Board of Statutory Auditors Carolyn Dittmeier (Chairwoman) Antonia Di Bella Lorenzo Pozza Francesco Di Carlo (Substitute auditor) Silvia Olivotto (Substitute auditor)
9 We, Generali 10 Company highlights 12 Our history 14 2017 key facts 16 Significant events after 31 December 2017 and 2018 corporate event calendar 18 How we create sustainable value: our business model 22 Vision, Mission, Values 24 Risks and opportunities of the external context 30 Group strategy 34 Our governance and remuneration policy 41 Management Report 42 Part A – Result of operations 73 Part B – Risk report 87 Appendix to the Management Report 95 Parent Company Financial Statements 97 Parent Company Balance sheet and the Profit and loss account 99 Balance sheet 113 Profit and loss account 123 Notes to the Parent Company Financial Statements 125 Foreward 126 Part A - Summary of significant accounting policies 133 Part B - Information on the Balance Sheet and the Profit and loss account 191 Part C – Other information 195 Cash Flow Statement 201 Appendices to the Notes 273 Securities and urban real estate on which revaluations have been 279 Attestation of the Financial Statements persuant to the provision of the article 154-bis of Legislative Decree 58 February, 1998 and Consob regulations 11971 of May 14,1999 283 Board of Statutory Auditors’ Report 299 Independent Auditor’s Report 308 Contacts
We report the story of our Group in an increasingly innovative and integrated manner: the story of how we create value is found within the Annual Integrated Report which is our core report1 centred on key financial and non-financial information while - by means of other reports and channels
Corporate Governance and Share Ownership Report This report illustrates the corporate governance system of Assicurazioni Generali and its ownership structure.
Annual Integrated Report and Consolidated Financial Statements This report expands the content of the Annual Integrated Report, providing details of the Group’s financial performance in compliance with national and international regulations.
Annual Integrated Report and Consolidated Financial Statements 2017 186th year | generali.com
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 2017.
Follow the Management Report which presents an analysis of the Company's situation, the trend and results overall, as well as a description of the principal risks and uncertainties to which the Company is exposed, and the Notes, part of the Parent Company Financial Statements that provides the explanatory and supplementary information to synthetic and quantitative data contained in the balance sheet and profit or loss.
Annual Integrated Report and Consolidated Financial Statements 2017, Consolidated Non-Financial Statement , p. 120 of communication (our more reports1) we present more detailed and supplementary information, some of which targets a specialized audience. The information of the Annual Integrated Report is therefore connected to the in-depth information, thus enhancing the integrated thinking.
Management Report and Parent Company Financial Statements This report provides information on the performance of Assicurazioni Generali, in accordance with currently effective regulations.
In economic, industrial and capital terms, the Group presented an operating result once again marked by growth and the best profit of the last three years, increasingly higher quality and premium income and a strengthened capital position. All this confirms the soundness of the strategy launched two years ago and that will be completed in 2018 before starting a new three-year period that - and of this we are sure - will be just as satisfactory.
We carried ambitious projects forward in 2017. We implemented the new asset management strategy to develop and perfect an area that is becoming more and more integrated with the insurance area, with the objective of enriching our expertise and of offering tailor-made solutions to companies and the retail customers in order to reach € 500 billion by 2020. We continued with the reorganisation of Generali Deutschland in Germany and entered a new stage focussed on strengthening its operating performance and on increasing the value creation over the long term. During the year, the Group continued its geographical optimisation plan that sets out to boost our presence in the most interesting markets and to free at least € 1 billion in resources from the less profitable ones.
2017 was also the year in which we started up The Human Safety Net, one of the most ambitious social projects of our almost 200 years of history. It is an initiative that has global reach, and its target is to connect and activate millions of people around the world to involve them in projects that make an enormous impact on the chosen local communities thanks to the contribution of our Group’s employees. In this way we started initiatives dedicated to equal opportunities for those children who grow up in poverty, to the entrepreneurial potential of refugees and to the prevention and treatment of neonatal asphyxia. We located the offices of The Human Safety Net in St Mark’s Square in Venice, in Palazzo delle Procuratie Vecchie, which will be restored with a visionary project of extraordinary historic restoration.
We then further innovated our way of reporting thanks to an important stage along our accountability path: in the Annual Integrated Report and Consolidated Financial Statements 2017 we are publishing the Consolidated Non-Financial Statement for the first time to provide an integrated understanding of all our activities. In 2017, we also renewed our Charter of Sustainability Commitments that defines what it means to do business in a responsible manner. It singles out a precise category of priorities resulting from the ongoing dialogue we have with our stakeholders, and it commits us to the constant monitoring of progress made in this area.
10 Company highlights 12 Our history 14 2017 key facts 16 Significant events after 31 December 2017 and 2018 corporate event calendar 18 How we create sustainable value: our business model 22 Vision, Mission, Values 24 Risks and opportunities of the external context 30 Group strategy 34 Our governance and remuneration policy
Assicurazioni Generali Austro-Italiche were established in Trieste, that was the ideal choice at the time as a commercial and international hub located in the main port of the Austro-Hungarian Empire.
The positive economic and social context, the keen business acumen of the founding fathers and Trieste’s strategic geographical position allowed Generali to grow and thrive: it was listed on the Trieste stock exchange in 1857 and became a Group in 1881. As a consequence, subsidiaries were founded in Italy and abroad, starting with Erste Allgemeine, established in Vienna in 1882.
The First World War affected the whole Europe. After the Allied victory over the Central Powers, Trieste became part of Italy: as a result, Generali became an Italian company.
Generali returned to the growth that had been temporarily interrupted during World War I. In line with what was going on in Italy in those years when public construction activities and agriculture were strongly boosted through the policies adopted by the government, Generali made significant investments in agriculture and real estate starting from 1933. With the outbreak of World War II, the Group lost contact with its subsidiaries located in ‘enemy’ countries: one of the most complex periods of its bicentenary history began.
Recent years have driven a new phase of change, with a new top management and a corporate reorganization. The Group presented the update of its strategic plan at the Investor Day in November 2016, which aims to set out a new business model and confirm the achievement of the already announced targets by 2018.
On 25 January, the Board of Directors of Assicurazioni Generali terminated its employment contract with Alberto Minali and appointed Luigi Lubelli as Group CFO, who also joined the Group Management Committee. It also decided that the Investments Committee would expand its responsibilities to strategically relevant operations, so its name was changed to the Investments and Strategic Operations Committee.
Marco Sesana, Country Manager of Italy, and Timothy Ryan, incoming Group Chief Investment Officer, became members of the Group Management Committee.
On 23 January, Assicurazioni Generali communicated that it had acquired voting rights on 505 million shares of Intesa Sanpaolo S.p.A., equal to 3.01% of the share capital, through a securities lending transaction.
On 20 April, Assicurazioni Generali completed the share capital increase in execution of the Long Term Incentive Plan approved by the Shareholders’ Meeting of the Company on 30 April 2014. The share capital of Assicurazioni Generali, fully subscribed and paid up, is subdivided into 1,561,808,262 ordinary shares of € 1 each (par value).
On 26 April - and following Fitch’s recent downgrade of Italy’s sovereign rating to ‘BBB’ from ‘BBB+’, with Stable Outlook - the agency announced that it has affirmed Generali’s and its subsidiaries’ IFS ratings at A-. The Outlooks are Stable. Fitch explained that the ratings are two notches higher than Italy’s sovereign rating (BBB/ Stable), “in recognition of Generali’s resilient capital position and strong geographical diversification (with around 60% of operating result from outside Italy), including significant operations in France and Germany with strong market positions”.
On 30 May, Assicurazioni Generali sold 510 million ordinary shares of Intesa Sanpaolo S.p.A., amounting to 3.04% of the share capital, and which had been acquired in January. At the same time, Generali ended the collateralized derivative transaction, settled on 17 February, in order to fully hedge the economic risk related to the acquisition of these shares. The Generali Group maintains a marginal exposure to Intesa Sanpaolo shares as an ordinary financial investment.
Effective as of 1 June, Jean-Laurent Granier joined the Generali Group as Country Manager and Président Directeur Général (PDG) of Generali France. He also joined the Group Management Committee. Eric Lombard resigned from the Group.
Generali returned to the Insurance Linked Securities (ILS) market with a € 200 million catastrophe bond on floods and windstorms in Europe and earthquakes in Italy, through a reinsurance agreement with Lion II Re DAC, an Irish special purpose company, providing per occurrence cover in respect to any mentioned events which occur to the Generali Group over a four-year period. The Lion II Re transaction transfers part of these risk to the bond investors allowing for a more optimized protection for the Group against catastrophes.
On 1 August, the Board of Directors of Assicurazioni Generali appointed Nora Gürtler as Head of Group Audit as from 1 October.
On 7 August, an agreement for the sale of its assets in Panama2 was undersigned. The operation is subject to approval from the competent authorities.
On 18 October, the Board of Directors of Assicurazioni Generali deliberated in favour of the entry - within the Group Management Committee - of Isabelle Conner, Group Chief Marketing & Customer Officer, and of Monica Alessandra Possa, Group Chief HR & Organization Officer; it also deliberated in favour of the mutually agreed resignation of Valter Trevisani, Group Chief Insurance Officer.
An agreement for the transfer of the run off P&C portfolio of the British subsidiary was signed on 19 December.
July August September October November December 2 The operation is part of the Group’s strategy to optimize its geographic presence as well as improve operational efficiency and the allocation of capital.
Annual Integrated Report and Consolidated Financial Statements 2017, Consolidated Non-Financial Statement, p. 120 15 March 2018: Publication of the results as at 31 December 2017 19 April 2018: Shareholders' Meeting Approval of the Parent Company Financial Statements as at 31 December 2017 and the Remuneration policy as well as the other agenda items 3 May 2018: Board of Directors approving the Interim financial information as at 31 March 2018 4 May 2018: Publication of the results as at 31 March 2018 23 May 2018: Dividend pay-out on the share of Assicurazioni Generali
Significant events after 31 December 2017 and 2018 corporate event calendar
Total emissions refer to 44% of the total Group employees in the following countries: Austria, France, Germany, Italy, Czech Republic, Spain and Switzerland.
Social and relationship capital We continue to implement our Net Promoter System Program - recently awarded by Medallia as one of the most successful global programs - and listen to our customers and distributors while responding to their feedback and allowing ourselves to improve their satisfaction and loyalty. Customer T-NPS, active in 54 business units and with a coverage of approximately 90% of our customer base 167 thousand unsatisfied clients were re-contacted +350 quick wins were implemented +250 structural improvements Distributor R-NPS, active in 31 sales channels in 20 business units 147 improvements were implemented Global Agent Excellence Contest launched in 23 business units to improve digital adoption and further empower our agents. Connected Agent and Mobile Hub, initiatives which aim to respectively equip our agents with tools to interact with customers through digital channels and our customers with a platform for managing their policies through their cell phones in an easier and more independent manner. The agents have already been provided with tools in Spain, Argentina, Austria, Switzerland and Indonesia; the platform was launched in France and Switzerland and is being launched in Italy and Spain.
We support the most vulnerable people through The Human Safety Net (THSN), a global initiative which tackles three important socio-demographic issues.
The premiums collected are managed through appropriate asset-liability management policies so as to guarantee the payment of claims and benefits to our policyholders or their beneficiaries after death, accidents or the occurrence of the insured event.
Financial capital 13.4% RoE (+0.0 pps) € 1,330 mln proposed total dividends (+6.5%)
Human capital We are committed to valuing and developing our people in order to be ready to more effectively meet future challenges. We listen to them as to understand how we can improve and meet their needs. Global Engagement Survey 2017 86% response rate (+1 pps vs 2015) 80% engagement rate (-2 pps vs 2015)
Intellectual capital We have strong technical know-how which allows us to offer insurance solutions that are high in quality as well as innovative and digital so as to meet the needs of our clients and simplify our processes.
Glossary available at the end of the Annual Integrated Report and Consolidated Financial Statements 2017
Annual Integrated Report and Consolidated Financial Statements 2017, Our performance, p. 41
The Group Policy for the Environment and Climate contains the guiding principles for the strategies and objectives of environmental management.
– European directive on insurance distribution and regulations on investment product disclosure and transparency guaranteeing an increasingly high level of consumer protection – European regulation on personal data protection – European directive on non-financial information, transposed into the Leg. Decree 254/2016 – Issue of the IVASS order no. 68 of 24 February 2018, amendments and additions to ISVAP Regulation No. 22 of 4
Lastly, we monitor developments in national accounting standards and in sectorial legislation.
Customers currently place greater focus on service quality: they no longer rely only on an agent to acquire an insurance product; rather, they have a more independent approach to the decision-making process, which includes visiting the websites of insurance companies, reading customer reviews on social media and checking comparison websites.
Modern communities are affected by distinct demographic and social phenomena with a strong impact on their socioeconomic balances. In Europe, the continual process of population aging, driven by an increase in life expectancy and a decrease in birth rates, is only partially counterbalanced by international immigration. The non-European area is affected by similar phenomena, albeit of a distinct nature with respect to local socio-political characteristics. 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.
We already have strong technical capabilities but to become the best player we will continue with price sophistication, risk selection and claims management in the P&C business while with the continuous improvement in the quality of our products and the capital return optimization in the Life business.
We will continue to be committed to our laser-like focus on customers and distributors with the introduction of specific, targeted innovations with clear added value.
We aim to become the first choice for consumers. We are focusing on strengthening brand preference in four areas: provide a delighting experience to our customers and distributors; shift to digital marketing channels (web, mobile and social); provide content on how to live a healthier, safer life; enhance the look & feel of our brand, to make it more straightforward, dynamic and likeable.
We want to accelerate the process of generating excellence by leveraging our strengths and rapidly acting upon improvement opportunities. We therefore commit ourselves to focusing our action plans on four global priorities in addition to local ones: – foster strategy cascading and communication – keep investing in performance management and meritocracy – accelerate on effectiveness and velocity – further enhance a diverse and inclusive culture.
45 countries 175 companies 33.571 open comments received 8 out of 10 of us feel engaged
I fully support the Values for which the Generali Group stands.
I would recommend the Generali Group as a place to work.
The engagement rate is calculated on the basis of the average percentage of collected favourable responses by means of the following questions: EMPOWERS TEAM THROUGH DELEGATION AND TRUST.
86% Group employees involved in performance management activities in 20174 (+25 pps)
The dialogue on performance will be expanded to the whole Group by the end of 2018.
we improve diversity and inclusion (D&I) We are committed to promoting a culture of inclusion which ascribes value to individuals and diversity of all types, particularly with regard to cultural, gender, generational and disability diversity..
In 2017, we have set a Group D&I Council that is led by a business sponsor of the Group Management Committee in the person of Frédéric de Courtois and has the task of establishing objectives and actions for promoting diversity and supporting these in local situations. We are focused on training modules within managerial training programs as well as different programs and events which aim to analyse the issue in depth. A few examples: – Be bold for women, for a group of international talents who have analysed in depth the theme of unconscious prejudices, particularly those which are gender-related, and have identified practical solutions for the elimination of barriers to gender balance and greater capacity of managers for inclusion – Inspiring Leaders on Diversity and Inclusion, for 100 people and with top testimonials – Our differences, our strengths, with a report on unconscious prejudices and their impact on decision-making processes.
• we provide succession plans for all key positions and career paths that facilitate professional growth with the aim of fostering internal growth in key positions • we develop leadership skills at various levels in the organization through international training programs with the best Business Schools • we identify and develop talents at the local and Group level with specific internal and external assessment programs • we attract, select and retain the best people through internal mobility and training programs
• we focus on customer needs, through the implementation of a Group NPS program • we value our ‘Client Heroes’, through recognition processes
88.7% (-2.4 pps) trained people 33.2 average hours (-10.9%) of training per capita € 54.7 mln (-10.8%) training costs www.generali.com/our-responsibilities/ investing-in-our-people e www.generali.com/it/work-with-us for more information on our people
Surveillance Body having duties and powers with respect to the oversight, development and promotion of the continuous updating of our Organization and Management Model
The Company maintains continuing relations with all external stakeholders: institutional investors, proxy advisors and retail shareholders. This intense relationship activity is also substantiated in a specific cycle of meetings with institutional investors and proxy agencies, focusing on issues of corporate governance, remuneration and sustainability which are relevant to the financial community. A constructive dialogue also occurs during the course of the annual Shareholders’ Meeting which serves as one of the primary opportunities for communication between shareholders and top management of the Company. Overall participation in the 2017 Shareholders’ Meeting grew both in terms of representation of share capital and in terms of the presence of institutional investors.
Not identifiable shareholders 0.62% of the share capital 3.55 % Gruppo Caltagirone 3.16 % Delphin S.AR.L. (Gruppo Leonardo Del Vecchio)
Director, as well as the Director responsible for the internal control and risk management system
Board of Directors having all of the broadest management powers for the pursuit of the corporate purpose and being supported by Committees with consultative, recommendatory and preparatory functions
Over 231 thousand 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.
www.generali.com/governance for further information on governance and the Corporate Governance and Share Ownership Report 2017
Corporate Governance and Share Ownership Report 2017, p. 72 and 105 for additional information on the diversity of administration, management and control bodies
The following principles lie at the heart of our remuneration policy and consequent actions:: The fixed component remunerates the role held and responsibilities assigned, also considering the experience and skills required, as well as the quality of the contribution made in terms of achieving business results.
The remuneration policy for non-executive directors establishes that remuneration consists of a fixed component as well as an attendance fee for each Board of Directors meeting in which they participate, in addition to the reimbursement of expenses incurred for participation in such meetings.
Directors who are also members of the board committees are paid remuneration in addition to the amounts already received as members of the Board of Directors (with the exception of those who are also executives of the Generali Group), in accordance with the powers conferred to those committees and the commitment required in terms of number of meetings and preparation activities involved. This remuneration is established by the Board of Directors. In line with the best international market practices, there is no variable remuneration
The Managing Director/Group CEO, the unique executive director, the members of the Group Management Committee (GMC) and the other executives with key responsibilities receive a remuneration package consisting of a fixed component, a variable component with no-claims bonus and claw back mechanisms, and benefits..
42 Part A - Result of operations 73 Part B – Risk report Company 87 Appendix to the Management Report
42 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
This report was prepared in accordance with the provisions of Legislative Decree 209/2005, Consob communications and other regulatory provisions. This report has been reviewed for consistency with the financial statements and compliance with the law rules 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. The portfolio of Italian direct business 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 Legislative Decree 209/2005.
— On 25 January 2017, the Board of Directors decided to suspend the collaboration relationship with the General Manager and Group CFO Alberto Minali and, after obtaining the favourable opinion of the Board of Statutory Auditors, appointed Luigi Lubelli as the new Group’s CFO and new Corporate Officer. All first-level corporate functions that reported to the General Manager now report directly to the Group CEO Philippe Donnet.
— In the month of June, Assicurazioni Generali S.p.A. executed a reinsurance agreement with Lion II Re DAC, an Irish special purpose company, in order to cover catastrophic losses caused by storms and floods in Europe and by earthquakes in Italy. Lion II Re DAC issued a tranche of debt securities for 200 million euro in order to fund the commitments undertaken pursuant to the reinsurance agreement, thus transferring part of the risk to the bond investors.
— In August, Assicurazioni Generali S.p.A. executed an agreement for the transfer of the assets and liabilities of the Panama branch, including the insurance portfolio, for US $ 172 million. This operation, subject to the approval of the competent authorities, is expected to be completed in 2018.
— Also in September, Assicurazioni Generali S.p.A. acquired the residual stake of its interest in Generali Finance B.V. from its subsidiary Generali Italia S.p.A. in the amount of 199 million. This purchase was carried out in preparation for the merger by incorporation, which took place in 2018.
— Also in December, Assicurazioni Generali S.p.A. executed two agreements for the transfer, in reinsurance, of the portfolio in run-off of the London and New York branches, in preparation for the future legal transfer of the London portfolio, subject to the approval of the competent authorities. The reinsurance transfer has determined the recognition, under the balance sheet assets, of the technical provisions sold for 309 million. In addition, the reinsurance transfer generated a gross capital gain for the Company of 196 million, recognised under the extraordinary items since the reinsurance agreement does not qualify as a protection, but as an integral part of the transaction.
— Also in December, Assicurazioni Generali S.p.A. executed an agreement for the gradual transfer of the P&C insurance portfolio of the Japanese branch. The transfer of the insurance portfolio will be concluded in 2019. The net technical provisions recognised in the financial statements amounted to 29 million.
Net profit for the period amounted to 1,404,459 thousand, an increase of 1,096,261 thousand versus the previous year. The increase is characterized by: — Un incremento del risultato dell’attività ordinaria per 200.715 migliaia su cui influiscono: • an increase in ordinary financial operations, net of technical interest attributed to the net life underwriting balance, of 280,469 thousand. This increase is primarily due to greater dividends coming from the subsidiaries, and, to a lesser extent, to higher net earned profits; • an increase in the net underwriting result of 41,306 thousand. This increase refers to the life insurance business (+51,444 thousand) whereas the P&C insurance business declined (-10,139 thousand); • an increase in ordinary net costs of 121,059 thousand. This trend was affected, for the most part, by the negative exchange differences recorded in the current year.
Income taxes 44 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
(b) Including net income on investments, net income on realisation, value adjustments and net profits on internal fund investments.
The premiums from indirect business were underwritten by the Parent Company Reinsurance unit for 448,403 thousand (483,810 thousand in the previous year) and the Generali Employee Benefits unit for 1,034,002 thousand (1,036,200 thousand in the previous year).
The foreign branches of the Company contributed with 751 thousand (1,176 thousand in the previous year).
The decline in the gross premium collection from direct business of 261,141 thousand (from 486,321 thousand to 225,180 thousand) resulted almost completely from the decreased gross written premiums by the Hong Kong branch of 258,795 thousand (from 288,080 thousand to 29,285 thousand) due to a shift in the new production of High Net Worth individual policies, from the main office to the local Company of the Group, Generali Life (Hong Kong) Limited.
46 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The gross premium collection of the P&C segment amounted to a total of 1,661,058 thousand (1,660,093 thousand in the previous year).
The other foreign branches of the Company and the Head Office portfolio contributed with 5,256 thousand (6,535 thousand in the previous year).
The collection of premiums from direct business was provided by the various foreign branches of the Company, to which the Head Office’s direct portfolio should be added. The foreign branches that affect for the most part the total collection are the London branch (131,608 thousand versus 117,407 thousand of the previous year) and the New York branch (95,290 thousand compared with 92,761 thousand of the previous year), in particular within the Global Corporate & Commercial segment.
The other branches reported a total premium collection of 175,560 thousand compared with 191,023 thousand of the previous year, broken down as follows: Hong Kong for 64,443 thousand (65,626 thousand in 2016), Panama for 49,370 thousand (60,120 in 2016), Head Office ’s direct portfolio for 43,996 (41,431 in 2016) and Tokyo for 17,750 thousand (23,846 thousand in 2016). The most significant decline concerned the Panama and the Japanese branches, currently being divested.
Net technical result amounted to 448,130 thousand, significantly up compared with the previous year (373,213 thousand). The result consists of the net underwriting result, up by 51,444 thousand, and of the allocated income transferred to the technical account, also up by 23,473 thousand.
The increase in the net underwriting result was driven, in particular, by the improved profitability of the reinsurance
Administration costs / net premiums 2.9 2.0 accepted directly by the Parent Company. The growth in income assigned to the technical account reflects the increase in net investment income within the life business.
Other branches 10,223 14,214 48 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
With reference to the reinsurance accepted by the subsidiary Generali Levensverzekering Maatschappij N.V., the results improved by 38,647 thousand (from -36,118 thousand to 2,529 thousand) due primarily to a decline in the interest rate risk provision, deriving both from an increase in specific financial returns and a streamlining of the calculation method applied to the technical provisions of the Dutch Company, in addition to fewer profit -sharing distributions being recognised.
As regards the reinsurance acceptance by Alleanza Assicurazioni S.p.A., the results showed an improvement from 80,680 thousand in the previous period to 89,495 thousand. This improvement is due to the positive effect deriving from the release of almost all the interest rate risk provisions, which more than offset the automatic decrease associated with the fact that the reinsurance treaties in question are in run-offs. The decrease in the premiums accepted by Alleanza Assicurazioni S.p.A. has determined, for the most part, the decrease in the overall collection of reinsurance accepted directly by the Parent Company.
As regards the Generali Employee Benefits units, the reinsurance contribution from both the Companies of the Group and outside the Group, shows an underwriting result of 25,767 thousand (23,360 thousand in the previous year) against a slight decline in the gross premium collection of 2,198 thousand (from 1,036,200 thousand to 1,034,002 thousand).
As regards the other branches of the Company, the net underwriting result showed a decline by 3,991 thousand (from 14,214 thousand to 10,223 thousand). This performance was negatively affected by the Hong Kong (-5,842 thousand) and Dubai (-4,773 thousand) branches, both characterised by a decrease in premium collection. Conversely, both the Panama branch and the Head Office’s direct portfolio recorded a positive performance (+2,776 thousand and + 3,886 thousand respectively).
Net technical result amounted to 222,924 thousand, up compared with the previous year (218,770 thousand). The result is comprised of the net underwriting result, down by 10,139 thousand, and of the allocated income transferred to the technical account, up by 14,292 thousand.
As regards the London branch, the underwriting result was subject to a significant decline by 112,015 thousand (from 11,660 thousand to -100,355 thousand of the previous year) with a gross premium collection up from 555,603 thousand to 566,132 and a net collection, also increased, amounting to 467,045 thousand (461,510 thousand in the previous year).
The lower result was affected by the Global Corporate & Commercial segment, including the reinsurance acceptances by other companies of the Group, which was particularly affected by claims related to catastrophic events occurring in the course of 2017, with a result standing at -97,870 thousand (-13,490 thousand in the previous year). Gross premium collection developed by the segment stood at 468,818 thousand, a decline compared with 494,130 thousand of the previous year. A major part of the decline in the premium collection comes from the appreciation of the English pound versus the Euro in 2017.
The claims pertaining to the year decreased from 117,997 thousand to 111,515 thousand, thus positively affecting the claims/premiums from 84.4% of the previous year to 78.5%. Operating expenses decreased in general by 463 thousand, with an impact on net premiums standing at 16.5 compared with 17.3%.
Overall, the combined ratio of the GEB unit stood at 95% versus the 101.7% of the previous year.
Higher acquisition expenses have impacted the new production in both Global Corporate & Commercial and Generali Global Health segments. In addition, this increase affects significantly the greater impact of acquisition costs versus the premiums of the entire P&C business of the Company.
The net combined ratio stood at 121.3% compared with 96.7% 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 health and occupational accidents segments, showed an underwriting result increasing from -2,451 thousand in the 52 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The class D net income amounted to 90,484 thousand, up from 41,926 thousand of the previous year. This year is benefiting mainly from greater interest on reinsurance deposits, which amounted to 67,031 thousand compared to 26,238 thousand in the previous year, and especially interest related to reinsurance deposits concerning the subsidiary Generali PanEurope dac. The positive results were affected by greater latent net capital gains amounting to 18,598 thousand versus 14,491 thousand in the previous year.
The following table and comments show the changes in each item.
Ordinary financial result includes mainly the income from shares and other investments, net of related expenses, as well as net realized and unrealized gains and losses.
The results of the ordinary financial operations amount to 2,450,022 thousand for the year and 2,139,127 thousand 53 Parent Company Financial Statements
Net interest on reinsurance deposits amounted to 237,437 thousand, decreasing compared with the previous year (253,878 thousand). The decrease is to be attributed primarily to the acceptance of reinsurance in run-off by the subsidiary Alleanza Assicurazioni S.p.A. (negative change of 20,325 thousand).
Other income net of other charges went from 15,449 thousand of previous year to 59,137 thousand primarily due to greater interest on loans with the companies of the Group (a change of 45,465 thousand) and in particular attributable to the subordinated loan issued by Generali Italia S.p.A. (1,187,500 thousand) and purchased from Generali Finance B.V., that held previously, during the 2017.
Ordinary return on investments1, determined on the basis of the average rate of return, stands at 5.8% (5.3% in 2016) .
1 The average rate of return on investments is the ratio of income for the period to half the sum of investments at book value at 31/12/2017 and 31/12/2016.
54 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Net income from the use of non-technical provisions amounted to 10,878 thousand. In detail, the total income amounted to 62,688 thousand primarily due from the release of the tax provision mainly related to favourable result of the assessments carried out on the Company for the tax periods 2010, 2011 and 2012. This income is partially offset by the expenses of 51,810 thousand mainly due to a provisions related the close pension fund of the London Branch employees.
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 351,705 thousand, a slight decrease versus the same figure of the previous year (352,176 thousand).
The following table shows details of the components of other ordinary income and charges: (in thousand euro) 2017 2016
Other ordinary income and charges show a negative balance of 1,232,701 thousand, 121,060 thousand higher than the 1,111,641 thousand in the previous year.
Interest expense on the financial debt of the Company amounted to a total of 714,768 thousand, an increase from 705,696 thousand in 2016.
As a partial offset, a slight decrease of the interest on a debenture loan was recorded (from 153,229 thousand in 2016 to 149,565 thousand) due to a partial repayment of the capital share of the loan to fund the tax recognition of goodwill relating to Alleanza Assicurazioni S.p.A..
56 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
More specifically, the income for the current IRES decreased to 195,482 thousand (from 204,969 in the previous year) whereas deferred IRES taxes involved an expense of 33,722 thousand (compared with an income of 12,760 thousand in the previous year).
Taxes also include an IRAP tax charge of 5,470 thousand (3,298 thousand in the previous year), a charge for taxes due in Italy on the income of some Group Companies overseas (Controlled Foreign Companies – CFC) of 10,636 thousand (14,774 thousand last year) and lastly a charge for taxes paid abroad amounting to 24,163 thousand (9,445 thousand in the previous year) of which 19,774 thousand referable to the foreign branches.
Investments Total investments amounted to 43,912,896 thousand, compared to 44,454,608 thousand of the previous year.
Class D investments, i.e. the investments of the Company benefiting the life-insurance policyholders who bear the risk, showed a decrease from 3,456,300 thousand to 3,268,077 thousand.
Shareholdings in Group companies increased from 29,638,995 thousand to 29,731,819 thousand. This change is primarily to be attributed to: — increase in the value of the shareholding interest in the subsidiary Generali Finance B.V. following the purchase of shares from Generali Italia (changes of 199,251 thousand); — increase in the value of the shareholding interest in Generali Vietnam Life Insurance (+38,537 thousand) and in Generali Vitality GmbH (+10,800 thousand), primarily for increases in the share capital; — reduction in the value of equity interest in GLL GmbH
traction of the portfolio in run-off accepted by the subsidiary Alleanza Assicurazioni S.p.A. As regards the P&C segment, the reinsurance deposits amounted to 64,785 thousand (404,522 thousand in the previous year). Most of the decrease is due to the cancellation of the reinsurance treaty with the subsidiary Generali IARD by the London branch within the Global Corporate & Commercial segment.
Class D investments declined from 3,456,300 thousand to 3,268,077 thousand, primarily as a result of the reduction in reinsurance deposits received from the subsidiary Generali PanEurope. This reduction derives from the increase in surrenders seen this year for that reinsurance treaty.
Total life and non life business 12,676,527 14,058,794 -9.8 100.0 100.0
60 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The reduction in technical provisions tied to the management of pension funds (from 3,454,111 thousand to 3,265,804 thousand) derives, in particular, from the increase in surrenders inherent in the reinsurance acceptances by the subsidiary Generali PanEurope.
In reference with subordinated liabilities, the decrease of 37,973 thousand is to be attributed to the counter value in Euro of the loans in pounds.
The subscribed share capital rose by 1,925 thousand following the assignment of Generali shares in favour of Group management on 15 March 2017, in implementation of the Long Term Incentive Plan 2014. The legal reserve rose by 385 thousand in order to reach the minimum level required by law.
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 knowhow, and the relationships which a Group like Generali fosters.
Our policy, named Generali People Strategy, is founded on four priorities: — promoting engagement and empowerment; — strengthening the skills of our leaders and talents; — building a lean organisation and developing new skills; — promoting a culture focused on the customer.
As at 31 December 2017, the Company employs a workforce of 2,003 units (2,010 units as at 31 December 2016), including a total of 912 staff employed in the foreign branches (890 as at 31 December 2016).
With the objective of fostering the growth of leaders and talents and investing in the improvement of their skills and expertise, in 2017 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. In the year in question, some initiatives such as Empower to Lead, reserved to the GLG (Generali Leadership Group) and Take Off, reserved to the Group Talent managers, were carried out.
Following is the additional information requested in compliance with the provisions under ISVAP Regulations (now IVASS) no. 22 of 4 April 2008, modified and supplemented by the IVASS provision no. 53 of 6 December 2016, Annex 6.
In 2017, the average gross salary of administrative personnel amounted to 106,052 euro, down from 109,704 euro in 2016. The average cost amounted to 152,002 euro (156,881 euro in 2016).
Within the environmental area, we have been managing for many years our environmental impact in compliance with a commitment that has become even stronger after the success of the Paris agreement endorsed in 2015 by the Conference of the Parties to the
As regards mandatory training, the classes for a better understanding of security measures to be adopted for the processing of personal information (Legislative Decree 196/2003) and for the control of aspects related to occupational health and safety (Legislative Decree 81/2008), continued. On a regular basis, classes intended to foster the dissemination and operating application of the “Organisational, management and control model”, as required by Legislative Decree 231/2001, also 65 Parent Company Financial Statements
In order to increase the credibility of our reporting and the results obtained, starting in 2011 we have applied for and obtained from RINA (Organismo di Certificazione RINA Services S.p.A.) a certification according to ISO 14064-1 about the direct emissions deriving from the combustion of fossil fuels purchased for heating, for the production of electrical and thermal energy, for the supply of the corporate fleet (Scope 1), and about the Indirect emissions deriving from energy consumption (Scope 2).
Furthermore, with reference to the statement about non-financial information of the Generali Group, the 2017 data related to total greenhouse gas emissions of the Group and the purchased renewable energy must also obtain a certification from a third-party entity. Consistent with the commitments undertaken by joining some important international initiatives (Paris Pledge for Action, The Geneva Association - Climate Risk Statement, European Financial Services Round Table), we are actively participating in round tables and national and international events on green finance, among which is the Italian National Dialogue on Sustainable Development promoted by UNEP and the Ministry for the Environment. We have organised relevant institutional events, including the presentation in Italy of the Interim Report of High-Level Expert Group (European Commission) on sustainable finance.
Our commitment to contribute to the transition toward an economy and a society that are more sustainable, is a component of our strategy definition that is focusing particularly on insurance and investment activities. As regards investments, Generali, in the capacity of asset owner (general account investment), will increase its exposure toward green activities, divesting progressively from companies tied to coal. As regards underwriting, the offer of products with a particular environmental value will increase, while maintaining a minimum exposure to the coal sector. In the countries where the economy and employment significantly depend on the coal sector, Generali will involve, through an on-going dialogue, issuers, customers and other stakeholders. As regards impacts that have been directly attributed to the exercise of our activities for years, we are 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 are committed to reduce travelling and to enhance further the tools used for remote communication, by setting up video conference rooms, and the availability of dedicated 66 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
As regards outward reinsurance, the reinsurance cessions 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 the optional reinsurance to a small number of cases.
The most important classes of business are protected by the excess of loss reinsurance, which allows specifically defining the retention for each class of business and thus reducing the volatility of results, whilst retaining higher expected margins.
The following is a prospect of the claim settlement velocity broken down by individual line of business, and current and previous origin year.
sions for risks related to the abovementioned request for damages are not met.
It is therefore confirmed that, at present, it is not possible to reliably estimate both the outcome of the aforementioned arbitration proceedings and its timing.
The trade price of the security Generali as at 29 December 2017 was 15.2 euro. The security has recorded, from early 2017, a minimum of 13.52 euro on 28 February 2017 and a maximum of 16.02 euro on 8 August 2017. Market capitalisation as at 29 December 2017, was 23,739,486 thousand euro.
In particular, Banco BTG Pactual SA, within the deadline set by the Arbitral Tribunal, on November 30, 2017, filed its first brief, containing the allegations supporting its claims for damages. These claims, strongly challenged by Generali, would be based, 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.
Taking into account the status of the arbitration proceedings and the legal opinions acquired in this regard, it is considered that the conditions of the probability and of the ability to make a reliable estimate to make any provi68 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
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 69 Parent Company Financial Statements
As at 31 December 2017, the Company held 107,256 own shares with a nominal value of 1 euro each, the same as the previous year.
With regard to CONSOB communications 97001574 of 1997, 98015375 of 1998 and 6064293 of 2006 concerning transactions with related parties, the Company states that transactions with Group companies are conducted as part of its normal activity of coordination and are, moreover, subject to specific ISVAP (now IVASS) supervisory controls. No transactions carried out during the year were atypical with respect to normal business operations.
Estimate of the reduction of costs arising from the verification of fraudulent motor claims
Consolidated entities were 423 as at 31 December 2017 compared to 428 as at 31 December 2016. In detail, entities consolidated line by line decreased from 393 to 388 and those valued at equity remain stable to 35.
In 2018, the current growth trends, which should stabilise at 2.1% in the Eurozone, a marginal decline from the figures of 2017, are expected to continue with exports supported by a global recovery, with consumptions supported by a continuous decline in unemployment, and with investments under a favourable access to credit conditions.
As regards the equity market, the upward trend should continue. Although the markets have already been, in a way, overvalued, the currently favourable economic trend, the tax reform in the United States and a still wide liquidity will support this growth.
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 reasonably expected to show a moderate growth, both in the life and P&C business.
Starting from 2016, the Company and the Generali Group comply with Solvency II regulation, which requires capital to be held for all quantifiable risks.
The Regulatory Solvency Ratio, estimated on the basis of preliminary data, amounts to 257.3% (237.6% as at 31 December 2016) , with a strengthening compared to the previous year due to the increase in the value of participations in subsidiaries.
In addition to financial and credit risks, the Company is exposed to life and non-life underwriting risks, which arise from the portfolio reinsured by the Group companies and from the direct business managed by foreign branches.
The sections of the Risk Report are structured as follows: — Section B, provides a brief description of the risk management system; — Section C presents the Company’s solvency position and key elements of the capital management; — Section D provides an overview of the risk profile of the Company.
Risk governance is a part of the broader internal control and risk management system.
The internal control and risk management system is the set of rules, procedures and structures that ensure the effective operation of the Company and enable to identify, manage and monitor the main risks to which it is exposed. Key elements of the system are: — internal control framework and related activities; — awareness and monitoring; — reporting duties; — roles and responsibilities that the Board of Directors
Control Functions collaborate according to a pre-defined coordination model, in order to share information and create synergies.
The principles defining the risk management system are provided in the Group Risk Management Policy , which is the cornerstone of all risk-related policies and guidelines. The Policy covers all risks the Company is exposed to, on a current and forward-looking basis.
Internal Audit together with Actuarial, Compliance and Risk Management Functions represent the “Control Functions”.
The roles and responsibilities of the BoD and related committees, Senior Management, Control Functions and the interactions among Control Functions are described within the Corporate Governance Report. Key roles within the risk management system are outlined below: — the BoD defines, with the Risk and Control Committee support, the Directives on Internal Control and Risk Management System and assesses its adequacy, effectiveness and functioning, at least once a year. With the Risk and Control Committee support it also defines the organizational set-up, appoints the heads of the Control Functions (also after hearing the opinion of the Board of Statutory Auditors for the appointment of the Internal Audit’s head)) and approves their annual activity plans, adopts Group risk policies, approves the ORSA Report results and, based on them, defines the risk appetite and tolerance limits; — the Senior Management is then responsible for executing the defined strategy, implements the internal control system and keeps it suitable and effective; — the Control Functions, in particular: • the Risk Management Function supports the BoD
The purpose of the risk identification process is to ensure that all material risks to which the Company is exposed are properly identified. The Risk Management Function interacts with the main Business Functions in order to identify their main risks, assess their importance and ensure that adequate measures are taken in order to manage them, according to a sound governance process. Within this process, emerging risks are also considered.
Identified risks are measured through their contribution to the capital requirement, complemented by other modelling techniques deemed appropriate and proportionate to better reflect the Company risk profile. Using the same metric for measuring the risks and the capital requirements ensures that each risk is covered by an adequate amount of capital that could absorb the loss incurred if the risk materializes.
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.
Risks not included in the capital requirement calculation, such as liquidity risk and other risks, are evaluated based on quantitative and qualitative techniques, models and additional stress testing or scenario analysis.
The Own Risk and Solvency Assessment (ORSA) Report is the main risk reporting process with the purpose to provide the assessment of risks and of the overall solvency needs on a current and forward-looking basis. Both the risks included in the SCR calculation and those risks where no capital requirement is foreseen are taken into account.
The ORSA Report is produced on an annual basis, both at Company level and at Group level. After the discussions and approval by the BoD, assisted by the Risk and Control Committee, both Reports are submitted to the Supervisory Authority. The results are shared with Senior Management and also the review by the Group Compliance Function is foreseen.
The solvency position, as presented below, has strengthened passing from 237.6% to 257.3% due to the increase in own funds related to the value of participations in subsidiaries, only partially offset by the increase of the related capital requirement for equity risk.
In compliance with IVASS Provvedimento n. 53, 2016, the SCR and Minimum Capital Requirement (MCR) data
EOFs to cover SCR are calculated based on the net equity, revaluating all assets and liabilities at market value. The main adjustments in net equity include: — Deduction of intangible assets; — Revaluation of investments at fair value (incl. participations and bonds); — Technical provisions (TPs) are accounted based on
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 € 0.85.
76 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
In implementing the Model, 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.
A dedicated committee, the Internal Model Committee, has been established to approve PIM calibrations, to support decision making 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, which is 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 reflect appropriately the risk profile. The Chief Risk Officer (CRO) is also responsible for defining the methodology of each model component, based on 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.
The PIM is subject to regular independent validation on an ongoing basis, which aims to gain assurance of the completeness, robustness and reliability of the processes and results, as well as their compliance with regulatory requirements.
78 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Within the validation activities, also the results obtained during previous validation cycles are 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).
The life portfolio has a prevailing component of traditional savings business. The portfolio also includes some annuity portfolios, with the presence of longevity risk, pure risk covers, with related mortality risk, and non-traditional business (unit-linked) accepted from Group companies.
Life and health underwriting risks include biometric and operating risks embedded in the life and health insurance policies. Biometric risks derive from the uncertainty in the assumptions regarding mortality, longevity, health, morbidity and disability rates taken into account in the insurance liability valuations. Operating risks derive from the uncertainty regarding the amount of expenses and the adverse exercise of contractual options by policyholders. The lapse of the policy is the most significant contractual option held by the policyholders, together with the possibility to reduce, suspend or partially redeem the insurance coverage.
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 risks also include mortality catastrophe risks, resulting from changes in mortality rates linked to the pricing or provisioning assumptions in case of extreme events (pandemic risk); — longevity risk that, similarly to mortality, is defined as the risk resulting from changes in mortality rates, where a decrease leads to an increase in the value of insurance liabilities; — disability and morbidity risk is defined as the risk of loss or adverse changes of the value of insurance liabilities, resulting from changes in disability, sickness, morbidity and recovery rates9; — health risk is related specifically to health products and it is linked to the changes of policyholder’s health, which could have a negative impact on the insurance liabilities’ value. This risk also includes the catastrophic component; — expense risk results from changes in expenses incurred in servicing insurance or reinsurance contracts; — lapse risk derives from unexpected exercise of the policyholder’s rights to fully or partly terminate, restrict or suspend insurance coverage, also as a consequence of catastrophic events.
Capital requirements for life underwriting risks are calculated on the basis of the difference between the technical provisions before and after the application of the stress.
Life underwriting risks are measured by means of the Generali Group PIM.
9 Recovery rates refer to the assumptions adopted by the Company in the calculation of the technical provisions, with regards to the time period in which the policyholders will benefit of the disability, sickness and morbidity compensation.
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. natural events in case of catastrophe 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’ included in the financial statements.
The non-life underwriting risks are measured by means of the Generali Group PIM.
Reinsurance is the key risk mitigation technique for non-life 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. Non-life reinsurance strategy of the Company is strongly linked to the P&C reinsurance strategy of the Group and it is developed consistently with the risk appetite and the risk preferences defined in the RAF, taking into account the reinsurance market cycle. The Company has historically preferred traditional reinsurance as a tool for mitigating P&C catastrophe risk. This has been achieved through a centralized approach where the Company accepts risks from its subsidiaries, with few specific exceptions (e.g. when local regulation prevents it).
The process described and the regular assessment performed enable to confirm the adequacy of the risk mitigation techniques. The operational limits proposed by the Insurance and Reinsurance Function are validated by the Risk Management Function which is also responsible for measuring, monitoring and preparing the risk profile reporting
Financial risks are measured by means of the Generali Group PIM.
Equity risk represents the main contribution to the capital requirement of the Company. In addition to that, the Company is also subject to currency risk arising from direct exposures due to branches (in particular linked to the UK branch) and from the participations in subsidiaries located in non-European Economic Area Countries, mainly in Central-Eastern Europe.
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” set out in the Solvency II Directive and related relevant implementation measures, maximizes the investment contribution to value creation, taking into account solvency, actuarial and accounting indicators.
The assets’ selection is performed by taking into consideration the risk profile of the liabilities held in order to satisfy the need to have appropriate and sufficient assets to cover the liabilities. This selection process aims to guarantee the security, quality, profitability and liquidity of the overall portfolio, providing an adequate diversification of the investments.
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 defined as investment limits. This technique contributes to an appropriate mitigation of financial risks.
Controls on assets and liabilities matching and compliance with the limits defined in the ALM&SAA, as well as on the overall monitoring risk limits, are performed regularly by the Company.
With reference to investments, a reporting process exists 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, the Risk Management Function coordinates the reporting on compliance with limits set and on derivative 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 Business Planning targets. Operations in derivatives are subject to a regular monitoring and reporting process, including governance requiring specific authorization before entering into derivatives transactions.
As for the financial risk, the monitoring of the credit risk is in line with the Group Investments Risk Guidelines (GIRG) and with the Delibera Quadro sugli Investimenti; provides specific reporting on the compliance with limits defined and on derivative exposures.
Credit risks are measured by means of the Generali Group PIM.
The management of credit risk is based on the same “Prudent Person Principle” described above, defined within the Group Investment Governance Policy.
Operational risk is the risk of loss arising from inadequate or failed internal processes, personnel or IT systems, or from external events. Losses from events such as fraud, litigation, damages to premises, cyber-attacks and failure to comply with regulations are therefore covered in the definition. It also includes financial reporting risk but excludes strategic and reputational risks.
Since 2015, the Group has been exchanging economic loss data related to operational risk in an anonymized fashion through the “Operational Risk data eXchange Association (ORX)”, a global association of operational risk practitioners where the main banking and insurance players at global level also participate. The aim is to use the data to improve internal controls and to anticipate emerging trends. In addition, since losses are collected by the first line of defence, this process contributes to create awareness among risk owners on the main risks that actually hit the Company.
Based on the last assessments, the most relevant scenarios at Company level are related to cyber and non-compliance risks, compared to the sectorial regulatory developments. These risks are currently managed through specific Group projects.
Liquidity risk is defined as the uncertainty, emanating from business operations, investment or financing activities, over the ability to meet payment obligations in a full and timely manner, in a current or stressed environment.
The liquidity sources not related to the Company’s operating activity are the dividends received from the subsidiaries and the obtained loans. This also produces cash outflows through loan redemptions and interest payments
In addition to the financial flows above mentioned, the Company bears the implicit liquidity risks arising from the issuance of guarantees and commitments in favour of its subsidiaries.
Expected cash flows are carefully monitored. In particular, the forward-looking reports used are the following: — the “Annual Liquidity Forecast”, is given by a forecast of cash flows over a time period corresponding to the end of the calendar year, updated on a weekly basis and with a high level of specific detail for individual flows; — the “Three-year Liquidity Budget”, is monitored over a three-year rolling time horizon on the basis of the strategic plan.
Assicurazioni Generali SpA, being the Group Parent Company, coordinates and monitors the centralized management of the Group liquidity through the Group Treasury Function. In particular, the centralized cash pooling allows increased flexibility in transferring cash across business unit and reduces the potential risks related to short-term liquidity needs, both at Company level and at Group level.
Although not included in the calculation of SCR, reputational, emerging and contagion risks are also taken into account.
Reputational risk refers to potential losses arising from deterioration or a negative perception of the Company among its customers and other stakeholders.
Emerging risks arise from new trends or risks difficult to perceive and quantify, although typically systemic. These risks usually include changes to the internal or external environment, social trends, regulatory developments, technological achievements, etc. For the identification and assessment of these risks, the Risk Management Function engages within a dedicated network, including specialists from business Functions (e.g. Insurance, Investment, Actuarial, Corporate Social Responsibility, etc.). To strengthen its understanding and awareness of emerging risks, the Company is also part of the Emerging Risk Initiative. Within this working group, emerging risks common to the insurance industry are discussed and specific studies are conducted.
Finally, contagion risk, consequent to being part of a Group, may arise from critical situations that occur within one Group company and that may negatively affect the other Group companies.
Considering such increase in Shareholders Capital, the profit for the year is allocated for the amount of maximum 671.420 euro to Legal Reserve, in accordance with Art. 2430 of the Italian Civil Code, for 1,095,875,594 euro to dividend distribution and for 73.397.304 to extraordinary reserve
The amount of the dividend to the shares currently in the market is 1,327,445,855 euro with an additional amount of 2,853,537 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 14, 2018.
The dividend will be paid, net of applicable withholding taxes, as from 23 May 2018 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 21 May, 2018.
Disclosures pursuant to Consob communication no. 6064293 dated July 28th 2006
The structure of the presentation for the profit and loss account, balance sheet and cash flow statement is more simplified than the statutory financial statements as it is based on presentation of financial data grouped into “macro classes”, rather than by individual line item and, therefore, allows for a more immediate analysis of the financial data, which is not reclassified.
Minus allocated investment returns transferred to technical accounts and technical interests -816,384
Total 210,977 105 1,282,969 Result before taxation 1,282,969 107 1,404,459 Profit for the year 1.404,459
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
Numerator 017 OClaims incurred, net of recoveries and reinsurance 823,519 019 Premium refunds and profit sharing, net of reinsurance 41
99 Balance sheet 113 Profit and loss account 123 Notes to the Parent Company Financial Statements 125 Foreward 126 Part A - Summary of significant accounting policies 133 Part B - Information on the Balance Sheet a nd the Profit and loss account 191 Part C – Other information 195 Cash Flow Statement 201 Appendices to the Notes 273 Securities and urban real estate on which revaluations have been
A. SUBSCRIBED CAPITAL UNPAID 1 0 of which called-up capital 2 0
D. INVESTIMENTS FOR THE BENEFIT OF LIFE-ASSURANCE POLICYHOLDERS WHO BEAR THE INVESTMENT RISK AND RELATING TO THE ADMINISTRATION OF PENSION FUNDS I - Investments relating to contracts linked to investments funds and market index 55 3,268,076,561
II - Investments relating to the administration of pension funds 56 0 57 3,268,076,561
1. Provision for unearned premiums 58 124,702,437 2. Provision for claims outstanding 59 733,251,755 3. Provision for profit sharing and premium refunds 60 0
Current accounts with insurance companies 75 1,506,994 4. Policyholders and third parties for recoveries 76 8,386,826 77 220,985,808
F. OTHER ASSETS I - Tangible assets and stocks 1. Furniture, office equipment, internal transport vehicles 2. Vehicles listed in public registers 84 1,178,251 3. Equipment and appliances 85 0
A. SHAREHOLDERS' FUNDS - Subscribed capital or equivalent funds 101 1,561,808,262 - Share premium account 102 3,568,250,216 - Reserve for parent company shares 400 0 - Profit or loss brought forward 108 0 - Profit or loss for the financial year 109 1,404,459,284 - Negative reserve for own shares held 401 3,040,355 110 14,825,483,457
1. Provision for unearned premiums 112 380,979,080 2. Provision for claims outstanding 113 1,916,612,111 3. Provision for profit sharing and premium refunds 114 0
D. PROVISIONS FOR POLICIES WHERE THE INVESTMENT RISK IS BORNE BY THE
I - Provisions relating to contracts linked to investments funds and market index 125 3,265,803,783
E. PROVISIONS FOR OTHER RISKS AND CHARGES 1. Provision for pensions and similar obligations 128 0 2. Provisions for taxation 129 45,277,681
III - Debenture loans 141 3,191,654,359 IV - Amounts owed to credit institutions 142 1,188,705,670 V - Loans guaranteed by mortgages 143 0 VI - Other financial liabilities 144 3,811,359,165 VII - Provisions for severance pay 145 4,746,128 VIII - Other creditors 2. Other tax liabilities 147 33,045,762
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 160 48,254,994,245 110 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
(+) ALLOCATED INVESTMENT RETURN TRANSFERRED FROM THE NON-TECHNICAL ACCOUNT (ITEM III. 6) 6 137,629,116 3. OTHER TECHNICAL INCOME, NET OF REINSURANCE 7 573,795 4. CLAIMS INCURRED, NET OF RECOVERIES AND REINSURANCE a) Claims paid aa) Gross amount 8 914,862,815 b) Recoveries net of reinsurance aa) Gross amount 11 11,563,028 c) Change in the provision for claims outstanding aa) Gross amount 14 155,489,553 5. CHANGE IN OTHER TECHNICAL PROVISIONS, NET OF REINSURANCE 18 0 6. PREMIUM REFUNDS AND PROFIT SHARING, NET OF REINSURANCE 19 40,948 7. OPERATING EXPENSES a) Acquisition commissions 20 230,160,873 b) Other acquisition costs 21 28,850,320 c) Change in commissions and other acquisition costs to be amortised 22 0 d) Collecting commissions 23 752,764 e) Other administrative expenses 24 51,011,682 f) (-) Reinsurance commissions and profit sharing 25 58,047,870 26 252,727,769 8. OTHER TECHNICAL CHARGES, NET OF REINSURANCE 27 9,691,278 9. CHANGE IN THE EQUALISATION PROVISION 28 116,288 10. BALANCE ON THE TECHNICAL ACCOUNT FOR NON-LIFE BUSINESS 29 222,923,859 114 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
b) From other investments aa) income from land and buildings 85 4,944,404 bb) from other investments 86 91,089,530 87 96,033,934
c) Value re-adjustments on investment 89 6,904,777 d) Gains on the realization of investments 90 36,869,456
(-) ALLOCATED INVESTMENT RETURN TRANSFERRED TO THE NON-LIFE TECHNICAL ACCOUNT (item I. 2) 98 137,629,116 9. RESULT FROM ORDINARY ACTIVITY 101 1,071,991,309 12. EXTRAORDINARY PROFIT OR LOSS 104 210,977,248 13. RESULT BEFORE TAXATION 105 1,282,968,556 14. INCOME TAXES 106 −121,490,728 15. PROFIT (LOSS) FOR THE YEAR 107 1,404,459,284 120 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
In order to achieve a better classification of assets, a net exposure to the accrued and deferred income on derivatives on the basis of the individual position was also provided, differently from previous years in which the exposure was made separately for the revenue component and cost. Consistently, the same classification was also adopted for the balances of the previous financial statements. The changes made did not affect the overall economic results.
The significant accounting policies that were applied when preparing the financial statements for the year are reported below.
The cost of tangible fixed assets whose use is limited in time is depreciated annually based on the useful life of the asset.
The value of land and buildings is determined on the basis of an appraisal by an independent expert. Both the appraisal report and the independent expert meet the requirements of ISVAP Regulation (now IVASS) n. 22/2008, and subsequent amendments and integrations.
With regards to the classification in current securities investments classified in item C.II, and the outline of the most significant positions, see part B Section 2.2 of the Notes to the accounting policies.
Current securities are carried at the lower of the purchase 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 cost of fixed interest securities is adjusted by considering the issuing difference that has matured over the year, equal to the positive or negative difference between the issue price and the redemption value.
The original cost of durable and fixed securities is partially or fully restored whenever the reasons for the writedowns cease to exist.
If, in situations of an 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.
The evaluation criteria, in accordance with the provisions of Art. 23-septies of ISVAP regulation (now IVASS) n. 22/2008, amended and integrated, it differs depending on the purpose for which is set up with the financial transaction.
In the cases where transactions are not classifiable as hedging transactions, only the fair value losses of the derivative are recorded in the income statement.
The item includes deposits with ceding undertakings in relation to reinsurance risks, and are recorded at nominal value.
Policyholders and third parties for recoveries include receivables for liability excesses and right of offset following the payment of insurance benefits.
Receivables arising out of reinsurance operations include current receivables from insurance and reinsurance companies related to both accepted and ceded business. The account also includes receivables from reinsurance intermediaries.
Newly purchased electronic equipment has been amortised over their remaining useful life.
Current purchases of furniture, office equipment and goods listed in public registers have been entirely amortised over the financial year, in view of the fact that are constantly replaced.
The account includes demand deposits and deposits that provide for withdrawals subject to a time limit of less than 15 days, bank cheques and drafts, cash and stamps, recorded at nominal value.
The account Includes assets not included in the previous items. The account includes the sum of the differences due to rounding of balance sheet items as well as the valuation offset from unrealised gains on hedging options and swaps.
For non-Group companies and only in cases where information received from ceding companies is not sufficient to precisely determine the economic result for the year at the reporting date, technical income items regarding inward and outward reinsurance are accounted for in the subsequent financial year. In the current financial year, such technical items are included in reinsurance asset and liability offset accounts as a counter entry to the ceding companies current accounts. Further information is provided in Part B, paragraphs 6.3 and 13.7.
The technical provisions for non-life business are made according to the provisions of Art. 23 - ter and 23 - quater of Regulation No. 22 dated 4 April 2008, amended and 128 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
integrated (hereinafter Regulation No. 22 dated 4 April 2008), in Annexes 15, 15 bis and 16 of the same Regulation.
The Italian direct business portfolio includes the provision for unearned premiums, the provisions for outstanding claims, the equalisation provisions.
The equalisation provisions, are established with the objective of equalising the rate fluctuations of future claims or in order to cover particular risks such as credit risk, natural disasters or risks deriving from the use of nuclear energy. The provisions are determined in accordance with the attachment 1 of the above-mentioned Regulation No.15.
The calculation principles, the valuations made and the declaration that technical provisions are sufficient to guarantee the obligations undertaken by the Company for the civil liability motor and marine sectors, 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.
For indirect business accepted through offices located in EU Member States, the technical provisions are determined, with relation to the commitments made, on the basis of the information provided by the ceding companies, appropriately integrated on the basis of independent evaluation to meet the commitments arising from contracts acquired pursuant to Annex 16 of Regulation No. 22 dated 4 April 2008.
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 commitments accepted by the Company.
For the Italian direct business portfolio, the provisions include: a) the mathematical provision, which includes unearned premiums, the provision for health and professional additional premiums; b) the reserve of the complementary insurance, calculated using the methods provided by Paragraph 18 of Annex 14 to Regulation No. 22 dated 4 April 2008, mentioned above; c) the provision for sums to be paid, is adequate to cover the payment of capitals, annuities, redemptions, claims incurred but not yet paid at the end of the year; d) the provision for future expenses; e) the provisions for profit sharing, representing the amounts to be accrued to the policyholders or to the beneficiaries of the contracts, such as technical profit sharing, which are not considered in the mathematical provision.
Considering the presence of additional guarantees on “unit-linked” contracts, pursuant paragraph 4 of Art. 41of the Legislative Decree No. 209/2005, additional technical provisions have been established, in accordance with actuarial principles and rules provided by paragraph 41 of Annex 14 to Regulation No. 22 dated 4 April 2008.
The calculation principles, the valuations made and the declaration that technical provisions are sufficient to guarantee the obligations undertaken by the Company, are presented, for the Italian portfolio, in the report of the appointed Actuary, pursuant to paragraph 3 of Art. 23 - bis 14 of the Regulation No. 22 dated 4 April 2008.
The methods of determination and the results of the analysis of the technical provisions of the indirect business are the subject of a technical report of the Actuarial 130 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Function, as provided by paragraph 4 of Art. 23-quarter 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.
The account includes payables towards reinsurers for deposits issued under reinsurance agreements. They are recorded at their nominal value.
The severance indemnity is determined pursuant Art. 2120 of the Civil Code, as well as Law dated 27 December 2006, No. 296 and the labour agreements in force at the balance sheet date; the liability is considered appropriate and corresponds to the total of the single indemnities due to employees at that date.
Accrued expenses and deferred income are recorded to ensure compliance with the principle of accrual of costs and revenue, in transactions involving a period of consecutive financial years. The discounts or premiums relating to financial liabilities are amortized over the residual duration of the liabilities.
The transfer of the quota of investment return to the technical account for non-life business and to the non- technical account for life business is made on the basis of the principles set by Art. 22 and 23 of ISVAP (now IVASS) Regulation n. 22/2008 amended and supplemented.
Current taxes are determined based on the current tax law; the company has opted, as a consolidating company, for the Group taxation regime, pursuant to Title II, Chapter II, Section II of the Income Tax Code TUIR (Arts. 117-129).
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 charged to the profit and loss account; they are determined based on the rates that are expected to be in force the year in which such income 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.
Pursuant Art. 7 of ISVAP (now IVASS) Regulation dated 11 March 2008, No. 17, which implements Art. 11 paragraph 3 and 348 of Legislative Decree dated 7 September 2005, No. 209, general expenses are charged to the relevant segment, when they are directly attributable to that segment, based on the information relative to the cost centre, reflecting the organization of the Company.
Brazilian real 3.983 3.433 −16.0 132 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The breakdown of the balance sheet between the life and non-life lines of business is presented in attachments 1 and 2 to the Notes to the Accounts.
(+) Quotas of investments profit transferred from the life technical account 0 729,570 729,570
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 48,254,994 48,233,051 21,943 134 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Increase for the year for: acquisitions or increases 17,230 reversal value 0 revaluation 0 other changes 0
Decreases for the year for: sales or decreases 0 long-term devaluations 0 other changes 85
The current value indicated in the Notes to the Accounts as the reference value for assets in classes C.II and C.III is as follows: — for investments in regulated markets, the value is that of the last trading day of the year; — for investments in non-regulated markets, the value is that deriving from a prudent estimation of their probable realisable value at year end, with the exception of unlisted participations in subsidiaries and companies in which a significant interest is held, for which the current reference value is equal to the value of the shareholders’ fund calculated in accordance with the international accounting standards IAS/IFRS.
The variation of the year for land and buildings is provided in attachment 4.
Decreases for the year for: long-term devaluations 4,085 other changes 2,453
Book value (a - b) 106,613 136 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Certain investments in Group companies and other companies in which a significant interest is held for a total amount of 221,355 thousand are considered non- durable since there is no permanent intention to hold these investments. The most significant are: Quantity Book value
Decreases for the year for: sales or redemptions 1,192 devaluations 2,997 other changes 586,632
2.2.2 Changes in bonds issued by companies over the year – Item C.II.2 (attachment 5)
Section C.II.2 includes: listed bonds 650 non listed bonds 0 book value 650 of which convertible bonds 0 138 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Increases for the year for: acquisitions, subscriptions or payments 1,296,983 reversal value 0 other changes 0
Book value 1,662,883 2.2.4 a) Detailed outline of the most significant bonds issued by companies – Item C.II.
The most significant bonds issued by Group companies amounted to 650 thousand and are related to issues by Generali Finance B.V..
2.2.4 b) Detailed outline of the most significant loans to companies – Item C.II.3
There are no shareholdings that exceed one tenth of the capital or one tenth of the voting rights that can be exercised during the Ordinary General Meeting, classified in this category in the financial statements.
Apart from the investments in Group companies and other companies in which a significant interest is held, durable investments are those that 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.
Non life 1) Equities of companies 2) Units in common investment funds 0 0 33,927 36,172 33,927 36,172 3) Bonds and other fixed-interest securities
Life 1) Equities of companies 2) Units in common investment funds 0 0 6,387 6,528 6,387 6,528 3) Bonds and other fixed-interest securities
With reference to bonds and other fixed interest securities in item C.III.3, the most significant items at book value are: (in thousand euro) 2017
Trading differences 96 3,430 −3,334 2.3.2 Variations over the year to durable assets included in the items as in point 2.3.1 (attachment 9)
The main changes in non-Group shares of the durable segment are mainly due to the capital increase approved by Istituto Treccani for 858 thousand. Among the decreases we report the reduction in the value of the investment in Schemaquattordici S.p.A. in liquidation for 957 thousand euro against the cancellation of the share certificates.
Total 128,799 2.3.6 Breakdown of other financial investments by type – Item C.III.7
The item includes options on indexes for a counter value of 9,990 thousand.
Deposits with ceding companies amount to 6,927,863 thousand (7,680,393 thousand in 2016). Information regarding transactions with Group companies is provided in attachment 16, deposits with subsidiaries ted from the Panama branch and 450 thousand granted from the Hong Kong branch. The residual amount is instead referable to loans on policy for a value of 760 thousand.
Other financial investments: Bonds and other fixed-interest securities 45,962 51,397 34,705 39,732
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, in decrease from 3,276,493 thousand to 3,075,177 thousand. This reduction is due to the higher redemptions observed in the current year as part of the reinsurance acceptance by the subsidiary Generali Paneurope dac.
Item E includes, among other things, receivables arising out of reinsurance operations. These amounted to 494,997 thousand and refer mainly to receivables from insurance and reinsurance companies (488,970 thousand ). This amount is relative to the non-life business for 208,574 thousand and to the life business for 280,396 thousand. Overall, the debtors counterparts are mainly other Group Companies.
Credits for the allocation of the financial year accrual of economic items 30,416
Write down of receivables from policyholders for premiums was carried out over the year. It was charged to the technical accounts and amounted to 320 thousand.
The following table provides a detailed description of the write down per line of business 144 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Among the receivables due from Group companies for direct cash pooling, the most significant amount relates to the counterparty Generali Italia for an amount equal to
6.1 Variations to durable assets in class F.i over the year
Miscellaneous assets, amounting to 245,919 thousand, mainly refer to the linkage account which recorded a credit of life sector towards non-life sector.
Subordinated assets classified under items C.II.2 and C.III.3, are indicated based on their level of subordination, in accordance with international practice.
7.3 Breakdown of multi-year accruals and deferrals and those with a duration of over five years.
The deferred charges with a residual duration of over one year are: — disagio on bond issues, subordinated liabilities and loans for 44,156 thousands; — derivatives hedging the variations in exchange rate, relative to the loans issued in previous years, for 14,296 thousand; — derivatives hedging the variations in interest rate, relative to the loans issued in previous years, for 28,180 thousands.
Other accrued income and deferred charges 337 113,917 114,254 146 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Credit Suisse Group Finance (Us) Inc 1,690 GBP fixed 05/10/20 no Tier II
Goldman Sachs Group Inc 3,943 GBP fixed 12/10/21 yes Tier II
Wells Fargo & Co 8,956 GBP fixed 29/11/35 no Tier II
Wells Fargo & Co 1,499 USD fixed 02/11/43 no Other clauses 147 Parent Company Financial Statements
The total of the revaluation reserves, amounting to 2,010,835 thousand include: — revaluation Reserve pursuant to Law 413/1991 for 802,314 thousand; — revaluation Fund for fixed assets pursuant to Law 168/1982 for 153,474 thousand; — revaluation Fund pursuant to Law 904/1977 for 20,123 thousand; — revaluation Reserve pursuant to Law 266 dated 23 December 2005 for 793,054 thousand; — revaluation Reserve pursuant to Law Decree 185/2008 converted with the Law No. 2 dated 28 January 2009 for 92,676 thousand; — revaluation Reserve pursuant to Law 576/75 for 30,425 thousand; — revaluation Reserve pursuant to Law 72/83 for 118,769 thousand.
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 merger residual reserves at the end of the period included: — for 3,998,607 thousand from the revenue reserves deriving from the merger of Alleanza Assicurazioni S.p.A.; — for 149,005 thousand from the capital reserves deriving from the merger of Alleanza Assicurazioni S.p.A..
The change in decrease of 155,410 thousand is due to the 2016 dividend distribution for 153,485 thousand as approved by the Shareholders’ Meeting on 27 April 2017, and for 1,925 thousand to the capital increase.
The extraordinary reserve consists of tax suspension for 170,928 thousand corresponding to the sum of the realignment of the real estate fiscal values during the 2006 financial year as required by Law No. 266/2005, net of substitute taxation.
Final amount of the 2015 financial year and initial amount of the 2016 financial year 1,556,873 3,568,250 −3,040 793,055 92,676 802,313 30,425 118,769 20,123 153,474 4,147,612 2,173,789 311,375 931,469 14,697,163
Final amount of the 2016 financial year and initial amount of the 2017 financial year 1,559,883 3,568,250 −3,040 793,055 92,676 802,313 30,425 118,769 20,123 153,474 4,147,612 1,978,607 311,977 1,096,261 14,670,385
Distribution of previous year result legal reserve adjustment 385 −385 0 to dividends (0.80 euro per share) −1,095,876 −1,095,876
Revaluation reserve pursuant to Law 413 - 30.12.1991 802,313 A,B,C 802,313 3)
Revaluation reserve pursuant to Law 266 - 23.12.2005 793,055 A,B,C 793,055 3)
2) In compliance with art. 2431 of the Italian Civil Code, the entire amount of this reserve can only be distributed if the legal reserve has reached the limit set out in art. 2430 of the Civil Code (20% of the share capital).
6) It is a negative reserve for own shares held. This reserve has been recorded as a deduction of shareholders’ funds, in compliance with the modified Regulation 22/2008. The negative reserve for own shares is unavailable.
— a bond issue of 750,000 thousand Euro with the following characteristics: • due on 10 July 2042; • early repayment option for the Company from 10
Solvency II; — a bond issue of 1,000,000 thousand Euro with the following characteristics: • due on 4 May 2026; • fixed rate until due date; • subordinated towards all the non-subordinated debtors, including policyholders; • suitable to cover the solvency margin.
— a bond issue of 1,250,000 thousand Euro with the following characteristics: • due on 27 October 2047; • early repayment option for the Company from 27
October 2027; • fixed rate until 27 October 2027, first date of the early repayment option; • variable interest after 27 October 2027, until due date; • subordinated towards all the non-subordinated debtors, including policyholders; • suitable to cover the solvency requirements of
Subordinated liabilities amount to 7,051,952 thousand and consist of: — a hybrid bond issue denominated in pound sterling, worth 394,300 thousand Euro, with the following characteristics: • expiry date is equal to the duration of the company; • early repayment option for the Company from the 16 June 2026; • fixed rate until 16 June 2026, first date of the early repayment option; • variable interest after 16 June 2026; • 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; — a hybrid bond issue denominated in pound sterling, worth 577,652 thousand Euro, with the following characteristics: • expiry date equal to the duration of the company; • early repayment option for the Company from the 8 February 2022; • fixed 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 bond issues private placement, for a total of 1,000,000 thousand Euro, with the following characteristics in common: • expiry date equal to the duration of the company; • early repayment option for the Company starting from the tenth year of issue; • fixed rate until the first date of the early repayment option; • variable interest 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; 153 Parent Company Financial Statements
• fixed rate until 8 June 2028, first date of the early repayment option;; • variable interest after 8 June 2028, until due date; • subordinated towards all the non-subordinated debtors, including policyholders; • suitable to cover the solvency requirements of
Section 10 – technical provisions – Item C.I for the non-life business and C.II for the life business 10.1 Changes over the year to the provision for unearned premiums – Item C.I.1 – and to the provision for outstanding claims – VItem C.I.2 non-life business (attachment 13)
154 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
in an amount equal to the sum of 35% of premiums of the year and 70% of premiums of previous years. The obligation to make this allocation ceases when the integration has reached an amount equal to 100 times the total premiums for the year. The additional reserve is used upon occurrence of the ensured events, when the cost of claims for the financial year exceeds gross premiums recognized in the year. During the year has been allocated to this reserve an amount of 4,034 thousand in direct insurance and 2,729 thousand in indirect business.
156 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
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).
In its traditional version, this method is based on the analysis of the accumulated payments, assuming that the progression of payments remains constant over time. The provisions for outstanding claims for each generation therefore depend exclusively on payments accumulated at the time of valuation and on this rule. There are also diverse variations in the calculation of model parameters, known as Link Ratio methods.
10.2 Other non-life technical provisions – Item C.I.4 – by provision type and line of business
158 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The decrease in the mathematical reserves significantly influences the physiological contraction of the portfolio in runoff by the subsidiary Alleanza Assicurazioni S.p.A.. The reduction in the additional reserves affects the release carried out again under the reinsurance treaties with 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
With reference to the amount of 3,075,177 thousand, in indirect business, in particular the reinsurance acceptances from Generali Paneurope dac (2,634,672 thousand) and from Generali Levensverzekering Maatschappij N.V. (390.684 thousand).
The allocations for the year comprise 33,797 thousand from the creation of a provision for future charges relating to the liability represented by the pension deficit of the closed pension fund reserved for employees of the London office, and for the remaining part expected future charges related to the exit in advance of personnel and ongoing disputes.
11.2 Outline of provisions deriving from the administration of pension funds – Item D.II
and to securities sales with repurchase agreement (reverse repo) carried out with Unicredit for 197,940 thousand.
The most significant components of the account, amounting to 3,811,359 thousand, refer to loans granted from: Section 13 – Payables – Item G
13.2 Details of liabilities to banks and other financial institutions – Item G.IV
The changes in increase are due to the revaluations, the uses refer to payments and advance payments, the other changes in decrease are relative to the transfer to the pension fund.
Deferred reinsurance items, amounting to 2,338 thousand, include the positive technical values that are to be entered in the profit and loss accounts in the following year.
Other accrued income and deferred charges 19,516 6,111 25,627 14.2 Breakdown of other accrued expenses and deferred income – Item H.3
Deferred income that has a residual duration of over one year relates to: derivatives hedging the change in exchange rates relative to loans issued in previous years, for 4,820 thousand.
Furthermore, deferred income that has a residual duration of over five years relates to: derivatives hedging the change in exchange rates relative to loans issued in previous years, for 2,836 thousand.
Investments relating to contracts linked to investment funds and market indexes 0 3,067,604 0 0 0 3,067,604
Credits arising from direct insurance operations 0 1,805 0 0 0 1,805
Credits arising from reinsurance operations 0 228,883 0 2,242 0 231,125
Creditors arising from direct insurance operations 0 3,906 0 0 0 3,906
Creditors arising from reinsurance operations 0 165,100 0 0 0 165,100
Other loans and financial debts 0 3,811,359 0 0 0 3,811,359 164 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The following loans have a residual duration of over one year: — Graafschap Holland N.V. equal to 2,308,778 thousand; — Generali Investments equal to 55,000 thousand; — Transocean Holding equal to 40,000 thousand; — UMS Immobiliare equal to 27,000 thousand; — Redoze Holding N.V. equal to 28,000 thousand; — Generali Versicherung Ag equal to 502.581 thousand.
Section 16 – Receivables and Payablesi 16.1 Duration of receivables and payables
With regards to payables in items F and G of liabilities, the following bond issue has a residual duration of over 5 years: — “Senior September 2024” amounting to 1,750,000 thousand.
There is a loan with Graafschap Holland N.V. equal to 200,000 thousand with a duration exceeding five years.
Section 17 – Guarantees, commitments and other memorandum accounts 17.1 Details of guarantees issued/received and commitments – Items I, II, III and IV (attachment 17)
III. Guarantees received in the interest of the Company a) from Group companies, associates and other companies in which a significant interest is held 0 0 b) from third parties 90.475 97.958
IV. Commitments a) Commitments for purchases which must be resold 0 0 b) Commitments for sales which must be repurchased 197.898 0 c) Other commitments 2.889.024 3.156.189
The guarantees referred to in point I.d) are mainly issued to the subsidiaries Generali Finance B.V. for 1,500,000 thousand and Generali Life (Hong Kong) Limited for 395,083 thousand. The guarantee given to CityLife S.p.A. for 296,500 thousand is instead expired during the year.
There are no assets and liabilities attributable to pension funds managed in the name and on behalf of third parties classified in this item.in questa voce di bilancio.
17.4 Details of securities deposited with third parties – Item VII
17.5 Breakdown of commitments – Item IV – and other memorandum accounts – Item VIII
Price Fair value Price Fair value Price Fair value Price Fair value
The most important transactions, with reference to notional values, took place in the Over the Counter (OTC) markets, offering adequate guarantees of settlement of the positions assumed. The contracts negotiated in these markets were drawn up with counterparties having investment grade rating, enabling the carrying out of professional operations, subject to prudential vigilance with the purpose of stability, pursuant the current regulations.
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 118,458 thousand.
168 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Allocated investment return transferred to/from the technical account 137,629 −729,570 −591,941 −573,322 −18,619
Income and charges from class D 0 90,484 90,484 41,926 48,558
18.2 Summary of the non-life business technical account – Italian and foreign business – (attachment 19)
(in thousand euro) Gross premiums Gross prem. Gross cost Operating (*) Reinsurers'
(*) The reinsurers’ share is the technical balance of cessions and retrocessions.
The net investment return assumed for the determination of the quota to be transferred to the non-life technical account arises from the amounts, registered in the nontechnical account, of investment returns and related financial charges.
In 2017 the ratio was 13.212%, applied to the investment profit of 1,041,698 thousand, the sum allocated to the technical account was 137,629 thousand (123,337 thousand in 2016).
170 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
The difference between the amount of the provision for outstanding claims recorded at the beginning of the year and the payment for claims accrued in previous years, as well as the amount of the relevant provision at the end of the year, produced a loss of 45,418 thousand, corresponding to 18% on the provision for outstanding claims.
172 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
19.2 Details of investment income – Item II.2 (attachment 21 – Life)
Income from other investments: Income from bonds of Group companies and companies in which a significant share is held 30
Reversal value adjustments on investments relating to: Land and buildings 0
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)
Other financial investments 1,069 - of which, income from bonds 1,061
The difference between the amount of the reserve for outstanding claims existing at the beginning of the year and the amounts paid to the beneficiaries of the contracts during the period for claims incurred in previous years and the amount of the reserves at year-end is not significant.
Bonds issued by Group companies and companies in which a significant share is held 0
Losses from investments in Group companies and companies in which a significant share is held 0
If the investment return that remains allocated to the life technical account is lower than the investment profits contractually acknowledged with 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.
(–) Change in unearned premium provision −66 4,311 −1,815 0 24 −209
(+) Balance of other technical items 0 −106 0 0 −21 −2
Technical balance of direct business 558 4,182 −499 253 −388 2,515
Risultato del conto tecnico 13,586 −2,036 1,428 319 −1,261 3,256 177 Parent Company Financial Statements
(–) Change in unearned premium provision −316 3,039 371 40 −224 0
(–) Change in other technical provisions 0 0 0 0 0 0
(–) Change in unearned premium provision 6,899 −1 −325 883 0 1
Technical balance of direct business −22,207 −2 1,840 3,536 135 103
Whenever possible, costs were 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.
(+) Balance of other technical items 0 1 0 0 0
(in thousand euro) Direct insurance Reinsurance Risks retainedDirect risks Ceded risks Direct risks Retroc. risks
(–) Change in mathematical and other provisions −49,700 2,972 −465,437 0 −518,108
(+) Balance of other technical items 1 0 −37 0 −36
(+) Investment profit net of the quota allocated to the non-technical account 87,199 287,980 375,179 20.3 Non - life and life insurance 20.3.1. Summary of non-life and life technical accounts – foreign portfolio – (attachment 29)
(+) Investment profit of the life branch net of the quota allocated to the non-technical account 47,538
Interest on loans to Group companies and companies in which a significant share is held 62,146
Gains on the realisation of investments: Gains from sale of land and buildings 0
Gains from equities of Group companies and companies in which a significant share is held 19,610
Equities in Group companies and companies in which a significant share is held 2,997
Grand total 78,648 21.3 Details of other income – Item III.7
The item other extraordinary income is represented by the realized gain on the sale reinsurance of the non-life portfolio in run-off of the London branch, which prepared for future legal portfolio disposal. Since the reinsurance 183 Parent Company Financial Statements
capital gains on exempt participations or subject to substitute tax −8.21%
Income tax of foreign subsidiaries and associates and other taxes paid abroad 2.71%
(in thousand euro) Initial balance Changes over the year Final balance
Other sums set aside and not deductible in the year 76,180 18,283 −19,741 −4,738 56,439 13,545
Liabilities for deferred taxes - IRAP 0 0 0 0 0 186 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
22.1 Outline of relations with Group companies and other companies in which a shareholding is held – (attachment 30)
Unrealised income and gains on investments for the benefit of policyholders 0 67,088 0 0 0 67,088
Gains on the realisation of investments 0 19,610 0 0 0 19,610
Interest on sums due to banks and financial institutions 0 1 0 0 0 1
Administration charges and expenses for third parties 0 28,854 0 0 0 28,854
Costs of non-subordinate workforce: Total cost of workforce 254,923 30,142 289,740
The amounts relating to remuneration paid to directors and auditors, differ from those reported in the Remuneration Report, which refer to the emoluments pursuant Article 78 of CONSOB Regulation No. 11971 dated 14 May 1999 and subsequent modifications, as they do not consider profit-sharing.
The early disposal of durable securities determined net profits equal to 7,857 thousand, mainly from the sale of fixed income securities.
These transactions were 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.
A breakdown of the results of the various categories of derivative instruments by transaction concluded during the year and outstanding transactions at year end is provided below: Outstanding contracts Closed contracts Total
The above-mentioned services aim at ensuring the rationalization of operational functions, an economically efficient management, an adequate level of the services obtained and the use of synergies within the Group.
The results of transactions with related parties, classified in accordance with IAS 24, pursuant to the Consob circular dated 28 July 2006, are detailed in the following table.
The increase in the legal reserve is needed in compliance with the provisions of Art. 2430, due to the expected share capital increase of 3,357 thousand for the assignment of an equal number of shares to the Group management, in accordance with the Long Term Incentive Plan 2015 (“LTI Plan 2015”).
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 management of liquidity: the direct pooling agreements allowed the deposit, as of 31 December 2017, with Assicurazioni Generali SpA of 1,953,805 thousand. The main counterparties are Generali Beteiligungs GmbH for 899,688 thousand, Participatie Maatschappij Graafschap Holland N.V. for 347,354 thousand, Generali Finance B.V. for 266,074 thousand, Generali Global Private Equity S.A. SICAR for 153,064 thousand, Generali Holding Vienna AG for 80,820 thousand, Lion River I N.V. for 69,542 thousand, Generali España, S.A. de Seguros y Reaseguros for 40,131 thousand, Generali Belgium S.A. for 33,001 thousand, L’Equité S.A. for 20,029 thousand, Generali Real Estate S.p.A. SGR for 15,005 thousand, Generali France S.A. for 9,930 thousand, Generali Asia N.V. for 8,311 thousand, Generali Shared Service S.c.a.r.l. for 7,989 thousand. On the other hand, the Company has a credit position of 271,192 thousand, of which 261,343 thousand to Generali Italia S.p.A. and 9,847 thousand to MyDrive Solutions Ltd. Interests due amount to 2,399 thousand, while interests income amount to 180 thousand; — financial investments and liabilities and net in192 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Company has committed to subscribe for at market value, directly or indirectly, capital of the subsidiary for up to 250 million euros; ii) a “Commitment Letter to pay and subscribe for a full T2 item” with which the Company is instead committed to subscribe, directly or indirectly, bonds Tier 2 of the subsidiary at market value for up to 250 million euros; — investments, relating to the capital increases carried out, described in section 2.2.1. of this note.
With regard to the Group’s reinsurance business, the main items affected are those relating to technical provisions, receivables and payables linked to reinsurance transactions and technical items in the income statement which determine the income and charges relating to reinsurance transactions.
The charges deriving from the payments to pension funds of the Company’s employees and managers amount to 10,394 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 60,430 thousand. With reference to the other related parties, the most significant relationship is in place with the Mediobanca Group, in which bonds are held for 24,650 thousand.
No events and significant operations not recurring have been made during 2017, compared to what was previously described.
Deposits with banks -14,549 5,585 Investments and pension funds -30,163 -41,555 Other investments 445,825 670,963 1. Cash flows from investing activities -676,439 -240,288 198 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Liquidity used for (-) / generated by (+) other items Intangible assets -17,230 -16,224 Acquisition of furniture and transport vehicles -3,506 -6,750 2. Cash flows from other items -20,736 -22,974
Cash flows from other items (1. + 2.) B. -697,175 -263,262
Loan capitals Increases (+) / (decreases) (-) in subordinated liabilities 0 445,829 Increases (+) / (decreases) (-) in bonds -63,885 -63,885 Increases (+) / (decreases) (-) in payables to banks and financial institutions 375,886 -160,392 Increases (+) / (decreases) (-) in net payables for central treasury activity 171,015 -414,676 Increases (+) / (decreases) (-) in collateralised loans 0 0 Increases (+) / (decreases) (-) in other loans and financial payables 218,000 -7,683 1. Cash flows from loan capitals 701,016 -200,807
Equity Increase in capital and paid capital reserves 0 0 Use of capital reserves to pay dividends -153,485 -192,172 Dividends paid to shareholders based on profits of the previous years -1,095,876 -930,001 2. Cash flows from equity -1,249,361 -1,122,173
Liquidity at the end of previous year 655,065 549,905 Adjustment to current year exchange rates -27,422 2,746 1. Liquidity at year-start 627,643 552,651 2. Liquidity at year-end 744,169 655,065
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) 6 Assets -Breakdown of information on companies in which a significant interest is held 1 7 Assets - Details of investments in Group companies and other companies where a significant 1 interest is held: equities
10 Assets - changes for the year regarding loans and deposits with credit institutions (items C.III.4, 6) 1 11 Assets - detail of operations relating to contracts linked to investment funds and 6 market index (item D.I) 12 Assets arising out of the management of pension funds (item D.II) 0 13 Liabilities - changes for the year of the components of the provision for unearned premiums 1
Expenses and unrealised losses relating to investments for the benefit of policyholders who 1bear 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
C. INVESTMENTS I - Land and Buildings 1. Property used for own activities 11 7,716 2. Property used by third parties 12 97,110 4. Other realty rights 14 0 5. Assets in progress and payments on account 15 1,787 16 106,613
C. INVESTMENTS (follows) III - Other financial investments 1. Equities a) quoted shares 36 8,696 b) unquoted shares 37 7,543 2. Shares in common investment funds 40 33,927 3. Debt securities and other fixed-income securities 4. Loans a) mortgage loans 45 0 b) loans on policies 46 0 5. Participation in investment pools 49 0 6. Deposits with credit institutions 50 82,439
1. Provision for unearned premiums 58 124,702 2. Provision for claims outstanding 59 733,252 3. Provision for profit sharing and premium refunds 60 0 carried forward 19,899,600 206 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
I - Debtors arising out of direct insurance operations a) for premiums - current year 71 89,289 3. Current accounts with insurance companies 75 1,507 4. Policyholders and third parties for recoveries 76 8,387 77 200,444
II - Tangible assets and stocks 1. Bank and postal deposits 88 664,002 2. Cheques and cash in hand 89 71 90 664,073
IV - Other of which Account linking to life business 901 173,643
X - Negative reserve for own shares held 401 3,040 110 6,782,141
I - Creditors arising out of direct insurance operations 2. Current accounts with insurance companies 134 2,821 3. Premium deposits and premiums due to policyholders 135 3,175 4. Guarantee funds in favour of policyholders 136 0 137 13,754
IX - Other liabilities 2. Commissions for premiums in course of collection 152 12,240 of which Account linking to life business 902 0 carried forward 22,080,396 212 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
brought forward 14,125,992 carried forward 21,268,845 213 Parent Company Financial Statements
TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 160 22,248,066 214 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
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 3,282 10 3,282
III - Other financial investments 1. Equities a) quoted shares 36 6,843 b) unquoted shares 37 5,279 c) other interests 38 4,732 39 16,854 2. Shares in common investment funds 40 6,387 3. Debt securities and other fixed-income securities a) quoted 41 1,402,237 b) unquoted 42 18,544 c) convertible bonds 43 367 44 1,421,148 4. Loans a) mortgage loans 45 0 b) loans on policies 46 760 c) other loans 47 1,696 48 2,456 5. Participation in investment pools 49 0 6. Deposits with credit institutions 50 46,361 7. Other 51 0 52 1,493,206 IV - Deposits with ceding companies 53 6,863,078 54 21,630,017
I - Provisions relating to contracts linked to investments funds and market index 55 3,268,077
2. Unearned premium provision for supplementary coverage 64 23,645 3. Provision for claims outstanding 65 341,307 4. Provision for profit sharing and premium refunds 66 19,424 6. Provisions for policies where the investment risk is borne by the policyholders and relating to the administration of pension funds 68 0 69 420,541 carried forward 25,321,917 218 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
IV - Other of which Account linking to non-life business 901 0
IX - Profit or loss for the financial year 109 854,530
VI - Negative reserve for own shares held 401 0 110 8,043,342
II - Provisions relating to the administration of pension funds 126 0 127 3,265,804 carried forward 21,858,111 222 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
I - Creditors arising out of direct insurance operations 2. Current accounts with insurance companies 134 2,086 3. Premium deposits and premiums due to policyholders 135 3,202 4. Guarantee funds in favour of policyholders 136 0 137 5,293
IX - Other liabilities 2. Commissions for premiums in course of collection 152 1,512 of which Account linking to non-life business 902 173,643 carried forward 25,870,489 224 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
H. ACCRUALS AND DEFERRED INCOME 1. Interests 156 126,187 3. Other accruals and deferred income 158 10,251 159 136,438
TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 160 26,006,928 226 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Income taxes for the year ................................................................... - 12 −70,324 32 −51,167 52 −121,491
16 b NQ 1 Generali Colombia S.A. BOGOTA' Carrera 7a. No. 72-13, Piso 8 - COLOMBIA COP 17 b NQ 1 Generali Colombia Vida S.A. BOGOTA' Carrera 10a 28/49 - COLOMBIA COP 18 b NQ 1 Generali Companhia de Seguros LISBONA Rua Duque de Palmela no. 11 - PORTOGALLO EUR 19 b NQ 9 Generali Consulting Solutions WILMINGTON 1209 Orange Street - STATI UNITI D'AMERICA USD 20 b NQ 9 Generali CST S.r.l. TRIESTE Via Machiavelli, 4 - ITALIA EUR 21 b NQ 2 Generali Deutschland AG MONACO Adenauerring 7 - GERMANIA EUR 22 b NQ 1 Generali Ecuador S.A. GUAYAQUIL WTC Torre B Piso 15, Avenida Francisco de Arellana - ECUADOR USD 23 b NQ 2 Generali España Holding S.A. MADRID Calle Orense 2 - SPAGNA EUR 24 b NQ 2 Generali Finance B.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 25 b NQ 2 Generali Financial Asia Ltd HONG KONG 5/F, 14-18/F Generalli Tower, 8 Queen's Road East - HONG KONG HKD 26 b NQ 2 Generali France S.A. PARIGI 2 rue Pillet-Will - FRANCIA EUR 27 b NQ 1 Generali Hellas Α.A.Ε. ATENE 35-37 Ilia Iliou Street & Pytheou - GRECIA EUR 28 b NQ 1 Generali Italia S.p.A. MOGLIANO VENETO Via Marocchesa n. 14 - ITALIA EUR 29 b NQ 9 Generali Latam Ltda. SAN PAOLO Av. Presidente Juscelino Kubitschek, nº 1455 - 8° - BRASILE BRL 30 b NQ 9 Generali Link Limited DUBLINO GH Navan Business Park, Athlumney, Navan, Co.Meath - IRLANDA EUR 31 b NQ 1 Generali PanEurope dac DUBLINO Navan Business Park, Athlumney, Navan, Co. Meath - IRLANDA EUR 32 b NQ 9 Generali Real Estate S.p.A. TRIESTE Via Machiavelli, 4 - ITALIA EUR 33 b NQ 4 Generali Realties Ltd TEL AVIV 2, Hagdud Haivri Str. - ISRAELE ILS 34 b NQ 1 Generali Vida de Seguros S.A. LISBONA Rua Duque de Palmela no. 11 - PORTOGALLO EUR 35 b NQ 1 Generali Vietnam Life Ins. HO CHI MINH CITY AB Tower, 76 Le Lai, District 1 - VIETNAM VND 36 b NQ 9 Generali Vitality GmbH MONACO Adenauerring 9 - GERMANIA EUR 37 b NQ 2 GI Holding S.p.A. TRIESTE Via Machiavelli, 4 - ITALIA EUR 38 b NQ 4 GLL GmbH & Co. Retail KG i.L. MONACO Lindwurmstr. 76 - GERMANIA EUR 39 b NQ 9 GSS - Generali Shared Services TRIESTE Piazza Duca degli Abruzzi, 2 - ITALIA EUR 40 b NQ 2 Lion River I N.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 41 b NQ 2 Part. Maat. Graafschap Holland AMSTERDAM Diemerhof 42 - OLANDA EUR 42 b NQ 2 Redoze Holding N.V. AMSTERDAM Diemerhof 42 - OLANDA EUR 43 b NQ 2 Transocean Holding Corporation NEW YORK 7 World Trade Center 250 Greenwich Street 33rd Fl. - STATI
N. Type Quoted or Activity Company name and registration place Currency ord. unquoted (**) (1) (2) (3) 47 d NQ 1 Generali China Insurance PECHINO B-12 Jianguomenwai Avenue, Chaoyang District - CINA REP. POPOLARE CNY 48 d NQ 2 Guotai Asset Management Co. SHANGAI 39F，World Financial Center，100 Century Avenue - CINA REP.
(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 234 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
(***)To be filled only for subsidiaries and associates 235 Parent Company Financial Statements
Assets - Details of investments in Group companies and other companies where a significant interest is held: Equities N. Type Name of the company Increases in the year ord. For purchases Others (1) (2) (3) Quantity Value increases 1 b D Aseguradora General S.A. 0 0 1,052 2 b D Assitimm S.r.l. 0 0 97 3 b V Caja de Ahorro y Seguro S.A. - Classe A 0 0 0 3 b V Caja de Ahorro y Seguro S.A. - Classe B 0 0 0 4 b D CMN Global Inc. 0 0 6,328 5 b D Donatello Intermediazione S.r.l. 0 0 0 6 b D Europ Assistance Holding 0 0 0 7 b D FATA Asigurari S.A. 0 0 0 8 b D GBS S.c.p.A. 0 0 0 9 b D Genamerica Management Corporation 0 0 0 10 b D Generali (Schweiz) Holding AG 0 0 0 10 b V Generali (Schweiz) Holding AG 0 0 0 11 b D Generali Beteiligungs-GmbH 0 0 0 11 b V Generali Beteiligungs-GmbH 0 0 0 12 b V Generali Beteiligungsverwaltung-GmbH 0 0 0 13 b D Generali Brasil Seguros S.A. 764,633 12,553 0 14 b D Generali CEE Holding B.V. 0 0 0 15 b V Generali China Life Insurance 0 0 0 16 b D Generali Colombia S.A. 0 0 0 17 b D Generali Colombia Vida S.A. 0 0 0 18 b D Generali Companhia de Seguros S.A. 128,000 0 0 19 b D Generali Consulting Solutions 0 0 0 20 b D Generali CST S.r.l. 10,000 10 1,400 21 b D Generali Deutschland Holding AG 0 0 0 21 b V Generali Deutschland Holding AG 0 0 0 22 b D Generali Ecuador S.A. 0 0 0 23 b D Generali España Holding S.A. 0 0 0 23 b V Generali España Holding S.A. 0 0 0 24 b V Generali Finance B.V. 740,000 199,251 0 25 b D Generali Financial Asia Ltd 11,645,700 447 731 26 b D Generali France S.A. 0 0 0 26 b V Generali France S.A. 0 0 0 27 b D Generali Hellas A.E.A.Z. 0 0 0 27 b V Generali Hellas A.E.A.Z. 0 0 0 28 b D Generali Italia S.p.A. 0 0 344,600 28 b V Generali Italia S.p.A. 0 0 0 29 b D Generali Latam Ltda 0 0 0 30 b V Generali Link Limited - Ord. 0 0 0 31 b V Generali PanEurope Limited - Ord. 0 0 35,000 31 b V Generali PanEurope Limited - Pref. 0 0 7,500 32 b D Generali Real Estate S.p.A. 0 0 0 33 b D Generali Realties Ltd 0 0 0 34 b V Generali Vida de Seguros S.A. 20,000 0 0 35 b V Generali Vietnam Life Insurance LLC 1,560,000,000,000 50,912 0 36 b V Generali Vitality-GmbH 0 0 10,800 37 b D Generali Investments Holding S.p.A. 0 0 0 38 b V GLL GmbH & Co. Retail KG 0 0 0 236 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
N. Type Name of the company Increases in the year ord. For purchases Others (1) (2) (3) Quantity Value increases 39 b D GSS - Generali Shared Services S.c.a.r.l. 0 0 0 40 b D Lion River I N.V. - Classe A 0 0 0 40 b D Lion River I N.V. - Classe B 0 0 34 40 b D Lion River I N.V. - Classe C 0 0 32 40 b D Lion River I N.V. - Classe D 0 0 0 40 b D Lion River I N.V. - Classe E 0 0 0 40 b D Lion River I N.V. - Classe F 0 0 0 40 b D Lion River I N.V. - Classe G 0 0 520 40 b D Lion River I N.V. - Classe H 0 0 0 40 b D Lion River I N.V. - Classe I 0 0 5 40 b D Lion River I N.V. - Classe J 0 0 0 40 b D Lion River I N.V. - Classe K 0 0 212 40 b D Lion River I N.V. - Classe L 0 0 5,133 40 b D Lion River I N.V. - Classe N 0 0 7 40 b D Lion River I N.V. - Classe O 0 0 48 40 b D Lion River I N.V. - Classe P 0 0 174 41 b D Participatie Maatschappij Graafschap Holland N.V. - Ord. 0 0 0 41 b V Participatie Maatschappij Graafschap Holland N.V. - Ord. 0 0 0 42 b D Redoze Holding N.V. 0 0 0 43 b D Transocean Holding Corporation 0 0 0 44 b D Welion S.c.a.r.l. 0 0 0 45 d D Assurance Maghrebia S.A. 0 0 0 46 d D Assurance Maghrebia Vie S.A. 0 0 0 47 d D Generali China Insurance 0 0 0 48 d D Guotai Asset Management Co. 0 0 0 49 d D NEIP II S.p.A. 0 0 0 50 d D Servizi Tecnologici Avanzati S.p.A. 0 0 0 51 e D Emittenti Titoli S.p.A. 0 0 0 52 e D Fin. Priv. S.r.l. 0 0 0 53 e D H2i S.p.A. 0 0 0 54 e D Perils AG 0 0 0 55 e D Perseo S.p.A. 0 0 0 56 e D Protos S.p.A. 0 0 0 57 e D SOA Group S.p.A. 0 0 0 58 e D Trieste Adriatic Maritime S.r.l. 0 0 0 59 e D Venice S.p.A. - Classe A 0 0 0 59 e D Venice S.p.A. - Classe B 0 0 0 a Parent companies 0 0 b Affiliated companies 263,173 413,672 c Affiliated of parent companies 0 0 d Associated companies 0 0 e Other 0 0 Totale D.I. 0 0 Totale D.II. 0 0
(1) It must be equal to what indicated in the Attachment 6 (3) Indicate: D for investments allocated to the non life business (item C.II.1) (2) Type V for investments allocated to the life business (item C.II.1) a = parent Companies V1 for investments allocated to the life business (item D.I) b = affiliated Companies V2 for investments allocated to the life business (item D.2) c = affiliated of parent Companies It must be given, however, the same order number to the d = associated Companies participation, although divided. e = other Companies 238 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
) o th er li st ed se cu rit ie s …
co m e se cu rit ie s, pa rti ci pa tio n in in ve st m en t p oo ls e o th er fi na nc ia l i nv es tm en ts
) o th er u nl is te d se cu rit ie s …
D eb t s ec ur iti es a nd o th er
Sh ar es in c om m on in ve st m en t f un ds 5, 6, 5, 3,
3, 8, 3, 6, 6, 3, 1, 243 Parent Company Financial Statements
. i n af fil ia te d un de rta ki ng s a nd o th er sh ar eh ol di ng s: 1. S
,2 244 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
A ss et s r el at in g to c on tra ct s l in ke d to in ve st m en t f un ds a nd m ar ke t i nd ex
ep os its w ith c re di t i ns tit ut io ns
th er fi na nc ia l i nv es tm en ts
D ep os its w ith c ed in g co m pa ni es …
3, 5, 3, 6, 5, 3, 6, 246 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
C ur re nt y ea r Pr ev io us y ea r
D eb t s ec ur iti es a nd o th er fi xe din
248 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Premium reserve: Provision for claims outstanding: Provision for refunds and direct expenses … .............. 4 1,285,719 14 1,487,984 24 −202,265
Provision for profit sharing and premium refunds .................. 6 84,475 16 99,294 26 −14,819
C ha ng e in th e re tir em en t a nd si m ila r
O th er p ro vi sio n se ve ra nc e ob lig at io ns pa y pr ov is io ns
Su m s s et a si de fo r t he y ea r ...
In ve st m en ts re la tin g to th e ad m in is tra tio n of pe ns io n fu nd s ..
,3 of w hi ch su bo rd in at ed a ct iv iti es .
252 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
et ai ls o f a ss et s a nd li ab ili tie s r ef er rin 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 si gn ifi ca nt in te re st is h el d
In ve st m en ts re la tin g to c on tra ct s l in ke d to in ve st m en t f un ds a nd m ar ke t i nd ex 7, 7,
O th er To ta l co m pa ni es pa re nt c om pa ni es co m pa ni es
Su bo rd in at ed li ab ili tie s . ...
Cr ed ito rs a ris in g ou t o f re in su ra nc e op er at io ns ..
A m ou nt s o w ed to c re di t i ns tit ut io ns .
th er fi na nc ia l l ia bi lit ie s.
is ce lla ne ou s l ia bi lit ie s ...
VI. Securities deposited with third parties…….………………………… .................. 24 14,143,372 54 6,882,753 Totale ............................................................................................................................... 25 14,143,372 55 6,882,753 254 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
VI. Securities deposited with third parties…….………………………… .................. 24 14,143,372 54 6,882,753 Totale ............................................................................................................................... 25 14,143,372 55 6,882,753
Pr ev io us y ea r Pu rc ha se s
pt io ns : on s ha re s on d eb t s ec ur iti es on c ur re nc ie s on ra te s ot he rs
Sw ap s: on c ur re nc ie s 1, 3,
. I n th e ev en t o f a c on tra ct n ot b el on gi ng p re ci se ly to th e ab ov em
en tio ne d ty pe s o r a c on tra ct w hi ch h as ch ar ac te ris tic s o f d iff er en t t yp es o f c on tra ct s, th e co nt ra ct m us t b e in cl ud ed in th e ne ar es t t yp e.
d ep en di ng o n w he th er th ey c om m it th e in su ra nc e co m pa ny to p ur ch as e or se ll th e fix ed ra te
nd ic at e th e fa ir va lu e of d er iv at iv es 255 Parent Company Financial Statements
(c la ss o f i ns ur an ce a nd
,9 256 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
D et ai ls o f t he n on li fe b us in es s t ec hn ic al a cc ou nt
(c la ss es o f i ns ur an ce a nd
C re di t a nd su re ty sh ip
Direct business Reinsurance Total 3. policies where the investment risk is borne bythe policyholders and relating to the administration of pension funds ............... 8 50,310 18 0 28 50,310 257 Parent Company Financial Statements
Life business Total Income from equities: Dividends and other income from shares and participations in group companies and other companies in which a significant interest is held 1 979,930 41 1,001,314 81 1,981,244 Dividends and other income from equities .................................................. 2 607 42 2,005 82 2,612 Total. ............................................................................................................................... 3 980,537 43 1,003,319 83 1,983,856 Income from land and buildings … ............................................................................. 4 4,944 44 0 84 4,944 Income from other investments: Income from debt securities of group companies and other companies in which a significant interest is held ................................ 5 0 45 30 85 30 Income from loans to group companies and ................................................. other companies in which a significant interest is held ................................ 6 62,146 46 17,473 86 79,619 Income from shares in common investment funds ....................................... 7 2,265 47 0 87 2,265 Income from debt securities and other fixed-income securities 8 18,240 48 61,981 88 80,221 Interests on loans ......................................................................................... 9 55 49 51 89 106 Income from participation in investment pools ............................................ 10 0 50 0 90 0 Interests on deposits with credit institutions ................................................ 11 814 51 673 91 1,487 Incom from other financial investments ...................................................... 12 4,906 52 0 92 4,906 Interests on deposits with ceding companies ............................................... 13 2,662 53 240,065 93 242,727 Total … ........................................................................................................................... 14 91,088 54 320,273 94 411,361 Value re-adjustments on other investments: Land and buildings ....................................................................................... 15 0 55 0 95 0 Shares and participations in group companies and other companies ... 16 0 56 0 96 0 Debt securities issued by affiliated companies and other companies in which a significant interest is held ......................................... 17 0 57 16 97 16 Other equities ............................................................................................... 18 0 58 114 98 114 Other debt securities .................................................................................... 19 1,172 59 4,820 99 5,992 Other financial investments ......................................................................... 20 5,733 60 0 100 5,733 Total … ........................................................................................................................... 21 6,905 61 4,950 101 11,855 Gains on the realisation of investments: Surplus on the sale of land and buildings ..................................................... 22 0 62 0 102 0 Gains on shares and participations in group companies and other companies in which a significant interest is held ......................... 23 19,610 63 0 103 19,610 Gains on debt securities issued by group companies and other companies in which a significant interest is held ......................... 24 0 64 0 104 0 Gains on other equities ................................................................................ 25 966 65 0 105 966 Gains on other debt securities ....................................................................... 26 2,181 66 10,865 106 13,046 Gains on other financial investments ............................................................ 27 14,112 67 0 107 14,112 Total ... ............................................................................................................................ 28 36,869 68 10,865 108 47,734 GRAND TOTAL … ....................................................................................................... 29 1,120,343 69 1,339,407 109 2,459,750 258 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
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 0 259 Parent Company Financial Statements
Investment management charges and other charges: ..................... Charges referring to equities ................................................................... 1 6,871 31 7,595 61 14,466 ..................... Charges referring to investment in land and buildings ............................ 2 1,909 32 0 62 1,909 ..................... Charges referring to debt securities ........................................................ 3 3,227 33 4,051 63 7,278 ..................... Charges referring to shares in common investment funds ....................... 4 0 34 0 64 0 ..................... Charges referring to shares in common investments ............................... 5 0 35 0 65 0 ..................... Charges referring to other financial investments .................................... 6 19,600 36 828 66 20,428 ..................... Interests on deposits received from reinsurers ........................................ 7 49 37 5,241 67 5,290 Total ........................................................................................................................... 8 31,656 38 17,715 68 49,371 Value re-adjustments on investments referring to: ..................... Land and buildings ................................................................................. 9 3,607 39 0 69 3,607 ..................... Shares and participations in group comp. and other companies .............. 10 2,997 40 0 70 2,997 ..................... Debt securities issued by group companies and other companies ........... 11 0 41 0 71 0 ..................... Other equities ......................................................................................... 12 264 42 18 72 282 ..................... Other debt securities ............................................................................... 13 5,068 43 3,544 73 8,612 ..................... Other financial investments .................................................................... 14 24,958 44 6 74 24,964 Total ........................................................................................................................... 15 36,894 45 3,568 75 40,462 Losses on the realisation of investments: ..................... Losses on the sale of land and buildings ................................................. 16 0 46 0 76 0 ..................... Losses on equities .................................................................................... 17 202 47 0 77 202 ..................... Losses on debt securities ........................................................................ 18 341 48 52 78 393 ..................... Losses on other financial investments .................................................... 19 9,555 49 230 79 9,785 Total .................................................................................................................................. 20 10,098 50 282 80 10,380 GRAND TOTAL .............................................................................................................. 21 78,648 51 21,565 81 100,213
Investment charges and unrealised losses relating to investments for the benefit of policyholders who bear the investment risk and relating to the administration of pension funds (item II.10)
................................................................................................................. Losses on other financial investments ....................................................................................... 26 0 ................................................................................................................. Other losses............................................................................................................................... 27 0 Total ........................................................................................................................................................... 28 0 Unrealised losses ........................................................................................................................................ 29 0 GRAND TOTAL ....................................................................................................................................... 30 0 261 Parent Company Financial Statements
Direct business gross of reinsurance Written premiums .......................................................................................................................... + 1 3,183 1 30,258
Change in the equalisation provision (+ o -) ................................................................... D 10 0 10 0 Allocated investment return transf. from the non-technical account ............................... E 11 6,209 11 4,129
Written premiums .......................................................................................................................... + 1 5,361 1 20,010 Change in the provision for unearned premiums (+ o -) ................................................................ - 2 −316 2 3,039 Claims incurred .............................................................................................................................. - 3 6,030 3 39,828 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 1,586 6 2,327
Change in the provision for unearned premiums (+ o -) ................................................................ - 2 6,899 2 −1 Claims incurred .............................................................................................................................. - 3 76,389 3 4 Change in other technical provisions (+ o -) .................................................................................. - 4 0 4 0 Balance of other technical income and charges (+ o -) .................................................................. + 5 −109 5 0 Operating expenses ........................................................................................................................ - 6 13,614 6 0
Net balance of accepted business (+ o -) ........(A + B + C - D + E) 12 −13,671 12 51 262 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Summary layout of technical account Lob 01 Lob 02 Accident Health
Balance on the technical account for direct business (+ o -) ……………… A 7 −1,939 7 −25,184 Balance of reinsurance ceded (+ o -) ……………………………………….. B 8 113 8 3,294 Net balance of accepted business (+ o -) ........................................................ C 9 2,119 9 16,856
Net balance of accepted business (+ o -) ........(A + B + C - D + E) 12 −13,671 12 51
Suretyship Miscell. financial loss Legal expenses Assistance 263 Parent Company Financial Statements
Su m m ar y la yo ut o f t ec hn ic al a cc ou nt s o f n on -li fe b us in es s
llo ca te d in ve st m en t r et ur n tra ns f.
al an ce o f d ir ec t b us in es s g ro ss o f r ei ns ur an ce (+ o -)
D ir ec t b us in es s g ro ss o f r ei ns ur an ce
B al an ce o f o th er te ch ni ca l i nc om e an d ch ar ge s (
N et b al an ce o f a cc ep te d bu sin es s (
A cc ou nt s 266 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Summary layout of technical accounts of non-life and life business - Foreign portfolio
Balance of reinsurance ceded (+ o -) ............................................................................................ B 8 −14,864
Balance on the technical account for direct business (+ o -) ……………………..(A+B+C-D+E) 12 195,892
Allocated investment return transferred to the non-technical account (1) ................................... ...... + 6 47,538
La yo ut o f t he li nk s w ith G
In co m e fro m o th er fi na nc ia l i nv es tm en ts
A ss oc ia te d co m pa ni es
In co m e fro m la nd a nd b ui ld in gs
In te re st s o n lo an s ...
th er in co m e an d re co ve rie s ...
A ff ili at ed o f pa re nt c om pa ni es A
In te re st s o n su bo rd in at ed li ab ili tie s ...
In te re st s o n de bi ts to w ar ds b an ks a nd fi na nc ia l . ...
U nr ea lis ed c ha rg es a nd lo ss es o n in ve st m en ts fo r th e be ne fit o f p ol ic yh ol de rs w ho b ea r th e 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 sio n fu nd s . ...
E xt ra or di na ry c ha rg es ..
Su m m ar y la yo ut o f d ire ct b us in es s p re m iu m s w rit te n
W rit te n pr em iu m s: in It al y
6, 5, 5, 1, 5, 270 Assicurazioni Generali Management Report and Parent Company Financial Statements 2017
Notes on the accounts - Attachment 32 Company Assicurazioni Generali S.p.A. Year 2017
Italian portfolio: - Wages ...................................................................................................... 1 139,715 31 4,675 61 144,390 - Social contributions ................................................................................. 2 42,289 32 1,572 62 43,861 - Severance payments and other obligations ................................................................................... 3 8,084 33 307 63 8,391 - Other employee costs ............................................................................... 4 9,943 34 168 64 10,111
Total ............................................................................................................... 21 254,923 51 34,817 81 289,740 III: Average number of staff
Securities on which revaluations have been carried out (Art. 10 of Law 19/3/1983 n. 72)
* total book value includes as amount of Euro 1,787,491 for work in progress
2. The adequacy of the administrative and accounting procedures in place for preparing the financial statements as at 31 December 2017 has been assessed through a process established by Assicurazioni Generali S.p.A. on the basis of the guidelines set out in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally-accepted reference framework.
Dott. Philippe Donnet Dott. Luigi Lubelli Managing Director and Group CEO Manager in charge of preparing the Company’s financial reports and Group CFO
1. Activities of the Board of Statutory Auditors during the financial year ending on 31 December 2017 (point 10 of Consob Notice no. 1025564/01)
– In addition to the above activities, in the course of its activity plan, the Board of Statutory Auditors, among other things: – held meetings with, and obtained information from, the Group CEO, also in his role as Internal Control and Risk Management Director, the Group Audit Manager, the Group Compliance Manager, the Risk Management Manager, the Group Actuarial Manager, the Group Financial Crime Manager, the Manager in Charge of Preparation of the Company’s Financial Reports, Group General Counsel and the Corporate Affairs Manager,
The BSA 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 assets 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 2017 are also reported on in the 2017 Integrated Annual Report and Consolidated Financial Statements.
They include the following events. – On 23 January 2017 the Company purchased the voting rights to 505 million Intesa Sanpaolo S.p.A. shares, namely 3.01% of the share capital, by means of a stock loan; on 17 February 2017 the Company purchased 510 million Intesa Sanpaolo S.p.A. ordinary shares, namely 3.04% of its share capital, and at the same time began the procedure for terminating the stock loan. A transaction in collateralised derivative instruments was conducted to hedge the whole of the economic risk associated with the purchase of the said shares. Subsequently, on 30 May 2017, the Company sold all the 510 million Intesa Sanpaolo S.p.A. shares previously purchased, and at the same time terminated the hedging transaction in collateralised derivative instruments.
– In June 2017, Assicurazioni Generali S.p.A. entered into a reinsurance agreement with Lion II Re DAC, an Irish special-purpose company, which will cover the possible catastrophe losses incurred by the Generali Group as a result of storms and floods in Europe and earthquakes in Italy for four years. Lion II Re DAC has issued a € 200 million tranche of bonds to finance the commitments undertaken pursuant to the reinsurance agreement, thereby transferring part of the risk to the bondholders.
– On 19 July 2017 the Company signed an Agreement with the Talanx Group for the sale of shareholdings in two Colombian insurance companies, Generali Seguros and Generali Vida, amounting to 91.3% and 93.3% respectively. The transaction is conditional on the approval of the competent authorities. The sale of the holding in the Company’s Guatemalan subsidiary, Aseguradora General S.A., to the Neutze family, our long-standing local partner, was also completed. On 7 August 2017 an agreement was also signed for the sale of the assets held by the Company in Panama to ASSA Compania de Seguros S.A. for a consideration of USD 172 million, subject to adjustment on closing of the transaction; that transaction is also conditional on the approval of the competent authorities
– On 13 September 2017 the Company signed an agreement for the sale of its entire holding in Generali Nederland N.V. for an initial consideration of € 143 million, subject to adjustment on closing of the transaction. Authorisations having been obtained from the competent authorities, that transaction was completed in February 2018.
– On 19 December 2017 the Company signed an agreement for the sale of the Non-life portfolio in run-off of its English subsidiary to Compre Group, a company specialising in the management of claims portfolios in run-off.
As regards the ongoing litigation relating to former Company executives Giovanni Perissinotto and Raf-
Management Report faele Agrusti, the Board of Statutory Auditors received periodic updates on the progress of the proceedings at meetings of the Board of Directors. The BSA took note of the Board of Directors’ decision of 13 June 2017, which concluded that the conditions for usefully continuing, in the Company’s interests, the proceedings previously commenced against the Company’s former executives, did not exist, and consequently resolved to discontinue the corresponding lawsuits.
As already stated in the 2016 Integrated Annual Report and Consolidated Financial Statements, the Brazilian company Banco BTG Pactual S.A. (“BTG”) commenced arbitration proceedings 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. In this context, the Board of Statutory Auditors received periodic updates about the development of the litigation at meetings of the Board of Directors and the Risk and Control Committee, examining the opinions prepared by the external lawyers and focusing in particular, insofar as falls within its remit, on the analyses requested from those lawyers, with a view to obtaining evidence of alleged irregularities by executives and/or employees of the Generali Group before the sale of BSI. These analyses are undergoing progressive, regular updating, partly in view of the extensive documentation produced during the arbitration proceedings.
Also in the context of the said RPT Procedure updating activity, following the request by the Board of Statutory Auditors to the Group Audit Function, an audit activity regarding specific aspects of the concrete operation of the RPT Procedures in the parent company and subsidiaries was added to the first half of the 2017 Audit Plan. That activity related to (i) the operation of the Related-Party Transactions Committee and (ii) the compliance of the activities performed by the internal functions in support of the said Committee with the Company’s procedures and the applicable legislation. The said auditing activity was monitored by the BSA in the ambit of periodic updates with the Group Audit Function, and the resulting suggestions were incorporated in the above-mentioned review of the RPT Procedures approved on 15 February 2017, and in the associated amendments to the Regulation of the Board of Directors and the Board Committees.
dures 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 2017 Annual Financial Statements and the 2017 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 Procedures were submitted for the attention of the Related-Party Transactions Committee during the 2017 financial year, nor were any urgent related-party transactions performed.
As far as we are aware, no atypical and/or unusual transactions were conducted.
4. Organisational structure of the Company and the Group (point 12 of Consob Notice no. 1025564/01)
Some organisational changes in the organisational structure of Group Head Office and the Group Management Committee took place in 2017, as described in the Corporate Governance and Share Ownership Report. The main such changes included the following:
– with effect from 1 December 2017 the Board of Directors appointed Marco Sesana as Country Manager for Italy (who maintains his position as Managing Director and General Manager of Generali Italia). Marco Sesana also became a member of the Group Management Committee; – with effect from 9 January 2017, the Board of Directors appointed Timothy Ryan as new Group Chief Investment Officer, and he also became a member of the Group Management Committee; – on 25 January 2017 the Board of Directors resolved to terminate the contract of employment of General Manager and Group CFO Alberto Minali, and appointed as new Group CFO Luigi Lubelli, who became a member of the Group Management Committee. All the first-level company functions that reported to the General Manager were required to report directly to Group CEO Philippe Donnet.
Company to establish that the companies controlled and incorporated by it which are governed by the legislation of countries not belonging to the European Union and are required to comply with the Consob regulations have an administrative/accounting system suitable to supply the Company’s management and external auditors regularly with the economic, capital and financial data required to draw up the consolidated financial statements. As at 31 December 2017, the non-EU companies to which the Market Regulation applies were: Generali Personenversicherungen AG, Generali (Schweiz) Holding AG e Generali China Life Insurance Co. Ltd. No noteworthy information emerged from examination of the reports of the supervisory bodies of the subsidiaries, and/or the information sent by them to the BSA following specific requests.
In the course of its supervisory activities over the ICRMS, the BSA, in 2017 as in the preceding financial years, paid particular attention to compliance with the money-laundering legislation. As stated in the Report pursuant to s. 153 of the CFBA relating to the 2016 financial year, issued on 31 March 2017, in the first few months of the last financial year the major project adopted by the Company regarding
Management Report money-laundering and anti-terrorism measures was substantially finalised, including the introduction of the new “Group Anti-Money Laundering & Counter-Terrorism Financing (AML/CTF) Policy”. During the 2017 financial year the BSA continued to monitor the implementation of the AML/CTF Policy in the individual Group companies, in liaison with the boards of statutory auditors or supervisory bodies of the subsidiaries concerned, taking into account also the different and variegated legislative situations. In November 2017, the Company approved an update to the said Group AML/CTF Policy, which takes account of the changes in the legislative picture since the 4th European AML Directive came into force during the year. The innovations introduced by the new version of the policy include, in particular, the provision that where national legislation does not allow the requirements laid down by the policy to be introduced, the Group companies concerned are specifically required to identify and adopt additional measures to deal with the local limitations, in order to ensure effective AML/CTF risk management.
The Board of Statutory Auditors, in liaison with the Risk and Control Committee, also monitored the trend of actual implementation of the actions and projects deriving from audit activities. In the preceding year, this aspect represented an area requiring attention, as indicated by the Risk and Control Committee and the Board of Directors, which agreed on the importance of drawing the attention of the management to ensuring that the action plans resulting from audit activities are completed in the scheduled times, informing the said bodies of the reasons for any delay, and rescheduling the corresponding time limits. After that request, the process significantly improved; however, this aspect is still considered to be an area requiring attention by both the BSA and the BoD, which has reminded management of its importance to ensure timely completion of the planned actions. The BSA will also continue its regular monitoring of this area. In 2017, the Board of Directors and the Risk and Control Committee promoted actions involving further reinforcement of the internal control system to take account of the new requirements introduced by the European legislation governing privacy and date protection, insurance distribution and Packaged Retail Investment-based Insurance Products (PRIIPS). For that purpose, it was agreed that the internal control system must be further updated and strengthened to take account of the higher risk profile, in particular as regards penalties, deriving from the new legislative and regulatory requirements. In view of the extent of the legislative innovations, the BSA suggested specific induction and training activities for Board members. Finally, the Risk and Control Committee and the Board of Directors monitored the implementation of the overall IT programme commenced in 2016, with a view to progressive reinforcement of the associated controls, and mitigation of the risks involved. This activity was conducted on the basis of the activities of the Control Functions and information supplied by the IT management, promoting accelerated implementation of the programme as far as possible. In particular, the Company intends to complete the cyber risk mitigation and prevention programme a year earlier than originally forecast. In this context, the refinement of systems and procedures suitable to prevent and reduce the said risk remains an area of attention subject to regular monitoring by the Board of Statutory Auditors.
In the light of all the above information and having regard to the above-mentioned areas of attention, no factors emerged from the analyses conducted or the information obtained that could lead this BSA to consider the Company ’s Internal Control and Risk Management System as not adequate as a whole.
With reference to the 2017 financial year, the Company is required, for the first time, to prepare and publish a Consolidated Non-Financial Statement (“CNFS”) in accordance with the terms of Legislative Decree no. 254/2016 and its Implementing Regulation issued by CONSOB in Resolution no. 20267 of 18 January 2018. As required by s. 4 of Legislative Decree no. 254/2016, the said Statement provides non-financial information relating to the
The BSA further noted that the External Auditors issued the said report on 27 March 2018. In the 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 ss. 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
Finally, the BSA emphasises that in view of the recent introduction of the legislation governing non-financial information reporting, it will continue to monitor with particular attention the development of its practical application and the actions performed by the Company with the aim of further improving the degree of formalisation of the socioenvironmental policies implemented and the related processes.
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. In particular the BSA, partly by attending meetings of the Risk and Control Committee: – monitored compliance with the investment policy guidelines resolved on, following the issue of ISVAP Regulation no. 36 of 31 January 2011, by the Board of Directors on 13 May 2011, and updated in 2012, 2013, 2014, 2015 and finally in September 2016, after IVASS Regulation no. 24 of 6 June 2016 came into force; – 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; – checked on 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 Board of Statutory Auditors has perused and obtained information about the organisational and procedural activities conducted pursuant to Legislative Decree 231/2001, as amended, regarding the administrative liability of organisations. The main aspects connected with the organisational and procedural activities conducted by the Company pursuant to Legislative Decree 231/2001 are illustrated in the Corporate Governance and Share Ownership Report. No noteworthy facts and/or circumstances emerged from the report submitted by the Surveillance Body instituted pursuant to Legislative Decree no. 231/2001 regarding the activities performed.
The Company has ratified the Corporate Governance Code issued by the Corporate Governance Committee promoted by Borsa Italiana S.p.A. This BSA 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. The Board Review process for the 2017 financial year, which involved all Directors and the Chair of the BSA, was conducted by means of a questionnaire based on the model developed for the preceding financial year by a leading firm of consultants. The answers were addressed to the Chair of the Board of Statutory Auditors to ensure their confidentiality and monitor the consolidation process (as regards those concerning the BSA, the answers were handled by the Secretary to the Board of Directors). The final self-assessment report formed the subject of a detailed discussion, first by the GSC and then by the Board of Directors. The Board of Statutory Auditors reports that having regard (inter alia) to the terms of Legislative Decree no. 254/2016, the BoD, at the meeting held on 13 December 2017, approved a specific diversity policy for members
of the Company’s corporate bodies, which combines in a single text the provisions already contained in other legislative and regulatory sources internal and external to the Company, with the aim of formalising the objectives pursued and the commitment to promoting generally recognised principles of non-discrimination. The Company also acknowledges and welcomes the value of the legislation and the generally accepted principles of diversity and inclusion in line with the European Commission ’s Guidelines on communication of non-financial information.
The Notes to the Financial Statements illustrate the evaluation criteria used, and provide the information required by the applicable legislation.
During the year, the BSA asked for further control processes to be implemented and established further refinements to the said procedure to take account of interpretative developments in the current legislation and practical application. In compliance with the terms of s. 19.1.e of Legislative Decree 39/2010 and art. 5.4 of EU Regulation 537/2014, and by way of application of the Company’s Guideline, the Board of Statutory Auditors, in its capacity as Internal Control and Audit Committee, examined in advance the proposal to commission non-audit services from the External Auditors or a company belonging to their network, evaluating in particular the compatibility of the said services with the prohibitions laid down in art. 5 of EU Regulation 537/2014 and the absence of potential risks to the auditors’ independence deriving from the performance of the said services. As the statutory pre-requisites were fulfilled, the BSA approved the commissioning of the service from EY S.p.A. or other companies belonging to its network.
The fees for non-audit services provided by the External Auditors or other companies belonging to their network for parent company Assicurazioni Generali and its subsidiaries in the 2017 financial year are disclosed in detail in the Notes to the Financial Statements. During the year, the Board of Statutory Auditors, in the legal capacity of Audit Committee, supervised the trend of the said fees.
During the year, the Board of Statutory Auditors also issued the opinions, comments and attestations required by the applicable legislation. In particular, at the meeting of the Board of Directors held on 25 January 2017, the Board of Statutory Auditors expressed, pursuant to s. 154-bis.1 of the CFBA and art. 40.2 of the Company’s Articles of Association, a favourable opinion of the proposed appointment of Luigi Lubelli as new Manager in Charge of Preparation of the Company ’s Financial Reports. At the meeting of the Board of Directors held on 15 February 2017, the Board of Statutory Auditors expressed a favourable opinion of the remuneration of the Group Audit Manager (meeting of 2016 targets and setting of 2017 targets) and the Audit Plan for 2017. The BSA expressed a favourable opinion of the appointment and remuneration of the new Group Audit Manager,
On 28 May 2017, shareholder Tommaso Marino sent a complaint pursuant to s. 2408 of the Civil Code, forwarded to the Company by certified e-mail and addressed to the Board of Statutory Auditors, the Board of Directors of Assicurazioni Generali S.p.A. and the Competition and Market Regulator (AGCM). He complained that he had not received a full answer at the General Meeting to a pre-meeting question he had asked. Mr Marino had asked whether “a cartel had been set up with other insurance companies”, naming the Unipol Group in particular, in connection with other questions on the subject of the investigation by the Antitrust Authority of a possible agreement in restraint of competition in the third-party vehicle insurance field. The BSA notes that the Group CEO had given a negative answer to his question, specifying that: “no agreement has been signed by Group companies to prevent competition from other parties in the third-party vehicle insurance field”; however, Mr Marino objected that his question had a broader scope. The BSA therefore agreed, following a discussion at a Board meeting, on a clarification of the answer given to Mr Marino, specifying that the companies belonging to the Group have never entered into any agreements to restrict competition with any party in any field. The clarification in reply to the shareholder was published on the Company’s website, as a supplementary reply to the pre-meeting questions.
On the basis of all the factors set out in this Report, the Board of Statutory Auditors finds no reason to object to the approval of the Annual Financial Statements of Assicurazioni Generali S.p.A. for the financial year ending on 31 December 2017, as submitted to you by the Board of Directors, and expresses a favourable opinion of the proposed dividend distribution, funded entirely by the profit for the year.