1. Statement from the Chairwoman and the Chief Executive Officer 8 2. Organisational structure 10 3. Macroeconomic environment 19 4. Group financial review 21 5. Operating results by operating segment 28 6. Consolidated non-financial statement 45 7. Risk management 103 8. Financial review for Poste Italiane SpA 104 10. Principal relations with the authorities 119 11. Other information 125 12. Summary of the resolutions passed by the Annual General Meeting held in ordinary and extraordinary session 127
Detailed table of contents DIRECTORS’ REPORT ON OPERATIONS FOR THE YEAR ENDED 31 DECEMBER 2017 1. Statement from the Chairwoman and the Chief Executive Officer 8 2. Organisational structure 10 3. Macroeconomic environment 19 4. Group financial review 21 5. Operating results by operating segment 28 6. Consolidated non-financial statement 45 7. Risk management 103 8. Financial review for Poste Italiane SpA 104 10. Principal relations with the authorities 119 11. Other information 125 12. Summary of the resolutions passed by the Annual General Meeting held in ordinary and extraordinary session 127
The 2017 results highlight Poste Italiane’s strategic role in Italy’s development and the Company’s ability to generate profits, provide quality services to customers and at the same time create value for shareholders, employees and all our stakeholders.
These results reassure us about our ability to face the profound social, environmental and economic changes that are transforming the environment in which we operate, including a radical digital transformation, the continuing backdrop of globalisation, new demographic trends and lifestyles, and climate change.
We have completed a reorganisation of our operating segments, in order to improve the visibility and transparency of the main value drivers for each segment. A part of this process is the creation of the new Payments, Mobile and Digital segment, with the aim of centralising the management of payment services, which will also be extended to include the activities envisaged by the new European Payment Services Directive (PSD2).
The Annual Report for 2017 also contains Poste Italiane’s first consolidated Non-Financial Statement, which provides information on the Company’s organisational model, policies and risks in accordance with the requirements of Legislative Decree 254/2016 and the standards defined by the Global Reporting Initiative, an international benchmark for sustainability reporting. The consolidated Non-Financial Statement was built around the 13 topics we have recognised as being material, by virtue of the significance of the impacts generated by Poste Italiane and those that most influence our stakeholders’ decisions. Examples include economic and financial sustainability, inclusion in all its forms, our contribution to innovation and digitalisation, cyber security, the customer experience and service quality, and human capital.
CHAIRWOMAN Maria Bianca Farina CHIEF EXECUTIVE OFFICER AND GENERAL MANAGER Matteo Del Fante
The corporate governance structure reflects the recommendations in the Corporate Governance Code for listed companies published by Borsa Italiana, the provisions of Legislative Decree 58 of 24 February 1998 (the Consolidated Law on Finance), where applicable, and the Supervisory Standards issued by the Bank of Italy and applicable to Poste Italiane in view of the unbundled activities conducted by BancoPosta RFC (Patrimonio destinato BancoPosta).
The Board of Directors and Board of Statutory Auditors are elected and dismissed by the General Meeting of shareholders, which is also responsible for determining the related remuneration and for appointing independent auditors. The General Meeting also approves the annual financial statements, amendments to the Company’s By-laws and transactions of a non-recurring nature, such as rights issues, mergers and demergers.
In accordance with the provisions of the Italian Civil Code, the Board of Directors has delegated certain executive powers to the Chief Executive Officer and has established, in accordance with the recommendations in the Corporate Governance Code and the Bank of Italy’s supervisory standards, four Board Committees to provide recommendations and advice: the Nominations and Corporate Governance Committee, the Remuneration Committee, the Audit, Risk and Sustainability Committee and the Related and Connected Parties Committee. The members of the latter committee are all independent Directors, with roles and responsibilities defined by the regulations governing related and connected party transactions. At a meeting on 25 January 2018, in line with the recommendations of the Corporate Governance Code, the Board set out the criteria for defining operations of strategic, economic and financial importance, keeping them within its sphere of competence.
The Chief Executive Officer and General Manager, to whom all key departments report, has full powers for the administration of the Company across the organisational structure, unless otherwise provided for by law and the Company’s By-laws and with the exception of the powers reserved to the Board of Directors. The Chief Executive Officer is also the Company’s legal representative within the scope of the powers delegated to him.
The Board of Statutory Auditors in office has 3 standing members and 3 alternates. The Board verifies compliance with the law, the Company’s By-laws and with correct corporate governance principles, also verifying the adequacy of the organisational structure and administrative and accounting systems adopted by the Company and their functionality. The Board of Statutory Auditors met 40 times during the year.
The Supervisory Board in office has three members. It is endowed with autonomous powers of initiative and control, supervises the functioning of and compliance with the Organisational Model pursuant to Legislative Decree 231/2001 and updates it in line with changes in the organisational structure and the relevant regulatory framework, by making justified proposals to the Chief Executive Officer, who submits them to the Board of Directors.
The auditing firm PricewaterhouseCoopers SpA has been appointed to audit the Company’s accounts for the period 20112019. The appointment was made in conformity with Legislative Decree 39/2010 (”Implementation of Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts”).
This Annual Report comprises the following documents: The Directors’ Report on Operations (including the consolidated Non-Financial Statement pursuant to Legislative Decree 231/2001) 254/16), the Poste Italiane Group’s consolidated financial statements, Poste Italiane SpA’s separate financial statements, including BancoPosta RFC’s separate report, and the related attestations pursuant to art. 154 bis, paragraph 5, of Legislative Decree 58/1998 and the reports of the Board of Statutory Auditors and the Independent Auditors, relating to the financial year ended 31 December 2017, as well as the “Report on Corporate Governance and the Ownership Structure” published in the Governance section of the Company’s website, which has been incorporated for reference purposes. The latter document may be consulted for further details on the Corporate Governance structure.
The operating segments, and especially Mail, Parcels and Distribution, are supported by two distribution channels for retail customers, on the one hand, and business and Public Administration customers, on the other. These channels operate alongside a series of corporate functions responsible for policy, governance, controls and the provision of services supporting business processes.
The organisational model, which ensures the development of synergies within the Group as part of an integrated approach to operations, is applied via governance and operating models, characterised by: �� coherent and integrated management of the Group, ensuring a uniform and coordinated approach to the market, whilst taking into account the central importance of customers and exploiting potential synergies, as well as assigning responsibility for coordinating subsidiaries to the relevant functions within the Parent Company according to operating segment; �� corporate functions capable of ensuring, through coordination and integration of their respective areas of expertise, coherent fulfilment of their assigned roles at Group level and the provision of shared services closely aligned with business needs, thus ensuring efficiency, economies of scale, quality and effective support for the different businesses.
Corporate actions during the year Having received clearance from the relevant antitrust authorities and authorisation from the Bank of Italy, on 15 February 2017, Poste Italiane acquired a 30% interest in FSIA Investimenti Srl for a consideration of €278.3 million. The investee owns 49.5% of SIA SpA (SIA) and was previously a wholly owned subsidiary of FSI Investimenti SpA. FSI Investimenti is in turn controlled by CDP Equity SpA, which holds 77.1% of the company. Following this transaction, Poste Italiane holds an indirect interest of 14.85% in SIA. At the same time as completing the acquisition of an interest in FSIA Investimenti Srl, Poste Italiane SpA also signed a “deed of pledge”, in which it declared that it was bound by, to the extent and in the exercise of its investment in the acquired company, the obligations provided for in a loan agreement entered into by FSIA Investimenti Srl with a number of banks on 28 May 2014.
Under the sale agreements, the price is subject to an upward adjustment of €0.55 million based on the value of SIA’s net debt at 31 December 2016.
Through the vehicle entity, FSIA, the shareholders, FSI Investimenti (CDP Equity) and Poste Italiane will exercise control over SIA.
Following issue of the relevant consents by the Ministry for Economic Development, the European Central Bank and the Bank of Italy, on 7 August 2017, Poste Italiane SpA and Invitalia SpA, Agenzia nazionale per l’attrazione degli investimenti e lo sviluppo d’impresa, completed the sale to the latter of Poste Italiane SpA’s 100% interest in Banca del Mezzogiorno-Medio Credito Centrale. The transaction, between related parties (given that Poste Italiane SpA and Invitalia SpA are under the common control of the Ministry of the Economy and Finance), in accordance with the law and the related regulations, was approved by Poste Italiane SpA’s Board of Directors, with the prior consent of the Board’s Related and Connected Parties Committee.
On 9 November 2017, the respective boards of directors approved the merger of Poste Tutela SpA (a wholly owned subsidiary of Poste Italiane SpA) with and into Poste Italiane. Poste Tutela is the company that provided – primarily to the Group - transport, cash collection and counting, custody, armed security and porter services, by coordinating a widespread network of specialist third-party operators located throughout Italy. The transaction will be effective for legal purposes from 1 March 2018, and for accounting and tax purposes from 1 January 2018.
On 25 January 2018, Poste Italiane SpA’s Board of Directors authorised the subscription for the rights issue to be carried out by Anima Holding SpA and approved by an extraordinary general meeting of Anima’s shareholders on 15 December 2017. The offer period is between 26 March 2018 and 12 April 2018.
As a result of these transactions, Poste Italiane will retain its 100% interest in BancoPosta Fondi SGR, with the aim of creating a competence centre for the management of the Group’s financial investments. The transaction will also enable the Company to boost training and refresher courses for Poste Italiane’s distribution network, in relation to asset management, and to
This will involve the contribution in kind to PosteMobile SpA of the e-money and payment services operated by BancoPosta RFC and PosteMobile’s establishment of a separate entity – to include the above unit – to specialise in e-money and payment services, and through which PosteMobile SpA will be able to operate as an electronic money institution, whilst also continuing to operate as a mobile virtual network operator.
The transaction, together with the proposed change to BancoPosta RFC and to its By-laws, and the grant of the related authority to submit a request for authorisation to the Bank of Italy, was approved by Poste Italiane’s Board of Directors on 25 January 2018. Should the Bank clear the transaction, the Annual General Meeting of Poste Italiane’s shareholders will be asked to vote on the proposed removal of the ring-fence that applies to BancoPosta RFC from the assets, contractual rights and authorisations that make up the e-money and payment services unit.
The main innovations introduced regarded: �� The establishment of the Corporate Affairs function, which has taken over responsibility for all processes relating to communication, the development of public affairs and legal and corporate matters, as well as for those relating to procurement management, corporate protection and philately management. Moreover, the Corporate Affairs function includes the Group Risk Management function, which is the sole reference point for the governance and management of all risks.
�� The establishment of the Regulatory Affairs and Relations with Authorities function, which oversees regulatory matters and the management of relations with supervisory authorities relating to the postal sector.
�� The centralisation of the planning and control units previously operating in the other corporate and business functions within the Chief Financial Office function, with the exception of those relating to BancoPosta RFC, which are subject to functional coordination, with the aim of ensuring uniform governance of the planning and control processes.
The Private Customer function manages the commercial front end for the Private Customer and SME segments.
In continuation of the rationalisation process1, the number of post offices was reduced from 12,845 at 31 December 2016 to 12,822 at 31 December 2017.
Geographical distribution of post offices and branch offices 1. The rationalisation of the post office network is being carried out in accordance with the criteria laid down by the Ministerial Decree of 7 October 2008 and AGCom Resolution 342/14/CONS.
Postamat ATM network 7,257 7,249 1. This format is present in post offices with high growth potential, with the aim of promoting the offer of ancillary current account services and providing information on the insurance offering, directing interested customers to the relevant insurance specialists.
In addition to evolutionary maintenance work on the portals during 2017, as part of the digital transformation process, initiatives were continued with the aim of improving the Group’s online offering. In particular, the various Poste Italiane apps were enhanced with new functions for customers (for example, the possibility to change, within pre-set limits, maximum withdrawal and payment amounts for cards, and the introduction of a chatbot4 that provides a rapid guide to operations that may be carried out at post offices).
Poste Italiane’s Business and Public Administration function is responsible for commercial operations and sales of Group products and services regarding large companies and Central and Local Government, via the following organisational model: �� central management dedicated to commercial coordination of the top business sales force, and the management of central government; �� dedicated pre- and post-sales functions, at central and local level; �� a function dedicated to the development of indirect channels and prospective customers; �� five Area Offices (Lombardy and Northwest, Northeast, North-Central, Central, South) each responsible for commercial operations in their own area via management of the local sales force and implementation of marketing initiatives defined on the basis of a model that targets initiatives by customer segment.
Poste Italiane SpA’s distribution network The Mail, Logistics and Communication function oversees the related area of business at Group level5
All workforce data is shown in full-time equivalent terms. (*) The geographical distribution of Multiregional Area Offices at 31 December 2017 is as follows: Piedmont, Valle d’Aosta and Liguria; Lombardy; Veneto, Trentino
Alto Adige and Friuli Venezia Giulia; Emilia Romagna and Marche; Tuscany and Umbria; Lazio, Abruzzo, Molise and Sardinia; Campania and Calabria; Puglia and Basilicata; Sicily.
(**) Delivery staff include 28,635 postmen and women and delivery supervisors (30,959 at 31 December 2016).
In 2017, the world economy grew at a brisk pace, outstripping expectations in both the major industrialised countries and emerging economies. Indeed, all the leading research institutes and international organisations revised their GDP estimates upwards. The most recent analyses by the International Monetary Fund (World Economic Outlook, January 2018 ) put world growth at 3.7% by the end of 2017 (up from 3.2% in 2016) and estimate growth of 3.9% for 2018). This expansion was underpinned by consumption, and also by international trade, which confirms the positive and accelerating trend compared with 2016.
On the whole, the global outlook remains favourable, although certain geopolitical uncertainty factors persist, linked to the possible development of North Korea’s nuclear programme, the US Administration’s management of tax reform plans and protectionist policies, and the prospects of the European integration process and the Brexit negotiations.
In the USA, after a slowdown in the early months of the year, growth steadily picked up enabling, for the eighth year running, GDP growth of around 2.5% and an unemployment rate of around 4%. This growth was largely driven by household consumption, exports and non-residential fixed investment. In this context of economic consolidation, in December the FED announced an increase of 25 basis points in the target range of interest rates for Federal Funds (1.25-1.50%) and expressed its intention to implement further increases in 2018.
The Japanese economy also witnessed an accelerating growth rate in 2017, thanks to the contribution of domestic demand and exports, and an uptick in private investment. The labour market trend was positive and household confidence remained buoyant. Despite the positive economic phase, monetary policy was still expansionary as inflation continued to be moderate.
After its Party Congress, China also confirmed vigorous growth in 2017, with GDP rising 6.8%, which is above the targets set by the government. This figure was underpinned by accelerating expansion of services, net exports and domestic demand, which together with a resilient agricultural sector offset the industrial slowdown. The Central Bank gradually tightened monetary conditions, leading to a further increase in interbank rates.
The Brazilian economy consolidated signs of recovery. Production activities benefited from the recovery in foreign trade and the increase in commodity prices in US dollar terms. Strong political uncertainty remains linked to the forthcoming elections.
In addition, BancoPosta Fondi SGR SpA, previously allocated to the Insurance Services segment, was reallocated to the Financial Services segment in 2017.
Average workforce expressed in full-time equivalent terms 138,040 141,246 (3,206) -2.3%
Letters handled by the Group (volumes in millions)2 3,167 3,430 (263) -7.7%
Parcels handled by Group (volumes in millions) 113 97 16 16.5%
Current account deposits (average for the period in €m) 55,769 49,643 6,126 12.3%
1. These amounts include postal savings deposits, the mutual investment funds marketed, Poste Vita’s technical provisions and current account deposits. 2. The figure for 2016 does not include unaddressed mail. 3. Includes premium revenue before outward reinsurance premiums attributable to Poste Vita SpA and Poste Assicura SpA and Poste Welfare Servizi Srl’s revenue.
The Group’s total revenue amounts to €10.6 billion and is broadly in line with the previous year (down 0.1%).
The Payments, Mobile and Digital segment contributed €586 million to total revenue, including revenue from payment services, e-money products and PosteMobile SpA’s telecommunications services.
Total revenue from Financial Services is down from €5,009 million in 2016 to €4,956 million (a decline of 1.1%). However, it should be noted that the figure for the comparable period included non-recurring income of €121 million generated by the sale of the Group’s investment in Visa Europe Ltd. and revenue resulting from the investment in Banca del Mezzogiorno–MCC, amounting to approximately €56 million. The figure for 2017, on the other hand, has benefitted from income of €91 million generated by the sale of shares in Mastercard Incorporated. After stripping out the above items from the figure for 2016, revenue for 2017 is up €33 million (1%).
The Insurance Services segment contributed €1,456 million to total revenue (€1,242 million in the previous year), reflecting an increase in premium revenue and in the return on technical provisions, partially offset by the movement in the provisions due to a rise in obligations to policyholders. The overall result, bearing in mind the decline in the life market with respect to the positive performance of 2016 (new business is down 5.2% at national level at 31 December 2017), confirms the good performance.
Personnel expenses are down 2.4% from €6,241 million in 2016 to €6,093 million in 2017, largely reflecting a reduction in the ordinary component (down €138 million, or 2.4%), reflecting a decrease in the average workforce during the year (approximately 3,200 fewer FTEs compared with the previous year).
The ordinary unit cost of labour has risen from €40.6 thousand to €40.8 thousand, primarily due to renewal of the National Collective Labour Agreement.
Other operating costs are up from €301 million in 2016 to €465 million in 2017, above all due to the impact of provisions for risks, above all those relating to the voluntary action taken to protect customers who had invested in the Europa Immobiliare 1 fund.
Non-current assets and disposal groups held for sale and liabilities related to assets held for sale - 660 (660) n/s n/s: not significant
The Poste Italiane Group’s net invested capital at 31 December 2017 amounts to €1,983 million (€1,909 million at 31 December 2016).
Non-current assets total €3,077 million, marking an increase of €210 million compared with the end of 2016. This primarily reflects acquisition of the investment in FSIA Investimenti Srl, partially offset by the negative effect of the movements in non-current assets (capital expenditure of €467 million, offset by depreciation, amortisation and impairments of €545 million).
The group also invested in the upgrade and improvement of property used in operations and in improvements to occupational safety, in compliance with the related statutory requirements (Legislative Decree 81/08).
As regards electronic money, in February 2017, the new PostePay Evolution Business card for freelance professionals and sole traders was launched and, with regard to Full Acquiring services, the proprietary “card present” offering, with physical and mobile POS for use by SME customers was launched.
The Digital Transformation programme involved reengineering and improvement of the user experience on the poste.it website and of the related APPs and, as regards Payments, Mobile and Digital, support was provided for the development of new services and the acquisition of new customer targets.
In Insurance Services, work on planning for the segment’s growth continued, as did investment in ongoing functional/infrastructural improvements to key business support systems.
Working capital amounts to €1,452 million at 31 December 2017, up €269 million on the end of 2016. This reflects both the movement in payments on account of withholding tax and substitute tax on capital gains on life insurance policies, and a decline in net current tax liabilities, reflecting the reduction in the IRES rate from 1 January 2017.
The increase of €88 million in provisions for risks and charges primarily reflects the liabilities that Poste Italiane will incur for staff taking voluntary early retirement by 31 December 2019, and the charges relating to the voluntary action taken to protect customers who had invested in the Europa Immobiliare 1 fund, as approved by Poste Italiane SpA’s Board of Directors on 19 February 2018.
Equity amounts to €7.6 billion at 31 December 2017, a reduction of €584 million compared with 31 December 2016. This is due to payment of dividends totalling €509 million and the movement in the fair value reserve (€721 million, net of tax), reflecting positive and negative movements in the fair value of investments in available-for-sale financial assets. The above reductions in equity were partially offset by profit for the year of €689 million.
Technical provisions for insurance business* - - - 113,612 - 113,612
* Technical provisions for the insurance business are shown net of technical provisions ceded to reinsurers.
Total net funds at 31 December 2017 amount to €5,567 million, down on the figure for 31 December 2016 (when net funds amounted to €6,225 million). This primarily reflects the reduction in the fair value of available-for-sale financial assets (€991 million). The fair value reserve for available-for-sale financial assets amounts to €520 million before tax (€1,512 million at 31 December 2016).
The borrowings shown in the above analysis primary regard the following: �� an EIB loan maturing in 2018, amounting to €200 million, with a nominal value of the same amount (current bank borrowings); �� an EIB loan maturing in 2019 amounting to €200 million, with a nominal value of the same amount (current bank borrowings); �� a bond issue maturing in 2019, totalling €763 million, with a nominal value of €750 million (the current portion of non-current debt); �� a private placement of €49.6 million (bonds in issue).
Profit/(loss) on investments accounted for using the equity method (2) 7 12 - - 17
The postal services market The European postal market continues to be characterised by declining demand for the distribution of letters, newspapers, periodicals and advertising – as a result of the spread of electronic communications – and increasing demand for parcel services, thanks to the development of e-commerce, which is also sustained by new technologies (e.g. online purchases and mobile payments).
The Italian market confirms the reduced inclination, compared to other European countries, to use paper forms of communication. The reduction in the use of Direct Marketing and unaddressed mail as commercial communication tools, as well as the lesser propensity to use paper reporting tools by some specific industries such as banking and telecommunications, characterised by the use of prepaid consumption models, have had a particularly strong impact.
Mail, parcels and distribution segment profit or loss for the year ended 31 December (€m) 2017 2016 Increase/(decrease)
The Mail, Parcels and Distribution segment reported an operating loss of €517 million, up €81 million on the operating loss of €436 million of the previous year. This performance reflects the decrease in revenue from letter post, due to the contraction in volumes in its traditional market (down €257 million compared to 2016), and in intersegment revenue (down €43 million compared to 2016), which is governed by operating guidelines for the remuneration of distribution services provided to other segments. Moreover, 2016 benefitted from approximately €108 million in deferred revenue from previous years.
Parcels revenue, on the other hand, rose 6.8% (up €44 million compared to 2016) mainly due to the positive performance of the Domestic segment (volumes up €16 million compared to 2016). The segment’s results also reflect the fact that, from 10 September 2017, the subsidiary, SDA, was affected by industrial action that lasted a number of weeks until mid-October, causing delays in the collection and delivery of packages, above all heavy items.
Costs of €8,140 million have decreased compared with 2016 (down €122 million) due to a reduction in personnel expenses (down €133 million), only partially offset by an increase in other operating costs (up €34 million), of which the 2016 balance benefitted from the release of provisions for disputes with third parties (around €7 million), as the related liabilities for which provision had been made in previous years failed to materialise.
Total Mail attributable to the Group 3,167 3,430 (263) -7.7% 2,650 2,907 (257) -8.8%
The performance of the Group’s Mail services saw volumes and revenue decrease by 7.7% (263 million fewer items) and 8.8% (down €257 million), respectively, compared with 2016. This is primarily due to falling volumes in the traditional postal services market, partly as a result of the gradual dematerialisation of communications (letters replaced by e-mails, invoices sent online, etc.).
The compensation partially covering the cost of the Universal Service for 2017, as provided for in the 2015-2019 Service Contract in force from 1 January 2016, was set at €262 million. The publisher tariff subsidies, introduced from 1 January 2017, amount to €43 million.
The performance of the Parcels segment saw significant growth in volumes and revenue, with volumes up 16.5% (16 million more items) and revenue rising 6.8% (up €44 million), respectively, compared with 2016.
This positive performance is essentially due to the expansion of e-commerce in Italy in the B2C segment (17 million more items, equivalent to an increase of 41.5% and a rise of €64 million in terms of revenue or a 37.4% increase compared to 2016). This growth was partially offset by a reduction in volumes and revenue in the B2B segment (1 million fewer items, equivalent to a 3.3% decrease and a €13 million decline in revenue, down 5.9% compared with 2016). This was mainly due to the effect of the industrial unrest that regarded the subsidiary, SDA, in September and October, which hit its operating performance.
The current Contratto di Programma (Service Contract) for 2015-2019 was signed by the parties on 15 December 2015 and was formally submitted to the European Commission for the usual assessments relating to European regulations regarding state aid; it is effective from 1 January 2016 to 31 December 2019.
The European Commission has approved government compensation for the period 2012-2015 and 2016-2019, payable to Poste Italiane for provision of the Universal Postal Service, deeming it to be compatible with European Union regulations regarding state aid.
The 2018 Budget Law (Law 205 of 27 December 2017) established that the Service Contract may include - at the request of one of the parties and with effect from 1 January 2020 - the activities of collection, transport, sorting and distribution of postal items weighing up to 5 kilograms8. The same law also introduced the option for small municipalities to enter into special additional agreements with the Universal Postal Service provider to increase the frequency of actual delivery times, in line with large towns.
Legislative Decree 244 of 30 December 2016, the so-called Milleproroghe (“Thousand Extensions”) Decree, converted into Law 19 of 27 February 2017, in force since 1 January 2017, extended the reduced postal rates set out in the Interministerial Decree of 21 October 2010 for the deliveries of publishers and non-profit associations and organisations entered in the Register of Communications Operators, and reinstated the government tariff subsidies provided for by Law no. 46 of 27 February 2004 until 2019.
The process of restructuring the sector continued in 2017, with the aim of revisiting a new, high-quality, sustainable Universal Service that is in line with citizens’ changing requirements. In this context and as part of the optimisation, digitisation and automation process, measures were implemented to redefine sorting processes. These included the installation of a new sorting plant at the Milan Roserio Sorting Centre, aimed at automating the manual processing of parcels and small format recorded mail, and the inauguration, at the Bologna Sorting Centre, of the first department reorganised in accordance with “lean manufacturing ” methodology (with the introduction, for example, of new equipment to make operations and workstations safer and more ergonomic).
Finally, with regard to the Group’s commitment to providing a good customer experience, work is continuing to improve knowledge of all aspects of customers’ purchasing behaviour and to develop systems for listening to and surveying customers.
Gepin then filed a claim for damages from SDA, amounting to €15.5 million, relating to the alleged unjustified nature of termination of the above contracts, and has obtained an injunctive order for payment of approximately €3.7 million for uncontracted services. SDA challenged the claims in court.
(1) Based on data certified by IZI at the request of AGCom.
Digital innovation is a further driver of this transformation of the payments landscape, with market innovation driven by both the rapid take-up of new technologies, resulting in services capable of offering users continuous and highly flexible access to money transfer solutions, and the European regulatory framework, which aims to encourage innovation and competition in the payment services market. These developments reflect the transformational impact that the internet has had on the economy, finance and social behaviour: more recently, the so-called “digital revolution” has reached the door of finance with the birth of Fintech (Financial Technology Innovation) which, in applying technological innovation to financial services, has given rise to new business models, new channels and new products, above all with regard to e-commerce and mobile payments.
During 2017, the mobile market was marked by highly aggressive acquisition strategies adopted by the leading operators, involving the launch of deeply discounted offers, targeted at the customers of mobile virtual network operators, partly in response to the approaching market entry of new players, such as Kena Mobile, TIM’s second brand, which has been positioned as a low-cost, no-frills virtual operator, operating from 29 March 2017, and Iliad, the price leader in the French market, whose entry is expected in the first half of 2018.
The strategies adopted are based on CRM and Win-Back11 offerings. At the same time, the trend towards convergent landline and mobile services has strengthened, as has the development of varying degrees of partnership between the suppliers of digital content and the operators of telecommunications networks. In this context, the penetration of broadband is playing a key role in development of the market, with a further increase in coverage seen in 2017.
The total number of lines12 in the third quarter of 2017 amounts to around 99 million, including approximately 15 million Machine to Machine (M2M) SIM cards. In terms of market share, Wind-TRE, the market leader, has remained more or less stable, following by Telecom Italia and Vodafone. PosteMobile has a market share of around 4%, with over 49% of mobile virtual network customers.
Payments, mobile and digital segment profit or loss for the year ended 31 December (€m) 2017 2016 Increase/(decrease)
Bank lending rose in 2017. In December 2017, total lending to Italian residents (private sector and the Public Administration) – excluding interbank loans – amounted to approximately €1,786 billion, marking a year-on-year increase of 2.4%. Consumer loans are also up, with mortgage lending up 3.4% year-on-year, based on data for November 2017.
Regulatory environment On 3 January 2018, the new Directive 2014/65/UE (so-called “MiFID2”) came into effect throughout the European Union, introducing changes to the regulations in the Consolidated Law on Finance (legislative Decree 58/98) and the Regulations for Issuers. The new regulations have increased the efficiency and transparency of financial markets, boosting protections for investors and strengthening certain organisational requirements and rules for intermediaries. Following an assessment of the impact of the new regulations, in 2017, Poste Italiane took steps to ensure compliance with the new statutory requirements, primarily regarding improvements to product governance, the provision of information to customers, customer profiling, advisory services and the training of post office personnel.
13. Sources: Bank of Italy Economic Bulletin; ABI Monthly Outlook – Economy and Financial-Credit Markets; Data from Il Sole 24 Ore.
Total revenue generated by the segment is down compared with the previous year (a decline of 0.4%), primarily reflecting a reduction in income from the distribution of third-party financial products (down 16.8%) which, whilst the distribution of loan products performed well (up 3.2%), suffered the effects of the absence of BDM-MCC’s contribution, after this company was sold on 7 August 2017. The reduction in revenue also reflects a 5% decline in revenue from transaction banking, due to a reduction in the volume of payment of bills using payment slips, and the above decrease in income from the sales of shares in Visa and Mastercard. These results are only partially offset by an increase in gains (up 15.6%), increased fees from asset management at BancoPosta Fondi SGR (up 39.3%) and a rise in intersegment revenue (up 3.3%), resulting from an increase in income from insurance brokerage (up 3.2%).
On 14 December 2017, following the resolutions approved by their respective boards of directors, Cassa Depositi e Prestiti SpA and Poste Italiane SpA signed a new agreement covering the collection of postal savings in the three-year period 20182020. On the one hand, the intention is to consolidate the role played by Interest-bearing Postal Certificates and Savings Books in the Italian savings market, by increasing investment in technology, advertising, promotions and training, so as to widen the customer base for savings products, whilst, on the other, launching a new and expanded range of services.
The leverage ratio for 2017 is 3.1%, compared with 3.0% for 2016.
Single premiums continued to be the preferred form of payment for policyholders, representing 93.5% of total premiums written and 62.2% of policies by number.
With regard, finally, to distribution channel, over two-thirds of new business was obtained through banks and post offices, with premium revenue of €55.5 billion corresponding to 67.4% of the total.
Based on the latest official data, total direct Italian premiums in the non-life insurance market, thus including policies sold by Italian and overseas insurers amounted to €25.6 billion at the end of the third quarter of 2017, slightly up on the same period of 2016 (up 0.4%). This marked a reversal of the negative trend seen over the last five years (source: ANIA). Reversal of the trend reflects the contribution made by growth in other non-life classes (up 2.0% on the same period of the previous year) and an easing off of the decline in premium revenue from vehicle insurance. In detail, third-party land vehicle premiums amounted to €10.2 billion, down 2.8% compared with the third quarter of 2016 (when the decline was 5.9%), whilst land vehicle hull premiums amounted to €2.2 billion (up 7% on the same period of 2016).
Movements in premium reserve, technical provisions, reinsurance and other Life claims expenses (22,313) (21,928) (385) 1.8%
Operating profit generated by the Insurance Services segment totals €799 million, marking an increase of 32.3% compared with the previous year (€604 million). In addition to the positive operating performance, this also reflects a greater contribution from net life insurance income, relating to management of the technical provisions.
Net income amounts to €3,437 million (€3,306 million in 2016), including €3,425 million (€3,290 million in 2016) generated by the life business and primarily regarding: �� €3,335 million net finance income from securities related to traditional products, an increase of €64 million compared with the €3,271 million of 2016. This primarily reflects an increase in ordinary income of approximately €391 million compared with 2016 – reflecting growth in assets under management -, which offset the impact of less favourable financial market trends, which led to a reduction in unrealised gains of approximately €252 million on investments included in separately managed accounts - attributed in full to policyholders under the shadow accounting method – and net realised gains of approximately €75 million; �� €123 million in net finance income and commission income from management of the internal funds connected with index- and unit-linked products, up on the €35 million of 2016. This amount, which reflects market volatility, is almost entirely matched by a corresponding change in technical provisions.
As a result of the above operating performance and the corresponding revaluation of insurance liabilities due to the positive financial performance, the movement in technical provisions, after the portion ceded to reinsurers, amounts to €22.3 billion, compared with €22.0 billion in the previous year. claims paid to customers total €10.9 billion (€7.5 billion in 2016) and include policy expirations of €6.6 billion (€3.8 billion in 2016), with €4.1 billion of this sum attributable to Class III policies. Total surrenders amount to €3.0 billion (€2.6 billion in 2016), accounting for 2.9% of initial provisions (2.9% at 31 December 2016), a figure that continues to be far lower than the industry average (the latest figure published on ANIA’s website at 30 September 2017 is 6.78%).
Other operating income of €12 million (€10 million in 2016) almost exclusively regards revenue generated by Poste Welfare Servizi.
Total costs of €658 million are up €20 million compared with 2016 and regard: �� commissions paid for distribution, collection and maintenance of €482 million (€464 million in 2016). The increase has benefitted the Group’s Financial Services segment, which is responsible for marketing the products, and the Postal and Business Services segment in return for the distribution services provided; �� other costs of €176 million (€174 million in 2016), primarily regarding personnel expenses and other operating costs.
Operating review In keeping with the strategic objectives set in 2016, in 2017 the Poste Vita insurance group primarily focused its efforts on: �� strengthening its leadership in the life insurance market and consolidating its competitive position; �� boosting its position in the protection and welfare segment.
Sales of regular premium products also performed well (Multiutile Ricorrente, Long Term Care, Posta Futuro Da Grande), as did sales of the PostaPrevidenzaValore product which, with around 943 thousand policies sold during the period, has enabled Poste Vita to consolidate its role in the pensions market.
Sales of pure risk policies (term life insurance) also performed well, including both those sold in stand-alone versions (not bundled together with products of a financial nature) and those sold bundled together with financial obligations deriving from mortgages and loans sold through Poste Italiane’s network.
As regards insurance broking, work on IT systems and procedures began with a view to ensuring compliance with EU Directive 2016/97, which aims to boost protections for customers during the sale of insurance products (the so-called “IDD” Directive). The Directive is expected to be transposed into Italian legislation in 2018.
Management of the non-life business was also along the lines set out in the business plan, seeking to meet the new needs of customers in the areas of welfare and health insurance, expanding the offering and enhancing the model for network support. While the contribution to the Group’s results is still limited, the segment recorded an extremely positive performance, with total premium revenue for the period of €141.3 million15, up 19% on the figure for 2016 (€118.8 million). This performance was accompanied by a positive technical performance as a result of a reduced volume of claims with respect to the growth in sales.
As a result of the above operating and financial performance, technical provisions for the direct Italian portfolio amount to €123.6 billion (€113.6 billion at the end of 2016), primarily including €111.5 billion in mathematical provisions for Class I and V products (€96.9 billion at the end of 2016) and provisions for products where the investment risk is borne by policyholders, amounting to approximately €3.5 billion (€6.9 billion at 31 December 2016). The decline in the latter provisions reflects products reaching maturity during the period. Deferred Policyholder Liability (DPL) provisions, linked to the change in the fair value of the financial instruments covering the provisions relating to products included in separately managed accounts, amount to €8.2 billion, compared with €9.3 billion at the beginning of the year.
Technical provisions for the non-life business, before the portion ceded to reinsurers, amount to €160 million at the end of the period, up 12% compared with the end of 2016 (€143 million).
Atlante and Atlante 2 funds In April 2016, Poste Vita decided to invest approximately €260 million in an alternative investment fund called “Atlante”, and, on 27 July 2016, invested approximately a further €200 million in the alternative investment fund named “Atlante II” (now called the “Italian Recovery Fund). Both funds, which are managed by Quaestio Capital Management SGR SpA, are closed-end funds restricted to institutional investors, and invest primarily in financial instruments issued by banks looking to strengthen their capital and in non-performing loans held by various Italian banks.
At 31 December 2017, the Atlante fund has called up €239.6 million, including €211.9 million allocated to the separately managed account, PostaValorePiù, and €27.7 million allocated to the company’s free capital, whilst the Atlante 2 fund has called up a total of €101.9 million, allocated in full to the separately managed account, PostaValorePiù.
Impairment losses recognised in 2017 total €105 million (€106 million in 2016). Of this amount, €93 million, allocated to separately managed accounts, has been deducted from deferred liabilities due to policyholders, whilst the €12 million relating to the insurance company’s free capital has been recognised in finance costs. The total impairment loss recognised in the two-year period from 2016 to 2017 thus amounts to €211 million, with the total finance costs recognised on the investment of Poste Vita’s free capital totalling a cumulative amount of €24 million.
The digital future is now Digitalisation is a key element for the modernisation and sustainability of a country, as it helps to reduce environmental impacts and meet social needs, such as inclusion, through new ways of accessing information, and products and services. Digitalisation also has an extraordinary impact on business, operating and service models in the various sectors in which the Group operates. In the mail and parcel sector, for example, ways of interacting with customers and suppliers have changed in supply chains that are increasingly complex and integrated by automated digital processes, in order to cope with the rise of e-commerce.
In the insurance sector, the Internet of Things (IoT)16 enables new offering models regarding e-health, home insurance and third-party motor insurance. Analysis of Big Data also has potential linked to the monitoring of policyholders’ behavioural data, which is reflected in innovative policies and services aimed at improving the customer experience.
Digitalisation creates a need for increasingly advanced protection systems to combat cybercrime via cyber security tools, methodologies and processes to protect personal data, strategic services and the intellectual property of citizens, companies and the Public Administration. Therefore, it is vital that companies adopt adequate prevention and protection systems to safeguard their tangible and intangible assets and those of their stakeholders.
New business approaches to meet the social challenges of the third millennium Growing life expectancy, a low birth rate and immigration are changing Italian society and the approach to the development of products and services, especially in the banking and insurance sector. Immigration is a structural phenomenon in terms of its size and the effect it has on Italy’s economic and social fabric, while financial inclusion is an important incentive for accelerating the process of integrating immigrants. The financial inclusion rate among the adult population in Italy is 87%, while the percentage of adult foreign citizens holding a current account is 73% (source: World Bank).
The postal sector is experiencing a continuous and rapid increase in the volume of parcels in circulation due to the increase in e-commerce, and this affects the need for sustainable transport and logistics to minimise emissions into the atmosphere. The mail segment, which has seen a steady decline in volumes due to the replacement of traditional physical postal services (so-called e-substitution) by electronic services, and the creation of new innovative digital services such as online mail advertising and electronic notification services, can also undoubtedly make a significant contribution to reducing environmental impact.
The creation of shared value Given the deterioration of ecological balances, the persistence of social inequalities and sustainable de-growth processes, business models are being renewed to create shared value. The shared value approach developed by Michael Porter, a professor at Harvard Business School, is based on the assumption that it is necessary to identify a new model of capitalism, overwhelmed as we are by the economic and financial crises of recent years. Based on their own mission, companies with a public service role are increasingly called upon to redefine productivity in the value chain and evaluate forms of investment that aim to obtain positive results in financial, social and environmental terms, and also to support the nation’s economic system. In recent years impact investing, namely investments into companies, organisations and funds with the intention of generating a measurable and favourable social or environmental impact together with or instead of a financial return17, is becoming more reliable, to the extent that banks, insurance companies and pension funds are unanimously promoting it.
Poste Italiane has begun the due process to ensure compliance with the regulatory requirements set out in Legislative Decree 254/2016 which also specifies that the reporting standards – issued by authoritative supranational, international or national bodies, both public and private – used to comply with non-financial reporting requirements should be clarified. The Group chose to adopt the approach recommended by the Global Reporting Initiative (GRI), which is the most widely used standard at international level, given that, in addition to covering the aspects required by the EU Directive and consequently by Decree 254, it expresses the concept of materiality, another important element of convergence with the Decree.
�� Positioning of the relevant topics within the materiality matrix and identification of the material topics.
Prevent operational disruptions through implementation of disaster recovery plans, and promote the fight against terrorism through data analysis. Plan business continuity through the prevention and management of process interruptions that may cause inconvenience to customers and business partners, as well as loss of revenue.
�� in all the Group’s premises; �� on the means of transport used, including by suppliers, for delivery services; �� when staff are travelling.
Adoption of service models aimed at promoting the quality of the products and services offered. Systematic engagement, satisfaction surveys and effective complaints management, which are essential elements in enhancing the relationship with customers and responding to their needs. Offer a unique and distinctive experience that goes beyond traditional product and service provision.
Guarantee ethical behaviour within the supply chain, with particular reference to: legislative compliance; measures to combat fraud and corruption; working conditions and health and safety; and environmental aspects.
Guarantee long-term economic results and safeguard the stability, strength and profitability of the Group in the long term.
Integrate sustainability into the development of new services and products and incorporate Environmental, Social and Governance (ESG) criteria into investment decisions, in order to create social and environmental value as well as generating profits.
Central, local and international institutions National/international industry associations and other organisations Supervisory and regulatory authorities
[GRI 102-11; GRI 102-45; GRI 102-46; GRI 102-50 GRI 102-51 GRI 102-52 GRI 102-53 GRI 102-54]
As already mentioned, for the preparation of the NFS the GRI Sustainability Reporting Standards have been adopted, in accordance with the core option, published in 2016 by the GRI - Global Reporting Initiative. The standards’ indicators, which correspond to Poste Italiane’s material topics, are shown at the beginning of each section and next to the headings of the tables regarding quantitative data linked to the material topics.
It should be noted that Poste Italiane’s operational organisational model serves the development of synergies within the Group and provides for the focus of Poste Italiane SpA (the Parent Company) on management and coordination activities.
The terms “Poste Italiane”, “Group” or “Company” are used in the NFS to refer to the Poste Italiane Group.
Implementation of the obligations set out in Legislative Decree 254/2016 entails application of new criteria and methods, which may be based on subjective assessments and estimates linked to the Company’s specific historical experience and on assumptions that are deemed reasonable and realistic with respect to the relevant circumstances, on a case-by-case basis. Application of these estimates and assumptions might influence the values shown in the NFS, so Poste Italiane has opted to use estimated indicators as little as possible. The estimated data regard certain items relating to energy consumption inside and outside the organisation. In particular, data regarding electricity consumption (for security purposes and relating to outsourced data centres), natural gas and district heating for the Group’s real estate facilities have been calculated taking into account costs incurred and average tariffs, while consumption of diesel and LPG have been estimated on the basis of historical data and the actual amounts pumped into tanks. All the consumption connected with logistics is estimated in terms of distance travelled and/or the average consumption of a vehicle and the load transported, except for company cars.
The Poste Italiane Group will closely monitor upcoming regulatory and interpretative developments, as well as the best market practices that will gradually become available, and assess any consequent effects on possible estimates and the information contained in future non-financial statements.
The scope of reporting includes companies consolidated on a line-by-line basis for financial reporting, and the reporting year is 2017. Comparable quantitative data for 2016 is provided. For each material topic, if applicable, information has been provided on the relevant management and organisational model, policies, including due diligence policies, and the results achieved through their application, as well as certain non-financial performance indicators.
Delayed innovation of products and services offered to customers and of related operating processes, resulting in negative perception of the Company by stakeholders.
Risks related to industrial unrest and labour union strikes that may have an impact on business continuity and on stakeholders’ perception of the Company.
Limited satisfaction of business and consumer customers needs, regarding the various products and services, throughout the customer life cycle, as well as provision of poor quality and failure to comply with regulatory and contractual standards, resulting in the payment of fines and penalties.
Sustainable logistics Risks connected with inadequate management of the Group’s logistics and production processes, including in terms of environmental sustainability, which might influence stakeholders ’ perception of the Company.
Human capital Risks connected with a lack of/inadequate staff management in terms of professional enhancement, training and development.
Corporate Governance Risks connected with a Corporate Governance system that is not in line with leading practices, resulting in negative impacts on the Company’s reputation.
“Risks connected with relations with suppliers, with possible impacts in terms of compliance and financial damage due to fraudulent behaviour.”
“Deterioration of the Company’s reputation in the financial community (rating agencies, investment banks, analysts, etc.) which could have a negative impact on the share price.”
The following table shows the link between the areas specifically required by Legislative Decree 254 and the sections of the NFS in which they are dealt with.
Aspects relating to personnel management, gender equality, international and supranational employment conventions, dialogue with social partners, impact on health and safety, other personnel matters)
Economic and financial sustainability Directors’ Report on Operations: - Group operating and financial performance - Operating results by sector of activity
Digitalisation and innovation Responding to new customer needs through innovation of the products and services provided, as well as of processes, especially via the opportunities offered by digitalisation.
The importance given to aspects relating to innovation and digitalisation of business processes and of the products and services provided is confirmed by the Group’s mission, which is a driver for inclusive development in Italy, accompanying citizens, businesses and the Public Administration on the road towards the new digital economy by offering simple, high-quality, transparent and reliable services.
The commitment to digital innovation is translated into concrete terms in the Deliver 2022 Strategic Plan, which presented the new corporate organisation with the establishment of a new Payment, Mobile & Digital operating segment, created to best meet the competitive challenge that will arise with implementation of the new European PSD2 directive.
Digitalisation Digital initiatives improve process efficiency and customers’ perception of quality, and enable reductions in environmental impacts relating, for example, to travel and paper consumption.
The digitalisation process aims to enhance the post office network, develop multi-channel access methods and tools to interpret and anticipate customer needs, qualify the Company as a key stakeholder for the Public Administration, and encourage the inclusion and development of the digital economy. The main services that have been implemented it in recent years include: Financial and insurance services �� the payment portal, which may be accessed from the poste.it website, is a single environment where users can easily pay bills, utilities and charges to companies and the Public Administration, and have the receipts delivered directly to their mailboxes; �� the new platform in the home banking area of the Poste.it/consumer website; �� Ordinary and Smart Postal Savings Books which may be issued in paper or dematerialised form, as may Interest-bearing Postal Certificates; �� the Remote Banking BancoPostaImpresa Online (BPIOL) service, dedicated to professional and entrepreneurial activities, the non-profit sector and the Public Administration; �� the Poste Vita pension simulator, a digital platform that enables users to assess their pension contributions situation and build up supplementary pension income by constantly monitoring results obtained.
Across all business segments, and therefore by distribution channel �� Postepay, BancoPosta, Post Office and PosteID apps, which enable various functions, including management of BancoPosta current accounts and Postepay prepaid cards; telephone top-ups; the payment of bills; booking your turn at a post office counter; sending money in Italy and around the world (p2p); secure online access to public services; tracking sent parcels and mail; and sending telegrams, registered mail, mail and parcels on the move; �� free Wi-Fi available at 4,119 post offices (32% of the total), 895 of which were activated in 2017 alone, and may be accessed with a single registration for a maximum of three hours per day; �� VoIP technology installed at 7,100 post offices, which makes it possible to have a telephone conversation via an internet connection.
Customers who use Poste Vita and Poste Assicura services via mobile devices (%) 28.1 31.6
Total electronic transactions (millions) 27.0 30.3 * Dematerialisation services activated in the second half of 2016. ** The increase in the volume of dematerialised procedures in 2016 and 2017 is linked to the increase in the number of post offices equipped to handle them
Dematerialisation of communications The Group company, Postel SpA, provides communications services to businesses and Public Administration entities, offering a full range of services including mass printing and enveloping, electronic document management, direct marketing and commercial printing. Postel provides its customers with a technology platform for the digitalisation of communications and document management processes, enabling the dematerialisation and electronic processing of documents – including receipt, creation, collation, classification, storage and custody – regardless of the method or channel through which they arrive at the Company.
Communications are stored electronically at the Postel Data Centre and made available to the addressee. The dematerialisation of mail enables verification and monitoring of the receipt of sent documents at all stages of the process.
Moreover, the Digital Pick-up service enables addressees to digitally collect registered mail that was undelivered due to their absence, as an alternative to the physical process.
The SPID enabled PosteID Digital Identity service enables users to create a digital profile to access all of Poste Italiane’s online services and apps, as well as the services of Public Administration entities and private providers that are registered users of SPID. A SPID enabled PosteID Digital Identity may be applied for online by all adult Italian citizens who have been visually recognised at a Poste Italiane post office, as they have previously purchased, for example, a BancoPosta financial product, or have a National Services Card (NSC), an Electronic Identity Card (ICE), or a digital signature, or have directly registered online at a post office, or at home using a postman or woman’s palmtop computer, for those citizens who do not have a recognised online identification device.
National Traffic Police Violation Centre: The Group supports the Traffic Police in the management of the entire fines process relating to offences deriving from automatic detection systems (Tutor), by providing an IT platform to support the authority with regard to complete digitalisation of all incoming procedures. This platform enables a reduction in document processing time, and thus reduces the time required to respond to complaints and contributes to optimal use of the Public Administration’s resources.
The Centre handles an average of 1,200 procedures per day, 60% of which are paper and 40% via certified e-mail, with an annual total of over 700,000 records.
IT security and business continuity Guarantee the confidentiality of customers’ data, safeguard intellectual property and protect assets from cyber-attacks inside or outside the organisation. Prevent operational interruptions by implementing procedures regarding the management of security incidents and disaster recovery plans, with a view to preventing and managing process interruptions that could cause inconvenience to customers and business partners, as well as a loss of revenue.
Poste Italiane has always considered IT security and business continuity to be priority and strategic components, due to the nature of the services offered and the large number of customers served. Therefore, the Company has identified organisational responsibilities and adopted specific policies to ensure adequate management of the topic.
To monitor the risks relating to information security and information systems, within the Corporate Protection function: �� a single contact person, the Chief Information Security Officer, has been identified for risk connected with IT security; �� integrated management of cyber security risk is in place; �� greater operating effectiveness and efficiency is guaranteed by reducing the fragmentation of operating processes among functions.
The IT security framework adopted by Poste Italiane breaks down into various levels of intervention: �� The IT Security Policy is the documentation system through which objectives and strategic guidelines are expressed, aimed at directing the security management of IT resources and processes that support business services, in order to contain, within predefined acceptable limits, the risk of compromising their confidentiality, integrity and availability, in terms of business protection and also in contributing to the fight against cybercrime incidents.
�� Assessment of IT risk, aimed at identifying and evaluating potential breach scenarios regarding the confidentiality, integrity and availability of ICT resources that support business services, as well as guiding the implementation of appropriate vertical risk reduction measures on applications and individual IT assets (middleware, operating systems, databases, etc.) in accordance with the IT risk propensity threshold defined for the business services which use the ICT resources concerned.
�� The Permanent Security Plan (PSP), consisting of all the cross-cutting interventions and technological projects required to guarantee the presence, update and correct functioning of security platforms, to provide operational security processes, and to carry out all the necessary checks and assessments to maintain the risk profile at acceptable levels over time; �� Security by Design activities which – during the analysis, design, implementation and production phases of new services or modification of existing services, as well as within the change processes of IT systems – are aimed at identifying the security requirements to ensure adequate protection of the ICT resources involved. The ultimate goal of Security By Design activities is to affect the entire value chain and ensure compliance with legal regulations and IT security standards, as well as to integrate IT security within IT and service creation processes.
�� Innovation projects in the security area. Poste Italiane pursues innovation in the field of IT security by carrying out scenario studies and research into vertical security issues, with a specific focus on identity management, mobile security and distributed ledgers (blockchain technology).
Specifically, the Information Security Policy contains the strategic IT security management guidelines that all Group companies have adopted with respect to the specific nature of their business. The policy defines security objectives and requirements regarding regulatory and voluntary compliance with industry standards and best practices. Based on this policy, a documentation system has been defined, including: safety requirements and rules, technical and organisational standards, procedures and instructions that explain the operating procedures of safety processes, and details of the tasks and activities performed by operating personnel.
Through Security by Design activities, the Group identifies requirements relating to the design of a new service or the modification of existing services, with the aim of safeguarding ICT resources throughout the value chain. With regard to aspects relating to Security by Design, security requirements were provided for more than one thousand development initiatives.
Number of complaints received from third parties and recognised by the organisation 12 6
In 2017, a series of project initiatives were managed and monitored at the 11 sites where the permanent plan is in place, thus enabling various initiatives to be completed: 1. IT Security and Risk Assessment 2. Infrastructure security 3. Environment segregation 4. Applications security
�� the process of masking personal data in a non-production environment, guided via the SeDaM (Secure Data Masking) platform, which is aimed at reducing the risk of exposure of real production data to third parties and/or unauthorised parties through processes and procedures to reduce the use of real data in non-production environments, to anonymise real data in non-production environments, and to mask said data.
�� activities regarding the security of all apps displaying trademarks attributable to Poste Italiane that may be used through official (Google Play Store and Apple Store) as well as alternative markets, with the aim of analysing the types of data collected and possibly transmitted, and preventing customers’ exposure to direct or indirect violations (e.g. fraud or reputational damage) attributable to their misuse.
The Cyber Security Technological Cluster in Cosenza, set up as part of the Research and Competitiveness 2007-2013 National Operational Programme financed by the Ministry of Education, Universities and Research. Its purpose is to implement solutions to safeguard electronic payments. The Cluster’s primary objective is to study, define and implement models, methodologies and developmental prototypes for the analysis of cyber threats and the protection of personal data, in order to enhance Poste Italiane’s defence and response capabilities and ensure effective and efficient management of privacy matters within the Group, also by virtue of the issue of EU data protection regulations (EU Regulation 2016/679).
In recent years, Poste Italiane has also launched several IT security projects financed via EU programmes, including the Waffle project as part of the EU’s EIT Digital 2017 initiative to prevent phishing attacks aimed at persuading users to reveal their confidential information and then steal their identity.
During 2017, the Company also organised various training activities, which were carried out via 7 workshops that regarded the new Privacy Regulations and their requirements, information resilience and business protection, the Internet of Things, the human factor and cyber security, open data and data science, security in the new digital bank, and finally the issue of trust in the digital age.
Business continuity plans Pursuant to Bank of Italy Circular 285/13, the Group has developed the following plans, which are held ready to be activated: �� a BancoPosta Business Continuity plan, which aims to illustrate the decisions made with regard to strategic and organisational issues and the assignment of roles and responsibilities with regard to business continuity; �� a Disaster Recovery plan, which defines technical and organisational measures to deal with events that could cause the unavailability of data processing centres that support operations; �� a Crisis Management plan aimed at supporting the various corporate actors involved in an emergency situation that impacts financial services.
Mainframe services (open services under development) covered by disaster recovery plans (%) 100% 100%
Investment refers to business continuity management and technology disaster recovery planning.
19. Not-for-profit organisation, created to promote cyber security in Italy and the rest of the world. The Centre was founded and financed by Poste Italiane and other associated companies.
Poste Italiane’s approach to quality is based on the principle of providing simplified and transparent information to customers, and the equality and impartiality of the services provided to all customers without discrimination.
Two new customer experience indicators were introduced into the Company in 2015: the Net Promoter Score (NPS) to measure the performance of business units (BancoPosta, Mail, Communications and Logistics and Poste Vita) and the Customer Effort Score (CES) to monitor the various channels (post offices, call centres and the internet).
Based on the information from customer surveys, a detailed analysis and priority list is developed, which is useful for planning improvement activities.
The Company also set out a customer-centred design process, aimed at obtaining simple and effective user interaction at the various touch points (including post office layout, apps and the internet), which puts customers at the centre of design activities, involving them from the outset through needs analysis, and verification of the concept and the usability of the prototypes created.
Business postal product disputes discussed 37 94 of which settled 68% 88%
PosteMobile product disputes discussed 17 38 of which settled 71% 61%
In 2017, the “Poste Risponde” Contact Centre handled more than 26 million contacts (21 million in 2016). Assistance is provided regarding financial and postal services, insurance and pension services and the mobile telecommunications services provided by Poste Mobile. In 2017, two new toll-free numbers were dedicated to customer care and the start-up of Health Card-related services at post offices. Customer care campaigns were conducted, involving approximately 15,000 calls aimed at gathering opinions on specific after-sales processes.
Average reply time (days) n.a. 6 * The increase in BancoPosta complaints (the figures do not include appeals to the extrajudicial Financial and Banking Ombudsman and Financial Disputes Ombudsman) primarily regarded these products: Savings Books, due to the lowering of interest rates and an increase in the number of ISEE (Equivalent Economic Status Indicator) checks on deposits; prepaid cards due to the gradual introduction of Postepay Evolution, which offers more services to customers; Interest-bearing Postal Certificates, due to customers’ differing yield expectations.
Corruption is an unacceptable obstacle to business efficiency and fair competition. Poste Italiane has identified organisational responsibilities and adopted specific policies to ensure appropriate management of this issue. To this end, the Company has set up a Fraud Management and Security Intelligence function, which is an operational and functional reference point for corporate structures to report illegal or suspicious events, and constantly provides an anti-fraud service engaged on several fronts: analysis and assessment of fraud risks; direct collaboration with the police, the judicial police and the judicial authorities; support for other corporate functions such as business and money laundering prevention; in-depth digital forensics analysis for IT incidents; implementation of project initiatives aimed at ensuring improvement of security levels and supervision of activities designed to prevent, mitigate and combat fraud; activities for detecting, monitoring and combatting fraudulent attacks on digital service customers and on the physical channel; monitoring and blocking suspicious/fraudulent transactions; reporting aimed at monitoring performance levels and fraud trends; specialist anti-fraud support for the analysis and definition of security requirements for new products and services. In addition, it provides support to the Supervisory Board regarding investigations of reports of offences, as provided for by Legislative Decree 231/01.
In line with national and international best practices and the relevant legal and regulatory framework, in 2016 and 2017, during the risk assessment phase the Internal Auditing function analysed 100% of the processes, identifying 30 processes at risk of corruption, including the procurement process, corporate finance and human resources management. Moreover, by carrying out audits, the Internal Auditing function has guaranteed various coverage levels for processes at risk of corruption, which in 2017 amounted to 94%.
Percentage of coverage* of processes at risk of corruption by auditing initiatives [GRI 205-1]
Operational staff 87,343 49,065 * The content on this matter in the online course on “Legislative Decree 231/01” was considered to be anti-corruption training.
Whistleblowing Whistleblowers are employees who decide to report illegal conduct or a danger that might damage their organisation of which they have become aware during the course of their work. Ensuring the necessary protection measures and, even more, encouraging workers to report, can be decisive in combating corruption.
Poste Italiane has adopted guidelines (available on the Company’s website at www.posteitaliane.it) aimed at regulating the internal whistleblowing system, regarding reporting, including anonymously, of actions or events relating to: �� violations of the internal and external rules that govern Poste Italiane’s business and/or of the principles and rules of conduct contained in the Code of Ethics; �� illicit or fraudulent conduct carried out by employees, members of corporate bodies, or third parties (suppliers, consultants, collaborators, etc.) that may directly or indirectly cause business or financial damage and/or damage to the Company’s image.
The aim is to encourage the spread of ethical behaviour in the workplace, strengthen compliance with the rules and corporate governance, and protect investors and the various categories of users of the services offered. The guidelines adopted are intended to guarantee the confidentiality of the personal data of the person making the report and of the person allegedly responsible for the violation, without prejudice to the rules governing investigations or proceedings initiated by a judicial authority in relation to the facts reported.
This restructuring will take place during 2018 and 2019. The Parties also defined procedures for managing the labour surplus resulting from this reorganisation process, excluding recourse to collective redundancy procedures pursuant to articles 4 and 24 of Law 223/91. The agreement represents one of the key elements that enable achievement of the efficiencies envisaged in the Deliver 2022 Strategic Plan, thus guaranteeing growth, competitiveness and business continuity.
Labour union protection pursuant to art. 14 of the National Collective Labour Agreement On 30 November 2017, at the same time as the renewal of the National Collective Labour Agreement, an agreement was signed which regulates the percentage limits regarding the protection and availability of joint and Company labour union representatives and union executives engaged in negotiating the National Collective Labour Agreement. The agreement, which has the same duration as the National Collective Labour Agreement, stipulates that protection of so-called “non-transferability” also applies to union executives, up to a maximum of 3.3% of the members in each production unit.
Bilateral Agencies In 2017, the activities of the Ente Bilaterale per la Formazione e Riqualificazione del Personale (the Bilateral Agency for Staff Training and Retraining) continued. This contributed towards the discussion and presentation of various projects, and several agreements were signed that enabled the Company to obtain finance from Fondimpresa.
European Social Dialogue [GRI 102-13] The Training, Health and Safety working group of the Social Dialogue Committee of the European postal sector, chaired by Poste Italiane, continued with implementation of the project entitled Promoting Social Dialogue in the postal sector in an enlarged Europe. The initiative, which is funded by the European Commission, aims to raise awareness of European social dialogue among European postal service providers and labour unions, and to analyse the impact of digitalisation in the postal sector, with particular reference to training and retraining programmes.
Poste Italiane considers workplace health and safety to be a fundamental value, to be considered by everyone in the performance of their everyday duties. Poste Italiane has identified organisational responsibilities and adopted specific policies to ensure appropriate management of this issue.
In accordance with the Group’s policy, each employer has approved the policy for its production unit, and made it available to all workers.
In 2017, an important framework agreement was signed with the Ministry of the Interior, aimed at consolidating collaboration with the Postal and Communications Police on security matters to prevent and combat illegal activities, such as fraud and cyberattacks perpetrated against users of the financial, postal, logistics and insurance services offered by the Group.
Vehicle safety As part of the process of modernising its corporate fleet, Poste Italiane is gradually introducing vehicles equipped with the Black Box system, consisting of technological equipment aimed at collecting data regarding identification of a vehicle’s geographical position, detection of accidents and reconstruction of their dynamics, refuelling stops, and reading the badge of an employee who is picking up a vehicle or when a vehicle enters and leaves a workshop. This device also enables monitoring of the expiry of vehicle maintenance operations, and the drawing up of a precise schedule. The Black Box system is also a useful deterrent against vehicle theft and the resulting damage or inconvenience caused to customers.
Poste Italiane’s Technology Campus includes the Business Control Centre (BCC), where business processes are monitored to prevent damage and malfunctions, and to guarantee the quality of services and the protection of transactions, products, customers and staff. Fraud attempts are detected and blocked online and at post offices in the Security Room, in order to guarantee customers’ virtual and physical security. In addition, the Company’s sites are monitored via a network of remote and video surveillance. The system enables the filtering of reports received, and the identification of those for which police intervention is requested.
National security Poste Italiane receives alert messages issued by the Italy Situations Room run by the National Civil Protection Department and is included in the main emergency planning tools, such as the national seismic risk rescue programme and the emergency plan for the Mount Vesuvius-Phlegraean Fields area. The Group also receives weather alert messages from the Central Operations Centre regarding hydrogeological and hydraulic risk, enabling it to ensure information and prevention initiatives are arranged at regional level.
With the Prime Ministerial Directive of 17 February 2017, Poste Italiane was also included in the national alert system for tsunamis generated by earthquakes (SIAM - published in the Official Gazette on 6 June 2017), which, within its area of responsibility, has assigned the Company the task of implementing and managing alerts issued by the Civil Protection Department.
Security training for staff Poste Italiane has brought the Company into line with all the rules and regulations, thus guaranteeing the continuity of existing training programmes and implementing new teaching methods to improve the quality of service provided, with particular reference to managers and supervisors who hold key roles in the organisation of security. Training initiatives based on innovative classroom management techniques were addressed to this particular target group in order to develop further awareness of the role. Training programmes aimed at emergency teams were also strengthened. In 2017, a total of approximately 500,000 hours of training in workplace safety were provided.
Finally, the Company has drawn up an information plan (art. 36 of Consolidated Law 81/08) focused on disseminating knowledge of the protection measures set out in the Risk Assessment Document, which is sent to all personnel who work in Poste Italiane’s main Communications and Logistics and Private Customer production units (the information handbooks have been sent to over 100,000 staff).
Occupational disease rate**** 0.10 0.12 ** no. of injuries/hours worked x 1,000,000. *** no. of days lost due to accidents/hours worked x 1,000. **** no. of cases of occupational disease/hours worked x 1,000,000.
Poste Italiane provides citizens, businesses and the Public Administration with the wealth of skills and experience of its people, which it monitors through guidelines designed to develop talent and provide professional training. Therefore, the Company has identified organisational responsibilities and adopted specific policies to ensure adequate management of the topic.
The percentage of female staff among middle managers and executives is 45%.
Development activities As part of the Human Resources Plan strategy, it is a priority to ensure that the recruitment processes for critical business roles are governed by systems that identify, assess and cultivate the best talent within the Company’s workforce. In this context and in line with the Group’s Personnel Development Guidelines, the Professional Guidance Programme (PGP) and the Managerial Lab (MLAB) continued, involving a total of 459 people in assessment, a skills workshop, feedback to managers and coaching. The aim is to monitor and develop the managerial and professional potential of young staff members and the managerial potential of the best performing managers. Assessment of managers’ potential continued through the Leadership Assessment programme, which involved 18 staff and supplemented the first session held in 2016. Two pilot editions of the Poste Italiane Innovation Storm hackathon project were launched, involving around 100 talented people engaged in the design of innovative projects to support change. A campaign was also carried out to map the technical and specialist skills (Skill Up) of Distribution Centre managers, involving 468 employees in 33 Individual Business Coaching courses dedicated to managers under development. Management Review meetings were held with all department heads to identify the best resources for the definition of succession plans for level 2 positions, and for planning individual growth and development initiatives.
The 2016 performance appraisal process, which was carried out in 2017, involved Poste Italiane’s entire workforce (approximately 135,000 appraisals in total) and 8,300 appraisers. In the period July-September 2017, interim feedback was introduced as an innovative phase of the process. For the first time, all the appraisees were able to access their appraisal form via the Company notice board. A pilot project was also launched which, in addition to appraising direct managers, introduced an appraisal by colleagues with whom they have significant organisational relations.
Professional training programmes In 2017, more than 3.8 million hours of training were provided, including: �� Mandatory courses on Workplace Health and Safety, Privacy, Legislative Decree 231/01 Organisational Model, anti-money laundering and the financing of terrorism.
�� Management training: aimed at strengthening leadership and management effectiveness, with a focus on marketing, performance assessment for lead appraisers, and digital and innovation topics. Poste Italiane also participated in the European “INNOV’AGE in the Postal Sector” project, aimed at promoting an understanding of age management in the postal sector at European level.
New hires will be able to participate in the InPoste System training programme, which is aimed at promoting awareness and understanding of the Group, its businesses and organisational culture, and facilitating their integration.
Average hours of training for employees by gender and category GRI 404-1
Commitment to wellbeing In 2017, Poste Italiane continued actions aimed at consolidating the welfare system, through ongoing initiatives on behalf of the most vulnerable and paying attention to vital social issues. The National Collective Labour Agreement for non-managerial staff of Poste Italiane SpA and of the Group companies to which it applies, which was signed with all the labour unions on 30 November 2017, introduced some important innovations regarding health and welfare. All staff on permanent contracts (including apprentices and new hires who have completed a trial period, if required) may subscribe - at the Company’s expense - to the basic package of the PosteVitaFondosalute Supplementary Health Care Fund, which covers several essential services such as hospitalisation in a treatment centre, compensation for loss of salary in the event of major surgery, highly specialised diagnostics and specialist outpatient visits. The new National Collective Labour Agreement also provides for an increase (from December 2018) in the Company’s contribution to the supplementary pension fund (Fondoposte), which will play an increasingly important role in the working life of future generations and with regard to the delicate matter of protection in the event of illness.
As a “public enterprise” operating in special sectors, Poste Italiane applies the rules of public procurement pursuant to the new Public Procurement Code (Legislative Decree 50/2016, as amended by Legislative Decree 56/2017, the so-called “Corrective Decree”), for the award of contracts to postal services, as per art. 120 of the above Code.
Together with the Code when applicable, these procedures constitute the principal means of ensuring the statutory and regulatory compliance of Poste Italiane’s procurement contracts.
The procedures for awarding contracts are usually carried out via the Procurement Portal (“Poste-procurement”), the web platform used for all procurement activities as well as for management of the Supplier Register. For the purposes of conducting award procedures, the Supplier Register is normally called upon if the related product or service is available from a registered supplier in accordance with the detailed rules for each category of good or service. These rules take into account the specific technical and organisational capabilities of potential suppliers in order to ensure equal access opportunities to the award procedures.
Furthermore, with reference to the organisational risk safeguards associated with procurement activities, the Fraud Management and Security Intelligence function carries out checks, assessment and monitoring of parties and counterparties (checks of a corporate and financial nature and on the assets of companies and their representatives, and an assessment of existing relations with Poste Italiane).The purpose of this activity is to limit the risks deriving from transactions with third parties; to guarantee adequate rotation of suppliers, and to minimise losses deriving from the non-payment of receivables.
The supplier qualification system [GRI 308-1] [GRI 414-1] In 2006, in line with current legislation (art. 134 of the Public Procurement Code), the Group established its own Supplier Register in order to have a pool of suppliers with the capacity to meet the necessary requirements and to adopt definite and transparent selection criteria in the procedures used in the procurement of goods, services and works. Adoption of the Register has enabled simplification of contract award procedures, thus ensuring consistency among the parties selected in each product area and transparency towards the market.
Parties from EU member countries or third-party countries that are signatories of the General Agreement on Tariffs and Trade (GATT) may qualify as suppliers. The Supplier Register is organised into product categories, which are divided into subcategories and classes according to complexity. The categories have a duration of three years. Management of the Register is regulated by the Supplier Register Regulations which govern the qualification system, as well as by the Regulations that govern the qualifica-
tion process for each product category. In terms of environmental sustainability, the system provides for access to the “Cleaning and Sanitation” and “Multiservice” categories, for holders of environmental management system certification in accordance with the UNI EN ISO 14001 standard. For the IT sector, a score is awarded to suppliers who have implemented one or more initiatives aimed at greater corporate sustainability or a Green IT strategy. 160 qualified suppliers have environmental sustainability requirements (20% of the pool of qualified suppliers, which includes around 800 companies). For enrolment in the “Cleaning and Sanitation” and “Multiservice” Register and in the Register for Class IV-bis Works and above, with regard to Social Responsibility and in compliance with Health and Safety regulations, operators must have SA8000 and OHSAS 18001 certification.
The total number of qualified suppliers who meet the social requirements is 150.
In 2018, the Supplier Qualification System Guidelines were approved with the aim of setting out the criteria and methods to be applied in the qualification process for the business operators to be called upon for the award of works, supply and service contracts relating to strategic Group sectors, in line with the provisions of the Supplier Qualification System. In addition, the Supplier Register function was separated from the Procurement function and merged with the Group Risk Governance function.
Additional specific health and safety measures have been introduced into works contracts. The assessments and related measures are contained in the Safety and Coordination Plans (SCP) and in the specific Safety Operational Plans (SOP), with provisions for contract termination in the event of violations of the safety documentation.
Following the signing of the Memorandum with the tax authorities, the contractual standards were supplemented with a specific provision.
Transparency At the end of 2017, Poste Italiane launched the new “Open and Transparent Contracts” portal, with a view to providing ever greater clarity for citizens, and to make public and accessible all information regarding contracts signed by the Company arising from competitive procedures relating to provision of goods and services, of EU relevance, and works subject to the Public Procurement Code, as well as contracts regarding the provision of goods, services and works that are excluded from the Public Procurement Code.
Inclusion Contribute to the process of integration of the most vulnerable groups and promote access to new information technologies and digital literacy (e.g. Education 2.0 in schools).
The Group has always been committed to offering simple insurance and financial products that can be readily understood by the general public and respond to current social needs.
Although Poste Italiane does not have a specific policy at Group level, it has launched a series of initiatives to promote social, financial and insurance inclusion. The Group also complies with the regulations on equal opportunities and has subscribed to the Equal Opportunities Charter, a declaration of intent voluntarily signed by companies of all sizes regarding the dissemination of a corporate culture and inclusive human resources policies, free of any discrimination and prejudice, and capable of valuing talents in all their diversity. The Group’s 2017 Integrated Marketing Plan was drawn up with particular attention paid to the young, elderly and new Italian citizen targets, all customers for whom Poste Italiane wishes to be a qualified partner that is capable of responding to social needs and challenges with specific, simple and user-friendly postal, insurance, financial and telephone products.
�� multi-ethnic post offices, as a meeting point for the predominant ethnic groups in larger cities such as Rome, Milan and Turin.
Financial inclusion of citizens in difficulty In 2017, provision of the service to issue the Carta Acquisti (Social Card), which was launched in 2008, continued.
Following the award of a contract, Poste Italiane, acting as the agent for a temporary consortium set up by Poste - Postel, has entered into an agreement (6 September 2017 - 5 September 2020) with the Ministry of the Economy and Finance regarding integrated management of the Social Card (Carta Acquisti) and the Support for Active Inclusion (SIA) Card. In October 2017, a combined initiative to combat poverty at national level, involving the issue of the REI (Inclusion Income) card, was launched. This enabled applications for the Inclusion Income Card from 1 December 2017 (from 1 November 2017, it was no longer possible to submit an application for the SIA card). With the issue of an Inclusion Income Card, the related benefits became available from 1 January 2018. The integrated management service provides for the issue of an electronic payment card (prepaid ) on which a financial contribution is loaded to support categories of citizens in financial difficulty, who have demonstrated that they meet the requirements set out in the relevant regulations for the type of card concerned.
The main services offered are: �� collection and digitalisation of applications for the Social Card only; �� the issue and distribution of cards; �� periodic top-ups of active/issued cards; �� the issue of cards through the network of enabled post offices; �� the replacement of cards in the event of theft, loss, etc.; �� reporting services; �� the printing of forms (Social Card only) and information material; �� telephone assistance services (Interactive Voice Response); �� services regarding automated text messages for each transaction carried out, and the balance and credit remaining on the card; �� a website providing information.
Percentage of current account holders who are "new Italians" 16.5 17.6
Percentage of Postepay Evolution card holders who are "new Italians" 19.6 20.6 * The young and senior categories include new accounts or cards for both Italians and immigrants, while the figures for new Italians (“immigrants”) also include a portion of young people and senior citizens.
Insurance inclusion The Poste Vita Group is constantly committed to promoting insurance inclusion, by developing specific products such as “Posta protezione Dal Mondo”, which offers foreign citizens legally residing in Italy accident insurance and certain assistance services that guarantee their loved ones compensation in the event of death due to an accident, or a predefined sum in the event of permanent disability of 60% or more following accidents at work or during their free time.
Gender inclusion Due to its size and the significant presence of women, over the years Poste Italiane has responsibly promoted a broader protection of gender equality and maternity in particular, through a series of dedicated initiatives. In this regard, various benefits have been activated, including women-only parking spaces, a telecommuting option and registration of children for summer camps and crèches. In addition, training courses, events, testimonies and inter-company working groups have been held on the topics of diversity management, conciliation and welfare. Poste Italiane also participates in inter-company mentorship projects to promote the professional development of women for managerial roles, management training, skill building and role model training initiatives to promote topics connected with gender balance, and inter-company Welfare Lab programmes to develop and share best practices regarding conciliation and flexibility issues.
The Maam U “maternity as master” project continued, with around 370 registrations with the maam platform. This training course, dedicated to women on maternity leave, may be accessed via a computer tool that enables discovery and practice of soft skills acquired during motherhood (relational, organisational, creative, etc.) to be used in the social and working context. The plan was associated with a new service, called “engage”, aimed at facilitating dialogue, via a dedicated app, between
Although Poste Italiane has no specific policy at Group level, it has always paid attention to the continuous renewal of its fleet with more environmentally-friendly vehicles, such as hybrid cars and electric vehicles, by optimising logistics routes thanks to the latest generation technologies, and by requesting minimum environmental requirements from outsourced transport suppliers, who are required to use vehicles that are at least in the Euro 4 class.
The integrated logistics chain at regional level is divided into two supervisory levels, one for coordination and one for operations. The first is guaranteed by Area Logistics Offices, each of which has regional or multi-regional coverage, that are responsible for ensuring the smooth running of the logistics process, through coordination of operating structures and planning of resources in line with traffic flows, as well as ensuring management and accurate recording of administrative and accounting events. At operating level, each Area Logistics Office consists of: �� Sorting Centres, broken down into Postal Sorting Centres, which are highly automated industrial sites that serve a specific area comprising several provinces, and Priority Centres, which are smaller sites where only “fast” products are manually sorted.
The “Regulations regarding the use and maintenance of company vehicles” provide operating and behavioural instructions to staff using the vehicles, set out the responsibilities and tasks of the central and local vehicle management organisational structures, and define the activities and responsibilities relating to routine and special vehicle maintenance processes.
The corporate fleet, which is used for the delivery of mail and parcels, comprises over 38,000 vehicles at 31 December 2017 and breaks down into the following types: motorcycles and quadricycles, delivery vehicles, vans and light trucks, and saloon cars for service use.
Total vehicles 50,528 38,690 of which: traditional vehicles (no.) 45,176 34,321 alternative vehicles (no.) 5,676 4,693 of which: Bicycles (no.) 324 324
Total energy (GJ) 1,034,862 998,702 * Electricity used to fuel vehicles entirely from renewable sources.
Other types of emissions from outside the Group - Scope 3 (t) 137,488 123,753
Mistral Air aircraft fleet Mistral Air is the Group company that provides air mail transport services for Poste Italiane.
Energy consumption and emissions * of postal and air transport [GRI 302-1; GRI 305-1]
The overall impact of Mobility Management actions in 2017 has enabled a reduction of over 9,000 tonnes of CO2, both in terms of reduced atmospheric emissions and the monetary value of the external economic costs avoided, thus generating a reduction in emissions equal to 38% of the total amount produced.
Green building Minimise the environmental impact of the Group’s offices and buildings, in terms of energy use, water consumption, waste, and raw material consumption. Promote green procurement by incorporating “minimum environmental criteria” in all phases of the goods and services procurement process.
Poste Italiane has identified organisational responsibilities and adopted specific policies to ensure adequate management of this issue.
The commitment to adopt measures aimed at reducing the environmental impact of its activities and raising awareness of people ’s respect for the environment is set out in the Group’s Code of Ethics. Moreover, for several years Poste Italiane has been producing the “Environmental Values Charter”, aimed at everyone who works permanently or temporarily at Group companies, in order to raise awareness of the impact that everyday actions have on the environment. Specifically, organisational oversight of the environmental impacts connected with real estate assets is implemented via the areas of responsibility set up within the organisation, which assigns one central function the task of ensuring compliance with current energy use regulations, monitoring and measuring consumption, identifying areas where savings can be made, and drawing up efficiency drives.
SDA Express Courier and Postel have obtained ISO14001 certification for their environmental management systems.
Poste Italiane allocates annual targets for reducing energy consumption and CO2 emissions relating to electricity and gas consumption and promotes technical and infrastructural energy efficiency measures.
Non-renewable energy 848,114 836,190 of which: Electricity supplied by the National Grid** 94,811 83,377
Total energy (GJ) 2,638,361 2,646,932 * Includes the energy consumption of SDA agencies, amounting to 10,719 GJ. ** Includes the energy of external data centres without where the supply contract is in a third party’s name.
Total emissions 54,283 53,098 * Includes CO2 emissions from external data centres without where the supply contract is in a third party’s name.
In 2017, these initiatives led to savings in natural gas consumption of approximately 20,000 GJ, which corresponds to around 3% of the annual gas consumption of the Group’s real estate facilities.
The Group participates in the EMMS (Environmental Monitoring and Measurement System) project, which is promoted by the International Post Corporation, an association comprising 24 of the world’s leading postal operators that handle around 80% of global traffic volumes. The initiative was launched in 2008 with the aim of monitoring CO2 emissions and assessing the sustainability of the participants’ activities, in order to reduce the impact of postal activities on the environment. The programme now has 20 participating operators (in addition to 18 of the 24 members of IPC, including operators from Brazil and South Africa) which manage a total area of approximately 51,700 square kilometres of buildings they own, a fleet of 576,000 vehicles, and approximately 1,700,000 people.
In 2017, the group of participants reported a 26% reduction in CO2 emissions compared to the 2008 baseline, falling from 8,360 tonnes to 6,458 tonnes of CO2, thus resulting in overall savings of more than 12.7 million tonnes of CO2 over the eight years since the programme was established. The excellent results achieved confirm postal operators’ commitment to reducing environmental impact and bear witness to their growing professionalism and expertise in this area, making EMMS the sector’s first sustainability programme to be based on sharing best practices and a concrete sustainable development model. In 2017, the Group continued its participation the OSCAR (Online Solution for Carbon Analysis and Reporting) project, which was launched by the Universal Postal Union (UPU, a United Nations agency specialising in the postal sector). The project involves a simplified procedure for reporting polluting emissions produced by operators in the 192 UPU member countries, including application of the principles set out in the Greenhouse Gas Inventory Standard for the Postal Sector. The Poste Italiane Group contributes to this monitoring and reports its emissions on an annual basis. In 2017, the Group was ranked in the mediumto -high performance range in terms of environmental sustainability, contributing to the target of reducing direct emissions by approximately 18,000 tonnes of CO2 compared to the previous year.
In the interests of efficient and sustainable waste management and therefore a consequent reduction in waste, Poste Italiane promotes the “virtuous” reuse of assets and equipment the Company deems obsolete but which may still have a “second life”. In 2017, assets such as obsolete electronic equipment (around 2,500 items) and some types of vehicle (around 250) were removed from the waste management cycle and “transferred” to third parties for reuse.
Over the years, communication campaigns have been launched to raise staff awareness of the right behaviour to adopt when disposing waste, in the workplace as well as in the private sphere.
Water The use of water resources is mainly linked to office sanitary facilities. The significance of water consumption derives from the Group’s large number of real estate facilities.
Postel and the materials used In addition to providing digital storage services that enable dematerialisation and electronic document processing, Postel also provides printing services at the centres in Milan, Rome and Genoa, which are equipped with systems for bulk printing (bills, invoices, account statements) and enveloping, with a production capacity of more than 4 billion printed sheets per year. To minimise the impact of paper use, lightweight paper solutions have been adopted as well as envelopes with windows made of biodegradable material that comply with the FSC® (Forest Stewardship Council) Chain of Custody management system, which guarantees the traceability of materials such as wood and its derivatives (pulp and paper) from responsibly managed forests.
GENERAL DISCLOSURES - GRI 102: General Disclosures - Organisational profile, Strategy, Ethics and integrity
Directors’ Report on Operations: 1. Statement from the Chairwoman and the Chief Executive Officer
GRI 102-3 Location of headquarters Directors’ Report on Operations: Back cover
GRI 102-4 Number of countries where the organisation operates, and the names of countries where it has significant operations
GRI 102-5 Ownership and legal form Directors’ Report on Operations: 2. Corporate Governance
Directors’ Report on Operations: 8. Financial review for Poste Italiane SpA Report on Corporate Governance and the Ownership Structure: Section I Governance structure and ownership structure
GRI 102-10 Significant changes during the reporting period (size, structure, ownership, or supply chain)
GRI 102-21 Processes for consultation between stakeholders and the highest governance body on economic, environmental, and social topics. If consultation is delegated, describe to whom it is delegated and how the resulting feedback is provided to the highest governance body
GRI 102-41 Percentage of total employees covered by collective bargaining agreements
GRI 102-19 Process for delegating authority for economic, environmental, and social topics from the highest governance body to senior executives and other employees
Report on Corporate Governance and the Ownership Structure: 14. Other corporate governance procedures (ex art. 123-bis, paragraph 2 d), Consolidated Law on Finance)
GRI 102-28 Processes for evaluating the highest governance body’s performance with respect to governance of economic, environmental, and social topics
Report on Corporate Governance and the Ownership Structure: 6.10 Assessment of the operation of the Board of Directors and Committees
GRI 102-26 Role of highest governance body in the development of strategies, policies, and goals related to economic, environmental, and social topics
GRI 102-29 Highest governance body’s role in identifying and managing economic, environmental, and social topics and their impacts, risks, and opportunities – including its role in the implementation of due diligence processes
Report on Corporate Governance and the Ownership Structure: 6.3 Role and functions (ex art. 123-bis, paragraph 2 d), Consolidated Law on Finance)
Report on Corporate Governance and the Ownership Structure: 7.2 Audit, Risk and Sustainability Committee (formerly Audit and Risk Committee)
GRI 102-31 Frequency of the highest governance body’s review of economic, environmental, and social topics and their impacts, risks, and opportunities
GRI 102-47 A list of the material topics identified in the process for defining the content of the Non-Financial Statement
GRI 102-49 Significant changes in the scope and topic boundaries compared with the previous Non-Financial Statement
GRI 103-1 Explanation of the material topic and the scope of its impacts
GRI 102-50 Reporting period for the information provided (for example, tax year, calendar year)
GRI 305-3 Other types of greenhouse gas (GHG) emissions Scope 3
Non-renewable energy (GJ) 2,783,864 2,937,824 of which: Electricity supplied by the National Grid 94,811 83,377
Total energy (GJ) 4,575,651 4,750,248 * Includes energy relating to real estate facilities, and the energy connected with the road logistics business, passenger transport and air mail.
Other types of emissions from outside the Group - Scope 3 (t) 170,675 157,916 * The factors used to convert fuels into CO2: LPG (1.5704 kgCO2/litre) Natural gas (2.6928 kgCO2/kg) Petrol (kg CO2/litre 2.3839), Diesel (2.74790 kg CO2/litre), Jet fuel (2.4910 kg CO2/litre). Source: Methodology paper Emission Factors 2017 published by the UK Department for Environment Food & Rural Affairs (Defra) and Regulation 601/2012 on the EU ETS system (for calculating CO2 emissions from air transport).
** Poste Italiane acquires renewable energy guarantee of origin certificates for approximately 95% of its electricity consumption. The GRI Sustainability Reporting Standards envisage two calculation methods for Scope 2 emissions – the location-based method and the market-based method. The market-based method (the method used by Poste Italiane) is based on CO2 emissions emitted by the energy suppliers from which, via a contract, the organisation purchases electricity (in this case renewable energy guarantee of origin certificates), and for the remaining 5%, emission factors from the national electricity grid (emission factor: 375 grams of CO2/kWh, source Terna 2015). The location-based method, on the other hand, is based on average emission factors for regional, sub-national or national power generation. Applying the location-based method, the Group’s total Scope 2 emissions in 2016 amount to 199,871 tonnes of CO2, and in 2017 to 198,347 tonnes (emission factor: 375 grams of CO2/kWh Source: Terna 2015.
GRI 404-3 Percentage of employees receiving regular performance and career development reviews
GRI 402-1 Minimum notice periods in the event of corporate reorganisation/restructuring by site, and whether they are included in collective bargaining agreements
Human capital Breakdown by gender Information unavailable It is planned to report this information in future reporting cycles
GRI 405-1 Diversity in the company's governance bodies and among staff
Materiality The choice of topics was based on assesment of economic, social and environmental impacts and their ability to influence stakeholders' decisions and assessments.
Accuracy The information has been provided with notes and comments to enable the performance and results to be correctly assessed.
Clarity The contents have been written in simple and practical language, including for lay people.
Reliability The document requires a separate attestation of conformity from the independent auditors PricewaterhouseCoopers SpA.
The Group has adopted a Group Risk Management model, based on the Enterprise Risk Management (ERM) framework, to form part of its Internal Control and Risk Management System (also “SCIGR”), in line with the requirements of the Corporate Governance Code for listed companies and the relevant national and international best practices.
The GRM function has the following responsibilities: �� to ensure, through a structured and integrated process, the identification, assessment and monitoring of strategic, reputational, operational, regulatory and compliance, financial and insurance risks; �� to ensure the standardisation and integration of the models used and the information flows between the various specialist second level units, Group companies and the oversight bodies, including through the implementation of an integrated, cross-cutting platform for the different areas of risk; �� to promote the dissemination of a risk management culture at all levels within the Group.
The specialist risk management units, in turn, operate in line with Group standards defined by the GRM function, ensuring that information is shared at consolidated level, without affecting compliance with the specific statutory requirements applicable to the various areas of responsibility.
The principal risks resulting from the Group’s activities are described in the Consolidated Non-financial Statement. Information on financial and insurance risks is provided in Poste Italiane Financial Statements for the year ended 31 December 2017 – Risk Management.
(*) Includes the item, “Capitalised costs and expenses” n/s: not significant
Other income from financial activities is up from €599 million in 2016 to €646 million in 2017, primarily due to increased income from the sale of BancoPosta RFC’s available-for-sale financial assets, which is up from the €473 million of 2016 to €547 million. This figure includes €91 million in non-recurring income from the sale of the investment in Mastercard Incorporated (in 2016, non-recurring income included €121 million from the sale of the share in Visa Europe).
Other operating income is up from €478 million in 2016 to €584 million in 2017, including €508 million in dividends from subsidiaries.
Despite a reduction in personnel expenses and the cost of goods and services, total costs are up €39 million from €7,991 million in 2016 to €8,030 million in 2017. This reflects increased provisions for risks and charges, amounting to €178 million, due to a revised estimate of probable liabilities linked to third-party financial products sold in the early 2000s, including €35 million relating to the voluntary action taken to protect customers who had invested in the Europa Immobiliare 1 fund, and the revision of other liabilities due to adjustments and revised estimates of income for previous years.
Income tax expense is down from €154 million for 2016 to €56 million for 2017. The total effective tax rate for 2017 is 8.31%, reflecting an IRES tax rate of 4.98% and an IRAP tax rate of 3.33%. The difference in the effective IRES tax rate compared with the statutory rate (down from 27.5% in 2016 to 24% from 1 January 2017, in accordance with the 2016 Stability Law) primarily regards the fact that 95% of the dividends received from a number of subsidiaries and the realised gain on investments was exempt from taxation, under the participation exemption. Poste Italiane SpA’s profit for the year ended 31 December 2017 is €617 million (€625 million for 2016).
Fixed-term contracts With regard to fixed-term contracts, the Company employed 14,358 people on fixed-term contracts in 2017 (7,036 in 2016), equal to 14,166 FTEs (6,953 FTEs in 2016), all employed pursuant to art. 19, paragraph 1 of Legislative Decree 81/2015. As a result of specific measures establishing quotas limiting the use of such contracts20, the permanent workforce at 1 January 201721 totalled 132,716 (138,236 at 1 January 2016), corresponding to 128,437 FTEs (133,392 at 1 January 2016).
The National Collective Labour Agreement for the non-managerial staff of Poste Italiane of 30 November 2017 establishes limits on the usage that differ from those provided for by law and previously adopted by the Company. In this specific regard, in 2017, the annual average number of fixed-term contracts was 6,54022.
20. Art. 23, paragraph 1 of Legislative Decree 81/2015 establishes, among other things, that employees recruited on fixed-term contracts cannot exceed 20% of a company’s permanent workforce at 1 January of the year in which they are recruited, after rounding up to the nearest whole number should the figure be equal to or above 0.5.
Net invested capital and related funding at 31 December (€m) 2017 2016 Increase/(decrease)
Non-current assets held for sale and discontinued operations - 384 (384) n/s n/s: not significant
Non-current assets of €4,430 million are up €195 million compared with the end of 2016, essentially following acquisition of the investment in FSIA Investimenti Srl for €278 million. Other movements in non-current assets reflect depreciation, amortisation and impairments (including the reversal of impairments) of €480 million and capital expenditure of €402 million, as described in the description of the Group’s non-current assets.
Net working capital at 31 December 2017 amounts to €144 million, an increase of €126 million compared with the end of 2016 and primarily due to a decline in net current tax liabilities, reflecting the reduction in the IRES rate from 1 January 2017.
The increase in net deferred tax assets, amounting to €311 million, largely reflects the net positive effect on taxation of fair value losses on investments in available-for-sale financial assets (a reduction in deferred tax liabilities).
Poste Italiane SpA’s net funds at 31 December 2017 amount to €3,273 million, down on the figure for 31 December 2016 (€4,110 million). This primarily reflects the component linked to fair value measurement of BancoPosta RFC’s available-for-sale financial assets, totalling approximately €979 million, before tax.
Under the guiding principles adopted at Group level, one of the most important aspects of the system is the control environment in which employees carry out their activities and exercise their responsibilities. This environment is based on integrity and other ethical values, the organisational structure, the allocation and exercise of authorities and responsibilities, the separation of duties, staff management and incentive policies, staff expertise and, more in general, the corporate culture. BancoPosta’s control environment is evidenced by: �� the Group Code of Ethics; �� implementation of the Organisational Model required by Legislative Decree 231/2001 and the related corporate procedures; �� the organisational structure of BancoPosta, as reflected in organisational charts, service orders, organisational notices and procedures determining the roles and responsibilities of the various functions; �� the “General Guidelines governing the process of contracting out BancoPosta’s corporate functions to Poste Italiane” which, in implementation of the BancoPosta RFC Regulation, establish the procedures to be used in contracting out BancoPosta RFC’s functions to Poste Italiane in terms of decision-making processes, the minimum content of operating guidelines, levels of services, information flows and control procedures; �� the “Outsourcing Guidelines for BancoPosta RFC”, governing and formalising the process of outsourcing BancoPosta corporate functions to entities external to Poste Italiane’s organisation, identifying the related operational phases and the roles and responsibilities of the various bodies and functions involved in the process; Directors’ report on operations for the year ended 31 December 2017 8. Financial review for Poste Italiane SpA
In compliance with the regulatory requirements contained in the Bank of Italy’s Supervisory Standards and the CONSOB regulation governing the controls to which BancoPosta is subject, in early 2018 BancoPosta’s Internal Auditing function prepared its Annual Report for 2017, the purpose of which is to provide information to the various corporate bodies on the completeness, adequacy, functionality and reliability of the overall system of controls, with specific regard to processes, procedures, information systems and mechanisms applied in the oversight of BancoPosta’s activities. The Report was prepared on the basis of the findings of the audit activities carried out by the function and set out in the Audit Plan for 2017. The report contains information on the outcomes of the audit of the services contracted out by BancoPosta to Poste Italiane function under operating guidelines and the activities outsourced to providers external to the Company.
Internal Auditing has also drawn up the Annual (2018) and Multi-year (2018 - 2020) Audit Plan, based on a risk assessment process designed to ensure adequate coverage of BancoPosta’s Business Process Model, including operational and financial risks, changing aspects of the business, regulatory issues and BancoPosta RFC’s organisational structures. This Plan has been presented to the Board of Statutory Auditors and submitted for the attention of the Board of Directors.
Risk management system BancoPosta RFC has an independent Risk Management unit, responsible for ensuring, in collaboration with the Group Risk Management function, an integrated, retrospective and prospective view of the risk environment and of BancoPosta RFC’s capital and organisational adequacy. Among other things, the function provides a detailed evaluation of the risk profile of the financial products sold to customers and provides the operational and business functions involved in product development and placement with advice and support. It is also responsible for periodic reporting.
During 2017, the Risk Appetite Framework was revised in accordance with the budget. The annual report for 2016 and the programme of activities for 2017 were submitted to the Board of Statutory Auditors, the Audit and Risk Committee and the Board of Directors, as were the ICAAP (Internal Capital Adequacy Assessment Process) report and the Public Risk Report for 2016. These bodies also received quarterly reports on the performance of the effective risk profile versus the determined risk appetite. The principal types of risk to which BancoPosta RFC is exposed in the course of its ordinary activities are described below: �� credit risk (including counterparty risk); �� market risk (including banking book rate risk); �� liquidity risk; �� operational risk.
In terms of the evolution of significant risks, the first quarter of 2017 witnessed an increase in the yields on Italian government securities, resulting in a significant reduction in fair value gains. From the second quarter, the trend was reversed and the yields on 10-year Treasury Notes (BTPs) once again began to fall. This was reflected in unrealised gains, which returned to higher levels, even if still below those of the beginning of the year as a result of sales. The spread between BTPs and German Bunds
Details of the various areas of risk and the methods used for their measurement and prevention are provided in Poste Italiane SpA’s financial statements for the year ended 31 December 2017.
Key performance indicators (*) for the year ended 31 December 2017 2016
(*) The key income ratios normally used reflect the unique nature of BancoPosta RFC and the fact that payments to Poste Italiane functions in reimbursement of costs are classified as “administrative expenses”. The absolute amounts of the ratios are, consequently, irrelevant and should not be used for market comparisons but for analyses over time.
The interest margin amounts to €1,448 million (€1,469 million in 2016) and is the difference between: �� interest earned primarily on investments in government securities and interest-bearing deposits at the MEF, amounting to €1,526 million (€1,543 million in 2016); �� interest expense of €78 million (€74 million in 2016), including €49 million in accrued differentials on Asset Swaps (€33 million in 2016) entered into as part of the wider strategy for actively managing BancoPosta’s portfolio. The increase in differentials paid on derivatives primarily reflects the greater volume of forward start contracts entered into in previous years, with the effects on profit or loss seen in 2017. The overall balance of interest expense includes interest paid to current account holders, totalling €15 million (€20 million in 2016), interest on repurchase agreements of €10 million (€16 million in 2016) and €4 million (in line with the previous year) in interest on deposits used as security for derivative transactions (cash collateral).
Net fee and commission income amounts to €3,564 million (€3,537 million in 2016), reflecting: �� fee and commission income of €3,629 million (€3,603 million in 2016), including €1,566 million linked to the collection of postal savings deposits (€1,577 million in 2016), €1,046 million from transaction banking (€1,082 million in 2016), €743 million (€707 million in 2016) from other services offered to customers (per e.g. insurance broking and the distribution of loan products) and €274 million (€237 million in 2016) relating to e-money services; �� fees and commissions paid, amounting to €65 million (€66 million in 2016), primarily relating to debit/credit card clearing services.
Net other operating expenses of €58 million (€39 million in 2016) primarily relate to operating losses resulting from withdrawals that customers claim not to have made.
Due from customers 7,951 9,004 of which postal current account deposits held at the MEF 6,390 7,499
Available-for-sale financial assets amount to €39.1 billion (€37.3 billion at 31 December 2016) and consist of investments in Italian government securities, securities guaranteed by the Italian government and equity instruments (Visa Incorporated). The increase in debt securities, which are up 5%, is linked is linked to the purchase of new securities in which to invest the increased volume of current account deposits in 2017, which has offset fair value losses. In addition, in view of the macroeconomic environment, the strategy aimed at managing the duration of the portfolio, so as to protect against the exposure of securities to changes in fair value resulting from potential rises in interest rates, continued during the year.
Equity instruments of €41 million are down €63 million following the above sale of the Mastercard Incorporated shares.
They include €6,390 million (€7,499 million at 31 December 2016) in in amounts deposited by private and Public Administration customers and held at the MEF.
The amount due to banks, totalling €5,950 million (€5,799 million at 31 December 2016) primarily regards repurchase agreements amounting to €4,482 million (€5,381 million at 31 December 2016), relating to: �� €3,903 million relating to Long Term Repos entered into with primary counterparties, with the resulting resources invested in Italian fixed income government securities of a matching nominal amount; �� €939 million relating to BancoPosta’s ordinary borrowing operations with primary financial institutions as funding for incremental deposits used as collateral for transactions.
Other liability items amount to €4.8 billion (€5.5 billion at the end of 2016) and include other liabilities of €2.3 billion (€2.2 billion at 31 December 2016), primarily regard tax liabilities in the form of tax withholdings, items in progress that will be settled after the end of the reporting period and amounts payable to other Poste Italiane functions.
BancoPosta RFC’s equity at 31 December 2016 amounts to €2,759 million (€3,386 million in 2016) and, in addition to the initial reserve of €1 billion and retained earnings (€1,059 million), includes the fair value reserve of €115 million, after reflecting fair value losses on investments in available-for-sale financial assets, and profit for the year of €585 million.
On 25 January 2018, Poste Italiane SpA’s Board of Directors approved the Company’s transfer of free reserves of €210 million to BancoPosta RFC in order to restore the leverage ratio to the target level set out in the Risk Appetite Framework23. For this purpose, at the same time, the Chief Executive Officer of Poste Italiane SpA was given the authority to carry out any activities and to negotiate and sign any deeds or documents necessary or appropriate. It was also decided to submit the proposal to strengthen BancoPosta RFC’s capital for approval by an Extraordinary General Meeting of Poste Italiane SpA’s shareholders.
In addition, as in previous years, the strategy of actively managing the securities portfolio, with the aim of stabilising the overall return, will continue.
Related party transactions Information on transactions between BancoPosta and its related parties is provided in Poste Italiane Financial Statements for the year ended 31 December 2017 (BancoPosta RFC’s Separate Report, Part H of the notes).
Information on proceedings and BancoPosta RFC’s relations with the authorities are provided in the section, “Principal relations with the authorities”.
In 2018, the Poste Italiane Group will be engaged in implementing the objectives outlined in the five-year Deliver 2022 Plan, approved by the Board of Directors on 26 February 2018.
The strategic objective of the Group’s Strategic Plan is to achieve physical and digital transformation, taking advantage of market trends and the recovering Italian economy.
With the creation of the new Payments, Mobile and Digital business unit, the Poste Italiane Group aims to become Italy’s leading payments ecosystem, ensuring convergence between payments and mobile technology, and between physical and digital channels, by using existing assets in terms of expertise, customer base and physical and digital networks.
The objective is to contribute to the planned evolution of the payments offering, in order to develop the electronic money and payment services market.
Directors’ report on operations for the year ended 31 December 2017 9. Outlook
In the Insurance Services segment, the Group expects to consolidate its leadership in the life insurance sector, as well as driving growth in the private pensions and property and casualty sectors.
Implementation of the above-mentioned Strategic Plan objectives will be supported by an Investment Plan, amounting to €2.8 billion in the period 2018-2022, equal to 5% of sales revenue (4% in the previous 2015-2017 period). 61% of the investment will be allocated to information technology, 23% to the real estate sector and 16% to other projects, primarily relating to reorganisation of processes in the Mail, Parcels and Distribution segment.
The additional element enabling achievement of the Plan’s objectives regards the forecast trend for overall personnel expenses, which are expected to fall over the life of the Plan. It is estimated that the workforce will be reduced by around 15,000, also taking into account the recruitment of around 10,000 new staff. Indeed, the reduction in the workforce is due to the initiative launched by the Company in recent years, aimed at bringing forward generational turnover through voluntary early retirement schemes.
Autorità per le Garanzie nelle Comunicazioni (AGCom - the Italian Communications Authority) With regard to quantification of the cost of the Universal Service, in September 2017, the regulator published Resolution 298/17/CONS relating to its assessment of the net cost of the universal postal service incurred by the Company for 2013 and 2014 and the applicability of the mechanism for allocating such cost. In detail, the regulator has assessed the cost of providing the universal service for 2013 and 2014 to be €393 million and €409 million, respectively, compared with revenue of €343 million and €277 million recognised in Poste Italiane SpA’s statement of profit or loss in previous years. The regulator has also determined that the cost of providing the universal service for 2013 and 2014 is unjustified and that the compensation fund to cover the cost for these years, provided for in art. 10 of Legislative Decree 261/1999, has not been established. With regard to the method used to calculate the net cost, on 6 November 2017 the Company appealed against this resolution to the Lazio Regional Administrative Court, before which Poste Italiane’s appeal against Resolution 412/14/CONS, which verified the net cost for 2011 and 2012, is still pending24.
On 27 October 2017, the Authority announced that it had initiated the net cost verification procedure for 2015 and 2016.
In addition, in accordance with the above Resolution, the Company has agreed a new formula for the distribution of printed publications with the regulator. This will cover delivery of publications to subscribers in the areas in which the alternate day delivery model is being implemented.
Directors’ report on operations for the year ended 31 December 2017 10. Principal relations with the authorities
which support the legality of the obligations laid down by the legislation in question regarding couriers and road hauliers insofar as they provide postal services. A ruling is awaited. Regarding the right to direct access to the universal postal network, on 18 October 2017 the regulator published Resolution 384/17/CONS containing “Changes to the provisions governing access to Poste Italiane’s postal network and infrastructure”, establishing a new regime for access to the universal postal network based on the following points: i. retention of the obligation to provide equal and reasonably free access throughout the country25, in addition to – in postcodes without the presence of an alternative operator – an obligation to provide access in accordance with conditions based on the effective pertinent costs incurred, after appropriate efficiencies; ii. obligations to give third-party operators access to PO boxes26 located at post offices and to ensure market transparency in the event of changes to postcodes; iii. definition of the volume threshold beyond which it is assumed that the service for returning other operators’ mail that has finished up in the Poste Italiane network is an “access mail collection” service; iv. definition, with a subsequent ruling, of a test of the replicability of Poste Italiane’s offerings regarding multi-items deliveries to large private customers or formulated within the scope of public tenders.
With reference to Resolution 621/15/CONS regarding the “Contract terms and conditions regarding the return of items of mail entrusted by senders to other postal operators that finish up in Poste Italiane’s network”, given the financial impact this ruling may have on Poste Italiane – especially the possibility of only being able to recover additional costs with the new rates –, the Company appealed the ruling before the Lazio Regional Administrative Court. In September 2016, the Court published its judgment, upholding the appeal insofar as it relates to the principle under which the additional costs alone may be recovered and establishing Poste Italiane’s right to recover the full cost of the service through the prices charged. Subsequently, AGCom, Nexive and GPS appealed to the Council of State which, in September 2017, upheld the appeal and the legality of the Resolution.
With another appeal before the Lazio Regional Administrative Court, for which Poste Italiane entered an appearance before the court, GPS has also contested AGCom’s prohibition against use of the term “stamp” to indicate the “stickers” used by GPS. This appeal was rejected by the Regional Administrative Court on 26 July 2017, and the deadline for appealing to the Council of State has expired.
In addition, on 7 July 2017, the Company applied to AGCom for permission to reformulate the rates charged for the ordinary international parcel service for various destination areas. The application was accepted by the regulator and the new rates came into effect from 11 September 2017.
25. Other postal operators may access the collection network at Sorting Centre level for outbound sorting, or as an alternative to the delivery network at Sorting Centre level for inbound sorting.
On 4 June 2015, the AGCM launched an investigation (SP/157) pursuant to art.8, paragraph 2-quater of Law 287/90, aimed at ascertaining whether actions taken by Poste Italiane were designed to prevent H3G SpA (now WindTre SpA) from accessing the post office network. Requests to participate in the investigation from Fastweb SpA and Vodafone Omnitel BV, as well as PosteMobile, were accepted. With the ruling adopted at a meeting held on 16 December 2015, the Authority deemed that Poste Italiane failed, when requested, to offer a competitor of its subsidiary, PosteMobile, equal access to goods and services that are exclusively available from Poste Italiane, as they form part of the activities carried out within the scope of the Universal Postal Service. The Authority issued a warning to Poste Italiane that it should desist from such conduct in the future, but did not impose any fine.
Poste Italiane and PosteMobile lodged an appeal against this ruling before the Lazio Regional Administrative Court, which rejected the appeals lodged by Poste Italiane and Poste Mobile, whilst confirming the principle, backed by Poste Italiane and expressly approved by the AGCM, under which the obligation established by art. 8, paragraph 2-quater of Law 287/90 regards equality of treatment. As a result, H3G’s request was unlawful, as it aimed to limit access to certain areas of Poste Italiane’s network and was not interested in obtaining treatment equal to that applied by Poste Italiane to its subsidiary, Poste Mobile27.
In June 2016, the AGCM notified Poste Italiane of the launch of investigation A493 pursuant to art. 14 of Law 287/90, aimed at determining whether behaviour towards Nexive SpA, in multi-item ordinary mail delivery markets, constitutes an abuse of its dominant market position as per art. 102 of the TFEU.
On 13 December 2017, the Authority handed down the final ruling of the investigation, notified on 15 January 2018, by which an infringement regarding abuse of dominant position was ascertained, with a warning to the Company to refrain from similar conduct in the future. The same ruling imposed an administrative fine which was limited – compared with the Authority’s previous fines – to 2% of turnover and discounted in relation to the compliance obligations undertaken in advance by Poste Italiane and positively assessed by Nexive, amounting to €23 million. The AGCM set a 60-day deadline for submitting the compliance report.
27. In fact, in its ruling of 14 September 2016, the AGCM clarified that, at that time, there were no grounds to justify action pursuant to Law 287/90, as art. 8, paragraph 2-quater of Law 287/90 does not establish a generic obligation to grant access to the network on ad hoc terms, but an obligation to grant access on equivalent terms to those applied to subsidiaries.
Bank of Italy In 2017, the Bank of Italy conducted an inspection pursuant to art. 54 of Legislative Decree 385 of 1993, with the aim of assessing the governance, control and operational and IT risk management systems in relation to BancoPosta’s operations. The inspection began on 10 February 2017 and ended on 5 May 2017. The related Inspection Report was issued on 20 July 2017. Poste Italiane responded within the required deadline by submitting its views in September 2017 and launching the related compliance initiatives.
In addition, on 28 September 2017, the Bank of Italy began an inspection pursuant to art. 53 of Legislative Decree 231/2007, again with regard to BancoPosta’s operations. The inspection related to money laundering prevention at a sample of post offices. The process, having the nature of a follow-up to the inspection conducted in 2015, aimed to assess the progress made in implementing the compliance initiatives communicated to the Bank.
Istituto per la Vigilanza sulle Assicurazioni (IVASS - the insurance regulator) On 27 September 2017, IVASS sent Poste Vita the results of the inspection conducted at its premises pursuant to art. 189 of the Private Insurance Code (Legislative Decree 209 of 7 September 2005) in 2017. The focus of the inspection was “an audit of the best estimate of liabilities and the assumptions used in computing such liabilities and solvency capital requirements (SCR), including on a prospective basis”. Finding that the degree of implementation of the Solvency II framework was satisfactory overall, the regulator did not identify any specific shortcomings, and issued a partially favourably opinion, making a number of points and observations. Therefore, on 25 October 2017 the company submitted its considerations regarding the investigations and corrective measures required by the inspection report to IVASS, and planned a series of activities aimed at implementing the improvement initiatives recommended by the Authority. To date, Poste Vita’s implementation of the planned actions is on schedule.
With notification on 17 February 2017, the Data Protection Authority initiated proceedings against Poste Italiane requesting it to provide all useful information to enable it to assess reports submitted by certain local labour unions, which complained about the unlawful processing of the personal data of Poste Italiane staff using the queue management system, by displaying operators’ first names above their workstations at post office counters.
At the same time, the Data Protection Authority, on completing the investigation into the reports, initiated an independent procedure before the Inspections and Sanctions Department aimed at assessing “the existence of administrative violations by the data controller”. At the end of the sanctions procedure, the Data Protection Authority, via a ruling notified on 19 January 2018, found that Poste Italiane had “violated art. 13 of the Italian Civil Code, sanctioned by art. 161 of the same Code, for having processed personal data without having provided the persons concerned with adequate information”, and imposed a reduced fine of €24,000, which was paid on 19 February 2018.
With the aim of ensuring the transparency and substantial and procedural correctness of transactions with related parties and connected persons, Poste Italiane has adopted “Guidelines for the management of transactions with related and connected parties”, approved by Poste Italiane SpA’s Board of Directors in July 2015. The Guidelines have been drawn up in compliance with the principles established by the CONSOB in the Regulation adopted with Resolution 17221 of 12 March 2010 and Announcement DEM/10078683 of 24 September 2010.
Directors’ report on operations for the year ended 31 December 2017 11. Other information
At a meeting on 13 December 2017, the Board of Directors, having obtained the consent of the Related and Connected Parties Committee, authorised signature of the agreement with Cassa Depositi e Prestiti governing the collection and distribution of Postal Savings products, by BancoPosta on behalf of CDP, for the three-year period 2018-2020. Given the value of the agreement, which over the related term (3 years) will range from €4.65 to €5.55 billion, and the fact that both Poste Italiane and CDP are controlled by the Ministry of the Economy and Finance, the transactions is classed as a “related party transaction of greater significance” pursuant to CONSOB regulations and the Bank of Italy regulations applicable to BancoPosta RFC.
28. MPS Capital Services is 99.97% owned by Banca Monte dei Paschi di Siena SpA, which is in turn controlled by the Ministry of the Economy and Finance through its 52% interest in the bank.
12. Summary of the resolutions passed by the Annual General Meeting held in ordinary and extraordinary session
The Annual General Meeting of Poste Italiane SpA’s shareholders, held in Rome in single call on 29 May 2018 in the Auditorium Capitalis at the Palazzo dei Congressi, Viale della Pittura 50, adopted the following resolutions.
The ordinary session: 1. approved Poste Italiane SpA’s financial statements for the year ended 31 December 2017; acknowledgement of the results reported in the Poste Italiane Group’s consolidated financial statements for the year ended 31 December 2017, which report profit for the year of €689 million; 2. resolved to: i. appropriate BancoPosta RFC’s profit for the year of €584,979,647 to be put at the Company’s disposal; ii. appropriate Poste Italiane SpA’s profit for 2017, amounting to €616,965,039, as follows: • €548,566,200 to pay shareholders a dividend of €0.42 per share, payable to the holders of each of the 1,306,110,000 ordinary shares in issue at the ex dividend date of 18 June 2018, • €68,398,839 to “Retained earnings”; iii. pay the above dividend of €0.42 per ordinary share for 2017 – before any applicable taxation – from 20 June 2018, with an ex dividend date of 18 June 2018 for coupon number 3 and a record date (defined in accordance with art. 83-terdecies of Legislative Decree 58 of 24 February 1998 and art. 2.6.6, paragraph 2 of the Regulations for the Markets organised and managed by Borsa Italiana SpA), of 19 June 2018; 3. voted in favour of the section of the Remuneration Report that illustrates the Company’s remuneration policy for Directors, the General Manager and Key Management Personnel, for 2018, also approving the specific part of the Remuneration Report related to BancoPosta RFC; 4. approved the equity-based plans reserved for BancoPosta RFC’s Material Risk Takers; 5. granted the Board of Directors authority to purchase and subsequently dispose of up to a maximum of 65.3 million of Poste Italiane’s shares, representing approximately 5% of the share capital, for a total outlay of up to €500 million. The purchase of the Company’s own shares was authorised for 18 months from the date of the resolution. On the other hand, no time limit has been set for disposal of the shares purchased. The Annual General Meeting also defined the purposes, terms and conditions of the purchase and disposal of the Company’s own shares; 6. resolved, at the proposal of the Board of Statutory Auditors, to pay additional fees to the independent auditor for the financial years 2017-2019, following the entry into effect of new accounting standards.
Alternative performance indicators In keeping with the guidelines published by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415), in addition to the financial disclosures required by IFRS and used in preparing the financial statements for the year ended 31 December 2017, Poste Italiane has included a number of indicators in this report that have been derived from them. These provide management with a further tool for measuring the Group’s performance. As a result of the organisational changes introduced in 2017, and the new strategic guidelines set out in the “Deliver 2022” Strategic Plan presented to the financial community on 27 February 2018, the Group has revised the way it assesses and reports on the performance of its business in 2017. As a result of this revision, the operating segments identified for the purposes of this Annual Report for 2017 are: Mail, Parcels and Distribution; Payments, Mobile and Digital; Financial Services; Insurance Services.
The following alternative performance indicators are used: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) – this is an indicator of a company’s operating profit before non-operating financial expenses and taxation, and depreciation, amortisation and impairments of non-current assets and investment property.
GROUP NET (DEBT)/FUNDS - the sum of financial liabilities, technical provisions for the insurance business, financial assets, technical provisions attributable to reinsurers, cash and deposits attributable to BancoPosta and cash and cash equivalents.
This indicator is also shown separately for each operating segment before adjusting for intersegment transactions.
The figures shown in the tables below reflect the financial and operational indicators (as deduced from the related reporting packages) of the principal Group companies, prepared in accordance with International Financial Reporting Standards (IFRS) and approved by the boards of directors of the respective companies.
(*) From 1 April 2017, the spin-off of the consortium unit from Postecom SpA to Postel SpA is effective for legal, tax and accounting purposes. n/s: not significant
(*) During the year, the company paid dividends totalling €17 million.
(*) During the year, the company paid dividends totalling €21 million. n/s: not significant
Detailed table of contents POSTE ITALIANE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 2. Basis of preparation andsignificant accounting policies 142 2.1 Compliance with ias/IFRSs 142 2.2 Basis of preparation 142 2.3 Summary of significant accounting policies and measurement criteria 143 2.4 Basis of consolidation 157 2.5 Use of estimates 158 2.6 Determination of fair value 164 2.7 New accounting standards and interpretations and those soon to be effective 167 3. Material events duringthe year 176 3.1 Principal corporate actions 176 3.2 Other material events 179 4. Poste Italiane group for the year ended 31 december 2017 180 4.1 Consolidated financial statements 182 4.2 Notes to the statement of financial position 189 4.3 Notes to the statement of profit or loss 229 4.4 Operating segments 247 4.5 Related party transactions 250
The Poste Italiane Group (the “Group”) provides a universal postal service in Italy as well as integrated communication, logistics, financial and insurance products and services throughout the country via its national network of approximately 13,000 post offices.
The financial statements for the year ended 31 December 2017 mark a change in the presentation of the Group’s businesses. Four new operating segments have been identified: (i) Mail, Parcels and Distribution, (ii) Payments, Mobile and Digital, (iii) Financial Services and (iv) Insurance Services. The change was rendered necessary in order to bring presentation of the operating segments into line with the Group’s new strategic guidelines, as set out in the Strategic Plan for the period 20182022 approved by Poste Italiane SpA’s Board of Directors on 26 February 2017, and, in particular, with management’s new approach to assessing performance and making decisions. In particular, following the creation of the Payments, Mobile and Digital function during 2017, on 25 January 2018, Poste Italiane SpA’s Board of Directors decided to submit the proposed separation and transfer of certain assets, contractual rights and authorisations from BancoPosta RFC to a new e-money and payment services unit to be set up within PosteMobile SpA, for approval by shareholders. The transaction is subject to authorisation from the Bank of Italy.
The above changes are reflected in the consolidated financial statements for the year ended 31 December 2017, both in the statement of profit or loss, in which the Group’s revenue from ordinary activities is presented in a different manner, and in the note on operating segments, including the allocation of the Group’s activities and companies to the various segments.
The Mail, Parcels and Distribution segment includes letter post, express delivery, logistics, parcels and philately, in addition to the activities conducted by various units of Poste Italiane SpA for other segments in which the Group operates. The newly formed Payments, Mobile and Digital segment includes revenue from payment services (as an outsourcing partner), e-money products and the services provided by PosteMobile SpA. Financial Services regard the activities of BancoPosta, which include the collection of all forms of savings deposits from the public, the provision of payment services (of which some outsourced to the Payments, Mobile and Digital segment), foreign currency exchange, the promotion and arrangement of loans issued by banks and other authorised financial institutions, the provision of investment services and the activities of BancoPosta Fondi SpA SGR. Insurance Services regard the activities of Poste Vita SpA, which operates in ministerial life assurance Classes I, III and V, and of its direct subsidiaries, Poste Assicura SpA, which operates in non-life insurance, and Poste Welfare Servizi Srl, which provides services to the segment in question.
Further details are provided in Material events during the year (note 3) and Operating segments (note 4.4).
BancoPosta RFC’s Separate Report, which forms an integral part of Poste Italiane SpA’s financial statements, is prepared in accordance with the specific financial reporting rules laid down by the applicable banking regulations, is dealt with separately in this Section.
During 2017, an internal review of the disclosures provided in Poste Italiane’s financial statements was completed, followed by a revision of both the structure and form of presentation of the content, and the degree of detail provide for the various items. The revision of the content of the disclosures was carried out in full compliance with the accounting standards in force, and in line with recent international guidance regarding application of the materiality concept in financial reporting in relation to providing stakeholders with an understanding of the Group’s results of operations and financial position.
To help in reading the financial statements and render them comparable with the past, a brief summary of the changes made is provided below: �� A new section on Material events during the year (note 3) has been added. This provides information on events within the Group and in the external environment that have had a material impact on the results of operations and financial position at the end of the reporting period.
30. Net of intra-group fees paid to Poste Italiane’s distribution network. 31. The individual components that contribute to the net result from insurance activities will continue, in the statement of profit or loss for the year, to influence movements in the same items presented until 2016 and to be shown separately under the new revenue item. The new form of presentation is easily reconstructed and traced starting from historical data, as it has not led to any change in key performance indicators, such as operating profit or profit for the year.
2. Basis of preparation and significant accounting policies 32. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period (IAS 1 (Revised), paragraph 68).
The annual accounts are prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and endorsed by the European Union (“EU”) in EC Regulation 1606/2002 of 19 July 2002, and in accordance with Legislative Decree 38 of 28 February 2005, which introduced regulations governing the adoption of IFRS in Italian law.
The statement of financial position has been prepared on the basis of the “current/non-current distinction”32. In the statement of profit or loss, expenses are classified according to their nature. The indirect method33 has been applied in preparation of the statement of cash flows.
In order to allow comparison on a like-for-like basis with amounts for the year ended 31 December 2017, the allocation of the Group’s activities and companies to operating segments has changed and certain amounts and notes for the comparative period have been reclassified.
34. The tax authorities have issued regular official interpretations only in respect of certain of the tax-related effects of the measures contained in Legislative Decree 38 of 28 February 2005, Law 244 of 24 December 2007 (the 2008 Budget Law) and the Ministerial Decree of 1 April 2009, implementing the 2008 Budget Law, which introduced numerous changes to IRES and IRAP. The MEF Decree issued on 8 June 2011 contains instructions regarding the coordinated application of EU-endorsed international accounting standards coming into effect between 1 January 2009 and 31 December 2010, in addition to regulations governing determination of the tax bases for IRES and IRAP.
Property and any related fixed plant and machinery located on land held under concession or sub-concession, which is to be returned free of charge to the grantor at the end of the concession term, are accounted for, based on the nature of the asset, within property, plant and equipment and depreciated on a straight-line basis over the shorter of the useful life of the asset and the residual concession term.
Gains and losses deriving from the disposal or retirement of an asset are calculated as the difference between the disposal proceeds and the net carrying amount of the asset retired or sold, and are recognised in profit or loss in the period in which the transaction occurs.
Investment property Investment property relates to land or buildings held with a view to earn rental or lease income or for capital appreciation or both; in both cases such property generates cash flows that are largely independent of other assets. The same accounting treatment is applied to investment property as to property, plant and equipment.
An impairment loss is recognised in profit or loss for the amount by which the net carrying amount of the asset, or the CGU to which it belongs, exceeds its recoverable amount. In particular, if the impairment loss regards goodwill and is higher than the related carrying amount, the remaining amount is allocated to the assets included in the CGU to which the goodwill has been allocated, in proportion to their carrying amount35. Except in the case of goodwill, if the impairment indicators no longer exist, the carrying amount of the asset or CGU is reinstated and the reversal recognised in profit or loss. The reversal must not exceed the carrying amount that would have been determined had no impairment loss been recognised and depreciation or amortisation been charged.
35. If the amount of the impairment loss is greater than the carrying amount of the asset or CGU, in accordance with IAS 36, no liability is recognised, unless recognition of a liability is required by an international accounting standard other than IAS36.
�� Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and primarily regard amounts due from customers, including trade receivables. They are included in current assets, except for those with maturities greater than twelve months after the end of the reporting period, which are classified as non-current assets. These assets are carried at amortised cost37 using the effective interest rate method. If there is objective evidence of impairment, the asset is written down to the present value of the estimated future cash flows, with such impairment loss being recognised in profit or loss.If in subsequent periods the conditions which led to the impairment no longer exist, the carrying amount of the asset is reinstated on the basis of the value that would have resulted from application of the amortised cost method. The estimation procedure adopted in determining provisions for doubtful debts, or operating revenue to be so allocated, primarily reflects the identification and measurement of elements resulting in specific reductions in the value of individually significant assets. Financial assets with similar risk profiles are subsequently measured collectively, taking account, among other things, of the age of the receivable, the nature of the counterparty, past experience of losses and collections on similar positions and information on the related markets.
36. This is possible for transactions carried out on organised markets (the “regular way”). 37. The amortised cost of a financial asset or liability means the amount recognised initially, less principal repayments and plus or minus accumulated amortisation, using the effective interest method, of the difference between the initial amount and the maturity amount, after reductions for impairment and insolvency. The effective interest rate is the rate that exactly discounts contractual (or expected) future cash payments or receipts over the expected life of the asset or liability to its initial carrying amount. Calculation of amortised cost must also include external costs and income directly attributable to the asset or liability on initial recognition.
�� Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and maturities that the Group has a positive intention and ability to hold to maturity. These assets are carried at amortised cost using the effective interest method, adjusted to reflect any impairment loss. The same policies as described in relation to loans and receivables are applied if there is impairment.
IAS 39 allows, in addition to individual assets and liabilities, the designation of a cash amount, representing a group of financial assets and liabilities (or portions thereof) as the hedged item in such a way that a group of derivative instruments may be used to reduce exposure to fair value interest rate risk (a so-called macro hedge). Macro hedges cannot be used for net amounts deriving from differences between assets and liabilities. Like micro hedges, macro hedges are deemed highly effective if, at their inception and throughout the term of the hedge, changes in the fair value of the cash amount are offset by changes in the fair value of the hedges, and if the effective results fall within the interval required by IAS 39.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges after initial recognition is recognised in a specific equity reserve, with movements in the reserve accounted for in “Other comprehensive income” (the “Cash flow hedge reserve”). A hedging transaction is generally considered highly effective if, both at inception of the hedge and on an ongoing basis, changes in the expected future cash flows of the hedged item are substantially offset by changes in the fair value of the hedging instrument. If the hedging transaction is not fully effective, the gain or loss arising from a change in fair value relating to the ineffective portion is recognised in profit or loss for the period. Amounts accumulated in equity are recycled to profit or loss in the period in which the hedged item affects profit or loss. In particular, in the case of hedges associated with a highly probable forecast transaction (such as the purchase of fixed income debt securities), the reserve is reclassified to profit or loss in the period or in the periods in which the asset or liability, subsequently accounted for and connected to the aforementioned transaction, will affect profit or loss (for example, an adjustment to the return on the security).
Classification of receivables and payables attributable to BancoPosta RFC Receivables and payables attributable to BancoPosta RFC are treated as financial assets and liabilities if related to BancoPosta’s typical deposit-taking and lending activities, or services provided under authority from customers. The related operating expenses and income, if not settled or classifiable in accordance with Bank of Italy Circular 272 of 30 July 2008 – The Account Matrix, are accounted for in trade receivables and payables.
In the event of application of the own use exemption, the commitments assumed are reported in note 11 Additional information - Commitments.
the tax expense or tax losses for the period for each company included in the consolidation, taking account of any withholding tax or advances paid. Poste Italiane SpA posts its IRES tax expense to income taxes for the period, after adjustments to take account of the positive or negative impact of tax consolidation adjustments. Should the reductions or increases in tax expense deriving from such adjustments be attributable to the companies included in the tax consolidation, Poste Italiane SpA attributes such reductions or increases in tax expense to the companies in question. the economic benefits deriving from the offset of tax losses transferred to the consolidating entity by the companies participating in the tax consolidation arrangement are recognised in full by Poste Italiane SpA. Other taxes not related to income are included in “Other operating costs”.
Inventories Inventories are valued at the lower of cost and net realisable value. The cost of interchangeable items and goods for resale is calculated using the weighted average cost method. In the case of non-interchangeable items, cost is measured on the basis of the specific cost of the item at the time of purchase. The value of the inventories is adjusted, if necessary, by provisions for obsolete or slow moving stock. When the circumstances that previously led to recognition of the above provisions no longer exist, or when there is a clear indication of an increase in the net realisable value, the provisions are fully or partly reversed, so that the new carrying amount is the lower of cost and net realisable value at the end of the reporting period. Assets are not, however, recognised in the statement of financial position when the Group has incurred an expense that, based on the best information available at the date of preparation of the financial statements, is deemed unlikely to generate economic benefits for the Group after the end of the reporting period.
In the case of properties held for sale40, cost is represented by the fair value of each asset at the date of acquisition, plus any directly attributable transaction costs, whilst the net realisable value is based on the estimated sale price under normal market conditions, less direct costs to sell.
Long-term contract work is measured using the percentage of completion method, using cost to cost accounting41.
The European Emissions Trading System, which works on the basis of the cap and trade principle, has capped annual greenhouse gas emissions at European level. This corresponds to the issue, free of charge, of a set number of emission allowances by the competent national authorities. During the year, depending on the effective volume of greenhouse gas emissions produced with respect to the above cap, each company has the option of selling or purchasing emission allowances on the market.
The issue, free of charge, of emission allowances involves a commitment to produce, in the relevant year, a quantity of greenhouse gas emissions in proportion to the emission allowances received: this commitment is accounted for in the memorandum accounts based on the fair value of the emission allowances at the time of allocation. At the end of the year, the commitment is reduced or derecognised in proportion to the greenhouse gas emissions effectively produced and any residual value is reported in the section, “Additional information”, in the Annual Report. The purchase and sale of emission allowances are accounted for in profit or loss in the year in which the transaction occurs. At the end of the year, any surplus emission allowances deriving from purchases are accounted for in closing inventory at the lower of cost and net realisable value. Any surplus emission allowances allocated free of charge are not accounted for in closing inventory. In the event of a shortfall in emission allowances the resulting charge and related liability are accounted for at the end of the year at fair value.
40. These are properties held by EGI SpA and not accounted for in “Investment property” as they were purchased for sale or subsequently reclassified as held for sale. 41. This method is based on the ratio of costs incurred as of a given date divided by the estimated total project cost. The resulting percentage is then applied to estimated total revenue, obtaining the value to be attributed to the contract work completed and accrued revenue at the given date. 42. The subsidiary, Mistral Air Srl.
Cash and cash equivalents Cash and cash equivalents refer to cash in hand, deposits held at call with banks, amounts that at 31 December 2017 the Parent Company has temporarily deposited with the MEF and other highly liquid short-term investments with original maturities of ninety days or less. Current account overdrafts are accounted for in current liabilities.
Non-current assets and net assets in a disposal group held for sale are recognised as discontinued operations if one of the following conditions is met: i) they represent a major line of business or geographical area of operation, ii) they are part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation, or, iii) they are subsidiaries acquired exclusively with a view to resale. The profit or loss from discontinued operations, and any gains or losses following the sale, are presented separately in a specific item in profit or loss, after the related taxation, with comparatives.
If the commitment to a plan to sell is assumed after the end of the reporting period, and/or the asset or disposal group can only be included in the transaction under conditions that are different from the current conditions, the Group does not proceed with reclassification and discloses the necessary information.
In the case of contracts for separately managed accounts with discretionary participation features43 (as defined in Appendix A of IFRS 4), IFRS 4 makes reference to national GAAP. The contracts are classified as “financial”, but accounted for as “insurance ” as follows: �� premiums, movements in technical provisions and other claims expenses are recognised in the same way as the insurance contracts described above; �� unrealised gains and losses attributable to policyholders are assigned to them and recognised in technical provisions (deferred liabilities payable to policyholders) under the shadow accounting method (IFRS 4.30).
43. A contractual right of investors to receive returns on the separately managed account.
Post-employment benefits Post-employment benefits are of two types: �� Defined benefit plans Defined benefit plans include employee termination benefits payable to employees in accordance with article 2120 of the Italian Civil Code. For all companies with at least 50 employees, covered by the reform of supplementary pension provision, from 1 January 2007 vesting employee termination benefits must be paid into a supplementary pension fund or into a Treasury Fund set up by INPS. Accordingly the company’s defined benefit liability is applicable only to the provisions made up to 31 December 200644. In the case of companies with less than 50 employees, to which the reform of supplementary pension provision does not apply, vested employee termination benefits continue to represent a defined benefit liability for the company. Under these plans, given that the amount of the benefit to be paid is only quantifiable following the termination of employment, the related effects on profit or loss or the financial position are recognised on the basis of actuarial calculations in compliance with IAS 19. In particular, the liability to be paid on cessation of employment is calculated using the projected unit credit method and then discounted to recognise the time value of money prior to the liability being settled. The liability recognised in the financial statements is based on calculations performed by independent actuaries.The calculation takes account of termination benefits accrued for the period of service to date and is based on actuarial assumptions. These primarily regard: demographic assumptions (such as employee turnover and mortality) and financial assumptions (such as rate of inflation and a discount rate consistent with that of the liability). In the case of companies with at least 50 employees, as the company is not liable for employee termination benefits accruing after 31 December 2006, the actuarial calculation of employee termination benefits no longer takes account of future salary increases. Actuarial gains and losses are recognised directly in other comprehensive income at the end of each reporting period, based on the difference between the carrying amount of the liability and the present value of the Group’s obligations at the end of the period, due to changes in the actuarial assumptions, are recognised directly in Other comprehensive income.
45. Diluted earnings per share are calculated by taking into account the potentially dilutive effect of all instruments which can be converted into ordinary shares issued by the Parent Company. The calculation is based on the ratio of profit attributable to the Parent Company, adjusted to take account of any costs or income deriving from the conversion, net of any tax effect, and the weighted average number of shares outstanding, assuming conversion of all convertible securities.
Subsidiaries that, in terms of their size or operations, are, either individually or taken together, irrelevant to a true and fair view of the Group’s results of operations and financial position have not been included within the scope of consolidation. The criteria used for line-by-line consolidation are as follows: �� the assets, liabilities, costs and revenue of consolidated entities are accounted for on a line-by-line basis, separating where applicable the equity and profit/(loss) amounts attributable to non-controlling interests in consolidated equity and consolidated profit or loss; �� business combinations, in which control over an entity is acquired, are accounting for using the acquisition method. The cost of acquisition is based on the fair values of the assets given, the liabilities incurred and the equity instruments issued by the acquirer, plus any directly attributable acquisition costs incurred. Any difference between the cost of acquisition and the fair values of the assets and liabilities acquired, following review of their fair value, is recognised as goodwill arising from consolidation (if positive), or recognised in profit or loss (if negative); �� acquisitions of non-controlling interests in entities already controlled by the Group are not accounted for as acquisitions, but as equity transactions; in the absence of a relevant accounting standard, the Group recognises any difference between the cost of acquisition and the related share of net assets of the subsidiary in equity; �� any significant gains and losses (and the related tax effects) on transactions between companies consolidated on a lineby -line basis, to the extent not yet realised with respect to third parties, are eliminated, as are intercompany payables and receivables, costs and revenue, and finance costs and income; �� gains and losses deriving from the disposal of investments in consolidated companies are recognised in profit or loss based on the difference between the sale price and the corresponding share of consolidated equity disposed of.
At the time of acquisition, the investment is accounted for using the equity method. Any difference between the cost of acquisition of the investment and the net fair value of the investee’s identifiable assets and liabilities is accounted for as follows: a. goodwill related to an associate or a joint venture is included in the carrying amount of the investment. Amortisation of such goodwill is not permitted; b. in determining the initial value of the entity’s investment, any excess of the entity’s interest in the net fair value of investee’s identifiable assets and liabilities over cost is recognised as income in determining the acquirer’s interest in the profit (loss) for the period of the associate or joint venture in the period in which the interest is acquired.
The equity method is as follows: �� the Group’s share of an entity’s post-acquisition profits or losses is recognised in profit or loss from the date on which significant influence or control is obtained until the date on which significant influence or control is no longer exerted by the Group; provisions are made to cover a company’s losses that exceed the carrying amount of the investment, to the extent that the Group has legal or constructive obligations to cover such losses; changes in the equity of companies accounted for using the equity method not related to the profit/(loss) for the year are recognised directly in equity; �� unrealised gains and losses on transactions between the Parent Company/subsidiaries and the company accounted for using the equity method are eliminated to the extent of the Group’s interest in the associate; unrealised losses, unless relating to impairment, are eliminated.
The following table shows the number of subsidiaries by method of consolidation and measurement: Subsidiaries and joint ventures At 31 December 2017 At 31 December 2016
This section provides a description of accounting treatments that require the use of subjective estimates and for which a change in the conditions underlying the assumptions used could have a material impact on the Group’s financial statements.
On 7 August 2015, the MEF committed “the Ministry to complete all the procedures necessary in order to pay the amounts due in accordance with procedures and timing consistent with the current privatisation process (…), including provision of the necessary funding” and sent the Parent Company a letter signed by the Director General of the Treasury Department and General Accounting Office (the “MEF letter”), constituting a legally binding commitment.
Shareholder transactions: Amount due from MEF following cancellation of EC Decision of 16 July 2008 (iv) 39 45
Other receivables and assets: Sundry receivables due from Public Administration entities (viii) 8 8
Specifically, at 31 December 2017, the total exposure to the State includes the following items.
iii. Sums due from the MEF in the amount of €81 million, accruing during the period and not giving rise to any particular concerns. Receivables deriving from the distribution of Euroconverters, accruing in previous year and acknowledged in the MEF letter, were collected in full during 2017.
v. A sum due from the Cabinet Office, including €43 million accruing during the period46 included in the state budget for 2017 and awaiting approval by the European Commission. The sum of €1 million, acknowledged in the MEF Letter, was collected in 2017.
vii. Regarding receivables outstanding with central and local government entities, totalling €538 million, certain items are still overdue, mainly because no provision was made in the relevant budgets or in connection with contracts or agreements. To this end, steps continue to be taken to renew the expired agreements and to make the necessary provisions47.
viii. Other receivables of €8 million, for which provisions for doubtful debts for the full amount have been made.
ix. Remaining current tax assets and the related interest to be recovered in relation to: �� €55 million in IRES to be recovered on the unreported lump-sum deduction equal to 10% of IRAP and the unreported deduction of IRAP incurred on personnel expenses, including €8 million in principal and €47 million in interest. Recovery of a large part of the amount due, attributable to the Parent Company, Poste Italiane, is the subject of two disputes heard by the Provincial Tax Tribunal for Rome, which has upheld Poste Italiane’s appeals, ordering the tax authorities in Rome to refund the amounts claimed, in addition to the payment of interest. The tax authorities have appealed both rulings before the Regional Tax Tribunal and, on 23 March 2018, the Tribunal upheld the tax authorities’ appeal against one of the rulings. Poste Italiane intends to appeal this ruling before the Supreme Court of Cassation. The recent ruling, in contrast with other previous favourable rulings, introduces new elements of uncertainty as regards the final outcome. The progress of the dispute is being closely monitored and should further developments lead the Company to reach a new and revised assessment of the situation, this will be reflected in future financial statements.
�� €12 million in IRAP to be recovered on the unreported deduction of expenses for disabled personnel in 2003. This receivable, including accrued interest of approximately €3 million at 31 December 2017, was assessed during the year under review, following the ruling handed down by the Regional Tax Tribunal for Lazio, which upheld an earlier appeal brought by the Parent Company, challenging the failure of the tax authorities in Rome to refund the amount claimed. This ruling was not appealed within the statutory deadline and is thereby final.
Impairment tests of cash generating units and equity investments Goodwill and other non-current assets are tested for impairment in accordance with the applicable accounting standards.
Impairment testing involves the use of estimates based on factors that may change over time, potentially resulting in effects that may be significantly different from prior year estimates.
48. In the test carried out at 31 December 2017, use was made of an assumed growth rate of 1.4%, while the WACC for each CGU tested for impairment, determined in accordance with best market practices and for each operating segment, ranged from 5.71% to 6.74%.
Provisions for doubtful debts The provision for doubtful debts reflects the estimated losses on receivables, which, in the case of receivables due from Public Administration entities, considers the legislation restricting public spending. Provisions for expected losses reflect the estimated credit risk associated with historical experience of similar receivables, an analysis of past-due items (current and historical), losses and collections and the monitoring of the current and future economic conditions in the related markets. Net provisions for doubtful debts are accounted for in profit or loss under other operating costs, or, if relating to receivables accrued during the year, by deferring the related revenue.
Employee termination benefits The calculation of employee termination benefits is conducted also by independent actuaries, considering vested termination benefits for the period of service to date and actuarial assumptions of a demographic, economic and financial nature. These assumptions, which are based on the Group’s experience and relevant best practices, are subject to periodic reviews.
Level 1: this level is comprised of fair values determined with reference to unadjusted prices quoted in active markets for identical assets or liabilities to which the entity has access on the measurement date. For the Poste Italiane Group, these include the following types of financial instruments: Bonds quoted on active markets: �� Bonds issued by EU government bodies or Italian or foreign corporate bonds: measurement is based on bid prices, according to a hierarchy of sources where the MTS (the wholesale electronic market for government securities) ranks first, MILA (Milan Stock Exchange) second, for bonds intended for retail customers, and the CBBT (Composite Bloomberg Bond Trader)49 third; �� Financial liabilities: measurement is based on the ask prices quoted by CBBT (Bloomberg Composite Price).
Quoted investment funds: measurement is based on the daily closing market price as provided by Bloomberg or the fund manager. Level 1 bond price quotations incorporate a credit risk component.
Exchange rates published by the European Central Bank are used in determining the value of financial instruments denominated in currencies other than the euro.
For the Poste Italiane Group these include the following types of financial instruments: Bonds either quoted on inactive markets or not at all: �� Straight Italian and international government and non-government bonds: valued using discounted cash flow techniques involving the computation of the present value of future cash flows, inputting rates from yield curves incorporating spreads reflecting credit risk that are based on spreads determined with reference to quoted and liquid benchmark securities issued by the issuer, or by other companies with similar characteristics to the issuer. Yield curves may be slightly adjusted to reflect liquidity risk relating to the absence of an active market.
�� Warrants: considering the features of the securities held, measurement is based on the local volatility model. In particular, considering that buyback agreements have been entered into with the counterparties that structured these warrants, and that such counterparties use valuation models consistent with those used by the Group, these instruments are measured on the basis of the bid price quoted by the counterparties.
Fixed rate and variable rate instruments: measurement is based on the discounted cash flow approach. The counterparty ’s credit spread is considered through: �� use of the Italian government yield curve or the credit default swap (CDS) of the Italian Republic, in the case of Italian government agencies; �� use of quoted CDS yield curves or, if not available, the adoption of “synthetic” CDS yield curves represented by the counterparty ’s rating, as constructed starting from the input data observable on the market; �� use do yield curves based on the specific issuer’s quoted bond prices.
�� Structured bonds: measurement is based on a building blocks approach, where the structured product is broken down into its basic components: the bond component and the option component. The bond component is measured by discounting cash flows to present value in line with the approach applicable to straight bonds, as defined above. The option component - which considering the features of the bonds included in the portfolio of the Poste Italiane Group relates to interest rate risk - is measured in accordance with a standard closed form expression as with classical option valuation models with underlyings exposed to such risks.
�� Borrowings: these are measured by discounting their future cash flows using as input a yield curve reflecting the spread applicable to the credit risk.
�� Amendments to IAS 7 - Statement of Cash Flows – Disclosure initiative, adopted with Regulation (EU) no. 1990/2017. The amendments have introduced a requirement to provide additional disclosures on changes in liabilities arising from financing activities, enabling the users of financial statements to distinguish between those of a monetary nature and other changes.
A more detailed definition of revenue is provided, with the addition of “elements of variable consideration”, compared with the pre-existing accounting treatment.
Among these elements, special emphasis is placed on penalties (other than damages) which, based on IAS 18, fell within the scope of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. The new standard requires that penalties be deducted from revenue, instead of making provisions as per the pre-existing standard.
The variable elements must be identified at contract inception and estimated at the end of every accounting period (annual or interim) throughout the term of the contract, to take into account any new circumstances and any changes in circumstances already considered in previous measurements.
�� IFRS 9 - Financial Instruments, adopted with Regulation (EU) no. 2067/2016. The purpose of the new accounting standard, which replaces a large part of IAS 39 – Financial Instruments: Recognition and Measurement, is to improve disclosures on financial instruments with the aim of addressing the concerns that arose during the financial crisis. The standard also introduces an accounting model that aims to the timely recognition of expected impairment losses on financial assets. The changes introduced by the standard can be summarised within the following three categories: i. Classification and measurement of financial assets, based on the business model, determined by senior management, in which the financial asset is held and the related purposes, and on the expected contractual cash flow characteristics. The new standard envisages three different categories of financial asset (in place of the four envisaged by the existing IAS 39): Amortised cost; financial assets held to collect the contractual cash flows, represented exclusively by repayments of principal and interest; Fair value through other comprehensive income (FVTOCI); financial assets held to collect the contractual cash flows, represented exclusively by repayments of principal and interest, and flows resulting from the sale of the assets; Fair value through profit or loss (FVTPL); a residual category within which financial assets not falling within the previous categories are classified.
There are no substantial changes in the classification and measurement of financial liabilities with respect to IAS 39. The only change is the accounting treatment of own credit risk: in the case of financial liabilities designated at fair value (the so-called fair value option), the standard requires changes in the fair value of financial liabilities resulting from a change in own credit risk to be recognised in equity, unless this treatment were to create or amplify an accounting mismatch in profit for the period, whilst the remaining changes in the fair value of the liabilities must be recognised in profit or loss.
�� Amendments to IFRS 4 - Applying IFRS 9 – Financial Instruments with IFRS 4 - Insurance Contracts, adopted with Regulation (EU) no. 1988/2017. These amendments aim to address the temporary accounting consequences of the different effective dates of IFRS 9 and the new standard for insurance contracts (IFRS 17), replacing IFRS 4 presumably starting from 1 January 2021.
�� Annual improvements cycle to IFRSs 2014 - 2016, adopted with Regulation (EU) no. 182/2018 within the framework of the annual project to improve and review the International Financial Reporting Standards. The accounting standards affected by the amendments introduced by this Regulation, applicable as of 1 January 2018, are IAS 28 – Investments in Associates and Joint Ventures and IFRS 1 – First-time Adoption of International Financial Reporting Standards.
�� Amendments to IFRS 2 – Share-based Payment adopted with Regulation (EU) no. 289/2018. The Regulation introduces certain formal amendments and examples, to facilitate an understanding of the situations covered by the standard; it also provides specific indications on the accounting treatment of vesting and non-vesting conditions in case of cash-settled share-based payment transactions. In addition, the Regulation again illustrates the rules on Share-based Payment Transactions with a Net Settlement Feature for Withholding Tax Obligations.
�� Amendments to IAS 40 – Investment Property adopted with Regulation (EU) no. 400/2018. The amendments introduced clarify when an entity is authorised to change the designation of a property that was not an “investment property” as such and vice versa.
The main provisions for the lessee’s financial statements include: a. for the contracts in scope, the lessee recognises a right-of-use asset in its statement of financial position (in the same way as an owned asset) and a financial liability; b. at the commencement date, the lessee will recognise the asset for an amount equal to the present value of all future lease payments; c. at the end of the reporting periods after the commencement date, and throughout the term of the lease contract, the asset is amortised systematically, while the financial liability increases by the amount of interest accrued, as calculated on the basis of the internal rate indicated in the lease contract; d. when a lease payment is made, the liability is reduced by the amount of the payment.
Poste Italiane Financial statements for the year ended 31 December 2017 2. Basis of preparation and significant accounting policies
Lastly, as of the reporting date, the IASB has issued certain financial reporting standards, amendments and interpretations not yet endorsed by the European Commission: �� IFRS 17 - Insurance Contracts; �� Interpretation IFRIC 22 - Foreign Currency Transactions and Advance Consideration; �� Interpretation IFRIC 23 - Uncertainty over Income Tax Treatments; �� Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures; �� Annual improvements cycle in relation to IFRS 2015 - 2017; �� Amendments to IAS 19: Plan Amendment, Curtailment or Settlement.
New International Financial Reporting Standards: Transitional provisions and ESMA disclosures On 27 October 2017, the European Securities and Markets Authority (hereinafter ESMA) published a Public Statement51 to identify certain disclosures that listed companies are required or encouraged to provide in their 2017 Annual Financial Reports.
This note provides the disclosure under item 1 above, for a preliminary overview of the effects of the implementation of IFRSs 9, 15 and 16 on the Poste Italiane Group’s financial statements. For the other issues mentioned by the Public Statement, reference is made to the specific explanatory notes (B8 – Financial liabilities).
51. ESMA32-63-340, Public Statement “European common enforcement priorities for 2017 IFRS financial statements”
It is a well-known fact that implementation of IFRS 9 requires the application of new accounting criteria and methods, which are often based on subjective assessments and estimates related to an entity’s specific history and experience, as well as on assumptions that, from time to time, are considered reasonable and realistic, depending on the circumstances. The application of these estimates and assumptions affects the amounts reported in the financial statements and the relevant disclosures. As such, the amounts for which the above estimates and assumptions were used may differ from those that will be indicated in future financial reports, due to the uncertainty that marks certain assumptions and conditions on which the estimates are based. Estimates and assumptions are revised regularly and the effects of each change are reflected in the accounts of the year in which the estimate is revised, if the estimate only affects the current year, or also in the following periods, if the revision affects both the current and future periods.
At the same meeting of 13 December 2017, the Parent Company’s Board of Directors also approved an updated version of Poste Italiane’s Financial Management Guidelines, which, in accordance with specific prudential provisions issued by the Bank of Italy, also apply to BancoPosta RFC. The update was necessary in view of changes to the organisational and business structure of the Group, which operates under a unified and integrated strategic management, on the one hand, and financial market conditions, on the other, as well as to make the approach, operations and formal aspects consistent with the provisions of IFRS 9.
In the following notes, a description is provided of the most significant aspects addressed by the IFRS 9 Guidelines for Classification and Measurement, Impairment and Hedge Accounting.