15 Liabilities -Change for the year in the provisions in the funds for risks and charges (item E) and 1 change in the severance pay provisions (item G.VII) 16 Details of assets and liabilities referring to Group comp. and other companies in which a significant interest is held 1 17 Details of "guarantees, commitments and other memorandum accounts" 1 18 Breakdown of commitments regarding derivative transactions 1 19 Details of the non life business technical account 1 20 Summary of life business: premiums and reinsurers' share. 1 21 Income from investments (items II.2 e III.3) 1 22 Income and unrelised gains on investments for the benefit of policyholders who bear the investment 1 risk and on investments relating to the administration of pension funds (item II.3) 23 Details of investment charges (items II.9 e III.5) 1 24 Expenses and unrealised losses relating to investments for the benefit of policyholders who 1 bear the investment risk and relating to the administration of pension funds (item II.10)
B. INTANGIBLE ASSETS 1. Acquisition commissions to be amortised 4 0 2. Other acquisition costs 6 0 3. Formation and development expenses 7 0 4. Goodwill 8 0 5. Other intangible assets 9 32,641 10 32,641
C. INVESTMENTS I - Land and Buildings 1. Property used for own activities 11 304 2. Property used by third parties 12 97,192 3.Other properties 13 0 4. Other realty rights 14 0 5. Assets in progress and payments on account 15 2,371 16 99,867 II - Investments in affiliated companies and other shareholdings 1. Interests in: a) parent companies 17 0 b) affiliated companies 18 16,832,788 c) affiliates of parent d) associated companies 20 213,247 e) other 21 17,238 22 17,063,273 2. Debt securities issued by: a) parent companies 23 0 b) affiliated companies 24 0 c) affiliates of parent d) associated companies 26 0 e) other 27 0 28 0 3. Loans to: a) parent companies 29 0 b) affiliated companies 30 1,276,929 c) affiliates of parent d) associated companies 32 0 e) other 33 0 34 1,276,929 35 18,340,202 carried forward 32,641 206 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
1. Provision for unearned premiums 58 131,011 2. Provision for claims outstanding 59 408,834 3. Provision for profit sharing and premium refunds 60 0 carried forward 208 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Previous year brought forward 26,845 carried forward 19,899,600 209 We, Generali
IV - Other of which Account linking to life business 901 0
IX - Profit or loss for the financial year 109 576,874
X - Negative reserve for own shares held 401 3,040 110 6,882,776
B. INTANGIBLE ASSETS 1. Acquisition commissions to be amortised 3 0 2. Other acquisition costs 6 0 3. Formation and development expenses 7 0 4. Goodwill 8 0 5. Other intangible assets 9 6,552 10 6,552
II - Provisions relating to the administration of pension funds 56 0 57 228,850
I - Tangible assets and stocks 1. Furniture, office equipment, internal transport vehicles 83 29 2. Vehicles listed in public registers 84 56
II - Tangible assets and stocks 1. Bank and postal deposits 88 111,713 2. Cheques and cash in hand 89 6 90 111,719
3. Other prepayments and accrued income 98 66,587 99 103,875 222 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
IX - Profit or loss for the financial year 109 896,409
I - Provisions relating to contracts linked to investments funds and market index 125 225,895
II - Provisions relating to the administration of pension funds 126 0 127 225,895 carried forward 18,724,280 224 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
IX - Other liabilities 2. Commissions for premiums in course of collection 152 1,024 of which Account linking to non-life business 902 0 carried forward 23,154,638 226 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 160 23,299,584 228 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Allocated investment return transferred to the non-life technical account … ............................................. - 5 138,861 45 138,861
Income taxes for the year ........................................................... - 12 −97,347 32 −49,451 52 −146,798
Profit (loss) for the year .......................................................... 13 576,874 33 896,409 53 1,473,283 230 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Increases for the year.............................................................. 2 25,036 32 19,312 due to: 3 25,002 33 18,244 readjustments ................................................................... 4 0 34 0 revaluations ...................................................................... 5 0 35 0 other variations ................................................................. - 6 34 36 1,068 Decreases for the year ........................................................... 7 0 37 26,351 due to: 8 0 38 25,566 permanent devaluations ................................................... 9 0 39 219 other changes (**) ............................................................ 10 0 40 566 Gross final goodwill (a) ........................................................ 11 259,364 41 105,554
8 b NQ 2 Generali (Schweiz) Holding AG ADLISWIL Soodmattenstrasse, 10 - SVIZZERA CHF 9 b NQ 2 Generali Beteiligungs-GmbH AQUISGRANA Maria Theresia Allee 38 - GERMANIA EUR
10 b NQ 2 Generali Beteiligungsverwalt. VIENNA Landskrongasse 1-3 - AUSTRIA EUR 11 b NQ 1 Generali Brasil Seguros S.A. RIO DE JANEIRO Avenida Rio Branco 128 - BRASILE BRL 12 b NQ 2 Generali CEE Holding B.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 13 b NQ 1 Generali China Life Insurance PECHINO B-12 Jianguomenwai Avenue, Chaoyang District - CINA REP.
24 b NQ 2 Generali France S.A. PARIGI 2 rue Pillet-Will - FRANCIA EUR 25 b NQ 1 Generali Hellas Α.A.Ε. ATENE 35-37 Ilia Iliou Street & Pytheou - GRECIA EUR 26 b NQ 1 Generali Holding Vienna AG VIENNA Landskrongasse 1-3 - AUSTRIA EUR 27 b NQ 1 Generali Italia S.p.A. MOGLIANO VENETO Via Marocchesa n. 14 - ITALIA EUR 28 b NQ 9 Generali Link Limited DUBLINO GH Navan Business Park, Athlumney, Navan, Co.Meath - IRLANDA EUR 29 b NQ 1 Generali PanEurope dac DUBLINO Navan Business Park, Athlumney, Navan, Co. Meath - IRLANDA EUR 30 b NQ 9 Generali Real Estate S.p.A. TRIESTE Via Machiavelli, 4 - ITALIA EUR 31 b NQ 4 Generali Realties Ltd TEL AVIV 2, Hagdud Haivri Str. - ISRAELE ILS 32 b NQ 1 Generali Vida de Seguros S.A. LISBONA Rua Duque de Palmela no. 11 - PORTOGALLO EUR 33 b NQ 1 Generali Vietnam Life Ins. HO CHI MINH CITY AB Tower, 76 Le Lai, District 1 - VIETNAM VND 34 b NQ 9 Generali Vitality GmbH MONACO Adenauerring 9 - GERMANIA EUR 35 b NQ 2 GI Holding S.p.A. TRIESTE Via Machiavelli, 4 - ITALIA EUR 36 b NQ 4 GLL GmbH & Co. Retail KG i.L. MONACO Lindwurmstr. 76 - GERMANIA EUR 37 b NQ 9 GSS - Generali Shared Services TRIESTE Piazza Duca degli Abruzzi, 2 - ITALIA EUR 38 b NQ 2 Lion River I N.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 39 b NQ 2 Part. Maat. Graafschap Holland AMSTERDAM Diemerhof 42 - OLANDA EUR 40 b NQ 2 Redoze Holding N.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 41 b NQ 2 Transocean Holding Corporation NEW YORK 7 World Trade Center 250 Greenwich Street 33rd Fl. -
45 d NQ 1 Generali China Insurance PECHINO B-12 Jianguomenwai Avenue, Chaoyang District - CINA REP. POPOLARE
234 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Amount Number Gain or Loss (***) Direct Indirect Total (4) of shares (4) (4) % % %
(3) Activity (4) Amounts in original currency a = parent Companies 1 = Insurance Company b = affiliated Companies 2 = Financial Company (5) Indicate the total share owned c = affiliates of parent Companies 3 = Credit Institution d = associated Companies 4 = Real estate Company e = Other 5 = Trust Company 6 = Società di gestione o di distribuzione di fondi comuni di investimento (2) Indicare Q per i titoli negoziati in mercati 7 = Consorzio regolamentati e NQ per gli altri 8 = Impresa industriale 9 = Altra società o ente 236 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
(***) Da compilare solo per società controllate e collegate 237 We, Generali
242 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
: e qu iti es a nd s ha re s, s ha re s in c om m on in ve st m en t f un ds , d eb t s ec ur iti es a nd ot he r f ix ed -in co m e s ec ur iti es
A ss et s - Va ria tio n fo r t he y ea r o f o th er d ur ab le fi na nc ia l i nv es tm en ts
. Sh ar es in c om m on in ve st m en t f un ds …
ha re s in c om m on in ve st m en t f un ds
. i n af fil ia te d un de rta ki ng s an d ot he r s ha re ho ld in gs
as h at b an k an d in h an d
250 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
ss et s re la tin g to c on tra ct s lin ke d to in ve st m en t f un ds a nd m ar ke t i nd ex (i te m
E ) a nd c ha ng e in th e se ve ra nc e pa y pr ov is io ns
ha ng e in th e re tir em en t a nd s im ila r P
D eb to rs a ris in g ou t o f d ire ct in su ra nc e op er at io ns
S ha re s an d in te re st s ..
D et ai ls o f a ss et s an d lia bi lit ie s re fe rr in g to g ro up c om pa ni es a nd o th er c om pa ni es in w hi ch a s ig ni fic an t i nt er es t i s he ld
ffi lia te d of p ar en t co m pa ni es
ep os its re ce iv ed fr om re in su re rs
w ap s: on cu rr en ci es 1, 9, 1 −3
,2 on ra te s 1 7, 2 −1 0, 1,
(s am e co nt en t, de ad lin e, u nd er ly in g as se t…
nd ic at e th e fa ir va lu e of d er iv at iv es 257 We, Generali
C re di t a nd s ur et ys hi p (c la ss es o f i ns ur an ce 4 an d 15 1, 1,
Notes on the accounts - Attachment 20 Company Assicurazioni Generali S.p.A. Year 2018
Gross premiums: c) 1. policies without profit sharing ..................... 6 2. policies with profit sharing .......................... 7 3. policies where the investment risk is borne by the policyholders and relating to the administration of pension funds ........
Notes on the accounts - Attachment 21 Company Assicurazioni Generali S.p.A. Year 2018
Notes on the accounts - Attachment 22 Company Assicurazioni Generali S.p.A. Year 2018
Income and unrelises gains on investments for the benefit of policyholders who bear the investment risk and on investments relating to the administration of pension funds (item II.3)
................................................................................................................................................... Gains on common investment funds .......................................................................................................... 10 679 ................................................................................................................................................... Gains on other financial investments ..........................................................................................................
............................................................................................... - of which debt securities ..................................... 1 ................................................................................................................................................... Other income ............................................................................................................................................. 13 0 Total ............................................................................................................................................................................ 14 687 Unrealised gains ......................................................................................................................................................... 15 461 GRAND TOTAL ........................................................................................................................................................... 16 3,095
Amounts Income arising from: ................................................................................................................................................... Investments in group companies and other companies in which a significant interest is held ..................... 21 0 ................................................................................................................................................... Other financial investments ....................................................................................................................... 22 0 ............................................................................................... - of which income from debt securities ................. 0 ................................................................................................................................................... Other assets .............................................................................................................................................. 24 0 Total ............................................................................................................................................................................ 25 0 Profits on the realisation of investments: ................................................................................................................................................... Investments in group companies and companies where a significant interest is held .................................. 26 0 ................................................................................................................................................... Profits on other financial investments ........................................................................................................ 27 0 ............................................................................................... - of which debt securities ..................................... 0 ................................................................................................................................................... Other income ............................................................................................................................................. 29 0 Total ............................................................................................................................................................................ 30 0 Unrealised gains ......................................................................................................................................................... 31 0 GRAND TOTAL ........................................................................................................................................................... 32 0 261 We, Generali
Notes on the accounts - Attachment 23 Company Assicurazioni Generali S.p.A. Year 2018
Investment management charges and other charges: .................. Charges referring to equities ............................................................. 1 132 31 11 61 143 .................. Charges referring to investment in land and buildings ....................... 2 3,080 32 0 62 3,080 .................. Charges referring to debt securities ................................................... 3 1,940 33 4,623 63 6,563 .................. Charges referring to shares in common investment funds .................. 4 0 34 0 64 0 .................. Charges referring to shares in common investments .......................... 5 0 35 0 65 0 .................. Charges referring to other financial investments ................................ 6 11,552 36 734 66 12,286 .................. Interests on deposits received from reinsurers .................................. 7 33 37 10,367 67 10,400 Total .................................................................................................................... 8 16,737 38 15,735 68 32,472 Value re-adjustments on investments referring to: .................. Land and buildings ............................................................................ 9 1,285 39 0 69 1,285 .................. Shares and participations in group comp. and other companies ........ 10 7,228 40 9,537 70 16,765 .................. Debt securities issued by group companies and other companies ..... 11 0 41 0 71 0 .................. Other equities .................................................................................... 12 1,793 42 1,029 72 2,822 .................. Other debt securities ......................................................................... 13 3,142 43 15,249 73 18,391 .................. Other financial investments ............................................................... 14 24,829 44 964 74 25,793 Total .................................................................................................................... 15 38,277 45 26,779 75 65,056 Losses on the realisation of investments: Losses on the sale of land .................. and buildings ..................................................................................... 16 0 46 0 76 0 .................. Losses on equities ............................................................................. 17 259 47 90 77 349 .................. Losses on debt securities .................................................................. 18 147 48 591 78 738 .................. Losses on other financial investments ............................................... 19 4,095 49 67 79 4,162 Total .................................................................................................................... 20 4,501 50 748 80 5,249 GRAND TOTAL ................................................................................................... 21 59,515 51 43,262 81 102,777
Notes on the accounts - Attachment 24 Company Assicurazioni Generali S.p.A. Year 2018
Amounts Charges arising from: ....................................................................................................... Land and buildings ...................................................................................................................... 1 0 ....................................................................................................... Investments in group companies and other companies in which a significant interest is held ..... 2 0 ....................................................................................................... Shares in common investment funds........................................................................................... 3 0 ....................................................................................................... Other financial investments ......................................................................................................... 4 35 ....................................................................................................... Other activities ............................................................................................................................ 5 2,807 Total .............................................................................................................................................................. 6 2,842 Losses on the realisation of investments: ....................................................................................................... Losses on the sale of land and buildings .................................................................................... 7 0
....................................................................................................... Losses on investments in group companies and other companies in which a significant interest is held
Charges arising from: ....................................................................................................... Investments in group comp. and other companies in which a significant interest is held ............. 21 0 ....................................................................................................... Other financial investments ........................................................................................................ 22 0 ....................................................................................................... Other activities ............................................................................................................................ 23 0 Total .............................................................................................................................................................. 24 0 Losses on the realisation of investments: ....................................................................................................... Losses on investments in group companies and other companies in which a significant interest is held
Company Assicurazioni Generali S.p.A. Summary layout of technical account Lob 01 Lob 02 Accident Health Direct business gross of reinsurance Written premiums .................................................................................................. + 1 4,426 1 37,195 Change in the provision for unearned premiums (+ o -) ......................................... - 2 484 2 −2,538 Claims incurred ..................................................................................................... - 3 2,879 3 20,175 Change in other technical provisions (+ o -) .......................................................... - 4 0 4 0 Balance of other technical income and charges (+ o -) .......................................... + 5 0 5 0 Operating expenses .............................................................................................. - 6 168 6 3,998 Balance on the technical account for direct business (+ o -) ...................... A 7 895 7 15,560 Balance of reinsurance ceded (+ o -) ............................................................ B 8 97 8 −81 Net balance of accepted business (+ o -) ...................................................... C 9 5,991 9 −23,955 Change in the equalisation provision (+ o -) ............................................ D 10 0 10 0 Allocated investment return transf. from the non-technical account
Written premiums .................................................................................................. + 1 98,025 1 0 Change in the provision for unearned premiums (+ o -) .......................................... - 2 12,120 2 0 Claims incurred ...................................................................................................... - 3 20,149 3 −11 Change in other technical provisions (+ o -) ........................................................... - 4 0 4 0 Balance of other technical income and charges (+ o -) ........................................... + 5 −1,151 5 0 Operating expenses ............................................................................................... - 6 16,250 6 0 Balance on the technical account for direct business (+ o -) ...................... A 7 48,355 7 11 Balance of reinsurance ceded (+ o -) ............................................................ B 8 −14,814 8 0 Net balance of accepted business (+ o -) ...................................................... C 9 −3,461 9 29 Change in the equalisation provision (+ o -) ............................................. D 10 0 10 0 Allocated investment return transf. from the non-technical account ................... E 11 16,056 11 13 Net balance of accepted business (+ o -) .............................(A + B + C - D + 264 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Written premiums ................................................................................................... + 1 9,341 1 28,381 Change in the provision for unearned premiums (+ o -) .......................................... - 2 676 2 7,654 Claims incurred ...................................................................................................... - 3 9,221 3 19,662 Change in other technical provisions (+ o -) ........................................................... - 4 0 4 0 Balance of other technical income and charges (+ o -) ................................................... + 5 0 5 −64 Operating expenses ............................................................................................... - 6 2,154 6 2,847 Balance on the technical account for direct business (+ o -) ...................... A 7 −2,710 7 −1,846 Balance of reinsurance ceded (+ o -) ............................................................ B 8 441 8 5,415 Net balance of accepted business (+ o -) ...................................................... C 9 1,444 9 51,890 Change in the equalisation provision (+ o -) ............................................. D 10 0 10 153 Allocated investment return transf. from the non-technical account
Written premiums .................................................................................................. + 1 98,025 1 0 Change in the provision for unearned premiums (+ o -) .......................................... - 2 12,120 2 0 Claims incurred ...................................................................................................... - 3 20,149 3 −11 Change in other technical provisions (+ o -) ........................................................... - 4 0 4 0 Balance of other technical income and charges (+ o -) ........................................... + 5 −1,151 5 0 Operating expenses ............................................................................................... - 6 16,250 6 0 Balance on the technical account for direct business (+ o -) ...................... A 7 48,355 7 11 Balance of reinsurance ceded (+ o -) ............................................................ B 8 −14,814 8 0 Net balance of accepted business (+ o -) ...................................................... C 9 −3,461 9 29 Change in the equalisation provision (+ o -) ............................................. D 10 0 10 0 Allocated investment return transf. from the non-technical account ................... E 11 16,056 11 13 Net balance of accepted business (+ o -) .............................(A + B + C - D +
Notes on the accounts - Attachment 25 Year 2018 by branch - Non-life business -Italian portfolio Lob 03 Lob 04 Lob 05 Lob 06
S um m ar y la yo ut o f t ec hn ic al a cc ou nt s of n on -li fe b us in es s
ha ng e in o th er te ch ni ca l p ro vi si on s (+ o -)
ha ng e in th e eq ua lis at io n pr ov is io n (+ o -)
,9 9, 266 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
ha ng e in th e pr ov is io n fo r u ne ar ne d pr em iu m s
Li fe in su ra nc e - S um m ar y la yo ut o f t ec hn ic al a cc ou nt s by b ra nc h - I ta lia n po rtf ol io
et b al an ce o f a cc ep te d bu si ne ss (+ o -)
llo ca te d in ve st m en t r et ur n tra ns fe rre d to th e no nte
B al an ce o f d ire ct b us in es s gr os s of re in su ra nc e (+ o -)
B al an ce o f r ei ns ur an ce c ed ed
um o f t he it em s re la tin g to th e
um m ar y la yo ut o f t ec hn ic al a cc ou nt s of li fe b us in es s
Su m o f t he it em s re la tin g to th e Ita lia n lin e of b us in es s an d po rtf ol io in cl ud ed in it em s
A cc ou nt 268 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Change in the provision for unearned premiums (+ o -) ..................................................... - 2 15,105
Balance on the technical account for direct business (+ o -) ..................................... A 7 −39,993
Change in the equalisation provision (+ o -) ............................................................... D 10 0
Section II: Life Business Total lines of business Direct business gross of reinsurance
Balance of direct business gross of reinsurance (+ o -) ............................................ A ......
Net balance of accepted business (+ o -) .................................................................... C ......
La yo ut o f t he li nk s w ith
In co m e fro m e qu iti es .
U nr ea lis ed in co m e an d ga in s on in ve st m en ts fo r t he b en ef it of p ol ic yh ol de rs w ho b ea r t he in ve st m en t r is k an d re la tin g to th e ad m in is tr at io n of p en si on fu nd s ...
Ex tr ao rd in ar y in co m e ..
Pr of its o n re al is at io n of in ve st m en ts
ro up c om pa ni es a nd c om pa ni es w he re a s ig ni fic an t i nt er es t i s he ld
ha rg es o n in ve st m en ts an d pa ss iv e in te re st s: In ve st m en t c ha rg es
In te re st s on s ub or di na te d lia bi lit ie s
In te re st s on d ep os its fr om re in su re rs
In te re st s on d eb its fr om d ire ct in su ra nc e op er at io ns .
In te re st s on d eb its fr om re in su ra nc e op er at io ns .
In te re st s on d eb its to w ar ds b an ks a nd fi na nc ia l .
In te re st s on o th er d eb its
0 Ex tr ao rd in ar y ch ar ge s
) w ith re fe re nc e to th e co un te rp ar t i n th e op er at io n 271 We, Generali
5, 9, 4, 8, in th ird c ou nt rie s
3, 5, 9, 8, 272 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
Italian portfolio: - Wages ........................................................................................... 1 141,044 31 5,634 61 146,678 - Social contributions ....................................................................... 2 41,341 32 1,907 62 43,248 - Severance payments and other obligations ........................................................................ 3 7,789 33 385 63 8,174 - Other employee costs .................................................................... 4 9,948 34 136 64 10,084
* total book value includes as amount of Euro 2,370,747 for work in progress
Urban real estate on which revaluations have been carried out 277 We, Generali
3. The undersigned further confirm that: 3.1 the financial statements as at 31 December 2018: a) are prepared in compliance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, with the provisions of the Italian Civil Code, of Legislative Decree No. 173 of 26 May 1997, of Legislative Decree No. 209 of 7 September 2005 and with applicable provisions, regulations and circular letters issued by ISVAP (now IVASS); b) correspond to the related books and accounting records; c) provide a true and fair representation of the financial position of the issuer; 3.2 the management report contains a reliable analysis of the business outlook and management result, the financial position of the issuer and a description of the main risks and uncertain situations to which it is exposed.
In addition to the above activities, in the course of its activity plan, the Board of Statutory Auditors: – held meetings with, and obtained information from the Group CEO, also in his role as Director in charge of the internal control and risk management system, the Group CEO, also in his role as Manager in Charge
The Board of Statutory Auditors monitored compliance by the Company with the legislation and the Articles of Association and observance of the principles of correct administration, with special reference to transactions having a significant impact on the economic, financial and asset-based position, by regularly attending meetings of the Board of Directors and examining the documentation provided.
The most significant events involving the Company and the Group in 2018 are also reported on in the 2018 Integrated Annual Report and Consolidated Financial Statements.
As stated in the 2016 and 2017 Integrated Annual Report and Consolidated Financial Statements, the Brazilian company Banco BTG Pactual S.A. (“BTG”) initiated a dispute in 2016 relating to certain claims for compensation made by BTG pursuant to an agreement whereby the sale to the latter of Banca della Svizzera Italiana S.A. (“BSI”) by a Generali subsidiary was concluded in September 2015.
The Company has introduced “Related-Party Transaction Procedures” (“RPT Procedures”), adopted in compliance with Consob Regulation 17221/2010, as amended, and Art. 2391-bis of the Civil Code, which are also applicable to transactions performed by subsidiaries. The Board of Statutory Auditors concludes that the aforementioned procedures comply with Consob Regulation 17221/2010, as amended; the BSA monitored the Company’s compliance with the said procedures during the year. Assicurazioni Generali’s 2018 Annual Financial Statements and the 2018 Integrated Annual Report and Consolidated Financial Statements illustrate the economic and asset-related effects of the related-party transactions, and describe the most significant relationships. No transactions classifiable as major transactions pursuant to the above-mentioned RPT Procedures were submitted for the attention of the RPTC during the 2018 financial year, nor did any urgent related-party transactions take place.
With regard to intercompany transactions during the year, the supervisory activity of the Board of Auditors shows that they have been implemented in compliance with IVASS Regulation no. 30/2016 on intragroup transactions and risk concentrations, as well as the Policy on Infra-Group Transactions adopted by the Board of Directors on 15 March 2017. The main intercompany activities, with payment at market prices or at cost, were conducted by means of reinsurance and coinsurance agreements, administration and management of securities and real estate, claims management and settlement, IT and administrative services, loans and guarantees, and personnel loans. Said services allowed the rationalisation of operational functions and a better level of services.
The organisational structure of the Company and the Group and its developments are described in detail in the Corporate Governance and Share Ownership Report. The organisational structure of the Company includes the duties and responsibilities of the corporate functions, the hierarchical and functional relationships between, them and related coordination mechanisms. This is based on two dimensions: the Group Head Office (“GHO”) and 290 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
The internal control and risk management system (“ICRMS”) is formed by the rules, procedures and corporate structures that operate - also in regard to the role of the Company as the parent company of an insurance group - in order to allow the effective functioning of the Company and Group, and to identify, manage and monitor the main risks to which they are exposed. The ICRMS is an integrated system that involves the entire organisational structure.
During 2018, based on the results of the monitoring of the Group Compliance Function, the Group has adapted to new significant regulations, including the European Directive on Insurance Distribution (and related local implementing legislation) and the European Regulation on Personal Data Protection (GDPR).
IVASS Regulation no. 38/2018, involved a revision of the corporate governance system of insurance companies: the Company promptly initiated a gap analysis between the governance structure, the most important Group corporate controls and processes, and the model outlined by the aforementioned Regulation. Consequently, the relative implementation activities and appropriate coordination methods were identified amongst the various functions to which the individual actions have been delegated.
In the context of constant development and reinforcement of controls, in accordance with the applicable industry regulations, the Board of Statutory Auditors has constantly monitored the adequacy of the ICRMS of the Company and its Group, verifying their effective operation. In particular, in taking into account the provisions of Art. 74 of IVASS Regulation n. 38/2018 recently entered into force, the BSA has: 292 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
i) taken note of the favourable opinion of the adequacy of the ICRMS issued half-yearly by the Board of Directors after consulting the RCC; ii) examined the RCC report issued every six months in support of the Board of Directors; iii) examined the summary document regarding the assessment of the adequacy and effectiveness of the Internal Control and Risk Management System drawn up by the Group Audit, Group Compliance, Group Risk Management and Group Actuarial Functions; iv) attended all meetings of the RCC, obtaining information about the initiatives that the Committee has decided to promote or request on specific subjects (such as on matters of cyber security); v) obtained information on the development of the corresponding organisational structures and the activities performed by the Group Audit, Group Compliance, Group Risk Management and Group Actuarial Functions, partly by means of discussions with the managers concerned; vi) examined the reports on the activities of Group Audit, Group Compliance, Group Risk Management and Group Actuarial Functions submitted to the Risk and Control Committee and the Board of Directors; vii) examined the Group Audit Manager’s half-yearly Complaint Reports; viii) verified the autonomy, independence and functionality of the Group Audit Function, as well as implemented and maintained an adequate and constant connection with it; ix) examined the Audit Plan prepared by the Group Audit Function as approved by the Board of Directors, having observed compliance with the same and received information flows on the audit results; in this regard, a significant improvement was observed in the timeliness of implementation of mitigating actions that were previously considered as an area of attention that was taken into account in the 2017 Report; x) taken note of the activities of the Supervisory Body established by the Company in compliance with the provisions contained in Legislative Decree 231/2001 through specific disclosures and update meetings on the activity it carries out; xi) obtained information from the managers of corporate functions involved in the ICRMS; xii) exchanged information with the supervisory bodies of the subsidiaries, as required by Art. 151, paragraphs 1 and 2 of the TUIF and Art. 74, para. 3(g) of IVASS Regulation no. 38/2018; xiii) met and exchanged information with the Group
CEO in his role as Executive Director responsible for supervising the ICRMS; xiv) obtained information about the development of the Group’s regulatory system, in particular the Company ’s structure of policies, regulations, guidelines and procedures designed to ensure compliance with the specific regulations of the insurance industry and listed companies applicable to or approved by the Company.
The Board of Statutory Auditors points out that, pursuant to Legislative Decree no. 254/2016 and the related implementing regulation issued by CONSOB with resolution no. 20267 of 18 January 2018, the Company is required to prepare and publish a Consolidated Non-Financial Statement (“CNFS”). As required by Art. 4 of Legislative Decree no. 254/2016, said Statement provides non-financial information relating to the Company and its subsidiaries “to the extent required to ensure comprehension of the group’s business, trend and results, and the impact produced by it”. As specified in Art. 3, para.7 of Legislative Decree no. 254/2016, the Board of Statutory Auditors, in the performance of its statutory functions, monitored compliance with the legislation governing the preparation and publication of the CNFS. In particular, the BSA supervised the adequacy of the organisational structures adopted by the Group based on the strategic objectives it pursued in the social-environmental field, and on the adequacy of the processes and structures that govern the production, reporting, measurement and representation of non-financial results and information within the Group.
To this end, the BSA examined the documentation made available by the Company and met the management team responsible for the CNFS disclosure on various occasions, an interdisciplinary group that includes the Group CFO and Group Risk Management as well as the representatives of the auditing company appointed to carry out the statutory audit, which is also entrusted with the task of giving the declaration of conformity provided for by Art. 3, paragraph 10, of Legislative Decree no. 254/2016 in a specific report.
2019. It was drafted in compliance with Legislative Decree 254/2016 on the disclosure of non-financial information relating to environmental and social issues relating to personnel, respect for human rights and the fight against corruption. The criteria of the International <IR> Framework have also been applied in the preparation of the CNFS, issued by the International Integrated Reporting Council (“IIRC”). The standard adopted for reporting on the material subjects identified by the Group is represented by the GRI Sustainability Reporting Standard, published in 2016 by GRI Global Reporting Initiative (GRI – Referenced claim) with reference to selected GRI Standards and indicators of GRI G4 Financial Services Sector Disclosures. The BSA further noted that the auditing firm EY issued said report on 03 April 2019. In said report, EY certified that on the basis of the work performed, no information had come to its attention suggesting that the CNFS was not drawn up, in all significant respects, in compliance with the terms of Arts. 3 and 4 of Legislative Decree no. 254/2016 and the reporting standard used by the Group to prepare the CNFS. The Board of Statutory Auditors observes that in the course of the controls conducted and specified above, no evidence of non-conformity by the CNFS with the legislative provisions governing its preparation and publication came to its attention.
When drawing up the Consolidated Non-Financial Statement, the Company did not exercise the option to omit information concerning imminent developments and transactions under negotiation allowed by Art. 3, para. 8 of Legislative Decree 254/2016.
In addition to the matters described above, the Board of Statutory Auditors performed further specific periodic checks in accordance with the statutory and regulatory provisions applicable to the insurance industry. Namely, the BSA, partly by attending meetings of the RRC: – supervised compliance with the guidelines on investment policies approved by the Board of Directors, pursuant to Art. 8 of IVASS Regulation n. 24 of 6 June 2016; – checked that transactions in derivative financial instruments complied with the guidelines and limitations issued by the Board of Directors, and checked that the Company had duly submitted periodic communications to IVASS; – analysed the administrative procedures adopted for handling, safekeeping and accounting of financial instruments, checking the instructions issued to depositaries regarding periodic despatch of statements of account with suitable indications of any encumbrances; – checked that the assets destined for covering the technical reserves were free of encumbrances and fully available; – verified correspondence with the register of assets destined to cover the technical reserves.
7. Organisational and Management Model pursuant to Legislative Decree no. 231/2001
The Company has ratified the Corporate Governance Code issued by the Corporate Governance Committee promoted by Borsa Italiana S.p.A. The compliance checklist with the principles and criteria established by the Self-Governance Code is shown in the Disclosure Compendium to the Report on Corporate Governance and Ownership Structure 2018, available on the Company ’s website, to which reference is made.
This Board of Statutory Auditors has evaluated the procedures for concrete implementation of the Code in question, with reference to the principles and application criteria, and has no comments to make on them. The Board of Statutory Auditors notes that the Board of Directors has evaluated the operation, size and composition of the Board of Directors and the Board Committees.
In the early months of 2019, in line with the recommendations of Regulation Q.1.1 of the Rules of Conduct of the Board of Statutory Auditors of Listed Companies prepared by the NCCA, the Board of Statutory Auditors also carried out its own self-assessment of its composition and operation with the support of the Corporate Affairs Function, providing for the examination and discussion of the related results in a specific meeting.
statements and the consolidated financial statements of the Company as at 31 December 2018.
The Board of Statutory Auditors monitored, within the terms of its duties, the general layout of the financial statements and the consolidated financial statements in accordance with the legislation and specific regulations governing drafting of insurance companies’ financial statements. The BSA recognises that the consolidated financial statements of the Group were drawn up in compliance with the IAS/IFRS International Accounting Standards issued by the IASB and approved by the European Union, in compliance with EU Regulation no. 1606 of 19 July 2002 and the TUIF, and Legislative Decree 209/2005, as amended. The consolidated financial statements were also drawn up on the basis of the requirements of ISVAP Regulation no. 7 of 13 July 2007, as amended, and contain the information required by Consob Notice no. 6064293 of 28 July 2006. The Explanatory Notes to the Financial Statements illustrate the evaluation criteria used, and provide the information required by applicable legislation.
The BSA also held meetings with the heads of the auditing company EY pursuant to Art. 150, paragraph 3, of the TUIF and Art. 74, paragraph 3(e) of IVASS Regulation no. 38/2018. During said meetings, appropriate exchanges of data and information took place that were relevant for the performance of the respective tasks, and no facts or situations worthy of being highlighted emerged. In the context of supervision pursuant to Art. 19 of Legislative Decree 39/2010, the Board of Statutory Auditors also acquired information from EY with reference to the planning and execution of the audit.
9.2. Activities of the Board of Statutory Auditors in view of the conferment of the appointment of the statutory audit of the accounts for the nine-year period 2021-
In compliance with applicable legislation, auditing companies having the competence and experience in the statutory audit of issuers with listed shares, as well as knowledge and structures suitable for carrying out the audit engagement in a group international operating in the insurance sector were invited to take part in the selection procedure. The Board of Statutory Auditors examined in detail the proposals received from the candidate companies and met their respective representatives, all with the support of specialised external consultants and competent corporate structures. During individual stages of the selection process, the BSA held discussions with the internal control and auditing committees of subsidiaries which can be qualified as PIEs so as to organise the evaluation task, to define its methodologies and timing and to share the results. Maintaining that flow of information has enabled the BSA to coordinate the selection process of just one auditor of the group, although each subsidiary is responsible for making its decision. At the end of the tender, in the meeting of 4 March 2019, the Board of Statutory Auditors approved the recommendation requested pursuant to Art. 16, par. 2, of EU Regulation no. 537/2014, which was made available to the Company’s Shareholders in view of the Shareholders’ Meeting for the approval of the financial statements as at 31 December 2018, as called to resolve on the assignment of the audit appointment. As part of the Recommendation, in compliance with the provisions of Art. 16 of EU Regulation n. 537/2014, the Board of Statutory Auditors indicated two potential alternatives for appointment and expressed its duly justified preference for one of the two candidates. The Recommendation also contains a detailed illustration of the phases in which the selective procedure was articulated, the selection criteria that were applied and the results of the assessments performed by the Board of Statutory Auditors.
During the year, the Board of Statutory Auditors also issued the opinions, comments and attestations required by the applicable legislation. At the meeting of the Board of Directors held on 30 January 2018, the Board of Statutory Auditors expressed a favourable opinion of the remuneration of the Group Audit 298 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018
11. Complaints pursuant to Art. 2408 of the Civil Code. Omissions, reprehensible actions or irregularities found (points 5, 6 and 18 of Consob Notice no. 1025564/01)
The Board has found that ownership of the package of shares of Il Sole 24 Ore in question was attributable to GPE, and ascertained that the proxy to participate in the Shareholders’ Meeting of Il Sole 24 Ore of 28 June 2017, which did not provide for voting instructions, was duly issued by GPE personnel with the necessary powers of signature. Finally, as regards the request for clarification from the shareholder Marino on the potential attribution to the delegated subject of additional proxies by third parties in addition to that conferred by GPE, these are profiles that are beyond the legal scope of this Board of Statutory Auditors, referring them, if applicable, to that of the control body of Il Sole 24 Ore.
On 27 December 2018, shareholder Tommaso Marino sent a new complaint via certified email to the Company pursuant to Art. 2408 of the Civil Code, addressed to the Board of Statutory Auditors, in which he complained: (i) to have requested the Assicurazioni Generali Foundation The Human Safety Net (the “Foundation”) to be able to view the financial statements and to have been refused; and
With the support of the competent functions of the Company, the Board of Statutory Auditors therefore acquired and examined the articles of association of the Foundation, a disclosure on the composition of its administrative and control bodies and the Foundation’s financial statements approved by the Board of Directors on 14 February 2018. In relation to the first reason for the complaint, the Board of Statutory Auditors noted that the legislation applicable to the Foundation does not provide any legal obligation to make the financial statements public. This obligation can neither be inferred from the regulations applicable to foundations (Presidential Decree No. 361 of 10 February 2000), nor from the fact that the founding entity of the Foundation is a listed company such as the Company. Consequently, the decision of the Foundation not to make its own financial statements available to the requesting party is to be considered legitimate.
Antonia Di Bella 300 Assicurazioni Generali Management Report and Parent Company Financial Statements 2018