Over time the reports of the Group have evolved from pure accounting documents into vehicles that transmit ethical and strategic principles and affirm the Vision, Mission and Values which distinguish our Company.
The international component of the Group enters the scene due to the geographical and cultural diversity of the subjects and locations of the photos, showing that we are a truly international Company, through cities like Milan, Paris, Prague and Hong Kong.
Considered also the suggestions from our stakeholders, our report has been further improved in the connectivity of various sections, thus allowing the final users to read in a more fluent and logically coherent manner, and in conciseness. The Annual Integrated Review is available in an interactive version on the Group website.
Responsibility for the Annual Integrated Review The Board of Directors of Assicurazioni Generali S.p.A. is responsible for the preparation of this report.
For technical terminology and acronyms, please refer to the Glossary at the end of the report.
Please send to integratedreporting@generali.com your comments and opinion on the report.
7 coRPoRAte BodIes 8 letteRs FRom the chAIRmAn And the GRouP ceo 10 GRouP hIGhlIGhts 12 InsuRAnce PeRFoRmAnce 14 2014 key FActs 21 ouR GRouP 22 Our business model 24 External context 26 Vision, Mission and Values 28 Our governance and compensation policy 36 Our strategy 38 Our business 51 ouR PeRFoRmAnce 61 Group performance and financial position 62 Group performance 66 Group financial position 75 Share performance 77 Performance and financial position by segment 77 Life segment 91 Property&Casualty segment 106 Holding and other business segment 109 outlook 113 Appendix to management Report 114 Note on Management Report 117 Methodological note on alternative performance measures
Additional management information 123 consolIdAted FInAncIAl stAtements 127 consolidated Financial statements 130 Balance sheet 132 Income statement 133 Statement of comprehensive income 134 Statement of changes in equity 136 Statement of cash flow (indirect method)
137 notes to the consolidated Financial statements 138 Basis of presentation and accounting principles 169 Risk Report 197 Notes to the balance sheet 222 Notes to the income statement 230 Other information 260 Appendices to the Notes 279 Appendixes 280 Newly consolidated Change in the consolidation area 282 Subsidiaries consolidated line by line 304 Non-consolidated subsidiaries and associated companies 317 AttestAtIon oF the consolIdAted FInAncIAl stAtements pursuant to the provisions of Art. 154-bis of Legislative Decree No. 58 of 24 February 1998 and Art. 81-ter of Consob Regulation No. 11971 of 14 May 1999 321 BoARd oF AudItoRs’ RePoRt 333 IndePendent AudItoR’s RePoRt 338 Glossary
Please note that, except where clearly specified, the terms “Generali Group”, “Generali”, “we”, “us” and “our” in this document always refer to the Generali Group and/or its subsidiaries worldwide, while the terms “Assicurazioni Generali”, “Parent Company” and “Company” refer to Assicurazioni Generali S.p.A..
Organi Sociali all’ 11 marzo 2015 6 | Generali Group - Annual Integrated Report 2014
Board of Auditors carolyn dittmeier (Chairwoman) Antonia di Bella lorenzo Pozza Francesco di carlo (substitute) silvia olivotto (substitute)
Secretary of the Board of Directors Giuseppe catalano 2015 corporate event calendar and Corporate Bodies - Generali Group | 7
This is a complex scenario, in which the role of an insurance group like Generali is important and valuable, both for its ability to create value and become an impetus of development, anticipating and dealing with challenges. For instance, the theme of demographic changes, where longevity and aging processes represent a critical issue for choices in terms of welfare, or the theme of environmental challenges, climate change and its consequences, which greatly expands the possible actions of the industry in which we operate.
The report and results of Generali confirm the Group's position as a global player, modern and innovative. The results were achieved thanks to the work of all the employees led by a management capable of managing the company in a difficult turnaround process towards a new, important chapter in its history at the international level. This demanding work was possible also due to the choice of transparent governance, in line with the best market standards, and thanks to the unwavering contribution of the Board and other corporate bodies, that represent a solid reference point in support of the management.
I am sure that this report will be only an excellent chapter of a further long story of which all of us are proud.
Gabriele Galateri di Genola 8 | Generali Group - Annual Integrated Report 2014
In 2014, Generali confirmed its role as a major international player, with over € 70 billion premiums. International presence is our greatest strength: Generali is a large European centric company and continues to build, with a selective focus, its presence in Asia and South America.
This report also illustrates the progress made in areas other than in the industrial and financial ones. Our activities, by their very nature, impact and benefit our clients, our people, our sales force and, to a greater extent, also the communities in which we operate: in the following pages, we explain how we are trying to exploit even more our potential. It is not a requirement dictated by custom, but the best way to ensure that our business can prosper in the long term.
Letters from the Chairman and the Group CEO - Generali Group | 9
Generali confirmed as a Global Systemically Important Insurer by the Financial Stability Board
Conclusion of the squeeze-out of the minorities of Generali Deutschland Holding AG (Germany)
In February, the rating agency moody's upgraded Generali’s outlook from negative to stable and confirmed the Insurance Strength Rating at Baa1 and the rating Baa2 for the senior bonds.
In October, the rating agency A.m. Best upgraded Assicurazioni Generali’s outlook from negative to stable and confirmed its Financial Strength rating at A (Excellent). The rating demonstrates the Group’s strong business position, sound operating performance and increasing capitalization, while the outlook upgrade reflects the stabilization of the Italian macroeconomic and financial scenario and the success of Generali’s strategic plan.
In late March, the rating agency standard & Poor's affirmed its A- rating of Generali, thus resolving the credit watch initiated following last year’s review of the evaluation criteria linked to government debt securities (“Rating Above the Sovereign”).
In April, Generali became the first Italian sponsor to enter the Insurance Linked Securities (ILS) market through the first ever 144A indemnity catastrophe bond placement on protection against European windstorm. This innovative transaction allows Generali to optimize protection covers against catastrophic events deriving from European windstorms. The success on capital market has allowed the protection provided to Generali to be upsized to € 190 million with a fixed premium of 2.25% per annum and to extend it to 3 years.
In June, Generali approved the demerger from telco s.p.A.. The Group will complete the demerger as soon as the necessary authorization are received. The demerger from Telco is in line with the Group's strategy to actively manage its assets.
Generali passed S&P's stress test, clearly demonstrating its ability to maintain a positive solvency even in a highly distressed scenario. In December, S&P’s downgraded the rating of Generali to BBB+ from A- as a consequence of the downgrade of the sovereign Italian rating. The outlook was revised from negative to stable. In 2013 S&P's changed its global evaluation criteria, thus limiting the rating of Generali to two notches above that of Italy. The rating agency also stated that the indicative Group Credit Profile (GCP) remains unchanged at A confirming “the very strong business risk profile and upper adequate financial risk profile”.
Generali is included in many ethical indexes, such as FTSE4Good, NYSE Euronext Vigeo World 120, MSCI Global Sustainability Indexes and MSCI Global SRI indexes.
At the end of July, the Group reached an agreement with Allianz to become sole owner of citylife s.p.A. through the acquisition of the remaining 33% of the company that manages the largest urban development project in Milan. Citylife has also reached a binding agreement with the institutions financing the project to redefine certain terms and conditions of the original deal.
In December, Generali has entered into an agreement with multi-Purpose capital holdings Berhad - a wholly owned subsidiary of the Malaysian group headed by MPHB Capital - to acquire a 49% stake in its P&c insurance subsidiary, multi-Purpose Insurance Berhad (mPIB), for a consideration of € 81.4 million (MYR 355.8 million). Thanks to this take-over, the Group enters into the Malaysian market establishing itself among the ten biggest P&C insurance players of the country. The operation is essentially neutral in terms of Solvency. Generali immediately appoints various Board members and key managers of the Malaysian company.
In October, the independent Board member Paolo scaroni resigned as Chairman of the Remuneration Committee and member of the Appointment and Corporate Governance of Generali, and sergio Balbinot resigned as Group Chief Insurance Officer of Generali.
In January, the Generali Group completed the takeover of Generali PPF Holding B.V. (GPH), acquiring the remaining 24% of shares held by the PPF Group, in line with the agreements signed on 8 January 2013. With the acquisition of the full control of the shares in GPH, the operational holding company in Central-Eastern Europe, one of the biggest insurance players of the area, changed its company name to Generali CEE Holding B.V.. The purchase of the remaining shares of GPH was completed in line with the terms previously announced to the market for a final price of € 1,245.5 million.
On 13 February 2015, at Generali’s request, Standard & Poor’s withdrew its rating relative to the Group which consequently will not be evaluated by the agency. The decision is based on the obvious and inexplicable inflexibility of S&P's criteria that does not allow to take into account the significant improvement in the financial solidity achieved by the Group over the past two years. Furthermore, the mechanical link to the sovereign rating applied by S&P's does not give merit to the Group’s high level of diversification or the benefits of its broad geographical presence. In line with industry norms, Generali will remain rated by three major rating agencies: Moody’s (Baa1), Fitch (A-) and A.M. Best (A).
Our business model 22 | Generali Group - Annual Integrated Report 2014
Products and services that improve current customer offering and meet customers’ needs
u The challenging macroeconomic and financial contexts, together with the forthcoming enforcement of Solvency 2, have highlighted the importance of a strategic asset-allocation and asset-liability management process even more structured and integrated at Group level. The strategic asset-allocation implementation takes into consideration many indicators, such as economic capital requirements, Group targets on results and the expected returns of the insured. This scenario, characterized by very low interest rates, is dealt with by resorting to greater diversification in terms of asset classes and geographic exposure, reducing liquidity and paying even greater attention to the consistency between assets and liabilities, which would limit the reinvestment risk, especially for the life portfolios characterized by the presence of financial guarantees.
The regulation of the insurance industry is extremely dynamic at national, European and international level. Worthy of note are: Solvency 2, the European project reviewing the prudential supervision of insurance and reinsurance business, and the European directive IMD2 (Insurance Mediation Directive 2) which provides for the introduction of new requirements and stricter rules regarding the distribution of insurance products designed to increase consumer protection, improve information transparency and reduce conflicts of interest, restoring confidence in the sector.
The climate is changing, becoming even more extreme and unpredictable. This adds to the factors that may influence the risk landscape, especially for insurance protection against events that depend on the weather such as floods, drought and windstorm. The rise in claims tied to catastrophic events is infact reflected in higher expected losses and in an increase in their volatility, thus resulting in greater uncertainty in pricing and in higher risk capital absorption associated to the business being underwritten. Tariff adjustments may therefore be required. If unmitigated or not well managed, they could eventually make it unaffordable for customers to access insurance or, in extreme cases, even lead to the impossibility of insuring risks. The climate change also represents a business opportunity that derives from the new needs generated by the changes themselves.
u We are aware of both the growing demand for post-retirement income products and of insufficient levels of insurance literacy and lack of information on products that affect the ability of individual to save. We are therefore committed to offering proper solutions and to improve financial awareness in the society by educating the sales force to dialogue with the individuals and facilitate the comparison between pension funds accumulated and projected salary at retirement age. Improving dialogue allows people to become more aware of their needs and us to undertake the right actions. We offer not only traditional insurance solutions: we have developed innovative solutions, such as “living age solutions”, i.e. insurance products based on the life style. They will be developed through Generali Vitality, the start-up launched in partnership with Discovery in 2014. We are also analyzing how to better develop long-term care (LTC) products.
Societies are facing dramatic and unprecedented demographic changes: an aging population - the main causes for which are longevity, i.e. the greater life expectancy, and falling fertility rates, two drivers that are the result of successes in healthcare, education and increasing affluence but that create a social challenge -, an altering family structure and migration. Aging population has many potentially consequences on the economy, including pressure on growth and the labor market, on state budgets (through both pension and health care costs) and on the private savings behavior by individuals. Life insurance plays a vital role in mitigating the effects of an aging society.
Vision, Mission and Values deliver on the promise We tie a long-term contract of mutual trust with our people, clients and stakeholders; all of our work is about improving the lives of our clients. We commit with discipline and integrity to bringing this promise to life and making an impact within a long lasting relationship.
value our people We value our people, encourage diversity and invest in continuous learning and growth by creating a transparent, cohesive and accessible working environment. Developing our people will ensure our company’s long term future.
Our Vision our purpose is to actively protect and enhance people’s lives
Our Mission our mission is to be the first choice by delivering relevant and accessible insurance solutions deliver on the promise value our people live the community Be open
– posters, initially spread in digital format on the We, Generali Portal and local intranets, then more widely in all the Group offices. The four values were so largely displayed allowing our people to become more familiar with them. This approach highlighted our values and the simultaneous presence of negations and affirmations brought out the real meaning of value, strengthening it; – the mugs, personalized with our values, were distributed to each employee, thus enabling those words and messages to be present to be on every office desk; – the postcards, coupled with each value and illustrated with playful and evocative images, hosted on their backs the dos and don’ts, thus recalling in this way the contrast between positive and negative. These messages were designed to strengthen the meaning and to better understand all the different aspects of behavior and attitude embodied by our values.
During 2014 we have launched a global internal communication campaign based on actions aiming at informing and raising awareness on our values. Such campaign has used several tools: Management Report - Generali Group | 27
Corporate body that is appointed by the General Meeting through a slate voting mechanism and has supervisory functions on the compliance with law and the Articles of Association and on management control.
Established with the goal of ensuring greater alignement on Group strategic priorities and a more effective, shared decision-making process on relevant topics to the Group, by means of a team approach fostering shared information and strengthening international perspectives, it represents the main support mechanism for the Group CEO's strategic decisions, such as those concerning risks and investments, the assessment of Group �nancial and industrial results and the steering of the main strategic programs of the Group and/or impacting on more countries.
Corporate body which expresses the will of the shareholders by issuing resolutions.
Cross-functional Committee that examines and identi�es topics with material impact on the �nancial statements both at Group and Head Of�ce level.
€ 17.0 closing price of Generali shares at 31 December 2014 (€ 14.79 lowest price at 16 October and € 17.43 maximum price at 9 January)
Corporate governance lies at the heart of a company and must be considered as a way of running a company’s daily activities in the interests of all stakeholders in order to achieve sustainable results over time.
For the cv of the members of the Board of Directors, please see www.generali.com/ Governance/corporate-bodies 5 information meetings covering strategy, reinsurance and the Solvency II Directive
Dietmar Meister (Giovanni Liverani as from 1 April 2015) Country Manager Germany
He is responsible for the management of German business which accounts to about € 18 billion premiums with approximately 14,000 employees.
His mission is to transform Generali France into a client-obsessed organization serving the four client clusters chosen (individuals, af�uent, professional & small enterprises, commercial). The way forward is to engage the teams, to free the initiatives and to give con�dence to all employees.
His mission is to run the Generali operating platform to deliver operational excellence, enable distribution excellence and build the needed capabilities to drive the transformation and secure the executition of all programs and initiatives.
Focus on the Group management committee (Gmc) as at 15 January 2015
Giovanni Liverani joins the GMC as from 1 January 2015 and he will become Country Manager Germany as from 1 April 2015.
Percentage of the Directors' attendance at the meetings held in 2014
Group governance on compensation is primarily focused on Group executives: — Group CEO; — members of the Group Management
n competitiveness — Constant monitoring of our peers practices and general remuneration trends of the market; — competitive total compensation in terms of levels and structure; — Alignment with business strategy and direction.
— Variable compensation based on performance, differentiation and selectivity; — Strong connection between remuneration and Group results; — Performance-based comprensation as a key driver of motivation, retention and alignment with organizational goals.
The pillars of our compensation policy are consistently cascaded throughout the organization taking into account business and local specificities and regulations within the various markets where we operate.
For control functions (Internal Audit, Risk Management and Compliance) specific guidelines are applied in line with regulatory requirements.
In line with our compliance culture, assessments are made at individual level to ensure the adherence of conduct with respect to compliance, audit, Code of Conduct and governance processes; these assessments can trigger malus and claw back provisions on all incentives.
Particular attention is paid to developing a proactive and constructive dialogue on remuneration with our main investors and proxy advisors. The feedback we receive on these key topics is analyzed in the Remuneration Report, that gathers, in a single document, all compensation-related information, in order to enhance stakeholder awareness of our compensation policy, practices and outcomes.
— strong brand, especially in core countries; — broad, enviable and diversified international presence, with various excellent competitive positioning in both mature and emerging markets; — large premiums and assets base that position Generali among the top insurance groups in the world; — a consolidated leadership in the life segment and a strong performance in P&C segment.
The Group’s goal is to provide shareholders with an excellent return, through discipline, simplicity and focus on: — insurance core business; — stronger capital position to be acquired through a disciplined capital management over time; — customer acquisition and retention, with a focus on retail and affluent segments.
Products’ distribution is carried out through a variety of channels (both proprietary and third-party) allowing customers to choose according to their needs and preferences. These multiple access points must strongly interact and complement each other in order to offer superior customer experience and maximize customer value for the Group. We aim at pursuing excellence in the management of sales channels, through the strengthening of both traditional and direct channels, implementing and disseminating internal and external best practices to identify all potential levers (e.g. incentive systems, frontend applications, sales-funnel optimization, reduction in administration tasks for distributors) that can improve our productivity. We are also very attentive towards new distribution opportunities, such as bankassurance agreements especially in many emerging markets where we have decided to operate.
We aim at strengthening the P&C business, seizing new opportunities in both business lines (e.g. Accident and Health) and in client segments (e.g. Corporate and Commercial). We will further improve our technical performance by centralizing reinsurance and sharing best practices within the Group.
Life profitability will increase by optimizing returns on absorbed capital, focusing more on protection products, streamlining operations and reviewing incentive systems in the distribution network. In order to strengthen the technical performance, we are introducing Group guidelines and fostering best practice sharing on key elements along the value chain such as pricing, risk selection, and loss reduction.
Our objective is to optimize the operating model, pursuing a strong and continuous efficiency and greater integration of the main processes across our companies, in order to reduce costs, particularly in IT, procurement and real estate facilities. We will move towards a coherent and coordinated model, integrating local strengths with the full support of the Group and the development of new skills, using the Group's existing expertise and through knowledge sharing. We also aim to attract and invest in the best talent and develop their ability to pursue our strategy in the future. We invest in projects of international mobility, as we focus on incentive plans for our top management, which balances the individual dimension and that relating to the results of the entire Group.
We develop simple, integrated, customized and competitive life and P&C insurance solutions [B] for our clients [A] in order to satisfy their needs: our solutions range from savings and family-protection policies to unit linked policies and complex solutions for multinational companies, from mass market coverages, such as motor third-party liabilities, households and health policies, to sophisticated products covering commercial and industrial risks.
We, demain is one of the key projects in France, developing a closer client orientated business model aimed at all the stages of interaction. It focuses on three pillars: Clients (with dedicated approaches for different client segments), Offer (modular offers) and Multi-distribution (with the development of integrated channels).
We are an international insurance Group, widespread in more than 60 countries: we are leaders in Italy, among the fi rst insurance players in Germany, France, Austria,
Digitalization is a continuous stimulus in developing our offering and improving interaction with our clients, our sales channels and our partners. In Germany, through CosmosDirekt, we provide innovative services that support our leadership in direct insurance.
From: Investor Day - Germany d loss prevention Since its inception in 2013, Generali Global Corporate & Commercial has harnessed the skills, expertise and competences of the Group’s risk engineers in a global network. As insurance transfers the impact of present and future risks away from our customers’ business, loss prevention curtails these risks and the potential losses that they can generate. Our companies and customers are served by a global team of 100 risk engineers, located in more than 30 countries and reporting to a central unit. Every year our professionals inspect and visit more than 5,000 plants, implementing surveys and desktop assessment for our clients and brokers in each country of the world.
Our risk engineers draw from their broad international experience to identify and recommend risk mitigation plans to our corporate partners and help implement them in the most effective way supporting their future growth and development. Generali loss prevention is a technical excellence center that ensures the sustainability of the business and the environment in which customers operate. Furthermore, loss prevention acts as an underwriting risk level stabilizer for our companies. The risk engineers work together with underwriters, claims experts and client relationship managers to offer integrated solutions to our customers. They have a mature and extensive corporate and commercial expertise that is further supplemented by specialized partners and consultants who address the most sophisticated needs of our customers.
e-commerce distribution platform Plug&Sell is the e-commerce distribution platform of Europ Assistance (EA) group. It enables to sell and promote customized assistance and insurance products for all markets and business models (B2C, B2B2C, B2B). It has been rolled out in 5 main distribution solutions: — eShop to sell in a few steps insurance products under EA brand or from EA partner site; — mShop to sell insurance products on a dedicated mobile framework; — Telesales to sell insurance products in an on-line authenticated and secured environment for agents; — GDS/Amadeus connection to sell travel policies through an international booking platform connected to millions of customers; — Cross-Sell to sell complementary insurance products in a fully integrated partner site.
Decidedly business oriented, Plug&Sell is constantly improving since 2007 and provides to its partners key features, such as multi currency secure-payment interface, segmented and customized offering management, quote/contract management, up-sell/ cross-sell management and promotion management.
The development of connectivity through telematics technologies applied, for example, to Motor and Home lines of business are crucial for the development of our offer. Just in Italy Generali has a portfolio of over 600 thousand policies that contributed to the improvement of the loss ratio and customer retention.
Telematics journey already started with significant experience in Motor black-box products
As of the second quarter of 2014, Generali started entering in strategic agreements with the global brokers. These agreements entitle Generali business units to access the global brokers’ platforms based on risk and underwriting data. This enables the Group to better communicate its risk appetite and value propositions, with the aim of understanding the clients’ needs and of providing them with the best products and services.
In Serbia, that was heavily hit by floods in May, Generali Osiguranje Serbia prepared a set of actions to support its clients. Specifically, we opened 24/7 call centers to speed the notifications of claims. Over 148 claims or 95% of total claims reported were paid in 45 days for a total amount of € 1.1 million. In addition, we supported local communities by means of various donations.
In Generali Investments Europe (GIE), our asset management company, a socially responsible investment process was developed by a team of 6 dedicated analysts. This process is based on an innovative, transparent and rigorous methodology that involves: — the identification of 34 environmental, social and governance criteria, such as product quality, employees, supply chain, natural resources exploitation, emissions, composition and functioning of the Board of Directors; — the mapping of six environmental, social and governance risks such as reputational risk and damage to brand image, normative pressures, class actions, competitive advantage, intangible assets and carbon emissions; socially Responsible Investments
Generali is the leader in the Italian insurance market with an overall share of 15.4%. The Group offers its clients – retail, SME and corporate – a complete variety of insurance solutions, in both life and P&C segments. The Italian turnover makes up over 30% of the overall Group revenues. At a distributive level, Generali operates through a multi-channel distribution network mainly concentrated on agents. Generali has a strong position in the direct channel, through Genertel – Genertellife, the first online insurance company in Italy. Furthermore, through Banca Generali the Group offers a variety of financial products in the previdential and asset– management sectors and hybrid financial products. The integration process, launched in 2013 aiming at the unification of all the existing brands into three main strategic brands, i.e. Generali (retail market and SME), Alleanza (households) and Genertel (alternative channels), is proceeding as scheduled.
With reference to the macroeconomic scenario, Italy remained in with a negative GDP growth rate in 2014 (-0.52% the annual growth of the third quarter). The financial markets experienced a sensible drop of the bond yield (e.g. the 10y BTP yield went from 4.13% at 31 December 2013 to 1.89% at the end of 2014). The stock market was stable (FTSE Mib + 0.23% with respect to 31 December 2013).
Gross written life premiums increased by 31.3% compared to the prior year. A strong contribution for this performance was given by new business (+46.5% in the first nine months of the year). Infact, despite aforementioned economic crisis and the continuing weak saving capacity of families, the current scenario with low interest rates makes minimumyield insurance products appealing and fosters the demand for long-term saving products. Premiums per distribution channel illustrated strong increases in demand in all the channels: banks (+51.7%), agencies (+27.3%) and promoters (+57.8%). With regards to the life segment, all lines of business registered a significantly positive variation respect to the previous year. The P&C segment witnessed a decrease (-3.1%) compared to the prior year. Despite the increase in registrations (+4.2% at the end of the year), the persistence of the economic crisis together with strong competition resulted in a decrease in premiums written.
2 Indicated shares and market positions, based on turnover, refer to official data or to the most recent available estimates.
Generali Deutschland is the second largest insurance group in terms of life and P&C premium collection in Germany. The market share for P&C was 5.7%, while for life insurance was 11.5% (including Health business). Generali Deutschland is market leader in the unit-linked and protection life business. The strategy aims to enhance the competitive advantage generated by the multi-channel distribution system, in which Generali Deutschland operates over a variety of distribution alternatives (financial advisors of the DVAG network, direct channel, traditional distribution channels). At the same time the Group concentrates on exploiting the synergies between the various operating units, by integrating and optimizing back-office activities in shared service companies. The squeeze-out procedure, aiming at the acquisition of the entire shareholding in Generali Deutschland Holding, was completed in the first half of 2014.
The German economic context was overall positive. The GDP grew by 1.2% (annual growth at the 3rd trimester), however the growth was slowing down after a positive first quarter. The German Bund was steady - the 10y Bund went from 1.93% at the end of 2013 to 0.54% at 31 December 2014 - while the stock market registered a positive trend (Frankfurter Dax + 2.65% with respect to year end 2013).
The life insurance markets in the main countries of Central-Eastern Europe experienced a similar trend. In the Czech Republic, preliminary data illustrated a mild decrease (-0.7%). In Hungary the growth rate was 3%, benefitting from the highly positive trend of pure risk policies, while unit-linked products decreased by 5%. In Poland the result was negative (-3%), even if the decrease in traditional insurance products (-8%) was slowing down. In the Czech Republic, motor premiums were positive (+3.1% is the preliminary data for 2014) for the first time since 2008, as well as in Hungary (+5.0%), for the first time since 2006. In the P&C segment negative trends were reported for Poland (-3.6%).
spain Generali España is one of the main insurance groups in Spain, with a total market share of 3.9% in the life segment and 4.3% in the P&C segment. It provides a wide range of life and P&C policies dedicated to both private individuals and enterprises, ensuring appropriate solutions to complex multinational realities. The Group operates through a multi-channel distribution strategy which includes, in addition to bank branches, a network of agents and brokers which is among the most extensive in Spain. Overall, the Group ranks 8th the Spanish insurance market in terms of premiums.
emeA3 switzerland Generali Switzerland is the 8th insurance group in terms of life and P&C premium collection. The life market share is 3.6%, while the P&C one is 5.2%. Generali has been operating in Switzerland since 1987 and in the following decade it consolidated its presence through the acquisition and merger of many insurance companies. Today Generali operates through the Generali and Fortuna brands in the life and P&C segments. The Group is focused on retail business and is characterized by the provision of innovative and high quality services offered through diverse distribution channels: agents, brokers, financial advisors and direct channel.
The Generali Group has long been present in many countries in Latin America. Its main operations are in Argentina, where Generali is ranked as the second Group in the country. The Group's distribution network is based on agents, brokers and direct channels.
The Generali Group has been operating in the Far East since 1980. It is now present in China, Indonesia, Philippines, Thailand, India and, since 2011, in Vietnam. Two branches have been set up in Japan and Hong Kong, where the Asia Regional Office is based. The main operations are in China, where the JV incorporated with the local CNPC (China National Petroleum Corporation) partner has become one of the top life foreign insurance groups. In Indonesia, Philippines and Vietnam the business is focused exclusively on life insurance, whereas in Hong Kong, Thailand and Japan, P&C lines are also present.
* Data refers to Argentina * Data refers to the presence of the Group in the foreign operators' market of China
Achieving technical excellence means ensuring that tariffs, products, underwriting, claims management, distribution and client centricity are in place in all relevant business units, and innovative insurance technical practices are adopted. A country by country personalized approach is adopted, allowing Group priorities to be applied in a way that is consistent with local market realities. Building world-class technical capabilities in Life, P&C, Claims management, and Customer&Distribution is the key to competing and sustaining our performance.
TechEx is a journey and a journey is not confined to a single act. It is rather a habit. The habit of doing ordinary things extraordinary well. valter trevisani, head of Group Insurance and Reinsurance 2016e
Focusing on Group high priority initiatives, with a personalized approach by country life — In-force management — Saving guarantee management & Unit Link
P&c — Technical pricing — Portfolio cleaning — Price optimization — Telematics customer&distribution — Distribution efficiency — Multi-channel approach — Leveraging existing client base (cross sell and retention)
In 2014 we increased our investments in order to better understand our customers’ behaviour and the factors which most affect them in their decision making process. We conducted a survey on the brand awareness, involving 20,000 clients in 21 countries who reported that their purchase choices were influenced by the following factors : — insurers offer an adequate coverage in relation to the premium requested; — they take into consideration customer needs; — they interact with clients; — they have an open and approachable staff; — they deliver on the promise.
Direct channels continue to play a significant role in our distribution model. Leveraging on the capabilities and success stories in the Group (Italy and Germany), we have developed a direct distribution platform in various emerging markets, for instance, in Turkey.
In-force management focuses on extracting additional value with initiatives impacting on policyholder credit rate, sale, portfolio optimization and customer retention. The protection business has become a high priority, with dedicated projects in selected areas (e.g. Italy and Spain). The start-up Generali Vitality was launched at the end of 2014 in partnership with the South-African company, Discovery, leader in the market of behaviour-linked insurance products. The plan is to provide customers with the Generali Vitality solution starting with the German, French and Austrian insurance markets.
TechEx aims to develop the P&C portfolio while preserving profitability. P&C is beneficial for stabilizing performance as this business is less related to financial markets and contributes to positive cash flows and business diversification. TechEx strengthens the technical performance by acting on the key elements of the value chain: — technical pricing; — portfolio cleaning; — price optimization; — telematics.
A new pricing and underwriting policy (and related guidelines) was issued to guarantee full control on the underwriting process and an operating return on equity in line with the Group strategic objectives. Specific Group underwriting guidelines were released for all the businesses (motor and non motor) and a certification process was introduced to guarantee a state of the art pricing process.
Culture is the distinctive factor of any organization and the reason for its success in the long term. The definition and strengthening of culture are fundamental.
The Lion, a fascinating, evocative and powerful symbol, was redesigned and will replace the over 100 different logos worldwide, with the intent of unifying and fostering brand awareness.
Factors such as low interest rates, the increasing complexity of the regulatory framework and the evolution in the distribution channels and customer behavior require that our operating platforms – our IT, our people, our facilities – be adapted. We aim at making them more efficient and adapted to new customer and distribution trends and exploiting new opportunities offered by technological development.
The OpEx program was launched in 2013. It is in line with the objective of saving € 1 billion by the end of 2016, achieving almost 50% of such target by end of 2014. Several Operational Excellence initiatives are being implemented in order to increase the operational efficiency and the quality of our processes whilst supporting the achievement of the cost savings target. These savings will not only enable the Group to “finance” inflation but will also allow Generali to have more resources for further investments.
We believe that a proper remuneration, together with a benefit package, is a further instrument offered to our people that can strengthen their commitment and motivation in order to reach company targets.
People are a key factor in achieving our strategic objectives. We aim at valuing people and attracting new, highly skilled, open and flexible people, able to operate in an international context and to manage complexity and cultural diversity. They must be passionate about their work, be able to fulfil their potential and actively contribute to the Group’s growth through their professional and personal growth.
We therefore offer top–level leadership development programs, such as: — Global leadership Programs (Series, Accelerator, Women Hub), addressed to the members of the Global Leadership Group (GLG) and to Group executives. These initiatives have the purpose of strengthening strategic thinking and fostering a global mindset, which enables our people to better understand the competitive environment under a customer-centric perspective. They must boost the sharing and the alignment of strategic priorities and our culture on the basis of which to build and reinforce the new leadership capabilities and support professional, functional and managerial growth. All together these initiatives develop necessary skills to identify and develop talents, through structured (and also of succession) plans. Such programs are supported by a digital social learning platform that enables networking and the exchange of knowhow, best practices and ideas as well as integrated training activities; — Pilot Program on technical excellence that witnesses the commitment of the Group on investing more on the updating and development initiatives for talents and other professionals of the Group; — leave your mark, an initiative addressed to all the employees worldwide and finalized at the selection of a group of young talents working together for the definition of our future strategy.
We consider the diversity of our people as an asset. We adopt an inclusive approach which aims to give tangible form to our belief that cooperation and exchange between different cultures, competences and experiences are crucial for our growth. Remarkable in
In May, the disposal of Fata Assicurazioni danni s.p.A. (Italy) was completed and in July, Generali signed an agreement to sell its entire interest in the BsI Group. These disposals, together with those of previous years regarding the Israeli, American and Mexican assets and the partial placement of Banca Generali, have allowed the achievement of the forecasted targets one year in advance.
— Total gross written premiums significantly increasing to approximately € 70.4 billion, driven by the excellent development of the life segment.
— Group Solvency I at 156%; considering the disposal of BSI the ratio on a pro-forma basis is 164%.
Gross written premiums development total written premiums amounted to € 70,430 million, increasing by 7.7% with respect to 31 December 2013. Confirming the trend observed at nine months, this increase is entirely attributable to the life segment where premiums written increased by 11.2% due to the launch of new products and the strength of the distribution network. Premiums written in the property&casualty segment are stable, notwithstanding a continuous challenging macroeconomic environment in many markets where the Group operates.
Premiums written trend in the fourth quarter is positive in both segments.
The new business, in terms of Annual Premium Equivalent (APE), registered a significant growth over the previous year (+14.2% at constant exchange rates and shares attributable to the group), amounting to € 5,163 million. Thanks to higher volumes and improved profitability, the new business value (NBV) amounted to € 1,239 million, increasing by 33.7% on equivalent terms. The profitability of new business (margin on APE) was 24.0%, an increase compared to 2013 (21.0%), due to the further reduction of the level of financial guarantee offered by savings products.
Property & Casualty gross written premiums 62 | Generali Group - Annual Integrated Report 2014
Life segment operating result Holding and other businesses Consolidation adjustmentsProperty&Casualty segment operating result■■ ■ ■
The result attributable to minority interests amounted to € 182 million (€ 227 to 31 December 2013), corresponding to a minority rate of 9.8% (10.6% at December 31, 2013), decreasing mainly due the aforementioned purchases of the minority interests in GPH and minority interests in Generali Deutschland Holding.
Operating result Not operating result Taxes Minority interests Result of discontinued operations
The shareholders’ equity attributable to the Group amounted to € 23,204 million at 31 December 2014 compared to € 19,778 million at 31 December 2013. The increase of 17% is mainly attributable to: — the result for the period attributable to the Group, which amounted to € 1,670 million at 31 December 2014; — the dividend distribution of € -701 million, carried out in 2014; — other gains or losses recognized through equity in the current year amounted to € 3,372 million. In particular, this result was attributable to € 3,997 million gains or losses from financial assets available for sale and only partially offset by the deterioration of profits from the re-measurement of liabilities relating to defined benefit plans for €-537 million attributable to the decrease in the reference rate used to discount such liabilities; — the overall negative impact on Group equity from the purchase of minority interests in GPH in 2014 for € -648 million included in changes in other balance sheet items.
Reserve for unrealized gains and losses on available for sale financial assets 3,997 70
The Group Solvency I ratio was 156% at December 31, 2014 (141% at December 31, 2013) increasing by 15 pps despite the acquisition, of the remaining 24% of Generali PPF Holding, which has a negative effect on the index by 7 percentage points. The required margin rose to € 18.6 billion, benefitting from business development, while the available margin (also considering the possibility of dividend) amounted to € 29.0 billion. The surplus is therefore equal to € 10.4 billion.
The corporate component is divided between guaranteed bank corporate bonds, other financial sector bonds and bonds issued by industrial companies. With regards to new investments, non-financial sector bonds were preferred, with the aim of encouraging a greater level of diversification.
Bond portafoglio: detail by country of risk 68 | Generali Group - Annual Integrated Report 2014
The change in the period is mainly attributable to the recovery of the value of investments, in particular direct investments that benefited from the positive trend in share prices.
In particular, with reference to the composition of the property portfolio at fair value, amounting to € 17.650 million, the Group’s investments are almost entirely allocated in Western Europe, mainly in Italy, France and Germany. In addition, the buildings are mainly allocated in their respective countries of operation.
Rest of Europe 70 | Generali Group - Annual Integrated Report 2014
In accordance with the IAS / IFRS managerial model used by the Generali Group, consolidated liabilities were split into two categories: — liabilities linked to operating debt, defined as all the consolidated financial liabilities related to specific balance sheet items. This category also includes liabilities related to investment contracts issues by insurance companies and liabilities to banks and customers of banks belonging to the Group; Total liabilities were as follows: (€ million) 31/12/2014 31/12/2013
— liabilities linked to financial activities, including other consolidated financial liabilities, such as subordinated liabilities, bonds issued and other loans received. This category includes liabilities incurred in connection with a purchase of controlling interests.
Interest expenses on total liabilities are detailed below: (€ million) 31/12/2014 31/12/2013
details of issues an redemptions of subordinated liabilities and senior bonds
Senior debt Subordinated debt Hybrid debt 74 | Generali Group - Annual Integrated Report 2014
As established market practice for the sector, Assicurazioni Generali has a series of revolving credit lines for a total amount of € 2 billion with maturities between 2015 and 2016.
The counterparties are major fi nancial institutions of high international standing. This operation will have an impact the Group’s fi nancial debt only if the facility is drawn upon and allows Generali to improve its fi nancial fl exibility to manage future liquidity needs in a volatile environment.
As mentioned peviously, cash decreased to € 10,223 million, as a result of the Group investment policy focused on consolidating current return and reducing cash levels.
9 The payout ratio for 2012 is not shown in the graph as it is insignifi cant and not in proportion to the Group’s result for the period and it is impacted by the specifi c dividend payment policy applied by the Group.
Payout ratio 76 | Generali Group - Annual Integrated Report 2014
— Sharp increase in new business in terms of APE to € 5,163 million (+ 14.2%) and new business value (NBV) + 33.7%.
Written premiums in the life segment, including premiums related to investment contracts, amounted to 49,813 miillion, growing by 11.2% on equivalent terms compared to the previous year. This trend is encouraged by the signifi cant growth in linked contracts (+ 43% on equivalent terms), in line with the strategy to focus on low capital-absorption products. The other business lines showed a positive trend; saving lines increased by 4% on equivalent terms and, to a lesser extent, the protection policies (+ 2.5% on equivalent terms).
net cash infl ows amounted to € 12,747 million, a signifi cant increase with respect to 31 December 2013 (+ 49.7%), due to the above mentioned positive trend in premiums. Slight increase in capital outfl ows. new business annual premium equivalent (APe) increased signifi cantly over the previous year (+ 14.2% at constant exchange rates and share attributable to the Group) and totaled € 5,163 million. The new business production is mainly driven by the growth in single premiums (+ 27.2% on equivalent terms) in Italy, Ireland and France, while the annual premiums, mantaining a predominant weight on APE (56.2%), registered a moderate increase (+ 5.9% on equivalent terms). With reference to the lines of business, there is a signifi cant progression of the unit-linked business (+ 41.8% on equivalent terms, due to the strong growth of the pro-
duct “multi-ramo” (multi-line) in Italy and production in Ireland) and the business of saving lines (+ 11.1% on equivalent terms). The protection line decreased slightly (-3.7% on equivalent terms).
the profitability of new business (margin on APe) stood at was 24.0%, increasing compared to 2013 (21.0%), due to the further reduction of the level of collateral offered by savings products. The value of new business (NVB) was 33.7% on equivalent terms and amounted to € 1,239 million.
Gross written premiums in Italy rose from € 13,312 million at 31 December 2013 to € 17,393 million. This trend (+ 30.7%) is due to the growth of +35% in individual premiums, driven by the increase in single premiums (+ 60.5%), and by the competitive returns compared to alternative products and also to the success of new hybrid products. The latter are distributed through both the traditional channel whose individual premiums grew by 7.2%, and through promoters, the collection of which recorded an increase of +149.4%. The banking channel also contributes to the development with an increase of
+174.2%, essentially tripling its volumes. Positive performances were recorded in all companies, especially Genertellife.
new business annual premium equivalent increased (+35.1% on equivalent terms), due to the significant growth in both annual premiums (+ 20.0% on equivalent terms), which represent the predominant part of the APE (57.2%), and single premiums (+ 62.4% on equivalent terms). the profitability (margin on APe) increased from 18.2% in 2013 to 25.7% in 2014, due to the greater weight of the most profitable unit linked business and the recovery of savings and pension lines, due to the further decline in guarantees offered. As a result of higher volumes and improved profitability the value of new business increased by 91.1% on equivalent terms and amounted to € 641 million.
The increased weight of the more profitable new business with an annual premium (weight on APE from 57.8% in 2013 to 65.0% in 2014) contributes to the development of the profitability of which amounted to 30.7%. The value of new business is slightly higher and amounts to € 265 million (+ 1.6% on equivalent terms).
Gross written premiums in Central and Eastern Europe countries decreased from € 1,568 million at 31 December 2013 to € € 1,487 million, (-1.1% on equivalent terms). Specifically, compared with a positive performance from protection policies (+ 4.5%) and linked policies (+ 2.8% on equivalent terms), a decrease in the savings and pension policies was observed (-4.9% on equivalent terms) mainly in the Czech Republic.
The decline in profitability (margin on APE) from 38.5% in 2013 to 32.8% of 2014 is explained both by the exclusion of pension funds from the scope of evaluation and from higher interest rates observed in the first part of the year used as a discount factor.
Profitability decreased slightly from 26.1% in 2013 to 25.9% in 2014. the value of new business amounted to € 177 million, increasing by 11.2%.
This development is attributable to both the collection of protection policies (+ 29% on equivalent terms) and to a lesser extent, savings policies (+ 4.1% on equivalent terms ).
Excellent performance of the gross written premiums in Asia, which increased from € 902 million at 31 December 2013 € 1,049 million (+19.1% on equivalent terms), due to the positive performance of all the countries in the area.
Decreasing net cash inflows in Asia due primarily to the performances in China.
The contraction in terms of profitability, from 19.0% in 2013 to 11.8% in 2014, is explained in large part from the exit from the perimeter of the United States and Mexico during the first part of 2013. The value of new business is growing (+ 49.0% on equivalent terms) and amounted to € 19 million.
Finally, net cash inflows increased, favored by the above mentioned positive trend in premiums offsetting the decline in capital outflows.
Expeses ■ ■ Technical MarginInvestment Result 31/12/2014 31/12/2013 fourth quarter. 2014 fourth quarter. 2013
10 For further information of the calculation methodology for this indicator, please refer to the Glossary in the Appendix to the Management Report.
The technical margin11, amounted to € 5,532 million, slightly decreasing; in particular, the contraction of the loadings and profi tability of protection lines were only partially offset by growth in fees related to the sale of linked products. In addition, the technical margin, especially in Germany, refl ected the decline of the amount of the acquisition costs shared with policyholders.
This margin does not include insurance operating expenses, which are reported in Total operating expenses.
Net income from financial instruments related to unit and index-linked policies
The net investment result amounted to € 2,240 million, increasing (+ 29.2%) compared to € 1,734 million at 31 December 2013.
This trend was determined by the increase in net realized gains on both equities and on government bonds in the bond segment. In addition, due to the investment strategy implemented by the Group, there was higher current income from investments in equities and bonds despite the environment of low interest rates; however, such a scenario led to higher provisions for interest rate risk compared to the previous year.
the policyholders’ interest on income from investments increased from € -14,177 million at 31 December 2013 to € -14,354 million, resulting in a slight increase compared to the previous period, due to the increase in operating income from investments and to higher allocations to interest rate risk provisions linked to the extreme low level of interest rates.
In particular, management fees related to insurance amounted to € -4,759 million, a decrease of 0.3% with respect to December 31, 2013. Acquisition costs, which amounted to € -3,820 million, decreasing by 1.1%, contributed to this trend due to the performance observed mainly in Germany.
The acquisition and administrative costs ratio amounted to 9.7%, a decrease with respect to 31 December 2013 (10.8%) due to the contraction of 0.9 pps observed in the acquisition costs component concentrated mainly in France and Germany.
The decrease in other operating components was attributable to higher provisions for risk with respect to the prior period.
Net operating income from other financial instruments 11,912 11,138 2,789 2,717
(*) Commissions related to investments contracts, which amounted to € -92 million (€ -107 million at 31 December 2013), are included in net fee and commission income and net income from financial service activities. (**) At 31 December 2014 the amount is net of operating taxes for € 64 million and of non-recurring taxes shared with the policyholders in Germany for € 27 million (at 31 December 2013 respectively for € 64 million and € 14 million). (***) The amount is net of the share attributable to the policyholders. (****) The amount is net of the share attributable to the policyholders in Germany and Austria.
Total investments 388,290 330,840 88 | Generali Group - Annual Integrated Report 2014
At 31 December 2014 total investments of the life segment increased compared to 31 December 2013, amounting to € 388,290 million (+29.14%). Group investments amounted to € 320,583 million (+14.61%), and linked policy investments totalled 67,707 million (+14.53%).
The current return on investments in the life segment recorded a modest decline in all asset classes from 3.8% in 31 December 2013 to 3.6%, with revenues amounting to € 10,907 million (€ 10,517 million at 31 December 2013).
— Strong growth in the operating result (+13.1% on equivalent terms).
Property&casualty written premiums amounted to € 20,617 million, stable compared to the previous year (+ 0.2 % on equivalent terms). Motor line premiums increased by 0.8% with different trends in the main countries where the Group operates; positive trends were registered in Germany and emerging markets, while deceasing trends were registered in the markets of countries most affected by the current macro-economic scenario (in particular Italy, France, Czech Republic and Spain).
Group written premiums at 31 December 2013 92 | Generali Group - Annual Integrated Report 2014
Gross written premiums in France decreased (-6.5 % on equivalent terms) to € 2,545 million. The decrease was attributable to the portfolio pruning’s actions and consequently contracts reduction. In addition the Motor line (-7.2%) suffers in a very competitive market. The Non-Motor line (-5.6%) refl ects the decrease in premiums in the Commercial/Industrial line (-7.4%) affected by the diffi cult economic environment leading to a stagnant market. In reduction the Personal lines (-4.3%).
As for the Non Motor line, Commercial/Industrial (+5.0%) and Personal (+4.0%) segments witnessed an increase while a slight drop is observable in the Accident/Health (-2.2%) segment. As forecasted, the positive trend of the Motor line continued also in 2014, allowing Generali Deutschland to obtain a further improvement in the technical result.
Gross written premiums of Central and Eastern Europe amounted to € 1,884 million, increased with respect to 31 December 2013 (1.3% on equivalent terms). The trend is due mostly to the Motor line (+2.5% on equivalent terms) and, to a more limited extent, to the Non Motor segment (+0.8 on equivalent terms). Proama witnessed a signifi cant growth, driven by new contracts and existing policies renewals. Also Hungary observed growth, while Czech Republic and Poland decreased.
Gross written premiums in Spain were almost stable (-0.2%) reaching € 1,281 million (€ 1,284 million at 31 December 2013). Positive trend in the Non Motor segment; Personal line (+0.7%) is improving compared to the market, while the Commercial/Industrial line (-1.1%) mirrors the impact of the economic downturn. Accident/ Health line (+4.3%) is strongly increasing due to the decreased performances of the Spanish health system. Motor line (-6.4%) suffered from the market diffi culties characterized by a tariff competition that deceases the average premium amount. However in the last months of the year, the introduction of credit scoring requirements and customer segmentation contributed to the stabilization and underwriting’s growth of this business line.
The gross written premiums of International Operations witnessed a decrease compared to 31 December 2013 (-1.5 % on equivalent terms), amounting € 1,102 million. Specifi cally, the trend is attributable to the drop in the gross written premiums related to the care services.
With reference to the fourth quarter of 2014, compared to the same period of the last year, the operating result increased (+5.3%), due to the development of the technical result in the fourth quarter. The operating return on investments of the property &casualty segment increased to 4.69% (4.65% at 31 December 2013).
■ Other ■ ■ Technical ResultInvestment Result 31/12/2014 31/12/2013 fourth quarter. 2014 fourth quarter. 2013 96 | Generali Group - Annual Integrated Report 2014
current year loss ratio excluding natural catastrophes 69.3% 69.5% -0.3 natural catastrophes impact 1.2% 2.3% -1.1 prior year loss ratio -3.8% -3.4% -0.4
The ratio in Italy improved considerably (-3.2 pps), amounting to 89.2%. This trend mainly reflected the decrease in the loss ratio (−3.6% pps) which benefited from the positive trend of non - catastrophic events. Catastrophic claims increased, amounting to € 96 million (1.7 pps on the net cor; 0.5 pps at the end of 2013) due to the floods of January, October, November and the storms in July. The expense ratio increased with respect to the previous year, amounting to 22.1%, due to the increase in acquisition cost.
The combined ratio of France is equal to 104.9%, evidencing a decrease of 0.6 pps with respect to the previous year due to the contraction of the loss ratio, equal to 77.2% (-0.7pps). This ratio includes the impact of 2.4 pps of the catastrophic events, caused by the floods of January and the storms of June, while the impact in the prior year was of 2.8 pps.
The combined ratio of the central and easten European countries was 87.7%, decreasing slghtly with respect to 2013 (-1.0 pps). This ratio includes the impact of the catastrophic events of 0.4 p.p., while last year catastrophic events influenced the ratio for 4.1 pps.
Expense ratio experience (31.9%) a slight drop of -0.2 pps compared with prior year.
The combined ratio of the regional structure EMEA was 95.5%, improved slightly compared to 31 December 2013 (-0.3 pps) due to the trends observed in the main markets of the area.
The combined ratio of Spain, equal to 93.3, improved (-1.0 pps) due to the contraction of the loss ratio (-0.8 pps) and to a lesser extent to the expense ratio (-0.1 pps).
The current income from equity instruments, instead, recorded an increase at € 121 million (€ 94 million at 31 December 2013). Other operating net financial expenses, which include interest expense related to operating debt and investment management expenses amounted to € -279million (€ -325 million at 31 December 2013), due to lower interest expenses on operating debt.
In particular, the non-operating investment result decreased, despite the increase of the net realized gains which amounted to € 769 million (€ 726 million at 31 December 2013). The impairment losses, mainly on equity portfolios, increased to € -417 million (€ -258 million al 31 December 2013).
Europe, Middle East and Africa 1,060 1,060 829 821 666 669
(*) The Accident/Health business premiums, managed according to the criteria of the life business, are taken into account in the life segment.
(€ million) Combined ratio* Loss ratio Expense ratio 31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013
(*) CAT calims impacted on the Group combined ratio for 1.2 pps of which 1.7 pps in Italy, 2.4 pps in France and 1.1 pps in Germany (At 31 December 2013 CAT claims impacted on the Group combined ratio for 2.3 pps, of which 0.5 pps in Italy, 2.8 pps in France, 4.1 pps in Germany and 4.1 pps in the European Eastern Countries).
The current return of total investments in the property&casualty segment slightly decreased to 3.5% (3.9% at 31 December 2013), with the related incomes amounting at € 1,307 million.
Property&Casualty insurance provisions 30,117 29,533 of which Motor 13,254 13,503 of which Non Motor 16,863 16,030
In particular, the operating result of the holding and other activities segment amounted to € -5 million, decreasing compared to 128 million at 31 December 2013. This trend was determined by the increase of the holding ’s operating costs and by the negative performance of the non core activities, partially offset by the financial segment performance reflecting the positive result of Banca Generali.
The positive performance of the financial segment is attributable to the net result of financial activities, which have benefitted from higher net fees, only partially absorbed by the increase in the acquisition and administration costs.
The operating result of the aforementioned operations is reported in the table below: 106 | Generali Group - Annual Integrated Report 2014
Net operating income from other financial instruments 295 419 -13 118
Holding and other businesses result before taxes -922 -862 -337 -353
In 2015 the International Monetary Fund expects GDP to grow in the Euro Area by 1.3% (0.8% in 2014), although the recovery will not be uniform across countries; we will observe a first slight improvement in the unemployment rate (from 11.6% in 2014 to 11.2% in 2015), while inflation is expected at 0.9% in 2015 (0.5% in 2014). This scenario is consistent with the decision of the European Central Bank that will maintain an expansionary monetary policy.
With regard to the reinsurance business in particular, the catastrophic events that occurred in the world were of medium and small magnitude and had marginal effects on the reinsurance industry, that could reinforce its capital strength also benefiting from the capital inflows from the financial market (in particular thanks to Cat Bond’s issuances). The reinsurance business yielded a positive trend on average and has led to a reduction in costs of the Group renewals of reinsurance contracts for 2015.
The Group dedicates a great deal of attention on the Property&casualty segment, particularly on the Retail business, aiming at moving the product mix towards a more balanced portfolio in order to avoid the negative effects arising from a low interest rate environment. As a consequence, the level of competition in the P&C lines has significantly increased, in almost all areas, causing a steep decrease of the average premium. This effect is particularly visible on the Motor lines, but also on the Property lines such as Household. The P&C lines still experience a favourable market environment and this is also helped by a positive trend in claims frequency which keeps dropping since 2011, thus contributing to excellent results in almost all European markets. Generally speaking, also the outlook of the distribution network is changing, introducing multi-mandate agents, aggregator channels (e.g., in Italy, Spain and Germany) and sales, which seem to be increasingly digitalized. Companies are significantly investing in the digital space in order to ensure that the new customer needs are met. In fact, customers tend to be widely connected and companies need to adapt to this new trend. Consistently with the strategic objective of increasing the contribution to Group results of the Property&casualty segment, in 2015 we expect to enhance the technical efficiency achieved during 2014, thanks to the results of actions already put in place.
The investment policy for 2015 will continue to be based on an asset allocation aiming at consolidating current profitability and at minimizing the level of cash held. With regard to fixed-income investments, the investment strategy aims to diversify the portfolio, both in government bonds, where European “core” rates have reached a minimum, and in corporate bonds, including private placements and secured loans. This aims at ensuring adequate profitability for the policyholders and a satisfactory return on capital, while maintaining the risk profile under control. Equity exposure will be maintained substantially stable, pursuing a geographical and industrial rotation into geographical areas and industries with higher growth rates than Europe.
In light of the actions implemented, notwithstanding the uncertain macroeconomic scenario, consistently with the Group strategy, Generali Group expects for 2015 to strengthen the levels of operating performance achieved in 2014.
The Generali Group’s consolidated fi nancial statements at 31 December 2014 were prepared taking into account the IAS/IFRS issued by the IASB and endorsed by the European Union, in accordance with the Regulation (EC) No. 1606/2002, Legislative Decree No. 58/1998 and Legislative Decree No. 209/2005, as amended by Legislative Decree No. 32/2007.
In this yearly report the Generali Group prepared its consolidated fi nancial statements and Notes in accordance with the ISVAP Regulation No. 7 of 13 July 2007 and subsequent modifi cations and the information of the CONSOB Communication No. 6064293 of 28 July 2006. As allowed by the aforementioned Regulation, the Generali Group believed it appropriate to supplement its consolidated fi nancial statements with detailed items and to provide further details in the Notes in order to meet also the IAS/IFRS requirements.
On 14 July 214 the Group concluded an agreement for the sale of BSI Group. In October 2014 the Group has also agreed to sale the Argentinean entities La Estrella, Caja ART and Caja de Retiro. Pending the release of the necessary regulatory authorization, in accordance with IFRS 5, BSI group and the Argentinean entities under disposal were classifi ed in the fi nancial statements as disposal groups held for sale. Consequently, these investments have not been excluded from consolidation but both the total of the related assets and liabilities and the related profi t or loss, net of tax effects, have been recorded separately in the specifi c lines in the fi nancial statements. Comparative fi gures of this report have been restated, excluding from the consolidation area he non-current assets or disposal groups held for sale and sold during the period.
A description of the alternative performance indicators presented in this repot can be found in the Methodological note on alternative performance indicators.
In accordance with the connectivity of information principle, the report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the ability to create value over time. The key forms of connectivity used by Generali include the connectivity between qualitative and quantitative information, fi nancial and other information, the capitals recognized through the stakeholders and information consistent with that in other communication tools. Other elements improving the connectivity of information and the overall usefulness of the report are a logical and well presented structure, cross-referencing (the design further contributes to achieve the principle) and a clear language – reference to the glossary is envisaged when jargon or highly technical terminology is used. Generali also issues an interactive version of its Annual Integrated Review on its website: it is another tool further highlighting the connectivity of information.
Generali maintains stakeholder relationships as to understand and satisfy their needs, especially their information needs. The stakeholder engagement process promoted by the Group was addressed to the following stakeholders: fi nancial community (analysts and investors), the community (academia) and employees. Specifi cally, Generali regularly meets with members of the fi nancial community at roadshows, meetings and sector conferences: 35 were such events in 2014. Following the 2013 result presentation, some investors were asked to give us a feedback on the new set of information from Generali, i.e. the Annual Integrated Review, the Financial Supplement and the simplifi cation of the result presentation to the market. Feedback and suggestions on the integrated report were then collected through questionnaires over 2014, when the report was presented to about a hundred of students at the university of Trieste, Udine, Venice (Ca’ Foscari) and Milan (Bocconi) and to some Group employees. We regularly dialogue with regulators and the European Institutions as to maintain good relationships and ensure legislative compliance. We also offer our competences and participate in public consultations for the defi nition of new rules, by providing our view in order to safeguard the specifi cities of the Group and the insurance industry.
In accordance with the materiality principle, the report should only disclose information to explain to providers of fi nancial capital how an organization creates value over time. Generali believes that value is created by focusing on the following primary stakeholders: the fi nancial community, its people, clients, sales force and regulators. Matters that may signifi cantly affect the Group ability to create value over time are therefore those connected to such fi ve stakeholder categories. In order to identify material matters, Generali relied on strategic management control tools, such as the strategic plan and the Quarterly Business Review (QBR).
The Annual Integrated Review also meets the conciseness principle, as represented in the following diagram.
As for Reliability and completeness, the Annual Integrated Report is supported by a structured information system, which processes financial and non-financial information. This allows Generali to increase the homogeneity and reliability of both kinds of information. As for the scope of the reporting, the performance indicators refer to all the Group, unless otherwise indicated.
changes in the presentation of the performance indicators of the Group
All the economic indicators and comparative performance included in this management report have been restated in line with the current scope of consolidation and with the review of segment reporting. As concerns this last topic, please refer to the paragraph Segment reporting in the basis of presentation and accounting principles of the Notes.
As mentioned above, the comparative KPIs contained in this report have been restated as follows: 31/12/2013 as previously published change in scope and segment reporting 31/12/2013 as published
In order to support the assessment of the quality and the sustainability of the Groups earnings in each segment and country, in the management report the performance indicators have been included.
Under CESR Recommendation on alternative performance measures (CESR/05 – 178b), operating result cannot replace earnings before taxes calculated in accordance with IAS/IFRS. In addition, it should be read together with financial information and the related notes on the accounts which are included in the audited financial statements.
Starting from this integrated report, the Group has re-determined its operating segments in order to provide disclosures which are more closely aligned with the new organizational structure of the Group and to ensure a better economic representation of the individual business and geographical segments.
In the life segment, all profit and loss accounts are considered as operating items, except those representing the non-operating result, i.e.: — realized gains and losses and net impairment losses on investments which both did not affect the statutory reserves to the extent they were not included in the deferred policyholders liability and those on shareholders’ fund; — net other non-operating expenses, principally including results activities in run-off, Company restructuring charges, amortization of value of business acquired directly or through acquisition of control of insurance companies (value of business acquired or VOBA) and other net non-recurring expenses.
In particular, with respect to the calculation method of the policyholders’ profit sharing based on the net result of the period, the life non-operating result in Germany and Austria was calculated net of the estimated amount attributable to the policyholders.
Furthermore, where a new fiscal law materially affects the operating result of the countries for which the policyholders ’ profit sharing is based on the net result of the period, the estimated non-recurring effect on the income taxes attributable to the policyholders has been accounted for in the operating result.
With reference to holding costs, are considered as operating the Parent Company and territorial sub-holding direction expenses regarding coordination activities.
Generali Group are equivalent to the sum of the operating result and non-operating result of the above mentioned segments and related consolidation adjustments.
— within operating income, net other operating expenses are adjusted for operating taxes and for non-recurring taxes that affect in a relevant manner the operating income of the countries where policyholders sharing is determined taking into account the taxes for the period. These adjustments are included in the calculation of operating income and are excluded from the income taxes item.
The operating results of the life and property&casualty segments are also presented in the format of result drivers, which better describe the management trends of the changes that occurred in each segment performance.
The operating result of the life segment is made up of a technical margin gross of underwriting expenses, a net investment result and acquisition and administration costs related to insurance business and other net operating expenses. In detail, the technical margin includes loadings, risk and surrenders results.
The average investments (calculated on book value) included land and buildings (investment properties), investments in subsidiaries, associated companies and joint ventures, loans and receivables, available for sale financial assets, financial assets at fair value through profit or loss less financial assets and liabilities related to linked contracts, derivatives classified in financial liabilities at fair value through profit or loss and cash and cash equivalents. Total investments are adjusted for derivative instruments classified as financial liabilities at fair value through profit of loss and REPO classified as other liabilities. The average is calculated on the average asset base of each quarter of the reporting period.
Segment investments are presented without taking into account the investments in fully consolidated equity investments and intra-group financing among different segments, except for Life segment, of which some quotas are considered in the computation of the policy subscribers participation to the profits.
Adjusted shareholders’ equity consists of the Equity including minority interests, net of the profit or loss of the “Other Comprehensive Income”.
non life FcF: IFRS Non Life Operating Result Net of Taxes (normalized tax rate) and Minorities, and net of Change in Solvency 1 required capital
It represents the percentage of theoretically distributable earnings, i.e. Gross Free Surplus, made by our subsidiaries (including reinsurance cash flows) that is actually remitted or passed up to the parent company net of the above mentioned Holding expenses.
2.1 Land and buildings (self used) 2,797 2,879 3 AMOUNTS CEDED TO REINSURERS FROM INSURANCE PROVISIONS 4,378 4,875 4.1 Land and buildings (investment properties) 12,628 12,828 4.2 Investments in subsidiaries, associated companies and joint ventures 1,284 1,407 4.3 Held to maturity investments 2,940 4,115 4.5 Available for sale financial assets 276,498 230,031 4.6 Financial assets at fair value through profit or loss 83,061 72,893 of which financial assets where the investment risk is borne by the policyholders and related to pension funds 5.1 Receivables arising out of direct insurance operations 7,462 7,584 5.2 Receivables arising out of reinsurance operations 1,143 1,082 6.1 Non-current assets or disposal groups classified as held for sale 21,304 653 7 CASH AND CASH EQUIVALENTS 8,508 19,431
1.1 Shareholders' equity attributable to the Group 23,204 19,778 1.1.4 Revenue reserves and other reserves 7,571 7,276 1.1.6 Reserve for currency translation differences -239 -252 1.1.7 Reserve for unrealized gains and losses on available for sale financial assets 6,498 2,501 1.1.8 Reserve for other unrealized gains and losses through equity -943 -306 1.1.9 Result of the period 1,670 1,915 1.2 Shareholders' equity attributable to minority interests 981 1,627 1.2.1 Share capital and reserves 706 1,434 1.2.2 Reserve for unrealized gains and losses through equity 93 -34 1.2.3 Result of the period 182 227 3 INSURANCE PROVISIONS 386,202 345,752 of which insurance provisions for policies where the investment risk is borne by the policyholders and related to pension funds 4.1 Financial liabilities at fair value through profit or loss 18,374 16,084 of which financial liabilities where the investment risk is borne by the policyholders and related to pension funds of which subordinated liabilities 8,315 7,612 5.1 Payables arising out of direct insurance operations 3,553 3,190 5.2 Payables arising out of reinsurance operations 557 572 6 OTHER LIABILITIES 31,007 10,586 6.1 Liabilities directly associated with non-current assets and disposal groups classified as held for sale 6.4 Other liabilities 6,181 5,993 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 501,318 449,656
stAtement oF comPlensIve Income 1 CONSOLIDATED RESULT OF THE PERIOD 1,852 2,142
Other comprehensive income (*) 128 0 -84 -79 0 Total shareholders' equity attributable to minority interests stAtement oF cHAnGes In eQuIty
Change in the provisions for unearned premiums and for unexpired risks for non-life segment -26 -66
Change in the provisions for outstanding claims and other insurance provisions for non-life segment 450 620
Change in the mathematical provisions and other insurance provisions for life segment 19,935 16,249
Change in receivables and payables arising out of direct insurance and reinsurance operations 541 83
Income taxes paid -1,214 -1,468 Net cash flows from cash items related to investing or financing activities 2,581 -4 Financial liabilities related to investment contracts 2,380 113
NET CASH FLOWS FROM OPERATING ACTIVITIES 19,750 13,227 Net cash flows from investment properties 336 48
Net cash flows from investments in subsidiaries, associated companies and joint ventures(***) -39 181
Net cash flows from available for sale financial assets -18,983 -18,862 Net cash flows from tangible and intangible assets 116 -325 Net cash flows from other investing activities -6,851 -818
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD(*) 12,262 15,607 CHANGES IN CASH AND CASH EQUIVALENTS -3,779 -3,345
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD(**) 8,484 12,262 (*) Cash and cash equivalents at the beginning of the period include cash and cash equivalents (€ 12,287 million), liabilities to banks payables on demand (€ -2 million) and bank overdrafts (€ -22 million) without cash and cash equivalents of non current assets or disposal groups classified as held for sale (€ 7,145 million). (**) Cash and cash equivalents at the end of the period include cash and cash equivalents ( € 8,508 million), liabilities to banks payables on demand (€ 7 million), bank overdrafts (€ 17 million). (***) Includes mainly proceeds arising from the disposal of Fata Danni S.p.A. (€ 195 million) and the minority squeez-out of Generali Deutschland Holding (€ 234 mln). (****)It refers entirely to dividends attributable to minority interests.
In this yearly report the Generali Group prepared its consolidated financial statements and Notes in conformity with the ISVAP (now IVASS) Regulation No. 7 of 13 July 2007, as subsequently amended, and information of the Consob Communication No. 6064293 of 28 July 2006.
On 14 July Generali Group concluded an agreement for the sale of 100% of BSI Group. In October the Group also concluded the agreement for the sale of the Argentine companies La Estrella Seguros de Retiro S.A., La Caja Aseguradora de Riesgos del Trabajo ART S.A. and La Caja de Seguros de Retiro S.A.. Awaiting the necessary regulatory authorizations, in accordance with IFRS 5,BSI Group and the Argentine companies being sold was classifies as disposal groups classified as held for sale. Consequently such participation is not excluded from consolidation but both the total assets and liabilities and the result of the period has been separately recognised in specific items in the financial statements.
The consolidated financial statements at 31 December 2014 were approved by the Board of Directors on 11 March 2015.
The set of the consolidated financial statements is made up of the balance sheet, the income statement, the statement of comprehensive income, the statement of changes in equity and the statement of cash flow, as required by the ISVAP Regulation No. 7 of 13 July 2007, as subsequently amended. The financial statements also include special items that are considered significant for the Group.
The Notes, which are mandatory as minimum content established by ISVAP (now IVASS), are presented in the appendices to the notes to this report.
This yearly report is drawn up in euro (the functional currency used by the entity that prepared the financial statements) and the amounts are shown in millions, unless otherwise stated, the rounded amounts may not add to the rounded total in all cases.
Changes in the consolidation area compared to the previous year and the table listing companies included in the new consolidation area are attached to these Notes, in the Appendix related to the change in the consolidation area, compared to 2013.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: — The contractual arrangement with the other vote holders of the investee; — Rights arising from other contractual arrangements; — The Group’s voting rights and potential voting rights.
In preparing the consolidated financial statements: — the financial statements of the Parent Company and its subsidiaries are consolidated line by line through specific “reporting package”, which contribute to the consistent application of the Group’s accounting policies. For consolidation purposes, if the financial year-end date of a company differs from that of the Parent Company, the former prepares interim financial statements at December 31st of each financial year; — All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation (intra-group losses are eliminated, except to the extent that the underlying asset is impaired); — the carrying amount of the Parent Company’s investment in each subsidiary and the Parent Company ’s portion of equity of each subsidiary are eliminated at the date of acquisition; — Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the Parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. The non-controlling interests, together with their share of profit are shown as separate items.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. Consequently, no additional goodwill or badwill is recognized.
The assets acquired and liabilities assumed in a business combination are initially recognized at fair value at the acquisition date. Goodwill is initially measured at cost being the excess of the aggregate acquisition cost over the net value of the identifiable assets acquired and liabilities assumed is accounted for as goodwill. In the case of the acquisition cost is less than the fair value of the assets acquired and liabilities assumed, the difference is recognised in the profit and loss account.
In the Annexes the complete list of subsidiaries, associates and joint ventures included in the consolidated financial statements at 31 December 2014 is presented . Unless otherwise stated, the annex shows the share capital of each consolidated entity and the proportion of ownership interest held by the Group equals the voting rights of the Group.
The qualitative and quantitative disclosures required by IFRS 12 are provided in the appropriate section of the notes.
Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.
3.4 significant judgements in determining control, joint control and significant influence over an entity
Following the guidelines set out in the strategic plan, the Group has recently concluded some transactions that have led to fully control the most part of its subsidiaries. The control is normally ensured by the full ownership of the voting rights, having thus the ability to direct the relevant activities and consequently being exposed to the variability of results arising from those activities.
To a minor extent, the Group holds interests in associates and joint ventures. The agreements under which the Group has joint control of a separate vehicle are qualified as joint ventures where they give rights to the net assets.
new accounting principles, changes in the accounting rules and in the financial statements
Following the endorsement of the European Union, as from the 1st January 2014 new principles and amendments shall be applied. The most relevant changes for the Group with respect to the consolidated financial statements at 31 December 2013 are described below. The most relevant changes for the Group with respect to the consolidated financial statements at 31 December 2013.. In addition, the main documents issued by the International Accounting Standard Board, that could be relevant for the Group, but not yet effective, are described.
new accounting principles, changes in the accounting rules that shall be applied from 1 January 2014
Following the endorsement in the European Union, for the annual period began at 1 January 2014 the following new principles have been be applied: — IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, revised versions of IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures, Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities (endorsed by European Union with Regulation (EU) 1254/2012).
The assessment of control is based on all facts and circumstances and a reassessment is required when they indicate the elements of control has been changed.
The Transition Guidance illustrates a guidance to the transition to new standards on consolidation. The guidance introduces limits to retrospective application. In particular, a company must not make entries for the restatement of the company for which the consolidation conclusion on the date of initial application is the same as that obtained in accordance with IAS 27 and SIC-12 “Consolidation - Special Purpose Entities” and in opposite case the retrospective application is limited to the period preceding the date of initial application. Furthermore disclosure requirements regarding unconsolidated structured entities shall not to be presented for comparative periods.
Amendments to IAS 32 – Offsetting financial assets and financial liabilities
In December 2011, the IASB clarified the requirements for offsetting of financial assets and liabilities publishing the amendment to IAS 32 Offsetting Financial Assets and Financial Liabilities.
If both conditions are met net positions are presented in balance sheet. This amendment is effective for annual periods beginning on or after 1 January 2014.
Amendments to IAS 32 has been endorsed by European Regulation (UE) n. 1256 of 13 December 2012.
These amendments do not have material impacts in the consolidated financial statements of the Group.
IFRS 9 replaces IAS 39 “Financial Instruments: Classification and Measurement” and includes a principle -based model for the classification and measurement of financial instruments, an impairment model based on expected losses and an hedge accounting approach more in line with risk management strategies.
A financial asset is measured at amortized cost if both of the following conditions are met: — the asset is held to collect cash flows(business mode assessment)
— the contractual cash flows represent only payments of principal and interest (solely payments of principal and interest – SPPI)
On 20 June 2013, the IASB published the exposure draft “Insurance Contracts”. The E.D. proposes a new model for the measurement of insurance contracts that will replace the current IFRS 4 - Insurance Contracts. The valuation method is structured on a Building Block Approach based on the expected value of future cash flows, weighted by the probability of occurrence, on a risk adjustment and on a margin for the services provided within the contract (“contractual service margin ”). The contractual service margin is a component of the compensation that the insurer requires for its activity, that is characterized by uncertainty and various types of risk. A simplified approach (“Premium Allocation Approach”) is permitted if the coverage period of the contract is less than one year, or if the model used for the assessment provides a reasonable approximation compared to the building block approach. The effective date is three years after the publication of the final standard. Early application is permitted.
IFRS 9 introduces a model substantially reformed for hedge accounting that allows better than in IAS 39 to reflect in financial statements the hedging activities undertaken by risk management.
In particular there is a significant simplification of the effectiveness test. There are no more predetermined thresholds of coverage to achieve effective hedge (ie 80-125% in the current IAS 39),but it is sufficient that: — there is an economic relationship between the hedging instrument and the hedged item; and
The Group is assessing the impact of the requirements introduced by IFRS 9 that, from a first assessment, could be material for the Group but not determinable at the moment.
IFRS 11 Amendments regarding the accounting for acquisition of an interest in a joint operation
IAS 38 Amendments regarding the clarification of acceptable methods of depreciation and amortization
IFRS 10 Amendments regarding the sale and the contribution of assets between an investor and its associate or joint venture
IAS 28 Amendments regarding the sale and the contribution of assets between an investor and its associate or joint venture
After initial recognition, goodwill is measured at cost less any impairment losses and it is no longer amortised. According to IAS 36, goodwill is not subject to amortization. Realized gains and losses on investments in subsidiaries include the related goodwill. Goodwill is tested at least annually in order to identify any impairment losses.
For further details see paragraph 1.1 – Goodwill in the section Notes to the balance sheet.
In case of acquisition of life and non-life insurance contract portfolios in a business combination or portfolio transfer, the Group recognises an intangible asset, i.e. the value of the acquired contractual relationships (Value Of Business Acquired). The VOBA is the present value of the pre-tax future profit arising from the contracts in force at the purchase date, taking into account the probability of renewals of the one year contracts in the non-life segment. The related deferred taxes are accounted for as liabilities in the consolidated balance sheet.
The difference between the fair value of the insurance contracts acquired in a business combination or a portfolio transfer, and the insurance liabilities measured in accordance with the acquirer’s accounting policies for the insurance contracts that it issues, is recognised as intangible asset and amortised over the period in which the acquirer recognises the corresponding profits.
Similar criteria are applied for the initial recognition, the amortization and the impairment test of other contractual relationships arising from customer lists of asset management sector, acquired in a business combination where the acquiree belongs to the financial segment.
The depreciation is systematically calculated applying specific economic/technical rates which are determined locally in accordance with the residual value over the useful economic life of each individual component of the property.
Property, plant, equipment, furniture and property inventories are classified in this item as property inventory. They are initially measured at cost and subsequently recognised net of any accumulated depreciation and impairment losses. They are systematically depreciated on the basis of economic/technical rates determined in accordance with their residual value over their useful economic life. In particular the inventories are measured at the lower of cost (including cost of purchase, cost of conversion and cost incurred the inventories to their present location and condition) and net realizable value, i.e. the estimated selling price in the ordinary course of business less the estimated cost of completion and costs to sell.
In accordance with IAS 40, this item includes land and buildings held to earn rentals or for capital appreciation or both. Land and buildings for own activities and property inventories are instead classified as tangible assets. Furthermore, assets for which the sale is expected to be completed within one year are classified as non-current assets or disposal groups classified as held for sale.
To measure the value of land and buildings (investment properties), the Generali Group applies the cost model set out by IAS 40, and adopts the depreciation criteria defined by IAS 16. Please refer to the paragraph on land and buildings (self-used) for information about criteria used by the Group and finance leases of land and buildings.
This item includes investments in subsidiaries and associated companies valued at equity or at cost. Immaterial investments in subsidiaries and associated companies, as well as investments in associated companies and interests in joint ventures valued using the equity method belong to this category.
Financial Instruments included in scope of IAS 39 are classified as follows: - Held to maturity - Loans and receivables - Available for sale financial assets - Financial assets at fair value through profit or loss
Available for sale financial assets are accounted for at the settlement date at the fair value at the related transaction dates, plus the transaction costs directly attributable to the acquisition.
This category comprises non-derivative financial assets with fixed or determinable payments, not quoted in an active market. It does not include financial assets held for trading and those designated as at fair value through profit or loss or as available for sale upon initial recognition.
In detail, the Generali Group includes in this category some unquoted bonds, mortgage loans, policy loans, term deposits with credit institutions, deposits under reinsurance business accepted, repurchase agreements, receivables from banks or customers accounted for by companies of the financial segment, and the mandatory deposit reserve with the central bank.
The Group’s trade receivables are instead classified as other receivables in the balance sheet.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when: - The rights to receive cash flows from the asset have expired; - The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
In particular both bonds and equities, mainly quoted, and all derivative assets, held for both trading and hedging purposes, are included in this category. Financial assets at fair value through profit or loss also take into account investments back to policies where the investment risk is borne by the policyholders and back to pension funds in order to significantly reduce the valuation mismatch between assets and related liabilities.
Deferred tax assets are recognized for deductible temporary differences between the carrying amounts of assets and liabilities and the corresponding amounts recognized for tax purposes.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity
Deferred tax assets are not recognized in the following cases provided in paragraph 24 of IAS 12: - when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
- for all deductible temporary differences between the carrying amount of assets or liabilities and their tax base to the extent that it is probable that taxable income will be available, against which the deductible temporary differences can be utilised 5.2 other receivables
This item comprises non-current assets or disposal groups classified as held for sale under IFRS 5. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition.
of the investment management service component. They are recognised along the product life by reference to the stage of completion of the service rendered. Therefore, acquisition commissions are incremental costs recognised as assets, which are amortised throughout the whole policy term on a straight line approach, reasonably assuming that the management service is constantly rendered.
Deferred commissions for investment management services are amortised, after assessing their recoverability in accordance with IAS 36.
The item mainly includes accrued income and prepayments, specifically accrued interest from bonds.
It also comprises deferred commissions for investment management services related to investment contracts. Deferred fee and commission expenses include acquisition commissions related to investment contracts without DPF fair valued as provided for by IAS 39 as financial liabilities at fair value through profit or loss. Acquisition commissions related to these products are accounted for in accordance with the IAS 18 treatment
The item comprises retained earnings or losses adjusted for the effect of changes arising from the firsttime application of IAS/IFRS, reserves for share-based payments, equalisation and catastrophe provisions not recognised as insurance provisions according to IFRS 4, legal reserves envisaged by the Italian Civil Code and special laws before the adoption of IAS, as well as reserves from the consolidation process.
1.1.7 Reserve for unrealised gains and losses on available for sale financial assets
In order to mitigate the valuation mismatch between financial investments carried at fair value according to IAS 39 and insurance provisions which are accounted for in accordance with previous local GAAP, shadow accounting is applied to insurance contracts and investments contracts with DPF. This accounting practice attributes to the policyholders part of the difference between IAS/IFRS valuation of the basis on which the profit sharing is determined and valuation which is used to determine the profit sharing actually paid.
Investment contracts without DPF and that do not have a significant investment risk, mainly include unit/index -linked policies and pure capitalization contracts.
As previously mentioned, insurance provisions include deferred policyholder liabilities related to contracts with DPF. The recognition of the deferred policyholder liabilities is made in accordance to shadow accounting (as mentioned in paragraph 3.1.2 of insurance provisions ).
The insurance contracts modelling and best estimates assumptions used are consistent with Group Embedded Value methodology and are reviewed by an international actuarial consulting society.
These products are accounted for in accordance with IAS 39 as follows: — the products are recognised as financial liabilities at fair value or at amortised cost. In detail, linked products classified as investment contracts are fair valued through profit or loss, while pure capitalization policies are generally valued at amortised cost; — fee and commission income and expenses are recognised in the profit and loss account. Specifically, IAS 39 and IAS 18 require that they are separately identified and classified in the different components of: (i) origination, to be charged in the profit and loss account at the date of the issue of the product; and (ii) investment management service, to be recognised throughout the whole policy term by reference to the stage of completion of the service rendered; — fee and commission income and incremental costs of pure capitalization contracts without DPF (other than administration costs and other non-incremental costs) are included in the amortised cost measurement; — the risk component of linked products is unbundled, if possible, and accounted for as insurance contracts 3.2 life insurance provisions
These actuarial assumptions take into consideration the most recent demographic tables of each country where the risk is underwritten, aspects of mortality, morbidity, determination of risk-free rates, expenses and inflation. The tax charge is based on laws in force.
Among life insurance provisions, provisions in addition to mathematical provisions, already envisaged by the local regulations in case of adverse changes in the interest rates or mortality, are classified as provisions for the liability adequacy test.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.
This item mainly includes provisions for the Italian ”trattamento di fine rapporto” (employee severance pay). These provisions are accounted for in accordance with IAS 19 (see paragraph 6.4 below).
The provisions for outstanding claims are determined by a prudent assessment of damages, based on objective and prospective considerations of all predictable charges. Provisions are deemed adequate to cover payments of damages and the cost of settlement of claims related to accident occurred during the year but not yet reported.
Financial liabilities at fair value through profit or loss and financial liabilities at amortised cost are included in this item.
The item refers to financial liabilities at fair value through profit or loss, as defined and regulated by IAS 39. In detail, it includes the financial liabilities related to investment contracts where the investment risk is borne by the policyholders as well as derivative liabilities.
Deferred fee and commission income includes acquisition loadings related to investment contracts without DPF, which are classified as financial liabilities at fair value through profit or loss, according to IAS 39. Acquisition loadings related to these products are accounted for in accordance with IAS 18 treatment of the investment management service component during the product life. They are recognised by reference to the stage of completion of the service rendered.
6.1 liabilities directly associated with noncurrent assets and disposal groups classified as held for sale
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.
— In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
1.3 net income from financial instruments at fair value through profit or loss
The item comprises income from investments in subsidiaries, associated companies and joint ventures, which are accounted for in the corresponding asset items of the balance sheet..
The item includes income from financial instruments not at fair value through profit or loss and from land and buildings (investment properties). In detail, it includes mainly interests from financial instruments measured using the effective interest method, other income from investments, including dividends recognised when the right arises, income from properties used by third parties, realized gains from financial assets, financial liabilities and investment properties and reversals of impairment.
The item comprises expenses from land and buildings (investment properties) and from financial instruments not at fair value through profit or loss. It includes: inter-
est expense; expenses on land and buildings (investment properties), such as general property expenses and maintenance and repair expenses not recognised in the carrying amount of investment properties; realized losses from financial assets, financial liabilities and land and buildings (investment properties); depreciations and impairment of such investments.
The statement of comprehensive income was introduced by the revised IAS 1 issued in September 2007 by the IASB, approved by the EC Regulation No 1274/2008. The statement comprises items of income and expenses different from those included in profit or loss, recognised directly in equity other than those changes resulting from transactions with shareholders.
In accordance with the ISVAP (now IVASS) Regulation n.7/2007 as subsequently amended, items of income and expenses are net of taxes as well as net of gains and losses on available for sale assets attributable to the policyholders according to the deferred policyholders liabilities calculation.
This section comprises the allocation of the profit or loss of the year, the allocation of the previous year profit or loss into the capital reserves, increases in capital and other reserves (for the issuance of new shares, equity instruments, stock options or derivatives on own shares, for the sale of shares pursuant to IAS 32.33, for the reclassification to equity instruments previously recognized in liabilities and, in the consolidated financial statements, for changes in scope of consolidation), changes within equity reserves (es. allocation of surplus capital, stock option exercise, transfer of revaluation reserves related to tangible and intangible assets to retained earnings in accordance with IAS 38.87 and IAS 16.41 etc.), the changes in gains and losses recognized directly in equity.
If the fair value cannot be measured reliably, amortised cost is used as the best estimate in determining the fair value.
these checks show that the measurement is not considered as market corroborated the instrument must be classified in level 3. In this case, generally the main inputs used in the valuation techniques are volatility, interest rate, yield curves, credit spreads, dividend estimates and foreign exchange rates.
Derivatives are financial instruments or other contracts with the following characteristics: — their value changes in response to the change in interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or other pre-defined underlying variables; — they require no initial net investment or, if necessary, an initial net investment that is smaller than one which would be required for other types of contracts that would be expected to have a similar response to changes in market factors; — they are settled at a future date.
The fair value hierarchy levels are based on the type of inputs used to determine the fair value with the use of adequate valuation techniques, which shall maximize the market observable inputs and limit the use of unobservable inputs: — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
The fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Assessing the significance of a particular input to the entire measurement requires judgement, taking into account factors specific to the asset or liability.
is recognized among the components of profit or loss, while the part is not effective be recognized in the separate income statement.
Reversals of impairment are recognized respectively: in the profit or loss in the case of debt instruments, in
According to this accounting model the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in an appropriate item of comprehensive income while the ineffective portion of the gains or loss on the hedging instrument is recognized in profit or loss.
The amount accumulated in the other components of comprehensive income is reversed to profit and loss account in line with the economic changes of the hedged item.
Further the Group set cash flow hedges on forecast refinancing operations of subordinated liabilties that are accounted for as hedge of a forecast operations, that are highly probable and could affect profit or loss. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in an appropriate item of comprehensive income. The ineffective portion of the gains or loss on the hedging instrument is recognized in profit or loss. If a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment.
Hedges of a net investment in a foreign operation are accounted for similarly to cash flow hedges: the effective portion of gain or loss on the hedging instrument
mial pricing model takes into account the possibility of early exercise of the options. If present, the pricing model estimates separately the option value and the probability that the market conditions are satisfied. Therefore, the fair value of equity instruments granted reflects market conditions.
The cost is charged to the profit and loss account and, as a double-entry, to equity during the vesting period, taking into account, where possible, the probability of satisfaction of the vesting condition related to the rights granted.
The charge or credit to the profit or loss for a period represents the change in cumulative expense recognised as at the beginning and end of that period and is recognised as employee benefits expense.
Estimates are periodically reviewed and are based on key management’s best knowledge of current facts and circumstances. However, due to the complexity and uncertainty affecting the above mentioned items, future events and actions, actual results ultimately may differ from those estimates, possibly significantly.
The holding expenses mainly include the holding and territorial sub-holding direction expenses regarding coordination activities, the expenses relating to the parent company of stock option and stock grant plans as well interest expenses on the Group financial debt.
Segment data derives from a separate consolidation of the amounts of subsidiaries and associated companies in each business segment, eliminating of the effects of the transactions between companies belonging to the same segment and, the carrying amount of the investments in subsidiaries and the related portion of equity.
The main impacts are explained below: — the elimination in the non-life segment and holding and other businesses segment of participations and loans to companies of other segments, belonging to the same country, as well as related income (dividends and interests)
— the elimination in the life segment of realized gains and losses arising from intra-segment operations if not backing technical reserves
When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
As of this financial report, the segment reporting has been revised, in order to provide a disclosure more in line with the new organisational structure of the Group, as well as a better representation of economic performances by business segment and by country.
The previous segment’s identification “Life segment”, “Non Life segment”, “Financial Segment” and “Holding expenses” has been revised in the following three business segments: — non-life segment, which includes non-life insurance activities; — life segment, which includes life insurance activities; — holding and other businesses segment, which includes banking and asset management activities, expenses regarding coordination activities and interest expenses on the Group financial debt, as well as other activities that the Group considers ancillary to the core insurance business.
The abovementioned approach reduces consolidation adjustments, that currently include dividends received by life companies and paid by Group companies belonging to other segments, and net commissions for financial services rendered and received by Group companies 7. Geographical segment information
on the risk modelling, the monitoring process and the subsequent risk reporting to Supervisory authority and to the market. This process implied also the definition and updating of risk policies including provisions for the main business processes with related roles and responsibilities as required by the regulation. In preparation for the entry in force of the Solvency II regime, the Group has also confirmed its commitment to the pre-application process, in order to receive approval for the use of the Internal Model to be used for the calculation of the solvency capital requirement, following the schedule agreed upon with the Group Supervisor and the other Supervisory Authorities. This task has required a significant development and model improvement for the evaluation of the main risks.
The following sections provide an insight on the updated Group Risk Management Policy, integrated with the Own Risk and Solvency Assessment (ORSA) principles and with a management model aimed at the implementation of the risk strategy, as defined by the Board of Directors.
The Generali Group has been designated as Global Systemically Important Insurer (G-SII) by the Financial Stability Board (FSB), taking into consideration its size, its international presence and its role in the broader global financial system. This designation, which is part of an international framework in which various qualitative and quantitative criteria were considered, implies the need to adapt the Group internal processes to the specific requirements defined by the ‘International Association of Insurance Supervisors (IAIS) aimed at mitigating and managing global systemic risks. The Group, in line with the other systemic insurance entities, is actively involved in the working group supporting the definition of the methodological framework for systemic insurers.
By means of the Internal Control and Risk Management System the Generali Group aims at the maintenance within acceptable levels of the identified risks in order to optimize the available financial resources required for these risks and to improve the Group profitability in relation to its exposure to risks (risk-adjusted performance ). The Group aims at maintaining a significant integration of its risk management processes in all business areas in the countries where it operates. The Risk Management processes apply to the Group as a whole and also to individual companies, with a varying depth and level of integration depending on the complexity of the underlying risks and on the characteristics of the local activities performed. The objective of an integrated management system at Group level is pursued with the coordination and direction activities by the Head Office, with the adoption of Group Policies and Guidelines, of monitoring tools as well as common methodological frameworks. The coordination and direction is ensured also by the reporting of the local risk management functions to the Group risk management function. The HO coordination is fundamental to ensure an efficient Risk Management System and to allocate capital to business units on the basis of their specific risk profile.
In order to comply with the forthcoming Solvency II regulatory framework, the Group has further strengthened its overall risk management system with a focus
11 Board of Directors is meant to be the Board of Directors of Assicurazioni Generali S.p.A. (Parent Company).
Underwriting risks Group Life Underwriting and Reserving Policy Group Non Life Underwriting and Reserving Policy
The risk management is put in place through a specific ongoing process which involves, with different roles and responsibilities, the Board of Directors, the Top Management and the operating and control structures both at Group and Company level, as illustrated in the “Internal Control and Risk Management System”, annually approved by the Board of Directors of the Parent Company and subsequently, taking into consideration specificities and local regulations, by the Board12 of each entity.
The Board of Directors approves the risk management policies and strategies, as well as the risk tolerance levels. The risk adjusted performance targets are defined in coherence with the capital adequacy level.
The Top Management of the Parent Company is supported also by the Balance Sheet Committee, the Finance Committee and the Product & Underwriting Committee. The Balance Sheet Committee examines and identifies the issues which may have material impact in the balance sheet, both on a Group and Head Office level. The Finance Committee examines and assesses extraordinary investments and transactions, while Product & Underwriting Committee oversees the profitability and the riskiness of new insurance products through a centralized process calling for prior approval of new products.
The functions involved in the risk management process operate according to the Three Line of Defence approach as outlined in the Internal Control and Risk Management System: — the operational department heads (Risk Owners) have direct responsibility to take charge for risks, manage them and implement appropriate control measures. To this end, they provide the Top Management with the information needed to define the policies, methodologies and tools for the management and control of the risks for which they are responsible, both at Group and Company level, they oversee their implementation and ensure their adequacy over time. They also ensure that the operational departments that are under their responsibility comply with their objectives and policies, they implement corrective actions within the scope of their autonomy, while on a higher hierarchical level, they submit specific recommendations or proposals to the Top Management; — the Group Risk Management and the Group Compliance functions are the second Line of Defence. The Group Risk Management, whose responsible is the Group Chief Risk Officer, guarantees the accurate implementation and the overall tightness of the Risk Management System, as prescribed by the regulation and as defined by the Board of Directors. He supports the Board of Directors and the Top Management in the definition of the risk strategy and in the development of the methodologies to identify, evaluate, control and report risks. Through an adequate reporting system the Group Risk Man-
The Board of Directors is informed by the Top management of the Parent Company and by the Group Risk Management function about the group risks exposures, on ongoing basis through periodical reports concerning the results and the underlying risk profile and on extraordinary basis in case of material changes in the risk profile, or when prompt intervention through corrective measures is required. The Board of Directors is also informed by the ‘Dirigente Preposto’ in charge of preparing the company’s financial reports, through the Risk and Control Committee, as regards the risk management and internal control over the process of financial reporting. The Risk and Control Committees supports the Board of Directors in carrying out the tasks related to the Internal Control and Risk Management System. The committee is composed by non-executive directors, the majority of whom independent.
At Group level, the Board of each group company maintains the ultimate responsibility to approve risk management policies and strategies and risk tolerance levels as well as to periodically define risk adjusted targets, in alignment with Group directives and capital adequacy of each company.
The Group CEO is also the director in charge of the internal control and risk management system who, among other tasks, implements the Risk Management Policies and proposes initiatives to the Board of Directors aiming at adjusting and reinforcing the system of internal controls and risk management.
The Group Management Committee (which is the main committee supporting the Top Management) applies a team management approach in managing business at an international level, in order to improve the alignment on the strategic priorities of the Group and to increase the effectiveness and sharing of the decision-making process. In particular, it supports the Group CEO for the strategic decisions, such as the sharing of the recommendations submitted to the Board of Directors, the main decision in terms of risk and investment, the as-
Group companies are requested to adopt this Policy, according to the local specificities and the regulatory requirements.
The risk management process, regulated by the Policy includes the following main phases: — Risk identification, — Risk measurement, — Risk management and control, — Risk reporting (including forward looking evaluation included in the ORSA Reporting) for the Board of Directors, the Supervisory Authority and external stakeholders.
Own Risk and Solvency Assessment (ORSA) is defined as the set of processes and procedures employed to identify, assess, monitor, manage and report risks on a current and forward looking basis, as well as the level of Own Funds required to ensure that the firm’s solvency needs are met.
agement provides the elements for the evaluation of the tightness of the overall Risk management system. With the purpose of fully complying with independence requirements from the business functions, the Group CRO also functionally reports to the Board of Directors. Further, the Chief Risk Officers of the local entities report also to the Group CRO. The Group Compliance function, whose responsible is the Group Compliance Officer, has the responsibility to evaluate if the organization and the internal procedures are adequate to prevent the risk of incurring in judicial or administrative sanctions, financial losses and damage to reputation as a result of violations of laws, regulations or measures of supervisory Authorities or self-regulatory standards. Also the Group Compliance Officer functionally reports to the Board of Directors; — the Group Internal Audit is the Third Line of Defence.
It is an independent function carrying out assurance activity on an objective basis for the benefit of the Board of Directors, the Top management and other corporate areas, with the aim of improving the effectiveness and efficiency of the system of internal controls, the organization and the governance processes. The Internal Audit function reports directly to the Board of Directors.
The Group Risk Map approved by the Board of Directors identifies the main risks listed hereafter: 3. Risk identification
The risk identification process is designed to ensure that: — Risks identified by the business are properly considered,
The risks identified in the Group Risk Map within the financial, insurance and credit risks categories are measured through a quantitative model aimed at determining the solvency capital requirement, based on the Partial Internal Model (also called Economic Balance Sheet). The Solvency II Directive provides for specific tests and standards, aimed at ensuring the reliability of the results obtained and their actual use in business decision making processes.
Assets subject to mentioned market movements are invested both to profitably employ the capital subscribed by shareholders and to meet contractual obligations to policyholders; financial market movements imply a change both in the value of investments and insurance liabilities. Therefore, oversight through analysis of the impact of adverse market movements implies an adequate consideration of volatility, correlations among risks and the effects on the economic value of the related insurance liabilities.
13 From investments whose market risk affects the Group are excluded investments back to policies where the investment risk is borne by the policyholders, investments in subsidiaries, associated companies and joint ventures, derivatives, mortgage loans, receivables from banks or customers, cash and cash equivalents and other residual financial investments different than equities, bonds or loans. Instead, land and buildings used by third parties and. self used properties are included.
The exposure to fixed income instruments, considering the investments for which market risk is intended to affect the Group, increases to 88.9% (87.4% as at 31 December 2013) while both the exposure to equity instruments and Group’s real estate investments decreased respectively to 4.8% (5.5% at 31 December 2013) and 6.3 % (7.2% at 31 December 2013).
As mentioned above, the economic impact of changes in interest rate, equity values and the related volatilities for the shareholders will depend not only on the sensitivity of the assets to these shifts but also on how the same movements affect the present values of its insurance liabilities, which may absorb a portion of risk.
In order to control the Group exposure towards the financial markets, while maintaining a perspective of risk/return, the management adopts procedures and actions on the single portfolios including: — credit and tactical asset allocation guidelines are being updated to the changing market conditions and to the ability of the Group to assume financial risks; — matching strategies in terms of net cash flow or duration matching strategies, for the management of the interest rate risk; — dynamic hedging strategies through the use of derivatives instruments as options, swaps, forwards and futures; — portfolio and management rules and product pricing, coherent with sustainable guarantee level.
Group’s exposures to investments in equities - detailed by sector and country of risk of investees - as well as to direct real estate investments - detailed by country of location - are reported at fair values in the following tables: The Group uses a data warehouse to collect and consolidate the financial investments’ data, which guarantees a homogeneous, time effective and high quality analysis of the financial risks.
14 Generali Group publishes annually also a separate Embedded Value report for life segment.
Embedded Value is an actuarially determined estimate of the Group value, net of any value attributable to future new business.
Valuation of impact on Group’s financial statements deriving from possible changes in interest rate was assessed both considering instrument with fixed interest rate (exposing Group to “fair value” risk with impact on equity or result depending on their accounting classification ) and with floating interest rate (exposing Group to “cash flow” risk with impact on profit or loss). This impact was assessed considering the 12 month period ending at the reporting date.
The stress test of +/- 100bp on the yield curve and of +/-10% of equity value changes shows: — a potential impact on the Group shareholders’ equity attributable to the consequent change in the fair value of bonds and equities classified as available for sale15,
Changes in interest rates and equity prices, net of the related deferred taxes, may have a potential impact on shareholders’ equity. The impact is detailed in the table here below. With regard to the sensitivity on the result of the period, it is not material and therefore considered within the impact on shareholders’ equity.
According to the requirements of IFRS 7, the impact on the non-life and financial segment of possible changes in interest rates and values of the equity instruments is represented by the impact on the result of the period and on the shareholder’s equity of the Group, net of the corresponding tax effects.
value available is used. Securities without a rating are given an internal one based on exhaustive economic and financial analysis.
The portfolio of fixed income investments of the Group is prudently built.
The distribution by rating class shows that the absolute majority of the investments is of high rating standing.
Note that the same considerations on market risk regard also the financial instruments backing life insurance policies, therefore, default, downgrades or changes in spread could affect the financial liabilities values with a consequent mitigation effect.
The main criterion consists in the definition of a maximum exposure transferable to each reinsurer. In principle, the maximum liability transferable to an individual reinsurer for each reinsurance program should not exceed a given percentage of its shareholder’s equity.
Group’s exposures to investments in corporate bonds - detailed by sector and rating- are reported at fair value in the following tables: Breakdown of direct investments in corporate bonds by sector
In addition to debt and derivative financial instruments, the Group is exposed to credit risk through the exposure to reinsurance counterparties to which part of the business is ceded. In particular, the ability by reinsur-
In some circumstances, local regulations, market practice or specific types of business allow the Group to benefit from mitigation of the related reinsurance credit risk through deposits from reinsurers and/or letters of credit as a guarantee on ceded reserves. This is especially true this year where a new important reserve was posted with a not rated counterparts almost entirely covered by deposits.
Insurance risk is analysed separately for life and nonlife businesses. It should be noted that health risks are classified as life or non-life depending on their technical features.
Insurance Risk Life & Health includes biometric risks embedded in life and health policies deriving from the uncertainty in the expected future claims payout related to assumptions regarding mortality, longevity, morbidity and disability rates. It includes also risks coming from uncertainty, in respect of expected value, on lapse and expenses risks.
Generally, such exposure is further reduced according to the rating provided by the rating agencies and to the line of business being considered. Based on the features of risk being transferred, a maximum amount threshold has been established. For long-tail business more restrictive criteria are adopted.
Our policy in selection of counterparties is stable over time and prudent, and changes from year to year normally depend on rating variations occurred during the year relating to certain reinsurers and/or on significant variations of reserves related to individual claims as it was the case in 2014 for rating class AA (reduction by € 450 million of outstanding reserves related to one reinsurer ).
In 2014 it is still visible the impact of the Group business model implemented in 2012 which provides for 100% treaty reinsurance cessions to the Holding company; it produces significant reduction in ceded reinsurance outside the Group and, consequently, of the total reserves to reinsurers.
“Not rated” counterparties remain; as in the past, they also include a considerable amount of captive insurance companies of large industrial Groups that do not qualify for any rating while showing a good financial strength, companies that are no longer active in the reinsurance market and not valued by the rating agencies, but not necessarily less financially sound , companies that are part of major insurance groups which benefit from high rating but who have abandoned their
ucts, the Group is continuing to pursue the policy, already undertaken in previous years, of redefining the structure of related financial guarantees.
The total insurance provisions include the gross direct amount of mathematical provisions, which amount to € 249,760 million (€ 238,629 million at 31 December 2013), the provisions for policies where the investment risk is borne by the policyholders and for pension fund, which amount to € 51,663 million (€ 45,795 million at 31 December 2013), the ageing provision for life segment, which amount to € 10,962 million (€ 10,249 million at 31 December 2013), and financial liabilities related to investment contacts, which amount to € 20,776 million (€ 17,933 million at 31 December 2013).
The insurance provisions above are grouped in three macro classes: — contracts with a minimum guarantee level: this group considers both yearly cliquet and at event (death and maturity) guarantees; — contracts without interest guarantee: in this category, together with standard unit linked policies are also included contract whose benefits and premiums can be adjusted by Companies in order to mitigate interest rate risk; — contracts matched by specific assets: this category includes contracts where the liabilities are totally matched by specific assets.
For all risk categories, in the annual Embedded Value analysis, locally and centrally, there are two levels of control, both ex-ante and ex-post.
The tables below show the concentration of gross direct premiums of life segment, including investment contracts, by line of business and by geographical area.
The longevity risk, notwithstanding its minor weight in the life business of the Group, is constantly monitored. For the most important portfolios of annuities in course of payment, there is an annual evaluation for the adequacy of the technical basis, that considers the demographic component but also the financial component related to the minimum interest rate guarantee and any mismatch between the liabilities and the corresponding assets.
— the pricing risk and the catastrophe risk cover the risk that the premium earned in the following year is insufficient to cover actual future claims, expense and extreme events.
Regarding this risk, the Group: — has developed stochastic or deterministic bottom -up simulation models, which are validated by sensitivity analyses and stress tests; — determines for frequency risks, large risks and catastrophe risks (such as earthquake, flood, windstorm, etc.) possible loss scenarios and risk capital requirements, also in consideration of reinsurance structures (proportional, excess of loss, etc.), net retention and cover; — adopts, also for evaluating reinsurance cessions,
Europe, Middle East and Africa 2,267 2,057 848 833 3,780 2,789 6,894 5,679
With reference to the distribution by geographical area, the Group, in the life and health market, is present in various countries with a relative stability in terms of written premiums. However it is worth noting that around 97% of the total written life and health premiums refers to the European market.
Insurance Risk Non-Life refers to uncertainty as to the occurrence, amount and timing of insurance liabilities. This includes the following sub-risk: — the reserving risk relates to the uncertainty of the claims reserves run-off around its expected value, in a one-year time horizon. In other words, this covers the risk that actuarial reserves are not sufficient to cover all the liabilities related to the incurred claims,
models that are consistent with Value Based Management principles, which consider value creation estimated from risk capital as the metric to be used to evaluate the efficiency and adequacy of the solutions to be chosen.
Reinsurance structures are based on a detailed risk analysis that allows identifying, for each class of business, the structure type, the retention level and the total amount of cover needed to mitigate exposures from single risks and, for some classes, events that derive from the accumulation of risks existing within a portfolio.
The placement of facultative reinsurance is instead managed by the individual companies, as it is a type of protection strongly related to individual risk assessment carried out by the underwriting unit.
Reinsurance counterparties are chosen in accordance to the criteria defined by the Corporate Centre (as described in paragraph 5.2).
With specific reference to the Parent Company, these principles have been confirmed by the Board of Directors on 18th February 2014 and the structures in place during the year in course reflect the new business model for the purchase of the contractual reinsurance described above both in the structures and levels of retention.
The assessment is closely related to the valuation of technical provisions, in particular to the uncertainty of the claims provisions in respect to their expected value. Consequently, the risk assessment properly considers the reserving processes, by using claim triangles and all other relevant information collected and analysed according to specific guidelines.
The following table shows the cumulative claim payments and the ultimate cost of claims by accident year and their development from 2005 to 2014. The ultimate cost includes paid losses, outstanding reserves on reported losses, estimated reserves for IBNR claims and ULAE. The amounts refer to direct business gross of reinsurance and recoveries (the latter amounting to € 485.4 million in 2014).
The difference between the ultimate cost of claims and the cumulative paid losses for calendar year 2014 constitutes the claim reserve for accident years 2005 to 2014. The reserve reported in the balance sheet also includes a residual claim reserve that is composed almost exclusively by the accident years not reported in the development triangle.
The observed trend in the ultimate cost for generations 2005-2014 indicates the adequate level of prudence adopted by the Generali Group in its reserving policy.
Estimate of ultimate cumulative claims costs at reporting date 10,873 11,474 12,456 12,886 13,231 12,901 12,271 12,458 12,492 12,188 123,230
Provision recognised in the balance sheet 489 598 753 841 1,078 1,374 1,707 2,289 3,605 6,936 19,670
The focus is mainly on products with a low or medium volatility, with a minor and selective presence in market segments such as, for example, energy.
The underwriting guidelines are particularly prudent with reference to emerging risks (electromagnetic fields, genetically modified organisms, nanotechnologies, etc.), while asbestos related covers are generally excluded.
The underwriting activity is geographically diversified, although mainly concentrated in continental Europe, which accounts for 94% of direct gross written premiums.
Europe, Middle East and Africa 1,592 1,581 2,554 2,550 4,146 4,130
result of not complying with laws, regulations and administrative provisions applicable to the company ’s business. The Group has introduced a “Group Compliance Policy” which sets out principles and provides guidelines for carrying out the compliance activities and provides, as part of the management and coordination activities of the Parent Company, that the compliance functions of the Group companies establish an information flow between them and the Parent Company.
The Group manages liquidity risk with the aim of efficiently dealing with expected and unexpected cash outflows, taking into account potential difficulties in liquidating assets due to assets illiquidity.
The Group aims at maintaining a sound financial structure over a short and long time frame through a constant cash flows’ monitoring activity.
At Group level, liquidity risk is defined as the risk of not being able to efficiently meet expected and unexpected cash flow requirements, or rather being able to meet these risks only through a worse credit market access or through the sale of financial assets at heavy discount.
Such framework has the aim of providing a common approach to manage the liquidity risk in order to guarantee the main Group companies financial sustainability in terms of expected and unexpected cash outflows over a short/medium time frame. The Liquidity Risk 8. operational risk
Operational risk refers to risks of losses arising from inadequate or failed internal processes, personnel and systems or from external events.
The Parent Company has set some common principles for this kind of risks: — policies and basic requirements to handle specific risk-sources; — a detailed operational risk classification and standard criteria to be applied to the whole Group in order to identify and evaluate operational risks within business processes; — criteria to evaluate operational risks and to collect major loss events; — common methodologies and principles guiding the internal audit activities, set by the Group Internal Audit department, in order to identify the most relevant processes to audit.
In July 2013, The Group has been formally nominated by the IAIS (International Association of Insurance Supervisors ) as a Global Systemically Important Insurers (GSII), i.e. the list of main international insurance groups whose eventual failure could create negative impacts over the entire economic system. This nomination has lead, among other things, to a specific improvement of the liquidity risk monitoring process, which is explicitly required by the new regulation. The GSII process has indeed the aim of creating a common framework between the main global peers included in the scope in order to avoid that financial crisis related to these groups would negatively impact the entire economic system.
The Group has already entered into an improvement process to adequate its internal liquidity risk framework and tools in order to be compliant also with the GSII requirements.
This process has been finalized during 2014 through the formal approval of the Liquidity Risk Management Plan (LRMP) by the Parent Company’s Board; the LRMP defines and disciplines the main aspects related to the Group liquidity risk, identifies the main sources of stress, the available monitoring tools and mitigation actions, and also establishes the relevant governance and escalation processes in order to manage potential stress situations.
In addition, with regard to entities operating in the P&C segment, reinsurance treaties towards the Head Office allow each business unit to reduce the exposure to the main risks assumed at local level, in order to mitigate the possible negative consequences of catastrophes events or large claims which could impact the company ’s financial stability.
With the aim of implementing a consistent liquidity risk monitoring approach at Group level, the main business units provide periodically the HO with a specific tool, the Liquidity Risk Model, that highlights possible future liquidity constraints both over an ordinary scenario and in several stressed scenarios over a one year horizon.
In order to achieve such results the Group set up a careful analysis of its cash flows. Financial liabilities are mainly fixed-rate exposures denominated in Euro. With reference to exposures denominated in currencies other than Euro, hedging has been put in place in order to pursue goals of cash flows predictability and stability, as well to reduce the currency risks.
performed over unfavourable macroeconomic and financial scenarios, in order to be able to satisfy every possible liquidity needs.
Financial liabilities related to investment contracts issued by insurance companies 4,811 4,663
During 2014 the Group issued three bonds for a total aggregate amount of 3,75 billion euro with the aim of substitute or refinance a corresponding amount of liabilities.
The Group’s Companies take into account the impact on their expected profits of all the exit and entry sources and in particular those related to any rational/irrational surrenders, as reported also in the previous paragraph 7.1 ‘Life underwriting risk’. In addition, in all the valuations, including sensitivities reported in the paragraph related to the market risk, a dynamic surrender approach is implemented, taking into account the interaction between the return of policyholder funds and the financial market developments.
The total amount of insurance provisions and financial liabilities related to investment contracts is the same as the total shown in chapter 7.1 – Life underwriting risk.
With reference to non-life segment, the table below shows the amount of gross direct claims and unearned premiums reserves split by remaining maturity. The total liability is broken down by remaining duration in proportion to the cash flows expected to arise during each duration band.
Contagion risk refers to the risk coming from Group’s belonging, i.e. the risk that problems arising from one of the Group’s Local Entities could affect the solvency, economic or financial situation of Generali Group.
The Generali Group risk profile, considered as a set of assessments regarding the level of overall exposure to various risks, is monitored by the Supervisory Authorities of the countries where the Group operates.
Compared to Solvency I, the framework currently under finalization at European level, implies a market consistent valuation of all balance sheet items and by the consideration of all risks the Group is exposed to. Risk calibration is performed according to the Value at Risk approach with a confidence level of 99.5% over a one year period. The risk appetite defined at Group level gives due consideration to that calibration level, even increasing it for internal and ratings purposes.
In February 2014, the rating agency Moody’s improved the outlook of Generali from negative to stable and confirmed the Insurance Strength rating to Baa1 and the Baa2 rating on the Generali senior bond placement.
at balance sheet date affects the ratio by around 12 percentage points.
It should be noted that the Company is the Parent Company of the General Group designated by the Financial Stability Board as a Global Systemically Important Insurer and is therefore subject to enhanced supervision and additional capital requirements still under definition by the main players including supervisory authorities at international level. To this end, the Company has been required to engage in the definition of both a Systemic and a Liquidity risk management plans as well as in Recovery and Resolution plans.
In each country that the Group operates, local laws and/ or local supervisor authorities require a minimum capital. This minimum capital should be maintained by each subsidiary to face its insurance obligations and/or operational risks. This minimum level of capital has been continuatively maintained during the financial year.
The Group is a financial conglomerate and it is subject to supplementary supervision regarding capital adequacy requirements, risk concentration, intra-group transactions and internal control. In particular, in 2014 the Group available margin amounted to € 29.0 billion (€ 25.3 billion at 31 December 2013) and the Groups required margin to € 18.6 billion (€ 18.0 billion at 31 December 2013). Therefore, the Groups Solvency I cover ratio (i.e. the ratio of available margin to required mar-
It is also specified how in consideration of the pre-application request for partial internal model for the calculation of the regulatory requirement, the risk policies system is complemented by additional policies to define the processes related to governance, validation and changes to the internal model.
With regard to the forward looking assessment of own risks, the Group has complied with the requirements of the above mentioned Reg. 20/2008 and Letter to market IVASS of April 15th, 2014 defining ORSA Policy as part of the Risk Management Policy. During 2014 the Group ORSA Report at 31.12.2013 has also been presented to IVASS.
With regard to Solvency II reporting, the Group is continuing in activities aimed to define processes and information systems necessary to fulfil quantitative and qualitative reporting requirements defined by the third pillar of Solvency II. During 2014 and the first part of 2015 Group implemented the information platform for the management of the processes necessary for the collection, validation and transmission of the content of individual and Group reporting planned for the preparatory phase with reference to the year end 2014 and the third quarter of 2015. In the coming months, the implementation of the entire set of reporting required upon the entry into force of Solvency II will be completed.
With regard to the pre-application process for the request for the approval for the use of an internal model for the calculation of the new capital requirements, the Group is pursuing the pre-application plan that will be completed by the second quarter of 2015 on the basis of a work plan and meetings agreed with IVASS and other Supervisory Authorities. During the month of June the formal request for approval of the internal model will be forwarded (application package).
Finally, with reference to the results of the European stress test of April 30th, 2014, and in line with EIOPA recommendations, no action in particular has been started. The Group had already started (and is further strengthening) a set of measures to improve the risk-return profile through the following main actions: — de-risking of investments with particular regard to equity investments
— reduction of crediting rating to the policyholder when allowed by the contract conditions
— plan for a strong reduction and containment of operating costs
— continuous business orientation towards products with lower capital/performance guarantees and strong commercial drive towards unit-linked products
The decrease was attributable to the application of IFRS 5 to BSI group.
The goodwill booked was subject to impairment tests as required by IAS 36. Cash generating units were established in accordance with the Group’s participation structure and considering the IFRS 8 requirements relating to operating segments, which Assicurazioni Generali identified as Life, Non-Life and Holding and other businesses segment.
The Dividend Discount Model (DDM) was used for the determination of the value in use for the following cash generating unit (CGU): Generali Italia, Alleanza Assicurazioni, Generali Deutschland Holding, Ceška Group, Generali Schweiz Holding AG, Europ Assistance, Generali Holding Vienna and Generali France.
This method represents a variant of the method of cash flows. In particular, the Excess Capital variant, defines the entity’s economic value as the discounted dividend maintaining an appropriate capital structure taking into consideration the capital constraints imposed by the Supervisor as the solvency margin. This method results in the sum of discounted value of future dividends and the cash generating unit terminal value.
The application of this criterion entailed in general the following phases: — explicit forecast of the future cash flows to be distributed to the shareholders in the planned time frame, taking into account the limit due to the necessity of maintaining an adequate capital level; — calculation of the cash generating unit’s terminal value, that was the foreseen value of the cash generating unit at the end of the latest year planned.
B) Cost of equity (Ke) of the company net of taxes: ke
Carrying amount as at the end of the period 1,983 2,189
The cost of equity (Ke) for each entity is extrapolated based on the Capital Asset Pricing Model (CAPM) formula. In detail: — the risk free rate was defined as the average value - observed during the last three months of 2014 - of the 10-years government bond of the reference country of operation of the CGU, on which the goodwill has been allocated; — the Beta coefficient was determined based on a homogeneous basket of securities of the non-life and life insurance sectors, which was compared to market indexes. The observation period was 5 years with weekly frequency; — the market risk premium amounts to 5% for all Group’s CGUs.
— the acquisition of the Ceška group, which brought a further activation of € 855 million, net of accumulated amortisation.
Deferred tax liabilities were accounted for with reference to the above mentioned intangible assets. Further information on calculation method are detailed in the paragraph 6.3 of the section Basis for presentation and accounting principles in 2014 Consolidated Financial Statements.
million (mainly related to Citylife) and furniture, fittings and office equipment, net of accumulated amortisation and impairment losses (€ 277 million).
The main changes that occurred in the period and the fair value of the properties used for own activity by the Parent Company and its subsidiaries to run the activity are shown in the table below: (€ million) 31/12/2014 31/12/2013
Gross book value as at 31 December previous year 3,865 3,979
Accumulated depreciation and impairment as at 31 December previous year -986 -977
Carrying amount as at the end of the period 2,797 2,879
Accumulated depreciation and impairment as at the end of the period 988 986
Gross book value as at the end of the period 3,785 3,865
Carrying amount as at the end of the period 1,814 1,907
Other tangible assets, which amounted to € 1,814 million (€ 1,907 million at 31 December 2013),mainly includes property inventories for a amount of € 1,497
(€ million) Direct insurance Accepted reinsurance Total 31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013
"Provisions for policies where the investment risk is borne by the policyholders and provisions for pension funds" 155 156 0 0 155 156
Accumulated depreciation and impairment as at 31 December previous year -2,046 -1,903
Accumulated depreciation and impairment as at the end of the period 2,247 2,046
Gross book value as at the end of the period 14,875 14,873
The fair value of land and buildings (investment properties ) at the end of the reporting period is mainly based on external appraisals.
More details on investments in subsidiaries, associated companies and joint ventures of the Group are provided in the section “Disclosure of interests in other entities” in Other Information.
The fair value of the held to maturity investments amounted to € 3,018 million, of which € 2,987 million represented by bonds.
This category accounts for 11.5% of total investments. It mainly consisted of unquoted bonds and mortgage loans, which represent 72.0% and 12.4% of total loans, respectively. More than 90% of the bonds category is represented by fixed income medium-to-long term bond instruments.
The increase compared 31 December 2013 was attributable to increase in value of investments and net acquisition in the period particularly of debt securities. In addition, the impact of the application of IFRS 5 to BSI group and Argentinean companies held for sale amounted to € 1,036 million at 31 December 2013.
(€ million) 31/12/2014 Fair value Unrealized gains / losses Amortized cost
The realized gains and losses and impairment losses on available for sale financial assets are shown in the table below.
(€ million) Financial assets held for trading Financial assets designated as at fair value through profit and loss
This category accounted for 18.7% of total investments. In detail, these investments were mainly allocated in the life segment (€ 81,743 million, which accounted for 98.4% of this category) whereas the residual part referred to the non-life segment (€ 1,045 million which accounted for 1.3% of this category) and to the Holding and other businesses segment (€ 272 million, which accounted for 2.6% of this category).
tion option. At 31 December 2014, after sales and pay backs during the years, the stock of these reclassified financial instruments amounted to € 4,330 million.
Furthermore, the reclassification into loans category of investments previously classified as financial assets at fair value through profit or loss implied a missing recognition of an unrealized gain in the profit or loss for € 10 million, € 1 million net of policyholders share and deferred taxes for the 2014 year.
Generali Group in the context of its business activities enters into securities lending transactions (REPO e Reverse REPO). In general, if the Group retains substantially all risks and rewards of the financial assets underlying these transactions, the Group continues to recognise the underlying assets.
At 31 December 2014, the Group has retained substantially all risks and rewards arising from the ownership of the transferred assets and there are no transfers of financial assets which have been completely or partially derecognised on which the Group continues to control. In particular, the Group continues to recognise approximately € 11,481 million of financial assets linked to various contracts and which are still recognised. In particular, approximately € 3,353 million are subject to securities lending transactions mainly in France, approximately € 815 million are subject to contracts to REPO while approximately € 7,313 million are assets pledged as collateral (please refer to the paragraph Contingent liabilities, commitments, guarantees, pledged assets and collaterals).
The item non-current assets held for sale and discontinued operations includes the assets of BSI and those of Argentinean companies held for sale. For more details on the “Non-current assets or disposal groups classified as held for sale” should be referred to paragraph 12 of the section “Other information”. For details on deferred taxes should be referred to paragraph 3 “Taxes” of the section “Notes to the income statement”.
Carrying amount as at 31 December previous year 1,650 1,628 307 694 1,957 2,323
The deferred acquisition costs amounted to € 1,958 million, stable compared to the previous year.
Reserve for unrealized gains and losses on available for sale financial assets 6,498 2,501
The reserve for currency translation differences arising from the translation of the subsidiaries’ financial statements denominated in foreign currencies amounted to € −239 million, which is substantially stable compared to 31 December 2013 (€ −252 million).
The decrease compared to 31 December 2013 was attributable to the application of IFRS 5 to BSI and to the gradual reinvestment of excess of liquidity.
sued and the reserves belonging to disposal groups held for sale reclassified also for the comparative period. The decrease in this reserve is attributable to losses arising from the re-measurement of the liability for defined benefit plans, for both the Group’s subsidiaries and the disposal group BSI, amounting to € -733 million as a result of a decrease of the reference interest rates used to discount these liabilities.
1.1 Reconciliation statement of the result of the period and shareholders’equity of the Group and the Parent company
Parent Company amounts in conformity with the Italian accounting principles 13,964 738 14,095 569
Elimination of participations, equity valuation impacts and other consolidation adjustments -3,894 -1,076 -3,512 -701
Reserve for unrealized gains and losses on available for sale financial assets 6,334 2,379
Shareholders equity attributable to the group 21,504 1,700 17,864 1,915 2. other provisions
The Group does not recognize any contingent asset that is a possible asset that arises form past events
and whose existence will be confirmed only by the occurrence or on-occurrence of one or more uncertain future events not wholly within the control of the entity. Only when it has become virtually certain that an economic inflow of economic benefits will arise, the asset and the relaed income are recognized in the financial statements of the period in which the change occurs. In the normal course of business, the Group may enter into agreements and transactions that do not lead to the recognition of these commitments as assets and liabilities in the consolidated financial statements under IFRS. For further information regarding contingent liabilities please refer to the paragraph Contingent liabilities, commitments, guarantees, pledged assets and collaterals in the Other information section.
(€ million) Direct insurance Accepted reinsurance Total 31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013 of which provisions for liability adequacy test 20 14 0 0 20 14
In the Non-life segment insurance provisions remain substantially stable (+0.5% compared to 31 December 2013).
In the Life segment insurance provisions increase by 12.9%, mainly due to the development of net inflow and the financial revaluation of technical reserves.
For year end 2014, 44.8% of the gross direct claims provisions were referred to the motor business in line with the prior year (44.1%). In the non-motor business, the personal and commercial lines weighted 82.6%.
Total insurance provisions include the mathematical provisions and provisions for policies where the investment risk is borne by policyholders and for pension funds net of reinsurance (which amounted to € 249,747 million and € 51,519 million respectively), and the ageing provisions for life segment, which amounted to € 10,962 million (accounted for in other insurance provisions of the life segment). In the Life portfolio the policies with significant insurance risk amounted to 63.9%
Carrying amount as at the ed of the period 260,722 248,878
Provisions for policies where the investment risk is borne by policyholders and for pension funds
Carrying amount as at the ed of the period 51,663 45,795
Carry amount as at the end of the period 3,999 4,000
Deferred policyholders liabilities have significantly developed during the period thanks to the raise in the policyholders’ share as a result of the increase of the available-for-sale investments due to favourable market conditions.
The following main subordinated issuances are included as part of the subordinated liabilities category: Coupon Outstanding (*)
Liabilities to banks and customers are mainly payable on demand or short term liabilities. The variation of the period is attributable to disposal group BSI.
Other senior bonds issued by Ceska Pojistovna for a nominal amount of CZK 500 million corresponding to an amortized cost of approximately € 13 million are also classified in this category.
employee benefit plans amounting to € 4,077 million (3,416 million as of 31 December 2013). For more details on the “liabilities directly associated to non-current assets and disposal groups classified as held for sale” should be referred to paragraph 12 of the section “Other information”. For details on deferred taxes should be referred to paragraph 3 “Taxes” in section “Notes to the Income Statement”.
As for defined benefit plans, participants are granted a defined pension benefits by the employers or via external entities.
The main defined benefits plans are concentrated in Germany, Austria and Switzerland, while in Italy the provision for Trattamento di fine rapporto (employee severance pay) matured until 1st January 2007 is included in the provisions for defined benefit plan for € 109 million.
In Germany and Austria, where the Group retains approximately the 77% of the present value of defined benefit obligations, the pension guarantee associations, to the extent of the yearly contributions paid by the companies, are liable for the fulfilment of the pension commitments granted in case of company insolvency.
The net defined benefit plans expense of the year recognised in the profit or loss account is represented as follows: (€ million) 31/12/2014 31/12/2013
Defined benefit obligation as at 31 December previous year 5,273 5,429
Defined benefit obligation as at 31 December previous year 1,755 1,715
The average duration of the obligation for defined benefit plans is 14.2 years at 31 December 2014 (13.7 years at 31 December 2013).
A sensitivity analysis was carried out showing how the defined benefit obligation would have been affected by changes in the discount rate and the most relevant actuarial assumptions: The assumptions used in the actuarial calculation of the defined benefit obligations and the related periodic pension cost are based on the best estimates of each companies granting defined benefit plans. The main
Rate of pension increase 0.5% increase 0.5% decrease 0.5% increase 0.5% decrease 0.5% increase
To provide an indication of the effect of the defined benefit plans on the future cash flows of the Group, the future expected payments divided by bands of maturity are presented below: (€ million) 31/12/2014 31/12/2013
notes to the income statement 1. Income 1.1 net earned premiums
(€ million) Gross amount Reinsurers' share Net amount 31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013
Change in the provision for unearned premiums 88 184 -62 -126 26 58 1.2 Fee and commissions income and income from financial service activities
The net income from financial assets at fair value through profit or loss mainly referred to the life segment (€ 3,698 million). This item is not material for non-life segment (€ -162 million) and for the holding and other businesses segment (€ -26 million).
Reversal of impairment of land and buildings (investment properties) 42 26
Income from non-current assets or disposal group classified as held for sale 0 0
Other income 299 234 2. expenses 2.1 net insurance benefits and claims
Non-life net insurance benefits and claims 13,696 14,499 -586 -924 13,110 13,575
Change in claims paid to be recovered 50 29 -1 15 49 44
Change in other insurance provisions 16 57 2 -2 18 56
Life net insurance benefits and claims 54,583 50,027 -690 -501 53,893 49,526
Change in the mathematical provisions 10,851 10,175 1 5 10,852 10,179
Change in the provisions for policies where the investment risk is borne by the policyholders and provisions for pension funds 5,965 4,790 1 2 5,967 4,792
Change in other insurance provisions 2,367 1,076 -75 -12 2,292 1,064
Fee and commission expenses related to pension funds management 11 10 2.3 expenses from subsidiaries, associated companies and joint ventures
Impairment losses 39 282 2.4 expenses from other financial instruments and land and buildings (investment properties)
In other administration costs of the life segment, administration expenses related to investment contracts amounted to € 56 million (€ 59 million at 31 December 2013), while administrative expenses of non-insurance companies amounted to € 11 million (€ 10 million at 31 December 2013). In the non-life segment, administrative expenses of non-insurance companies remained stable at € 14 million, of which € 11 million (€ 7 million at 31 December 2013) referred to the real estate activity. In the Holding and other businesses segment, other administration costs include € 19 million (€ 22 million at 31 December 2013) related to real estate activity.
Expenses from non-current assets or disposal group classified as held for sale 0 42
This item shows the income taxes due by the Italian and the foreign consolidated companies by applying the income tax rates and rules in force in each country.
All other foreign subsidiaries apply their national tax rates, including: Austria (25%), Belgium (34%), Bulgaria (10%), China (25%), Czech Republic (19%), Netherlands (25%), Romania (16%), Spain (30%), Switzerland (22%) and United States (35%).
Effect of permanent differencies and foreign tax rate differential -191 -253
About the 2014 fiscal year, the effective tax rate is higher than in the previous year, being up to 35%. In particular, as for Italy, the effective tax rate was influenced by both IRAP and substitute taxes on Controlled Foreign Companies, and on the 2013 revaluation of Banca d’Italia shares, as well as by the reversal of intercompany dividends at a consolidated level, whereas, in respect of foreign companies, the effective tax rate was substantially influenced by the realization of certain gains partially exempt from tax in the hands of the French companies.
Deferred income taxes are calculated on the temporary differences between the carrying amounts of assets and liabilities reported in the financial statements and their tax base, by using the tax rates applicable at the expected time of realisation according to each country ’s current legislation.
Deferred taxes as of 31 December 2014 and 2013 are related to the following assets and liabilities.
The cash flow hedging relationships mainly relate to cross currency swaps hedging subordinated liabilities issued by the Group in pounds and to micro-hedging operations in the Life portfolios.
During the financial year, the Group has activated a hedging strategy to neutralise the risk of fluctuations in the foreign exchange rates of its subsidiaries whose functional currency is the swiss franc.
(€ million) Maturity distribution by nominal amount Total notional Positive fair value
In general, in order to mitigate the credit risk relating to over-the-counter transactions, the Group collateralises most of them. Furthermore, a list of selected authorised counterparties is identified for the opening of new derivative transactions.
Net unrealized gains and losses on hedge of a net investment in foreign operations -1 0
Total comprehensive income 5,351 1,847 attributable to the Group 5,042 1,782 attributable to minority interests 309 65
Net unrealized gains and losses on cash flows hedging derivatives -11 -44
Actuarial gains or losses arising from defined benefit plans 240 -38 3. Fair value measurement
As for measurement and disclosure, the fair value depends on its unit of account, depending on whether the asset or liability is a stand-alone asset or liability, a group of assets, a group of liabilities or a group of assets and liabilities in accordance with the related IFRS.
16 With reference to investments in subsidiaries, associates and joint ventures, the book value, based on the fraction of equity for associates and interests in joint ventures or on cost adjusted for any impairment losses for non-consolidated subsidiaries, was used as a reasonable proxy of their fair value. With reference to Loans category, within the amount presented in table below are included unquoted bonds, loan and receivables from banks and customers.
Financial assets at fair value through profit or loss 15,354 15,354
Financial liabilities at fair value through profit or loss 18,374 18,374
The fair value hierarchy levels are based on the type of inputs used to determine the fair value: — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
a significantly higher or lower fair value measurement, the resulting measurement would be categorised within the level attributable to the input with the lowest level utilized.
Financial assets at fair value through profit or loss 56,584 24,720 1,756 83,061
Other assets at fair value through profit or loss 26 752 386 1,163
Financial liabilities related to investment contracts issued by insurance companies 12,174 1,095 0 13,270
Total liabilities at fair value 13,239 2,767 78 16,084 3.2 valuation technique
Valuation techniques are used when a quoted price is not available and shall be appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
In the opposite case, the fair value is determined using the market and income approach. Primary inputs to the market approach are quoted prices for identical or comparable assets in active markets where the comparability between security and benchmark defines the fair value level. The income approach in most cases means a discounted cash flow method where either the cash flow or the discount curve is adjusted to reflect credit risk and liquidity risk, using interest rates and
The fair value of other liabilities relating to investment contracts is determined using discounted cash flow models that incorporate several factors, including the credit risk embedded derivatives, volatility, servicing yield curves commonly observable at frequent intervals. Depending on the observability of these parameters, the security is classified in level 2 or level 3.
on the net asset value of the company. These contracts are valued individually using appropriate input depending on the security and therefore neither a sensitivity analysis nor an aggregate of unobservable inputs used would be indicative of the valuation.
It includes unquoted IFU funds, private equity and hedge funds, which are classified into available for sale and fair value through profit or loss. Their fair value is substantially provided by the fund administrators on the basis of the net asset value of the company. With reference to the inputs on which the assessment is based, Generali Group might have, in some circumstances, limited details and therefore it is not possible to provide a sensitivity analysis.
costs and redemptions. In general, however, are subject to the same valuation techniques used for financial assets linked policies.
Generally transfers between levels are attributable to changes in market activities and observability of the inputs used in valuation techniques to determine the fair value of certain instruments.
The transfers were as follows: — from level 2 to level 1 € 1,564 million of government securities, € 1,522 million of corporate bonds; — from level 1 to level 2 € 894 million of government securities and € 1,052 million of corporate bonds; — from level 2 to level 1 € 8,006 million of financial assets where the risk is borne by the policyholders and and related to pension funds in particular following the completion of the harmonization of the levelling policy 3.5 Additional information on level 3
The more significant assets classified within Level 3 are the following: — Unquoted equities
It includes unquoted equity securities, mainly classified into available for sale. Their fair value is determined using the valuation methods described above or based
Available for sale financial assets 5,769 925 -194 -988 - Other available for sale financial assets 595 396 20 -275
Financial assets at fair value through profit or loss 1,763 356 -3 -560
Other assets at fair value through profit or loss 391 0 0 -169
Financial liabilities at fair value through profit or loss 77 0 -14 0 - Financial liabilities related to investment contracts issued by insurance companies 0 0 0 0
Total liabilities at fair value 77 0 -14 0 a more precise allocation among levels due to a better analysis of the inputs used in the valuation primarily of unquoted equities.
3.6 Information on fair value hierarchy of assets and liabilities not measured at fair value
The table here below provides information on the fair value hierarchy for the main investment classes and financial liabilities: 31/12/2014 Level 1 Level 2 Level 3 Total
Investments in subsidiaries, associated companies and joint ventures 0 0 1,284 1,284
Liabilities to banks and customers 0 3,476 5,468 8,945 31/12/2013 Level 1 Level 2 Level 3 Total
Investments in subsidiaries, associated companies and joint ventures 0 0 1,407 1,407
puts of similar assets in active markets or of discounted cash flows of future income and expenses of the rental considered as part of the higher and best use by a market participant.
The category includes primarily bonds, which valuation is above described. If the fair value cannot be reliably determined, the amortized cost is used as the best estimate for the determination of fair value.
ity or funding needs of the customers of the Group’s banking operations.
As far as other commitments are concerned, approximately € 941 million refer to potential commitments of the German life companies towards a German entity incorporated in order to protect the policyholders in the local market if the funds already available within the policyholders protection scheme are not sufficient to face the insolvency of one or more insurers.
Furthermore, we indicate that the Group in the context of its business in some Countries receives guarantees given by third parties, mainly in the form of letters of credit.
At 31 December 2014, as already mentioned in the paragraph Assets transferred that do not qualify for derecognition of the section Assets, the Group has pledged approximately € 7,390 million of assets as collateral. In particular, approximately € 5,744 million have been pledged against transactions in bonds and loans, which have been recognised essentially in the context of the Group’s banking and real estate activities, and approximately € 904 million for transactions in derivatives. Residual part is related to collateral pledged in relation to reinsurance business accepted.
— a present obligation that arises from past events but is not recognized because: (i) it is not probable than an outflow of resources embodying economic benefits will be required to settle the obligation; or
Because part of these commitments may expire without being called back, the amounts disclosed are not indicative of the actual liquidity needs arising from these commitments.
In particular, approximately € 1,417 million represent commitments associated with alternative investments (private equity), mainly in private equity funds which are consolidated line-by-line by the Group. Approximately € 1,085 million refer to several investment opportunities and, in particular, to real estate investment funds. The potential commitments to grant loans amount to approximately 400 million, mainly associated to liquid-
5. disclosures on interests in other entities 5.1 Interests in subsidiaries
In relation to the Group’s interests in subsidiaries, no significant restrictions exist on the Group’s ability to access or use its assets and settle its liabilities. For further more detailed information on this aspect, please refer to paragraph 4 Contingent liabilities, commitments, guarantees, pledged assets and collaterals.
These transactions relate to the acquisition of minority interests in entities which the Group already controls.
The first part of the transaction (that is the acquisition of a 3% share held by private investors) was accounted for in 2013, while the completion of the squeeze-out procedure (acquisition of the remaining 4% share) has the following impacts in the 2014 accounts.
(A)-(B) Difference recognised through equity -561 of which: with impact on Group Shareholders equity -596 of which: with impact on Non-Controling Interests 36
The Group has material interests into two associates that are accounted for according to the equity method.
As part of the commercial relationships in the German area with the distribution partner DVAG we inform that the controlling shareholder holds an option to sell its majority block of shares to an entity controlled by Generali Group.
In relation to the Group’s interests in joint ventures, no significant contractual, legal or regulatory restrictions exist on the Group’s ability to access or use its assets and settle its liabilities, nor significant commitments
Group's interest in net assets of investees at the beginning of the period 240 234 125 125
Total comprehensive income attributable to the Group 64 53 12 5
Carrying amount in investee at the end of the year 257 240 130 125
TOTAL COMPREHENSIVE INCOME 34 -226 exist. For further more detailed information on this aspect, please refer to paragraph 4 Contingent liabilities, commitments, and collateral.
The number of employees is substantially unchanged from the previous year. It should be noted that the number of employees at 31 December 2014 still includes
At 31 December 2014 incentive plans based on equity instruments granted by the Parent Company and other Group companies are outstanding.
Long-Term Incentive (LTI) The long-term variable remuneration of Generali takes the form of multi-year plans, which are approved from time to time by the competent bodies and may be addressed to directors, managers with strategic responsibilities and other Generali employees; they may be based on cash disbursements or financial instruments.
However, Assicurazioni Generali is part of a reinsurance contract with a reinsurance vehicle which provides coverage with respect to the potential losses affecting Generali Group arising from catastrophes arising from the workforce of BSI Group, classified as a disposal group held for sale.
For the first tranche for 2014, the solvency ratio must be no less than 141%; for the second and third tranches, related to 2015 and 2016, it must be at least 160%, save the possibility to revise this level as a consequence of the introduction of the compulsory Solvency II methodology.
Once the level of the solvency ratio has been reached, the achievement of the Group’s financial targets, represented by the ROE and the relative TSR, compared with the following peers of the STOXX Euro Insurance index, is verified on a yearly basis.
In 2013, Generali adopted a new plan based on a single three-year cycle, after which free shares, subject to specific lock-up periods, may be granted to the participants.
The Plan is based on the following essential aspects: — the incentive connected with the achievement of the targets is paid through the grant of Assicurazioni Generali S.p.A. ordinary shares; — the right to receive the shares is subject to an entry threshold, defined annually by the Board of Directors and which represents a condition precedent; — the targets to which payment of the incentive is subject are Group financial ones and are defined at the beginning of the three-year performance period.
For additional information related to incentive plans refer to the 2014 remuneration report.
In line with the previous plans, the 2014 plan can be treated as an equity-settled share-based payment falling under IFRS 2 scope.
In order to assess the cumulative cost of the entire plan, for each tranche, the fair value related to the most probable RoE outcome was multiplied by the number of shares that can be assigned based on satisfaction of the vesting conditions. This cost is allocated over a period of maturity of 3 years (vesting period), with a corresponding increase in equity.
Re tu rn o n Eq ui ty lion. This amount includes both the cost for the sharebased payments linked to the performance of the Generali share as well as the component of the cash bonus linked to the performance objectives (which is identifiable as a benefit within the IAS 19 scope) associated to the first three-year periods of the 2010-2012 plans. The maximum number of shares that can be granted in relation to mentioned plans is approximately 15 million.
The following table shows the development of the options given by the Parent company to personnel, chairman, managing directors and general managers and their weighted average exercise price.
The weighted average expiry date of the stock options granted to managers and employees and outstanding at the balance sheet date is on 25 October 2015. The stock options granted to the Parent Company Chairman and Managing Directors have expired.
Instead, with reference to the plans approved in 2010, at 31 December 2014 the options granted amounted to 1,176 thousand, of which 89 thousand reserved to relationship managers (employees), while the options effectively exercisable amounted to 392 thousand, of which about 20 thousand reserved to relationship managers. The reduction of options granted, in comparison with the previous year, is mainly attributable to exercises actuated by relationship managers and, to a lower extent, to the cessation of relationships with some financial advisors.
At the balance sheet date there are the following sharebased compensation plans granted by Generali France to the employees of Generali France group: eight stock grant plans approved on 21st December 2006, 20th December 2007, 4th December 2008, 10th December 2009, 9th December 2010, 14th March 2012, 25th June 2013 and 7th March 2014 by the board and a stock granting plan, reserved to the employees of the Generali France group.
The costs charged in the profit or loss account of the period from stock option plans approved in 2010, reserved for financial advisors, private bankers and relationship managers (employees) of Banca Generali respectively amount to € 0.2 million.
Diluted earnings per share (€) 1.06 1.23 - from continuing operations 1.11 0.80 - from discontinued operations -0.05 0.44 8. earnings per share 31/12/2014 31/12/2013
Basic earnings per share (€) 1.07 1.24 - from continuing operations 1.13 0.80 - from discontinued operations -0.05 0.44
Basic earnings per share are calculated by dividing the result of the period attributable to the Group by the weighted average number of ordinary shares outstanding during the period, adjusted for the Parent Company ’s average number of shares owned by itself or by other Group companies during the period.
As shown in the table below, the impact of such transactions, if compared on a Group basis, is not material.
As far as other related parties are concerned, the most significant transactions are with Mediobanca Group regarding investment bonds for € 429 million, and financial liabilities amounting to € 134 million. Hybrid instruments of € 500 million was settled.
Further information is available in the section ‘Non-current assets or disposal group classified as held for sale’.
— Acquisition of the second tranche of shares of Generali PPF Holding
The operation was formally concluded on 16 January 2015, for a final amount of € 1,245 million.
In July Generali concluded the agreement for the sale of its entire holding in BSI for a total consideration of € 1.24 billion. The consideration of the sale of BSI will be adjusted using customary mechanisms and any fine established pursuant to the US Department of Justice ’s tax amnesty programme relating to Swiss financial banking institutions payable by BSI.
Pending the release of the necessary regulatory authorization, in accordance with IFRS 5, starting from 30 June 2014 BSI group was classified in the balance sheet as a disposal group held for sale. Consequently, this participation has not been excluded from consolidation but the total of the related assets and liabilities have been recorded in two separate lines in the balance sheet and the related profit or loss, net of tax effects, is recognized separately under the appropriate heading of the income statement net in the consolidated profit (loss) from discontinued operations.
Pending the release of the necessary regulatory authorization, in accordance with IFRS 5, starting from 31 December 2014 the mentioned companies were classified in the balance sheet as a disposal group held
With reference to policy of divestment of non-core and not strategic assets, as abovementioned, in July 2014, Generali Group concluded an agreement for the sale of 100% of BSI group and in October 2014 it has also agreed to sale the Argentinean entities La Estrella, Caja ART and Caja de Retiro. Pending the release of the necessary regulatory authorization, in accordance with IFRS 5, starting from 30 June 2014 and 31 December 2014 respectively, BSI group and the Argentinean entities under disposal were classified in the financial statements as disposal groups held for sale. Consequently, these investments have not been excluded from consolidation but both the total of the related assets and liabilities and the related profit or loss, net of tax effects, have been recorded separately in the specific lines in the financial statements.
(€ million) 31/12/2014 31/12/2013 3 INSURANCE PROVISIONS CEEDED 0 0 7 CASH AND CASH EQUIVALENTS 5,145 7,144
With reference to the statement of cash flows, the above information will not be considered for the purposes of the cash flow for the year. In particular, with reference to 31 December 2014 these activities reduced cash for € 2,008 million (€ -1,676 million from operating activities, € -564 million euro from investing activities and € +65 from financing activities. The effect of the foreign exchange translation differences on cash and cash equivalents amounted to €+168 million).
Other assets at fair value through profit or loss 615 0 0 615
Financial liabilities at fair value through profit or loss 572 604 0 1,176
(in milioni di euro) 31/12/2014 31/12/2013 3 INSURANCE PROVISIONS CEEDED 0 0 7 CASH AND CASH EQUIVALENTS 4 1
With reference to the statement of cash flows, the above information will not be considered for the purposes of the cash flow for the year. In particular, with reference to 31 December 2014 these activities reduced cash for € 3 million (€ +185 million from operating activities, € -182 million euro from investing activities).
Other assets at fair value through profit or loss 0 0 0 0
Financial liabilities at fair value through profit or loss 0 0 0 0
In table below, filled under the article 149-duodecis of Consob Regulation, are reported the 2014 fees for auditing and other service services to Parent company’s sentence issued on 5 March 2015 (the grounds of which have yet to be published), confirmed, in the first instance, the validity also of the agreement entered into with Mr Raffaele Agrusti in July 2013, condemning Assicurazioni Generali Sp.A. to fulfil its obligations under this agreement and rejecting the damages claims made against the same Mr. Raffaele Agrusti.
Other service fees 637 1,013 of which Taxe service fees 150 559 of which Other services 487 454 14. other information
The Employment Court of Trieste, through its sentence in the first instance issued on 23 December 2014, rejected Assicurazioni Generali’s claims challenging the settlement agreement entered into with Mr Giovanni Perissinotto in 2012, while it declared its lack of competence regarding the damages claims made against the latter. The same Court, through its non definitive