An impairment loss is recognised in profit or loss for the amount by which the net carrying amount of the asset, or the CGU to which it belongs, exceeds its recoverable amount. In particular, if the impairment loss regards goodwill and is higher than the related carrying amount, the remaining amount is allocated to the assets included in the CGU to which the goodwill has been allocated, in proportion to their carrying amount79. Except in the case of goodwill, if the impairment indicators no longer exist, the carrying amount of the asset or CGU is reinstated and the reversal recognised in profit or loss. The reversal must not exceed the carrying amount that would have been determined had no impairment loss been recognised and depreciation or amortisation been charged.
In Poste Italiane SpA’s separate financial statements, investments in subsidiaries and associates are accounted for at cost (including any directly attributable incidental expenses), after adjustment for any impairments. Investments in subsidiaries and associates are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any impairment losses (or subsequent reversals of impairment losses) are recognised in the same way and to the same extent described with regard to property, plant and equipment and intangible assets in the paragraph, “Impairment of assets”.
z Financial assets measured at fair value through other comprehensive income (FVTOCI) This category includes financial assets held both to collect the relevant contractual cash flows and for sale (the held to collect and sell or HTC&S business model), with the contractual cash flows representing solely payments of principal and interest. These financial assets are measured at fair value and, until they are derecognised or reclassified, gains or losses from valuation are recognised in other comprehensive income. Exceptions to this are gains and losses due to impairment and foreign exchange gains and losses recognised in the profit or loss in the year in question. If the financial asset is derecognised, the accumulated gains/(losses) recognised in OCI are recycled to profit or loss. This category also includes equity instruments that would otherwise be recognised through profit or loss, for which the irrevocable election was made to recognise changes in fair value through OCI (the FVTOCI option). This option entails the recognition of dividends alone through profit or loss.
z Financial assets measured at fair value through profit or loss This category includes: (a) financial assets primarily held for trading; (b) those that qualify for designation at fair value through profit or loss, exercising the fair value option; (c) financial assets that must be recognised at fair value through profit or loss; (d) derivative instruments, with the exception of the effective portion of those designated as cash flow hedges. Financial assets belonging to the category in question are measured at fair value and the related changes are recognised in profit or loss. Derivative instruments at fair value through profit or loss are recognised as assets or liabilities depending on whether the fair value is positive or negative.; positive and negative fair values deriving from transactions with the same counterparty are offset during the collateralisation phase, where contractually provided for.
An expected credit loss (ECL) provision must be made for financial assets recognised at amortised cost and financial assets at fair value through OCI, as follows: (i) specific provisions for doubtful debts are made for expected losses on financial assets measured at amortised cost; (ii) expected losses on financial assets measured at fair value through other comprehensive income are recognised in profit or loss, with a contra entry in the fair value reserve in equity. The method utilised is the “General impairment model”, whereby: z If on the reporting date the credit risk of a financial instrument has not increased significantly since initial recognition, a 12-month ECL is recognised (stage 1). Interest on the instrument is calculated on the gross carrying amount (amortised cost inclusive of the ECL); z If on the reporting date the credit risk of the financial instrument has increased significantly since initial recognition, a lifetime ECL is recognised (stage 2). Interest on the instrument is calculated on the gross carrying amount (amortised cost inclusive of the ECL); z If a financial instrument is already impaired on initial recognition or shows objective evidence of impairment as at the reporting date, lifetime expected losses are recognised. Interest is calculated on amortised cost (stage 3).
z if the financial asset is reclassified from fair value through profit or loss to amortised cost, the fair value on the reclassification date becomes the new gross carrying amount; z if the financial asset is reclassified from amortised cost to fair value through other comprehensive income, the fair value of the asset is determined on the reclassification date. Gains and losses resulting from the difference between the previous amortised cost and fair value are recognised through other comprehensive income. The effective interest rate and the expected credit loss are not adjusted following reclassification; z if the financial asset is reclassified from fair value through other comprehensive income to amortised cost, the cumulative gain (loss) recognised previously through other comprehensive income is derecognised from equity through an adjustment to the fair value of the financial asset on the reclassification date. Consequently, the financial asset is reported as though it had always been reported at amortised cost, by not changing the effective interest rate and the expected credit loss; z if the financial asset is reclassified from fair value through profit or loss to fair value through other comprehensive income, the financial asset continues to be measured at fair value; z if the financial asset is reclassified from fair value through other comprehensive income to fair value through profit or loss, the financial asset continues to be measured at fair value. The cumulative gain (loss) recognised previously through other comprehensive income is recycled to profit or loss on the reclassification date.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges after initial recognition is recognised in a specific equity reserve, with movements in the reserve accounted for in “Other comprehensive income” (the “Cash flow hedge reserve”). A hedging transaction is generally considered highly effective if, both at inception of the hedge and on an ongoing basis, changes in the expected future cash flows of the hedged item are substantially offset by changes in the fair value of the hedging instrument. If the hedging transaction is not fully effective, the gain or loss arising from a change in fair value relating to the ineffective portion is recognised in profit or loss for the period. Amounts accumulated in equity are recycled to profit or loss in the period in which the hedged item affects profit or loss. In particular, in the case of hedges associated with a highly probable forecast transaction (such as the purchase of fixed income debt securities), the reserve is reclassified to profit or loss in the period or in the periods in which the asset or liability, subsequently accounted for and connected to the aforementioned transaction, will affect profit or loss (for example, an adjustment to the return on the security). If, during the life of the derivative, the forecast hedged transaction is no longer expected to occur, the related gains and losses accumulated in the cash flow hedge reserve are immediately reclassified to profit or loss for the period. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, the related gains and losses accumulated in the cash flow hedge reserve at that time remain in equity and are recognised in profit or loss at the same time as the original underlying.
82. A hedge of the exposure to the variability of cash flows attributable to a particular risk associated with an asset or liability or with a highly probable forecast transaction, and that could have an impact on profit or loss.
Receivables acquired with reference to the relaunch decree no. 34/2020 Since it is not possible to identify an accounting framework directly applicable to this case, in compliance with the provisions of IAS 8, an accounting policy was defined suitable for providing relevant and reliable information aimed at ensuring a faithful representation of the financial position, income and cash flows and which reflects the economic substance and not merely the form of the transaction for the receivables acquired with reference to the relaunch decree no. 34/2020 (later converted into Law no. 77 of 17 July 2020). On the basis of the analyses carried out and the documents published by the main Italian supervisory bodies (Joint Document of the Bank of Italy, IVASS and Consob), although the definition of financial assets in IAS 32 is not directly applicable to this case, since: z at inception, an asset as defined by the Conceptual Framework arises in the transferee’s financial statements z they may be used to offset a payable that is usually settled in cash (tax payables), and exchanged for other financial assets on terms that may be potentially favourable to the entity z a business model can be identified (Hold to Collect, Hold to Collect and Sell)
An accounting model based on IFRS 9 has been developed, and consequently receivables are recorded at the date of purchase at their fair value (coinciding with the price paid) and subsequently measured on the basis of amortised cost.
83. These are properties held by EGI SpA and not accounted for in "Investment property" as they were purchased for sale or subsequently reclassified as held for sale. 84. This method is based on the ratio of costs incurred as of a given date divided by the estimated total project cost. The resulting percentage is then applied to estimated total revenue, obtaining the value to be attributed to the contract work completed and accrued revenue at the given date. 85. The subsidiary Poste Air Cargo Srl.
Green Certificates (Emission Allowances) With reference to Group companies subject to these rules85, Green Certificates (or Emission Allowances) are a means of reducing greenhouse gas emissions, introduced into Italian and European legislation by the Kyoto Protocol with the aim of improving the technologies used in the production of energy and in industrial processes.
In compliance with the requirements of the OIC (the Italian accounting standards setter) regarding “Greenhouse gas emissions allowances”, in addition to being best practice for the principal IAS adopters, the accounting treatment is as follows.
The amount transferred is allocated by recognising the identifiable assets, liabilities and contingent liabilities of the acquiree at the related fair values at the acquisition date.
If at the time of preparing the financial statements the fair value of the assets, liabilities and contingent liabilities arising from the transaction can only be determined provisionally, the business combination is recognised using these provisional values. Any adjustments resulting from the completion of the valuation process are recognised retrospectively within twelve months of the acquisition date.
Cash and cash equivalents Cash and cash equivalents refer to cash in hand, deposits held at call with banks, amounts that at 31 December 2020 the Parent Company has temporarily deposited with the MEF and other highly liquid short-term investments with original maturities of ninety days or less. Current account overdrafts are accounted for in current liabilities.
Non-current assets and net assets in a disposal group held for sale are recognised as discontinued operations if one of the following conditions is met: i) they represent a major line of business or geographical area of operation, ii) they are part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation, or, iii) they are subsidiaries acquired exclusively with a view to resale. The profit or loss from discontinued operations, and any gains or losses following the sale, are presented separately in a specific item in profit or loss, after the related taxation. The economic values of discontinued operations are also shown for the years under comparison.
If, after the date of preparation of the financial statements, an asset (or disposal group) no longer meets the conditions for classification as held for sale, it must be reclassified following measurement at the lower of: z the carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation, impairments or reversals of impairments that would have been recognised if the asset (or disposal group) had not been classified as held for sale; z the recoverable amount, calculated at the date on which the decision not to sell was made.
Reserves Reserves include capital and revenue reserves. They include, the BancoPosta ring-fenced capital reserve (hereafter “BancoPosta RFC”), representing the dedicated assets attributed to BancoPosta RFC, the Parent Company’s legal reserve, the fair value reserve, relating to items recognised at fair value through equity, and the cash flow hedge reserve, reflecting the effective portion of hedging instruments outstanding at the end of the reporting period.
Insurance contracts are classified and measured as insurance contracts or finance contracts, based on their prevalent features. Contracts issued by Poste Vita SpA primarily relate to life assurance. In 2010 Poste Assicura SpA began operating in the Non-life sector.
The separation of a contract, classified as insurance, into deposit component and insurance component is mandatory in some circumstances and optional in others. In the case of separation, which can only occur under certain conditions, the deposit component falls under IFRS 9, while the insurance component falls under IFRS 4. Group insurance companies do not perform this breakdown.
Contracts classified as insurance contracts in accordance with IFRS 4: include Class I and Class V life insurance policies, Class III policies that qualify as insurance contracts and Non-life insurance contracts. These products are accounted for as follows: z insurance premiums are accounted for when the policies are written, recognised as income and classified in revenue; they include annual or single premiums accruing during the period and deriving from insurance contracts outstanding at the end of the reporting period, net of cancellations; z technical provisions are made in respect of earned premiums to cover obligations to policyholders; such provisions are calculated on an analytical basis for each contract using the prospective method, based on actuarial assumptions appropriate to cover all outstanding obligations. The changes in the technical provisions and the charges relating to claims are as follows and recorded with the relevant sign as positive income components.
87. This threshold, defined by aggregating individual contracts into homogeneous categories based on the nature of the risk transferred to the Company, has been set by Poste Vita SpA's Board of Directors at 5%.
89. Where, following entry into effect of the new legislation, the employee has not exercised any option regarding the investment of vested employee termination benefits, the Group has remained liable to pay the benefits until 30 June 2007, or until the date, between 1 January 2007 and 30 June 2007, on which the employee exercised a specific option. Where no option was exercised, from 1 July 2007 vested employee termination benefits have been paid into a supplementary pension fund.
There are two types of post-employment benefit: z Defined benefit plans Defined benefit plans include employee termination benefits payable to employees in accordance with article 2120 of the Italian Civil Code. As a result of the supplementary pension reform, for all companies with at least 50 employees, from 1 January 2007 vesting employee termination benefits (TFR) must be paid into a supplementary pension fund or into a Treasury Fund set up by INPS. Accordingly, the company’s defined benefit liability is applicable only to the provisions made up to 31 December 200689. In the case of companies with less than 50 employees, vested employee termination benefits continue to fully increase the accumulated liability for the company. Under these plans, given that the amount of the benefit to be paid is only quantifiable following the termination of employment, the related effects on profit or loss or the financial position are recognised on the basis of actuarial calculations in compliance with IAS 19. In particular, the liability to be paid on cessation of employment is calculated using the projected unit credit method and then discounted to recognise the time value of money prior to the liability being settled. The liability recognised in the financial statements is based on calculations performed by independent actuaries. The calculation takes into account the employee termination benefits accrued for work already performed and is based on actuarial assumptions that mainly concern: demographic assumptions (such as employee turnover and mortality) and financial assumptions (such as rate of inflation and a discount rate consistent with that of the liability). In the case of companies with at least 50 employees, as the company is not liable for employee termination benefits accruing after 31 December 2006, the actuarial calculation of employee termination benefits no longer takes account of future salary increases. Actuarial gains and losses at the end of each reporting period, based on the difference between the carrying amount of the liability and the present value of the Group’s obligations at the end of the period, due to changes in the actuarial assumptions, are recognised directly in Other comprehensive income.
z Defined contribution plans Employee termination benefits fall within the scope of defined contribution plans provided the benefits vested subsequent to 1 January 2007 and were paid into a Supplementary Pension Fund or a Treasury Fund at INPS. Contributions to defined contribution plans are recognised in profit or loss when incurred, based on their nominal value.
In the case of employee benefits, the expense is recognised in personnel expenses over the period in which the employee renders the relevant service.
Revenue recognition In accordance with IFRS 15 – Revenue from Contracts with Customers, revenue is recognised to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services (the transaction price).
Every single supplier obligation with the customer is considered, measured and recognised separately. This approach involves a preliminary accurate analysis of the contract to identify every “single product/service” or every “single component” of a product/ service that the supplier promises to provide, attributing to each the relevant consideration, and to monitor each such obligation during the life of the contract (in terms both of manner and timing of fulfilment and the customer’s level of satisfaction).
For revenue recognition purposes, the principle provides for the identification and quantification of the so-called variable components of the consideration (discounts, rebates, price concessions, incentives, penalties and other similar) to include them to supplement or adjust the transaction price. Of the elements of variable consideration, particularly important are penalties (other than those related to compensation for damages), for which IFRS 15 provides for an innovative accounting discipline with respect to the pre-existing one: these negative income components are recorded as a direct decrease in revenue, instead of allocating them to a provision for risks and charges.
The incremental costs of obtaining a contract are capitalised and amortised over the useful life of the contract, if longer than 12 months, while any non-incremental costs of obtaining a contract are expensed as incurred. Costs incurred to fulfil performance obligations related to a contract that do not qualify for treatment under other standards (IAS 2 – Inventories, IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible Assets) are capitalised only if the following conditions are met: z the costs related directly to a contract (general and administrative costs are not capitalised); z the costs generate or enhance resources; z the costs are expected to be recovered.
For details on the distinction between revenue from contracts with customers recognised at a point in time or over time, see section 5.3 Notes to the Statement of profit or loss.
Government grants Government grants are recognised once they have been formally allocated to the Group by the public entity concerned and only if, based on the information available at the end of the year, there is reasonable assurance that the project to which the grant relates will be effectively carried out and completed in accordance with the conditions attached to the grant. Grants are recognised in profit or loss under Other operating income as follows: operating grants in proportion to the costs actually incurred for the project and accounted for and approved to the public entity; grants related to property, plant and equipment are recognised in proportion to the depreciation charged on the assets acquired and used to carry out the project and whose costs have been accounted for and approved to the public entity.
Financial statements of Poste Italiane at 31 December 2020 2. Basis of preparation and significant accounting policies
Diluted: at the date of preparation of these financial statements no financial instruments have been issued which have potentially dilutive characteristics90.
Subsidiaries that, in terms of their size or operations, are, either individually or taken together, irrelevant to a true and fair view of the Group’s results of operations and financial position are not included within the scope of consolidation.
After acquisition, appropriate adjustments are made to the entity’s share of the profits or losses of the associate or joint venture to account, for example, for additional depreciation or amortisation of the investee’s depreciable or amortisable assets, based on the excess of their fair values over their carrying amounts at the time the investment was acquired, and of any impairment losses on goodwill or property, plant and equipment. The equity method is as follows: z the Group’s share of an entity’s post-acquisition profits or losses is recognised in profit or loss from the date on which significant influence or control is obtained until the date on which significant influence or control is no longer exerted by the Group; provisions are made to cover a company’s losses that exceed the carrying amount of the investment, to the extent that the Group has legal or constructive obligations to cover such losses; changes in the equity of companies accounted for using the equity method not related to the profit/(loss) for the year are recognised directly in equity; z unrealised gains and losses on transactions between the Parent Company/subsidiaries and the company accounted for using the equity method are eliminated to the extent of the Group’s interest in the associate; unrealised losses, unless relating to impairment, are eliminated.
Moreover, the acquisition includes purchase and sale options that will allow Poste Italiane, starting from the second quarter of 2023, to purchase the additional 30% of MLK Deliveries SpA and ownership of the Milkman technology for e-commerce applications. The exercise price of these options is not fixed, but determined on the basis of a formula that provides for the application of a multiplier to certain economic/equity targets of MLK Deliveries SpA.
At the date of preparation of this annual report, the definitive difference between the consideration paid to the seller and the net value at the acquisition date of the identifiable assets acquired and liabilities assumed, measured in accordance with IFRS 3 in proportion to the recognised amounts of the identifiable net assets acquired, is equal respectively to: z sennder Italia Srl: €219 thousand and z MLK Deliveries SpA: €4,654 thousand.
The following table shows the number of subsidiaries by method of consolidation and measurement: Subsidiaries 31/12/2020 31/12/2019
During the year, in addition to the transactions described above, which led to the entry of the subsidiaries, sennder Italia and MLK Deliveries, into the scope of consolidation, the liquidation of Poste Tributi ScpA was concluded with consequent removal from the Register of Companies.
The preparation of financial information requires the use of estimates and assumptions that can have a significant effect on the final values indicated in the financial statements and in the disclosure provided. The preparation of these estimates involves the use of available information and the adoption of subjective assessments, also based on historical experience, used for the formulation of reasonable assumptions for the recognition of operating events. Estimates and assumptions are periodically reviewed and the impact of any changes is reflected in the financial statements for the period in which the estimate is revised if the revision only influences the current period, or also in future periods if the revision influences both current and future periods. Due to their nature, the estimates and assumptions used may vary from year to year and, therefore, it cannot be excluded that in subsequent years, the values recorded in these Financial Statements may also vary significantly as a result of changes in the subjective valuations used.
Revenue and amounts due from the State Revenue from activities carried out in favour of or on behalf of the State and Public Administration entities is recognised on the basis of the amount effectively accrued, with reference to the laws and agreements in force, taking account, in any event, of the instructions contained in legislation regarding the public finance. The legal framework of reference is still subject to change and, as has at times been the case, circumstances were such that estimates made in relations to previous financial statements, with effects on the statement of profit or loss, had to be changed. The complex process associated with the determination of receivables, which has not been completed yet, may result in changes in the results for the accounting periods after the period ended 31 December 2020 to reflect variations in estimates, due to future regulatory enactments or following the finalisation of expired agreements to be renewed.
Due from Ministries and Public Administration entities: Chair of the Board of Ministers for editorial benefits 67 50
Impairment and stage allocation for financial instruments For the purposes of calculating impairment and determining the stage allocation, the main factors estimated by the Poste Italiane Group are as follows, relating to the internal model developed for Sovereign, Banking and Corporate counterparties: z estimate of ratings by counterparty; z estimation of the probability of default “PD” for counterparties.
With regard to trade receivables, on the other hand, the Poste Italiane Group does not apply stage allocation in accordance with the Simplified Approach. Impairment, for these items in the Financial Statements, is based on: z analytical impairment: when a defined credit threshold is exceeded, the individual credit position is analytically monitored on the basis of internal or external evidence; or z on flat-rated basis: elaboration of a provision matrix for historical losses.
The impairment tests at 31 December 2020 were performed on the basis of the business plans of the CGUs (cash generating units) concerned or the latest available projections (except as specified below). Where required, the Discounted Cash Flow (DCF) method was applied to the resulting amounts. For the determination of value in use, NOPLAT (Net Operating Profit Less Adjusted Taxes) was capitalised using an appropriate growth rate and discounted using the related WACC (Weighted Average Cost of Capital), determined in accordance with the Operating Segment of reference and considering best market practices.
The radical transformation of the Mail, Parcels and Distribution segment in recent years, deriving from the transformation of SDA Express Courier and PosteAir Cargo into operational companies, the acquisition of sennder Italia and MLK Deliveries, and the centralisation of the main personnel functions at the Parent Company, has led management to revise the methodological approach used to carry out the impairment tests which, starting from the year in question, and in line with as represented on the market, was carried out at consolidated level, including the companies belonging to the same operating sector.
In addition, in assessing the value of non-current assets of the Mail, Parcels and Distribution segment, account was taken of any effect on the value in use of certain properties, should such properties no longer be used in operations in future, making adjustments to certain impairment losses taken in the past. The fair value of the Parent Company’s properties used in operations continued to be higher than their carrying amount, as confirmed by the property valuations carried out. As in the past, in determining the value of properties used as post offices and sorting centres, Poste Italiane SpA’s universal service obligation was taken into account, as was the inseparability of the cash flows generated from the properties that provide this service, (which the Parent Company is required to operate throughout the country regardless of the expected profitability of each location); the unique nature of the operating processes involved and the substantial overlap between postal and financial activities within the same outlets, represented by Post Offices, were also considered. On this basis, the value in use of the Parent Company’s land and buildings used in operations is relatively unaffected by changes in the commercial value of the properties concerned and, in certain critical market conditions, certain properties may have values that are significantly higher than their market value, without this having any impact on the cash flows or results of the Mail, Parcels and Distribution segment.
Investment in Anima Holding SpA With reference to the impairment test of the investment in Anima Holding SpA, the value in use was determined taking into account available 2021-2022 forecasts, a long-term growth rate of 0.92% (1.14% at 31 December 2019) and a cost of equity (ke) of 6.51% (compared to 7.54% used at 31 December 2019).
Investment in FSIA Investimenti Srl With regard to the impairment test of the investment in FSIA Investimenti Srl, given the absence of reliable medium-term projections, the fair value of the investment at 31 December 2020 was determined (level 3 in the hierarchy) using market multiples. To identify the market multiple to use, reference was made to studies of comparable companies by leading investment banks. The multiple used was 12x based on EBITDA for 2021. The test result did not reveal any critical issues.
Investment in Poste Welfare Servizi Srl With reference to the impairment test of the investment in Poste Welfare Servizi Srl, the value in use was determined taking into account the available forecasts for the years 2021-2024, a long-term growth rate of 1.23% and a WACC of 4.14%. Based on the test results, there was no need to adjust the carrying amount of the investment at 31 December 2020.
As a result of the strategic analysis carried out on the Group’s real estate assets in 2020, with the technical and specialist support of a third party, the residual economic-technical life of certain categories of assets was revised in accordance with the reference accounting standards and the relative residual value was recalculated.
The Group’s amortisation and depreciation for the year ended 31 December 2020, calculated in accordance with the restated values at 1 January, is approximately €120 million lower than the amortisation and depreciation that would have been determined on the basis of forecasts of useful lives and residual values estimated in previous years.
Technical provisions for insurance business The measurement of technical provisions for the insurance business is based on estimates made by actuaries employed by Poste Vita SpA, based on a series of material assumptions, including technical, actuarial, demographic and financial assumptions, as well as on projections of future cash flows from the insurance contracts entered into by Poste Vita and Poste Assicura and effective at the end of the year.
of the reporting period, based on appropriate assumptions regarding the cause of termination (death, surrender, redemption, reduction) and the performance of claim expenses. If necessary, technical provisions are topped up and the related cost charged to profit or loss.
Determination of the lease liability To determine the financial lease liability, the Group has opted to use an incremental borrowing rate or (IBR) determined in line with a hypothetical loan obtained in the current economic environment, and applied to groups of contracts with similar remaining terms and to similar companies. In particular, each IBR takes account of the risk-free rate identified on the basis of factors such as the economic environment, currency, contract term and credit spread reflecting the companies’ organisation and financial structure. The IBR associated with the commencement of the contract will be reviewed whenever there is a lease modification, meaning substantial and significant changes to the contract conditions over the life of the agreement (e.g. the lease term or the amount of future lease payments). The IBR table defined for groups of contracts with similar residual duration and for similar reference companies is periodically monitored and updated at least once during the year.
The lease term for all of the other agreements was set as equal to the duration of the obligation agreed upon between the parties, in keeping with future intent in wanting and being able to complete the term and past experience.
93. An option contract that allows an entity to purchase the interests of minority shareholders of a subsidiary in exchange for cash or other financial assets gives rise to a financial liability in the consolidated financial statements for the present value of the amount payable. Any change in the financial liability from the date of recognition is accounted for with a different balancing entry depending on whether it refers to: • minority shareholders directly interested in the performance of the subsidiary's business with regard to the transfer of risks and benefits on the shares subject to the option.
• minority shareholders not directly interested in the performance of the business (e.g. exercise price of the predetermined option). The exercise price of the option, duly discounted, is deducted from the corresponding amount of Capital and Reserves pertaining to third parties. Any subsequent changes in the valuation of the option exercise price follow the same logic, with no impact on the PL statement.
As mentioned in Note 2.4 - Basis of consolidation, as part of the transaction that led to the holding of 70% of the share capital of MLK Deliveries SpA, purchase and sale options are envisaged that will allow Poste Italiane to purchase a further 30% of the company, the exercise price of which is determined on the basis of a formula that provides for the application of a multiplier to certain economic/equity targets of MLK Deliveries SpA. In the consolidated financial statements, a financial liability has been recognised (in addition to the portion of equity attributable to non-controlling interests), to take account of the possible exercise of options, as matching entry to Group’s equity, the value of which depends on estimates made internally and which could change even significantly in the current and future years. Subsequent changes in the value of the financial liability will be reflected in the Group’s PL statement.
2.6 New accounting standards and interpretations and those soon to be effective
Accounting standards and interpretations applicable from 1 January 2020 z Amendments to references to the Conceptual Framework in the body of IFRS. The amendments update some of the references and citations in IFRS standards and interpretations that refer to the revised Conceptual Framework or specify the version of the Conceptual Framework to which they refer.
z Amendments to IFRS 9 - Financial Instruments, IAS 39 - Financial Instruments: Recognition and Measurement and IFRS 7 - Financial Instruments: additional disclosure, which introduced temporary and limited exceptions to the application of the hedge accounting provisions so that companies can continue to comply with the provisions assuming that the reference indices for the determination of existing interest rates are not changed as a result of the Interest Rate Benchmark Reform94. The purpose of the exceptions is to avoid possible interruptions in hedging operations due to interest rate reforms.
z Amendments to IFRS 3 - Business Combinations providing clarification on the definition of business activities in order to simplify practical implementation.
Accounting standards and interpretations soon to be effective The following are applicable from 1 January 2021: z Amendments to IFRS 4 - Insurance Contracts by which the temporary exemption to the application of IFRS 9 by insurance companies and financial conglomerates principally engaged in insurance business is extended until 1 January 2023. Entities that have decided to take advantage of this exemption may therefore continue to apply IAS 39 instead of IFRS 9 until that date (coinciding with the presumed effective date of the new standard IFRS 17 on insurance contracts).
Lastly, as of the reporting date, the IASB has issued certain financial reporting standards, amendments and interpretations not yet endorsed by the European Commission: z IFRS 17 - Insurance Contracts; z Amendments to IAS 1 - Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date; z Amendments to IFRS 3 - Business Combinations: Reference to the Conceptual Framework; z Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use; z Amendments to IAS 37 - Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts-Cost of Fulfilling a Contract; z Annual Improvements 2018-2020 that include amendments to the following standards: – IFRS 1 First-time Adoption of International Financial Reporting Standards, – IFRS 9 Financial Instruments, – IAS 41 Agriculture – Illustrative Examples of IFRS 16 Leases.
z Amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies; z Amendments to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates; z Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions.
As part of the collaboration with the German digital carrier sennder GmbH, on 12 February 2020, Poste Italiane subscribed a capital increase of €255 thousand in the company sennder Italia Srl, acquiring an investment of 75% of the share capital (25% is held by sennder GmbH). Moreover, on 25 February 2020, on the basis of agreements between the parties to support business needs in the start-up phase, Poste Italiane made an additional capital contribution of €3 million. (For accounting, equity and income details of the investment acquired, refer to paragraph 2.4 - Basis of consolidation).
MLK Deliveries SpA As part of its collaboration with technology start-up company Milkman SpA, which specialises in the management of “last mile” logistics for advanced delivery services in Italy, on 24 April 2020, Poste Italiane subscribed a capital increase of €15 million in MLK Deliveries SpA, acquiring 70%. The remaining 30% of MLK Deliveries is owned by Milkman SpA. At the same time, Poste Italiane acquired about 7% in the share capital of Milkman by participating in a capital increase with an investment of €5 million. Purchase and sale options are provided that will allow Poste Italiane, starting from the second quarter of 2023, to purchase the additional 30% of MLK Deliveries and ownership of the Milkman technology for e-commerce applications. (For accounting, equity and income details of the investment acquired, refer to paragraph 2.4 - Basis of consolidation).
Partnership with MFM Investments Ltd (Moneyfarm) On 2 August 2019, Poste Italiane launched a partnership with the digital asset management company MFM Investments Ltd (Moneyfarm) to offer innovative digital investment and asset management services. As part of this partnership, on 9 August 2019, Poste Italiane signed a contract with MFM Holding Ltd (the company that controls 100% of Moneyfarm) which provides for a capital increase by the latter for a value of approximately €40 million (GBP 36 million) through the issue of convertible preference shares to be subscribed by Poste Italiane, as lead investor, and Allianz Asset Management GmbH (the minority shareholder of Moneyfarm Holding Ltd). The capital increase involved two phases. In the first phase, which ended in August 2019, Poste Italiane subscribed shares in MFM Holding Ltd for a total value of €15 million, representing 9.70% of voting rights (10.36% of equity rights). In the second, additional MFM Holding shares were subscribed for a total value of approximately €9.6 million, with an increase in the investment of up to 14.10% of voting rights (15.16% of property rights). The latter was finalised on 13 May 2020 when the necessary authorisations were obtained by the supervisory authorities of Germany (Bafin) and the United Kingdom (FCA).
Partnership with Volante Technologies Inc On 26 June 2020, PostePay signed the agreements for the establishment of a strategic partnership with Volante Technologies Inc (Volante), a US company specialising in the development of technological solutions underlying payment processes. In addition to the provision to Poste Italiane under perpetual license of the Volpay payment platform for enabling instant bank transfers (SEPA Credit Transfer Instant) and the development of payments based on QR Code, these agreements also provide for the launch of a long-term strategic collaboration aimed at developing new solutions in the world of payments to enrich the Poste Italiane Group offer to customers.
Nexive Group Srl On 16 November 2020, Poste Italiane SpA signed a preliminary agreement (“Agreement”) with the Dutch company PostNL European Mail Holdings B.V. (“PostNL”) and the German company Mutares Holding - 32 GmbH (“Mutares Holding”), for the purchase by Poste Italiane of the entire share capital of Nexive Group Srl (“Nexive”).
BNL Finance On 23 December 2020, Poste Italiane SpA and BNL Gruppo BNP Paribas signed a binding framework agreement to strengthen their partnership in the sector of loans secured by the assignment of one-fifth of salary or pensions (“CQ Credits”). The framework agreement calls for Poste Italiane to acquire a 40% interest in BNL Finance, a company belonging to BNL Gruppo BNP Paribas and a leader in the CQ Credits market, for a consideration of €40 million.
The transaction is subject to regulatory approval and closing is expected by the end of the first half of 2021.
Sengi Express Limited On 19 January 2021, Poste Italiane SpA and Cloud Seven Holding Limited signed a binding framework agreement for strengthening the partnership in the e-commerce market between China and Italy. The framework agreement provides for the acquisition by Poste Italiane of 51% of the voting capital of Sengi Express Limited (“Sengi Express”), a company wholly owned by Cloud Seven Holding Limited based in Hong Kong. Sengi Express is a leading company in the creation and management of cross-border logistics solutions for Chinese e-commerce merchants active in the Italian market, with a pro-forma turnover of approximately €80 million in 2020. The closing of the transaction was completed on 1 March 2021.
z On 25 May 2020, the Board of Directors of Consorzio Logistica Pacchi S.c.p.A. approved the sale of the business unit “CLP Mercato” in favour of Poste Italiane SpA. The transaction is effective from 1 July 2020.
z On 30 June 2020, the Board of Directors of SDA Express Courier SpA approved the sale of 5% of the shares held in Consorzio Logistica e Pacchi S.c.p.A. to Poste Assicura SpA The transaction will take effect as of 30 June 2020.
z On 27 January 2021, Poste Italiane’s Board of Directors approved an amendment to BancoPosta RFC resulting in the removal of the restriction on the assets, properties and legal relationships that make up the Debit Business, to be submitted for final approval by Poste Italiane’s Extraordinary Shareholders’ Meeting, after obtaining all the authorisations required by current legislation and regulations; on 4 February 2021, PostePay’s Extraordinary Shareholders’ Meeting approved, among other things, a divisible capital increase to be subscribed and paid up by 30 September 2021 via the contribution in kind of the Debit Business by Poste Italiane.
The following material events also occurred in 2020: z Poste Italiane SpA: interim dividend 2020 On 11 November 2020, Poste Italiane’s Board of Directors, in light of the Parent Company’s performance and financial position in the first half of 2020 and in line with prevailing practice, decided to advance part of the ordinary dividend for 2020 as an interim dividend. The advance of €0.162 per share, gross of any withholding taxes, was paid with effect from 25 November 2020 for a total of €211 million.
POSTE ITALIANE GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20204.
Assets (€m) Notes 31 December 2020 of which related parties 31 December 2019 of which related parties
Investments accounted for using the equity method [A5] 615 615 617 617
Liabilities and equity Notes 31 December 2020 of which related parties 31 December 2019 of which related parties
Revenue from Mail, Parcels and other [C1] 3,201 400 3,492 498
Impairment losses/(reversals of impairment losses) on debt instruments, receivables and other assets
Net profit for the year 1,206 1,342 of which attributable to owners of the Parent 1,207 1,342 of which attributable to non-controlling interests (1) -
Increase/(decrease) in fair value during the year [tab. B4] 2,016 1,767
Taxation of items recognised directly in, or transferred from, equity to be reclassified in the Statement of profit or loss for the year
Share of after-tax comprehensive income/(loss) of investees accounted for using equity method - (1)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,461 2,404 of which attributable to owners of the Parent 2,462 2,404 of which attributable to non-controlling interests (1) -
Total comprehensive income for the year - - - - 1,276 (17) - - 1,203* 2,462 (1) 2,461
Use of provisions for risks and charges [tab. B6] (388) (696)
Impairment losses/(reversals of impairment losses) on financial assets [tab. C12] - 46
Losses and impairment losses/(reversals of impairment losses) on receivables [tab. C10] 61 62
Cash flow generated by operating activities before movements in working capital [a] 1,616 1,997
Movements in working capital: (Increase)/decrease in Inventories [tab. A7] (26) (4)
(Increase)/decrease in cash and deposits attributable to BancoPosta [tab. A10] (2,088) (984)
Cash generated by/(used for) financial assets/liabilities attributable to financial activities, payments, cards and acquiring and insurance
Net cash flow from /(for) operating activities [d]=[a+b+c] 1,917 1,120 - of which related party transactions (39) 248
Disposals: Property, plant and equipment, investment property, intangible assets and assets held for sale 6 4
- of which related party transactions (28) 3 Proceeds from/(Repayments of) long-term borrowings [tab. B8.4] 1,248 573
Cash and cash equivalents at end of year [tab. A11] 4,516 2,149
Restricted cash and cash equivalents at end of year (1,705) (884)
Unrestricted cash and cash equivalents at end of year 2,811 1,265
Financial statements of Poste Italiane at 31 December 2020 4. Poste Italiane Group Financial statements for the year ended 31 December 2020
A1 - Property, plant and equipment (€2,134 million) The following table shows movements in property, plant and equipment in 2020: tab. A1 - Movements in property, plant and equipment
Investments of €300 million in 2020 consists largely of: z €37 million relating to extraordinary maintenance of Post Offices and local head offices around the country (€15 million), personnel offices (€13 million) and mail sorting offices (€9 million); z €68 million for plants, with the most significant expenditure made by the Parent Company, of which €39 million for the realisation of plant and equipment related to buildings, €11 million for the realisation and extraordinary maintenance of connectivity systems and €8 million for the installation of ATMs; z €45 million invested in the upgrade of plant (€22 million) and the structure (€22 million) of properties held under lease; z €58 million relating to Other assets, of which €42 million incurred by the Parent Company for the purchase of hardware for the renewal of technological equipment at the post offices and head offices and the consolidation of storage systems and €13 million incurred by PostePay SpA mainly for the purchase of electronic devices to be used in the provision of Electronic Postman services (€5 million), “PosteMobile Casa” devices (€5 million) and equipment for the offer of rental telephones (€1 million).
Investments in progress amounted to €80 million, including €51 million incurred by the Parent Company, of which €29 million for extraordinary maintenance and the provision of infrastructure for the commercial and production network, €8 million for the provision and maintenance of active and passive infrastructure for the security and remote surveillance network at sites and €7 million for the acquisition of industrial parcel processing equipment.
With regard to the revision of the residual useful lives and residual values of the main categories of fixed assets, reference should be made to paragraph 2.5 - Use of estimates.
A2 - Investment property (€31 million) Investment property relates to service accommodation owned by Poste Italiane SpA in accordance with Law 560 of 24 December 1993 and residential accommodation previously used by post office directors. Movements in provisions for risks and charges are as follows: tab. A2 - Movements in investment property
A3 - Intangible assets (€755 million) The following table shows movements in intangible assets in 2020: tab. A3 - Movements in intangible assets
(€m) Industrial patents and intellectual property rights, concessions, licences, trademarks and similar rights Assets under construction and advances Goodwill Other Total
Investments in Intangible assets during 2020 amounted to €384 million, including about €33 million in software development activities and the related expenses developed within the Group, primarily relating to personnel expenses (€26 million). Development costs, other than those incurred directly to produce identifiable software used, or intended for use, within the Group, are not capitalised.
During the year the Group effected reclassifications from intangible assets under construction to industrial patents and intellectual property rights, concessions, licences, trademarks and similar rights, amounting to €190 million, reflecting the completion and commissioning of software and the upgrade of existing software.
The value of goodwill attributable to the Mail, Parcels and Distribution SBU comprises the final difference between the consideration paid to the seller and the net value at the acquisition date of the identifiable assets acquired and liabilities assumed, measured in accordance with IFRS 3, for the Parent Company’s acquisitions of the subsidiaries MLK Deliveries SpA and sennder Italia Srl, both made during the first half of 2020. This difference amounted to €4,654 thousand and €219 thousand respectively. For details of the transactions, refer to paragraph 2.4 - Basis of consolidation. With reference to the impairment test on goodwill and cash generating units, please refer to paragraph 2.5 - Use of estimates.
Investments in subsidiaries 2 2 tab. 5.1 - Movements in investments
Balance at 31/12/2020 accounted for using the equity method dividend adjustments in associates in subsidiaries
The changes in the year in the associate Anima Holding are due to a net negative adjustment to the carrying amount of about €11 million, of which: z an increase of €16 million for the share of the economic results achieved by the investee company between 30 September 2019 and 30 September 2020, the date of the last financial statements available; z a decrease of €8 million due to dividends received from the result for 2019; z an impairment adjustment of €19 million, recognised in the first half of 2020, following the impairment test carried out on the value of the goodwill implicit in the value of the investment.
The changes during the year of the associate FSIA Investimenti are attributable to the net positive adjustment of the relative carrying amount for the year of around €9 million: z an increase of €1.5 million related to the capital contribution made by the Parent Company on 23 June 2020; z an increase of €8 million for the share of the joint venture’s results, after amortisation of the intangible assets identified at the time of the purchase price allocation.
Description (€m) Balance at 31/12/2020 Balance at 01/01/2020 Balance at 31/12/2019 Acquisition-date values
97. During 2020, the value of intangible assets and goodwill was recalculated in the FSIA reporting package prepared in accordance with IFRS 10 - Consolidated Financial Statements for the purposes of Poste Italiane's consolidated financial statements, compared with the value identified in the original purchase price allocation.
Financial assets at amortised cost 1,811 68 1,879 1,586 156 1,742
Financial assets at amortised cost 58 17 75 37 25 62
Financial assets at amortised cost - 133 133 - 115 115
Movements in financial assets measured at amortised cost are shown below: tab. A6.1 - Movements in financial assets at amortised cost
At 31 December 2020, the fair value99 of these securities was €34,760 million (including €235 million in accrued income).
98. The variable rate in question is calculated as follows: 50% is based on the average return on 6-month BOTs recognised monthly and the remaining 50% is based on the average ten-year BTP return recognised monthly.
99. In terms of the fair value hierarchy, which reflects the relevance of the sources used to measure assets, €31,188 million of the total amount qualifies for inclusion in level 1 and €3,572 million for inclusion in level 2.
Movements in financial assets at fair value through other comprehensive income (FVTOCI) are shown below: tab. A6.2 - Movements in financial assets at FVTOCI
These are Eurozone fixed income instruments held primarily by BancoPosta RFC, consisting of government securities issued by the Italian government with a nominal value of €33,600 million.
Gains/(Losses) through profit or loss ** - - - - - - - (2) - - - - - (2)
Of which: * Increases/(decreases) refer to the nominal value of new transactions and changes in the fair value of the overall portfolio during the period. ** Income/(expense) recognised in profit or loss refer to any ineffective components of hedges, recognised in other income and other expenses from financial activities. *** Transactions settled include forward transactions settled, accrued differentials and the settlement of interest rate swaps linked to securities sold.
Cash flow interest rate hedges recorded a total net fair value loss of €27 million on the effective portion, reflected in the cash flow hedge reserve.
Fair value hedges in interest rate swaps are used to hedge: z securities classified at amortised cost with a nominal value of €15,420 million and securities classified at FVTOCI with a nominal value of €14,714 million; overall, they underwent a net effective negative fair value change of €3,434 million during the year, taking into account the net positive fair value change of €3,405 million in hedged securities (Table A6.1 and A6.2) net of €29 million for differentials paid; z repurchase agreements classified at amortised cost with a nominal value of €900 million. These transactions, entered into in 2020, allow a portion of repurchase agreement transactions to be transformed to a variable rate, thereby reducing exposure to interest rate risk. The fair value at 31 December 2020 is not significant.
Financial receivables of €21 million mainly regard receivables for management commissions of Poste Vita internal funds.
Fixed income instruments at amortised cost at 31 December 2020 have a carrying amount of €1,858 million. These instruments exclusively relate to the free capital of Poste Vita SpA and Poste Assicura SpA. At 31 December 2020, the fair value101 of these instruments is €2,191 million.
Fixed income instruments recognised at amortised cost are adjusted to take into account the related impairments. Accumulated impairments at 31 December 2020 amount to approximately €1 million (unchanged compared to 31 December 2019).
Movements in financial assets at fair value through other comprehensive income are shown below: tab. A6.6 - Movements in financial assets at FVTOCI
Changes in fair value through profit or loss 8 - 8
These financial instruments have recorded a fair value gain of €5,975 million. This includes €5,899 million primarily due to income from the measurement of securities held by Poste Vita SpA and transferred to policyholders, with a contra-entry made in technical provisions in accordance with the shadow accounting method, and a portion of €76 million reflected in a matching positive movement in the related equity reserve.
Changes in fair value through profit or loss - 27 847 4 1 879
Effects of sales on profit or loss - (6) (33) (15) - (54)
This item refers to contributions by way of subscription and capital calls on mutual funds of which the corresponding units have not yet been issued.
At 31 December 2020, units of mutual investment funds amounting to €38,115 million include €33,789 million to cover Class I separately managed account products and €4,320 million to cover Class III products. The remaining €6 million relates to investment of the company’s free capital (see note 13 – Additional information - Unconsolidated structured entities). Net investment in the funds during the period amounts to €1,374 million and the fair value has increased by approximately €847 million, almost entirely transferred to Class I policyholders using the shadow accounting method. At 31 December 2020, the investments which primarily regard equity funds total €34,830 million, units in mutual real estate funds total €1,959 million, and mutual funds that primarily invest in bonds total €1,326 million.
Financial assets at amortised cost refer to loans and financial receivables totalling €75 million. This item breaks down as follows: tab. A6.8 - Loans and receivables at amortised cost
102. Of a total consideration of €387 million, €158 million was collected in 2017 and €159 million in early 2018. As regards the remaining amount receivable, on 31 October 2018, Invitalia informed Poste Italiane that the Bank of Italy had requested the buyer not to proceed with the reduction of BdM's capital scheduled for 2018, and preparatory to payment of a €40 million tranche of the related consideration. On 16 January 2019, in line with the contractual provisions, Poste and Invitalia defined in good faith alternative methods for the payment of the aforementioned fee. Based on the agreement signed, on 27 February 2019, Invitalia paid Poste Italiane €20 million. The remaining €20 million will be paid from the dividends to be paid by BdM in 2018, 2019 and 2020. Payment of the remaining €30 million is expected to take place between 30 June 2021 and 30 June 2022 once certain conditions have been met.
This item entirely regards BTPs with a total nominal value of €400 million. Of these, instruments with a value of €375 million have been hedged using interest rate swaps designated as fair value hedges. In November 2020, securities with a nominal value of €100 million matured.
Lastly, on 9 April 2020, the company, Innovazione e Progetti ScpA, which was already in liquidation, was removed from the Register of Companies.
This item consists of equity instruments (as defined by art. 2346, paragraph 6 of the Italian Civil Code) resulting from the conversion of Contingent Convertible Notes103, whose value at 31 December 2020 is zero.
Derivative financial instruments tab. A6.10 - Movements in derivative financial instruments
103. These are Contingent Convertible Notes with an original value of €75 million, a twenty-year term to maturity and issued by Midco SpA, which in turn owns 51% of the airline Alitalia SAI SpA. The Notes were subscribed for by Poste Italiane SpA on 23 December 2014, in connection with the strategic transaction that resulted in Etihad Airways' acquisition of an equity interest in Alitalia SAI, without giving rise to any involvement on the part of Poste Italiane in the management of the issuer or its subsidiary. Interest and principal payments were provided for in the relevant terms and conditions if, and to the extent that, there was available liquidity. On the fulfilment of certain negative pledge conditions, in 2017 the loan was converted into equity instruments (as defined by art. 2346, paragraph 6 of the Italian Civil Code), carrying the same rights associated with the Notes.
Description Balance at 31/12/2019 Increase / (decrease) Reclassifications Balance at 31/12/2020
Properties held for sale refer entirely to the portion of EGI SpA’s real estate portfolio to be sold, whose fair value104 at 31 December 2020 amounts to approximately €297 million.
Ministries and Public Administration entities - 464 464 - 520 520
Parcel express courier and express parcel services - 624 624 - 327 327
Unfranked mail delivered and other value added services - 228 228 17 240 257
Specifically105: z Amounts due from Ministries and Public Administration entities refer mainly to the following services: – Integrated Notification and mailroom services rendered to central and local government authorities, amounting to €108 million.
– The payment of pensions and vouchers on behalf of INPS (the National Institute of Social Security), totalling €25 million.
z Amounts due from Cassa Depositi e Prestiti refer to fees for BancoPosta’s deposit-taking activities during 2020.
z Parcels, express courier and express parcel receivables relate to shipments carried out by the Parent Company and services provided by the subsidiary SDA Express Courier SpA.
z Receivables arising from unfranked mail delivered and other value added services refer to bulk mail services and other added value services.
Provisions for doubtful debts due from customers are described in note 6 – Risk management.
107. The principal agreements that have expired regard those governing relations with the tax authorities in relation to the collection and reporting of payments.
z The remuneration of current account deposits refers entirely to amounts accruing in 2020 and almost entirely relates to the deposit of funds deriving from accounts opened by Public Administration entities and attributable to BancoPosta RFC.
108. Of the total amount, €250 million, assessed on the basis of provisions at 31 December 2020, has yet to be paid and is accounted for in "Other taxes payable" (tab. B10.3). 109. Introduced by article 19 of Law Decree 201/2011 converted with amendments by Law 214/2011 in the manner provided for by the MEF Decree of 24 May 2012: Manner of implementation of paragraphs from 1 to 3 of article 19 of Law Decree no. 201 of 6 December 2011, on stamp duty on current accounts and financial products (Official Gazette 127 of 1 June 2012).
A9 - Other receivables and assets (€4,928 million) tab. A9 - Other receivables and assets
Receivables relating to fixed-term contract settlements 57 79 136 66 81 147
Receivables for amounts that cannot be drawn on due to court rulings - 78 78 - 79 79
Provisions for doubtful debts due from others (2) (144) (146) (1) (145) (146)
z Receivables relating to fixed-term contract settlements consist of salaries to be recovered following the agreements of 13 January 2006, 10 July 2008, 27 July 2010, 18 May 2012, 21 March 2013, 30 July 2015 and 19 June 2018 between Poste Italiane SpA and the Labour Unions, regarding the re-employment by court order of personnel previously employed on fixedterm contracts. This item refers to receivables with a present value of €136 million from personnel, from INPS and pension funds recoverable in the form of variable instalments, the last of which is due in 2042. This item includes a receivable of €42 million from INPS (formerly IPOST) under a specific agreement entered into with IPOST on 23 December 2009, consisting of six instalments of €6.9 million each, falling due between 30 June 2012 and 31 December 2014. Negotiations are underway to recover this amount and, should the outcome prove unsuccessful, Poste Italiane reserves the right to take all necessary steps to protect its rights.
z Interest accrued on IRES refund, refers to interest accruing up to 31 December 2020 in relation to the tax credit determined by an unreported deduction from the IRES tax base of IRAP paid on labour costs and almost entirely attributable to the Parent Company. With regard to the remaining overall tax credit, amounting to €55 million, two disputes were brought before the Provincial Tax Tribunal of Rome, which upheld Poste Italiane’s appeals, ordering the tax authorities in Rome to refund the amounts claimed. The tax authorities appealed both rulings before the Regional Tax Tribunal and, on 23 March 2018, the Tribunal upheld the tax authorities’ appeal against one of the rulings. Poste Italiane has appealed this ruling before the Supreme Court of Cassation. In the last quarter of 2019, however, the Supreme Court of Cassation had the opportunity to rule on other proceedings concerning the operation of the reimbursement pursuant to Law Decree no. 201/11; with respect to the judgement issued, there is a homogeneity of legal-formal circumstances that lead to the conclusion that the principle of law, referred to in the aforementioned judgement of the Court of legitimacy, can also have its effects in existing judgements. Elements of uncertainty about the final outcome of the case are taken into account in determining the provision for doubtful debts due from others.
110. They carry out transport and custody of valuables awaiting payment to the State Treasury.
The balance of cash and cash equivalents at 31 December 2020 includes restricted cash of approximately €1,705 million, of which €929 million relates to funds on deposit with the MEF, known as the “Buffer” account, collected from customers and subject to a restriction on their use, €718 million consisting of liquidity used to cover insurance technical provisions, €24 million deposited by the Cabinet Office - Publishing Department in a non-interest-bearing account with the State Treasury as an advance on payments for reductions in publisher fees granted by the Company (note A8), €21 million restricted as a result of judicial decisions regarding disputes of various kinds and €13 million for cash on delivery collections and other restrictions.
B1 - Equity (€11,507 million) The following table shows a reconciliation of the Parent Company’s equity and net profit/(loss) for the year with the consolidated amounts: tab. B1 - Reconciliation of equity
- Fees to be amortised attributable to Poste Vita SpA and Poste Assicura SpA (34) - 3 (37)
- Elimination of adjustments to value of consolidated companies 598 - 12 586 - Amortisation/depreciation until 1 January 2004/Impairment of goodwill (156) - - (156)
Equity attributable to owners of the Parent 11,502 597 1,207 9,698 - Equity attributable to non-controlling interests (excluding profit/(loss)) 6 6 - - - Net profit/(loss) attributable to non-controlling interests (1) - (1) -
At 31 December 2020, earnings per share were €0.927 (€1.032 at 31 December 2019), calculated as the ratio of the profit for the year of €1,206 million to the number of outstanding shares of 1,300,852,035.
B2 - Share capital (€1,306 million) The share capital of Poste Italiane SpA consists of 1,306,110,000 no-par value ordinary shares, of which CDP holds 35% and the MEF 29.3%, while the remaining shares are held by institutional and retail investors.
Increases/(decreases) in fair value during the year - - 2,033 (28) - - 2,005
Reserves related to disposal groups and liabilities held for sale - - - - - - -
This item breaks down as follows: z the fair value reserve regards changes in the value of financial assets at fair value through other comprehensive income. The increase of €2,033 million during 2020 reflects: – a net increase of €1,946 million in financial assets attributable to the Group’s Financial Services segment; – a net increase of €76 million in financial assets attributable to the Group’s Insurance Services segment; – a net increase of €1 million in financial assets attributable to the Group’s Postal and Business Services segment; – a net increase of €10 million in financial assets attributable to the Group’s Payment and Mobile segment.
B5 - Technical provisions for insurance business (€153,794 million) These provisions refer to the contractual obligations of the subsidiaries, Poste Vita SpA and Poste Assicura SpA, in respect of their policyholders, inclusive of deferred liabilities resulting from application of the shadow accounting method, as follows: tab. B5 - Technical provisions for insurance business
The technical provisions borne by reinsurers are shown under assets in the balance sheet and amount to a total of €54 million.
Details of changes in technical provisions for the insurance business and other claim expenses are provided in the notes to the consolidated statement of profit or loss.
Provisions for disputes with third parties 313 30 - (43) (33) 267
Provisions for taxation/social security contributions 22 1 - (3) (2) 18
Overall analysis of provisions: * Net provisions for personnel expenses amount to €8 million. Service costs (legal assistance) total €4 million.
z Provisions for disputes with staff regard liabilities that may arise following labour litigation and disputes of various types. Provisions of €12 million regard an update of the estimate of the liabilities and the related legal expenses, taking account of both the overall value of negative outcomes in terms of litigation.
z Provisions for personnel expenses are made to cover expected liabilities arising in relation to the cost of labour, which are certain or likely to occur but whose estimated amount is subject to change. They have increased by €223 million to reflect the estimated value of new liabilities and decreased as a result of past contingent liabilities that failed to materialise (€29 million) and settled disputes (€32 million).
z Provisions for early retirement incentives reflect the estimated costs to be incurred as a result of the Company’s binding commitment to pay early retirement incentives on a voluntary basis, under the current redundancy scheme agreed with the labour unions for a determinate number of employees who will leave the Company by 31 December 2022. The provisions made at 31 December 2019, amounting to €261 million, were utilised during the year.
Actuarial gains and losses are generated by the following factors: tab. B7.3 - Actuarial gains and losses 31/12/2020
Financial liabilities for purchase of minority interests 46 - 46 - - -
Postal current accounts They represent BancoPosta’s direct deposit. These payables include net amounts accrued at 31 December 2020 and settled with customers in January 2021.
Amounts due to financial institutions tab. B8.1 - Due to financial institutions
111. A commitment given to creditors by which a borrower undertakes not to give senior security or other restrictions on assets to other lenders ranking pari passu with creditors, unless the same degree of protection is also offered to them.
112. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 1. 113. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 114. A commitment given to creditors by which a borrower undertakes not to give senior security to other lenders ranking pari passu with existing creditors, unless the same degree of protection is also offered to them.
At 31 December 2020, the fair value116 of the two EIB loans totalling €573 million is €604 million.
For information regarding the Poste Group’s credit lines and available liquidity at 31 December 2020, reference should be made to note 6 - Risk management - Financial risks - Liquidity risk.
MEF account held at the Treasury tab. B8.2 - MEF account held at the Treasury
The balance of cash flows from management of postal savings, amounting to a positive €192 million, represents the balance of withdrawals less deposits during the last two days of the year and cleared early in the following year. The balance at 31 December 2020 consists of €146 million receivable from Cassa Depositi e Prestiti, less €46 million receivable from the MEF for Interest-bearing Postal Certificates issued on its behalf.
Other amounts payable to third parties - 149 149 - 164 164
Amounts to be credited to customers - 139 139 - 168 168
Financial liabilities for purchase of minority interests The item refers to the estimate of the amount (purchase and sale options) that will allow Poste Italiane, starting from the second quarter of 2023, to purchase the additional 30% of MLK Deliveries SpA and ownership of the Milkman technology for e-commerce applications. The exercise price of these options is not fixed, but determined on the basis of a formula that provides for the application of a multiplier to certain economic/equity targets of MLK Deliveries SpA.
Derivative financial instruments Movements in derivative financial instruments during 2020 are described in note A6 – Financial assets.
B9 - Trade payables (€1,837 million) tab. B9 - Trade payables
Other contract liabilities primarily regard Postamat and Postepay Evolution card fees collected in advance.
Tax due on insurance provisions - 250 250 - 487 487
Withholding tax on postal current accounts - 10 10 - 10 10
Specifically: z Stamp duty payable represents the amount payable to the tax authorities for stamp duty in virtual form, before the adjustment applied in 2021 pursuant to note 3-bis to art. 13 of the Tariff introduced by Presidential Decree 642/1972. The non-current portion of the stamp duty mainly relates to the amount accrued at 31 December 2020 on Interest-bearing Postal Certificates outstanding and on Class III and V insurance policies pursuant to the new law referred to in note A9 – Other receivables and assets.
The decrease in the item Sundry payables attributable to BancoPosta compared with 31 December 2019 is due to the settlement of prior year items resulting from a comprehensive review of estimates completed during the year, with the resulting positive impact recognised in the statement of profit or loss.
Guarantee deposits primarily relate to amounts collected from customers as a guarantee of payment for services (postage-paid mailing services, the use of post office boxes, lease contracts, telegraphic service contracts, etc.).
Revenue from Mail, Parcels and other [C1] 3,201 3,492 of which Revenue from contracts with customers 3,132 3,439 recognised at a point in time 259 509 recognised over time 2,873 2,930
Revenue from Insurance Services after changes in technical provisions and other claim expenses [C4] 1,643 1,669
of which Revenue from contracts with customers 9 9 recognised at a point in time - recognised over time 9 9
Revenue from contracts with customers breaks down as follows: z Revenue from mail, parcels and other refer to services provided to customers through the retail and business channels; revenue generated through the retail channel is recognised at a point in time given the number of transactions handled through the various sales channels (post offices, call centres and online) and measured on the basis of the rates applied; revenue generated through the business channel is generally earned as a result of annual or multi-annual contracts and is recognised over time using the output method determined on the basis of shipments requested and handled. These contracts include elements of variable consideration (primarily volume discounts and penalties linked to the quality of service provided) estimated using the expected value method and recognised as a reduction from revenue. In addition, revenue not arising from contracts with customers are accounted for in accordance with IFRS 16 - Leases and IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance.
z Revenue from payments and mobile refers to: – card payments, relating primarily to the cards issued by Postepay recognised at a point in time when issued and the services linked to them recognised over time as the service is used by the customer. These services include interchange fees recognised by international circuits on payment transactions with debit cards detected over time; – Mobile and fixed line telecommunications services, including: revenue from “standard telecommunications offerings” recognised over time using the output method and based on the traffic offered (voice, text and data) to the customer; revenue generated by the fixed line “PosteMobile Casa” offering, recognised over time using the output method and based on the fee charged to the customer; revenue in the form of SIM activation fees recognised at a point in time when the SIM card is handed over to the customer. Within the Poste Italiane Group, the only mobile and fixed line
118. Law no. 8 of 28 February 2020 - ordered that reimbursements of publishing tariff subsidies to Poste Italiane continue "for a duration equal to that of the universal postal service" (i.e. until April 2026). The application of the regulation is subject to approval by the European Commission.
Publisher tariff subsidies118 relate to the amount receivable by Poste Italiane from the Presidenza del Consiglio dei Ministri - Dipartimento dell’Editoria (Cabinet Office - Publishing department) as compensation for the discounts applied to publishers and non-profit organisations when sending mail. The compensation is determined on the basis of the tariffs set in the decree issued by the Ministry for Economic Development, in agreement with the Ministry of the Economy and Finance, on 21 October 2010 and Law Decree 63 of 18 May 2012, as converted into Law 103 of 16 July 2012. In this regard, it should be noted that for the year under review, the amount of subsidies that the Company has granted is partially covered in the 2020 State Budget.
z Revenue from current account services primarily relates to charges on current accounts, fees on amounts collected and on statements of account sent to customers, annual fees on debit cards and related transactions.
z Revenue from the distribution of loan products relates to commissions received by the Parent Company on the placement of personal loans and mortgages on behalf of third parties.
Expenses from financial activities showed an increase of €127 million compared to 2019, mainly due to higher realised losses from financial assets at FVTOCI (+€94 million) and at amortised cost (+€27 million).
Change in technical provisions for insurance business and other claim expenses (18,767) (21,463)
Gross life premiums amounted to €16,661 million, down 6% on the previous year, with a significant contribution from Multi-class products, mainly as a result of the health emergency that affected Italy from March 2020.
Although marginal in relation to total net inflows, the contribution of net premiums pertaining to the Non-Life segment was up from €193 million in 2019 to the current €214 million.
Total change in technical provisions for insurance business and other claim expenses: Non-life 102 65
Expenses from insurance activities break down as follows: tab. C4.4 - Expenses from insurance activities
The increase in Expenses from insurance activities (+€261 million compared to 2019) was mainly attributable to the negative financial market dynamics experienced in 2020, which resulted in the recognition of Expenses from financial activities at FVTPL of €380 million compared to €121 million in 2019.
C5 - Cost of goods and services (€2,523 million) tab. C5 - Cost of goods and services
Costs of goods and services increased by a total of €236 million compared to 2019 mainly due to extraordinary expenses incurred to deal with the health emergency (€106 million for the purchase of personal protective equipment, plexiglass screens, sanitisation expenses, extraordinary cleaning of premises, communication expenses, etc.) and higher variable costs related to business development and in particular parcel costs.
Change in inventories of work in progress, semi-finished and finished goods and goods for resale
Net provisions (reversals) for disputes with staff [tab. B6] 7 4
Personnel expenses decreased by €258 million overall compared to 2019, mainly due to the ordinary component of personnel expenses, which was affected by the reduction in the average workforce during the period (approximately 4,500 FTE less than 2019). The reduction is also affected by the mobilisation of the Solidarity Fund, the estimated effects of which amount to about €57 million. The decrease in the ordinary component was partly offset by the increase in the cost of early retirement incentives.
C7 - Depreciation, amortisation and impairments (€700 million) This item breaks down as follows: tab. C7 - Depreciation, amortisation and impairments
Industrial patents and intellectual property rights,concessions, licenses, trademarks and similar rights 273 224
Amortisation, depreciation, and impairments decreased by €74 million compared to 2019, due mainly to lower depreciation (-€120 million) recognised as a result of the revision of the residual useful lives and residual values of the main categories of non-current assets (for more details, see paragraph 2.5 - Use of Estimates), offset in part by higher amortisation of intangible assets (+€48 million) resulting from the completion and commissioning of new software programs and the development of existing ones.
C9 - Other operating costs (€103 million) Other operating costs break down as follows: tab. C9 - Other operating costs
Municipal property tax, urban waste tax and other taxes and duties 61 98
The decrease of €97 million in Other operating costs is due mainly to the net reversal of provisions for risks and charges (-€54 million), for which reference is made to note B6 - Provisions for risks and charges.
C10 - Impairment losses/(reversals of impairment losses) on debt instruments, receivables and other assets (€75 million)
Net impairments and losses on receivables and other assets (uses of provisions) 61 62
The increase of €16 million compared to 2019 is mainly due to higher impairment of securities at FVTOCI and securities at amortised cost (+€14 million), offset in part by lower impairment of other receivables. The estimates were partly influenced by the effect of the crisis triggered by the current health emergency. For further details, reference should be made to Note 6 - Risk management.
C11 - Finance income (€123 million) and costs (€75 million) Income from and costs incurred on financial instruments relate to assets other than those in which deposits collected by BancoPosta and the financial and insurance businesses are invested.
Finance costs on financial liabilities 40 41 on due to financial institutions 11 2 on lease payables 26 28 on derivative financial instruments 2 1
Finance costs on provisions for employee termination benefits and pension plans [tab. B7] 8 17
C12 - Impairment losses/(reversals of impairment losses) on financial assets (€1 million)
tab. C12 - Impairment losses/(Reversals of impairment losses) on financial assets
119. The nominal IRAP rate is 3.90% for most taxpayers, 4.20% for companies that operate under concession arrangements other than motorway and tunnel construction and operating companies, 4.65% for banks and other financial entities and 5.90% for insurance companies (+/-0.92%, representing regional increases and cuts and +0.15% representing an increase for regions that showed a healthcare deficit).
The tax rate for 2020, before recognition of non-recurring income, was 29.56%; however, the effective tax rate for the year was 23.49%.
Adjustments to equity investments measured using the equity method (1) -0.07% (26) -1.44%
Effective tax (before Patent Box and ACE tax effect) 364 23.10% 403 21.54%
Net provisions for risks and charges and doubtful debts 1 0.09% 7 0.38%
Impairment losses/(reversals of impairment losses) on financial assets - -0.01% 2 0.11%
Realignment of tax bases and carrying amounts and taxation for previous years
Effective tax (before Patent Box tax effect) 102 6.46% 127 6.77%
for payments on account for the current year 428 113 541 for balance payable for the previous year 203 79 282
Patent Box tax effect 80 16 96 of which: Current tax liabilities (2) (11) (13)
The following table shows movements in deferred tax assets and liabilities, broken down according to the events that generated such movements: tab. C13.6 - Movements in deferred tax assets
Income/(expense) recognised in profit or loss 1 (1) - 3 74 - 18 (12) 83
Income/(expense) recognised in equity - - (159) - - - - - (159)
Movements in deferred tax assets and liabilities recognised directly in equity during the year are as follows: tab. C13.8 - Income/(expense) recognised in equity
The identified operating segments, which are in line with the Group’s new strategic guidelines reflected in the 2024 Sustain & Innovate Strategic Plan, are as follows: z Mail, Parcels and Distribution z Payments and Mobile z Financial Services z Insurance Services
Net external revenue from ordinary activities 3,201 737 4,945 1,643 - 10,526
Net profit/(loss) for the year (419) 194 647 784 - 1,206
Investments accounted for using the equity method 3 402 210 - - 615
(Impairment losses)/reversal of impairment losses on debt instruments, receivables and other assets
External revenue from contracts with customers 3,439 664 3,033 9 - 7,145
Recognition at a point in time 509 287 412 - - 1,208
Insurance Services after changes in technical provisions and other claim expenses
The nature of the Parent Company’s principal related party transactions external to the Group is summarised below in order of relevance: z Amounts received from the MEF relate primarily to payment for carrying out the USO, the management of postal current accounts, as payment for delegated services, the franking of mail on credit, and for the integrated notification service.
z Amounts received from the Enel Group primarily relate to payment for bulk mail shipments, unfranked mail, franking of mail on credit and postage paid mailing services. The costs incurred primarily relate to the supply of gas and electricity.
z Amounts received from the ENI Group primarily regard payment for mail shipments. The costs incurred relate to the supply of gas and of fuel for motorcycles and vehicles.
z Purchases from the Leonardo Group primarily relate to the supply, by Leonardo SpA, of equipment, maintenance and technical assistance for mechanised sorting equipment, and systems and IT assistance regarding the creation of document storage facilities, specialist consulting services and software maintenance, and the supply of software licences and of hardware.
Related party transactions have been carried out on terms equivalent to those prevailing in arm’s length transactions between independent parties.
Net revenue from Financial Services 4,945 2,017 40.8 5,134 1,993 38.8
Cost of goods and services 2,523 159 6.3 2,287 169 7.4
Net cash flow from /(for) operating activities 1,917 (39) n.a. 1,120 248 22.1
Key management personnel Key management personnel consist of Directors, members of the Board of Statutory Auditors, managers at the first organisational level of the Parent Company and Poste Italiane’s manager responsible for financial reporting. The related remuneration, gross of expenses and social security contributions, of such key management personnel as defined above is as follows: Remuneration of key management personnel
The remuneration paid to members of the Parent Company’s Supervisory Board for 2020 amounts to approximately €96 thousand. In determining the remuneration, the amounts paid to managers of Poste Italiane who are members of the Supervisory Board is not taken into account, as this remuneration is passed on to the employer.
No loans were granted to key management personnel during the period and, at 31 December 2020, Group companies do not report receivables in respect of loans granted to key management personnel.
Transactions with personnel pensions funds The Parent Company and the subsidiaries that apply the National Collective Labour Agreement are members of the Fondoposte Pension Fund, the national supplementary pension fund for Poste Italiane personnel, established on 31 July 2002 as a non-profit entity. The Fund’s officers and boards are the General Meeting of delegates, the Board of Directors, the Chairman and Deputy Chairman of the Board of Directors and Board of Statutory Auditors. Representation of members on the above boards is shared equally between the companies and the workers that are members of the Fund. The participation of members in the running of the Fund is guaranteed by the fact that they directly elect the delegates to send to the General Meeting.
5. POSTE ITALIANE SPA FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
ASSETS (figures in €) Notes of which related parties of which related parties
LIABILITIES AND EQUITY (figures in €) Notes of which related parties of which related parties
(figures in €) Notes FY 2020 of which related parties FY 2019 of which related parties
Profit/(Loss) before tax 332,812,810 822,586,207 of which, non-recurring costs/(income) (37,902,133) - - -
Increase/(decrease) in fair value during the year [tab. B2] (27,841,189) 95,566,193
Actuarial gains /(losses) on employee termination benefits [tab. B5] (4,760,823) (68,414,816)
Cash flow generated by operating activities before movements in working capital [a] 469,862 1,002,831
Restricted net cash and cash equivalents at end of year (1,599,172) (141,950)
121. The business unit consists of assets and contractual rights linked to: Own products: prepaid cards (card payments), payment services, acquiring services, tax payments using forms F23/F24 and international money transfers (Moneygram)
Products handled under Service Contracts: payment products and services and money transfers carried out exclusively within the scope of BancoPosta RFC's operations, as they are "reserved to" the ring-fence by Presidential Decree 144/01. In particular, with the aim of leveraging the infrastructure of the hybrid EMI, BancoPosta has outsourced operations relating to payment products and services issued by BancoPosta, and distributed by BancoPosta through Poste Italiane's physical network, to the EMI under an outsourcing agreement between BancoPosta and the EMI.
122. Following the amendment of art. 1, paragraph 1097 of Law 296 of 27 December 2006, introduced by art. 1, paragraph 285 of the 2015 Stability Law (Law 190 of 23 December 2014), it became possible for BancoPosta RFC to invest up to 50% of its deposits in securities guaranteed by the Italian government.
Cost and revenue allocation and measurement of operations contracted out by BancoPosta RFC Given the fact that Poste Italiane is a single legal entity, the Company’s general accounting system maintains its uniform characteristics and capabilities. In this context, the general principles governing administrative and accounting aspects of BancoPosta RFC are as follows: z Identification of transactions in Poste Italiane SpA’s general ledgers relating to BancoPosta’s ring-fenced operations which are then extracted for recording in BancoPosta’s separate ledgers.
z Allocation to BancoPosta RFC of all relevant revenue and costs; in particular the services rendered by the different functions of Poste Italiane SpA to BancoPosta RFC, are exclusively recorded as payables in BancoPosta’s separate books, in special intersegment accounts only, and subsequently settled.
z Reconciliation of BancoPosta’s separate books to Poste Italiane’s general ledger.
Back-office and Customer Care Fees by professional role based on market benchmarks + recharge of external costs Market prices for similar services
Separate Report BancoPosta RFC’s Separate Report is prepared in application of Bank of Italy Circular 262 of 22 December 2005 - Banks’ Financial Statements: Layouts and Preparation, as amended. The application of these regulations, whilst in compliance with the same accounting standards adopted by Poste Italiane SpA, requires the use of a different basis of presentation for certain components of profit or loss and the statement of financial position compared with the basis of presentation adopted for the statutory financial statements.
Pursuant to art. 2, paragraph 17-undecies of Law Decree 225126 of 29 December 2010, which states that “the assets and contractual rights included in BancoPosta’s ring-fenced capital shall be shown separately in the Company’s statement of financial position”, Poste Italiane SpA’s statement of financial position includes a Supplementary statement showing BancoPosta RFC.
At 31 December 2020, property, plant and equipment includes assets located on land held under concession or sub-concession, which are to be handed over free of charge at the end of the concession term. These assets have a total carrying amount of €44 million.
Investments of €246 million in 2020 consists largely of: z €61 million for plants, of which €39 million for the realisation of plant and equipment related to buildings, €11 million for the realisation and extraordinary maintenance of connectivity systems and €8 million for the installation of ATMs (automated teller machines); z €44 million invested in the upgrade of plant (€22 million) and the structure (€22 million) of properties held under lease; z €42 million relating to “Other assets”, including €32 million for the purchase of new computer hardware for post offices and head offices and the consolidation of storage systems; z €37 million relating to extraordinary maintenance of Post Offices around the country (€15 million), personnel offices (€13 million ) and mail sorting offices (€9 million).
A2 - Investment property (€31 million) Investment property primarily regards former service accommodation owned by Poste Italiane SpA pursuant to Law 560 of 24 December 1993, and residential accommodation previously used by post office directors. None of the above items is attributable to BancoPosta RFC.
The fair value of investment property at 31 December 2020 includes €64 million representing the sale price applicable to the Parent Company’s former accommodation in accordance with Law 560 of 24 December 1993, while the remaining balance reflects market price estimates computed internally by the Company127.
A3 - Intangible assets (€719 million) The following table shows movements in intangible assets: tab. A3 - Movements in intangible assets
Investments in Intangible assets during 2020 amounted to €366 million, including €31 million in internal software development activities and the related expenses, primarily relating to personnel expenses (€26 million). Research and development costs, other than those incurred directly to produce identifiable software used, or intended for use, within the Company, are not capitalised.
The increase in industrial patents and intellectual property rights, totalling €238 million, before amortisation for the year, relates primarily to the purchase and entry into service of new software programmes following the purchase of software licences.
The balance of intangible assets under construction includes activities regarding the development for software relating to the infrastructure platform (€80 million), for BancoPosta services (€39 million), for use in providing support to the sales network (€24 million), for the postal products platform (€10 million) and for the engineering of reporting processes for other Business functions and personnel (€6 million).
During the year the Group effected reclassifications from intangible assets under construction to industrial patents and intellectual property rights, concessions, licences, trademarks and similar rights, amounting to €187 million, reflecting the completion and commissioning of software and the upgrade of existing software.
Acquisitions during the year refer mainly to new contracts and renewals of contracts existing at the beginning of the year for real estate (€83 million), the rental of company vehicles (€42 million) and the rental of computer equipment (€10 million). The item “Adjustments” refers to contractual changes during the year in question, e.g. for changes in duration due to extension, revision of economic conditions, etc.
A5 - Investments (€2,215 million) This item includes the following: tab. A5 - Investments
Cons. per i Servizi di Telefonia Mobile ScpA - - - - - - - - - in associates
Consorzio per i Servizi di Telefonia Mobile ScpA 51.00 120 - 116 59 61 (2)
A6 - Financial assets attributable to BancoPosta (€91,453 million) tab. A6 - Financial assets attributable to BancoPosta
The assets in question concern the financial transactions carried out by the Company pursuant to Presidential Decree no. 144 of 14 March 2001, as amended, which, as from 2 May 2011, fall within the scope of RFC (see note 5.2 - Information on BancoPosta RFC).
z Other financial receivables, including €7,494 million in deposits as collateral for amounts paid to counterparties for interest rate swap transactions (collateral provided under specific Credit Support Annexes) and €72 million in amounts due from the subsidiary, PostePay SpA, in respect of amounts primarily charged in the first few days of 2021.
These regard investments in fixed income Eurozone government securities, consisting of bonds issued by the Italian government and securities guaranteed by the Italian government, having a nominal value of €26,157 million. At 31 December 2020, the balance of €33,255 million refers to the amortised cost of unhedged fixed income instruments, totalling €11,380 million, and fair-value hedged fixed income instruments, totalling €17,485 million, increased by €4,390 million to take into account the effects of the hedge (€1,707 million in 2020). The value of these securities was adjusted to take into account the related impairments. Accumulated impairments at 31 December 2020 amount to approximately €15 million (€8 million at 31 December 2019). At 31 December 2020, the fair value130 of these securities was €34,760 million (including €236 million in accrued income).
Certain securities are encumbered as they have been delivered to counterparties for use as collateral in connection with loans and hedging transactions, as described in note 13 – Additional information.
Financial assets measured at fair value through profit or loss Below are the movements in financial assets at fair value through profit or loss (FVTPL): tab. A6.3 - Movements in financial assets at FVTPL
Changes in fair value through profit or loss - 2 2
In the year under review, the Company entered into: z forward and settlement purchases with a nominal amount of €100 million; z forward sales for a nominal amount of €2,645 million and settlement for €1,857 million, of which €1,280 million outstanding at 1 January 2020; z new interest rate swaps designated as cash flow hedges with a nominal value of €50 million; z new fair value hedge interest rate swaps with a nominal amount of €9,214 million, including €900 million in hedges for repurchase agreement transactions; z settlement of fair value hedge interest rate swaps on securities sold, whose fair value changes were hedged, for a notional amount of €3,870 million.
In addition, the Company entered into and settled forward purchases for a total nominal value of €165 million (recognised at fair value through profit or loss), aimed at blocking the return, for 2020, on the investment of inflows from public customers on the deposit with the parent company (MEF), remunerated at a variable rate (table A6.1.1). These transactions had a positive impact of €11 million on profit or loss for the year (tab. C1.2.1).
Provision for impairment of intercompany loans (1) - (1) - - -
The item includes: z €251 million relating to an irredeemable subordinated loan, issued to Poste Vita SpA in order to bring the subsidiary’s capitalisation into line with expected growth in earned premiums, in compliance with the specific regulations governing the insurance sector; z for €35 million to three loans granted to the subsidiary SDA Express Courier SpA in the financial years 2019 and 2020, to support the construction of the new plant for the automated HUB in Bologna, repayable in a single instalment on 2 August 2027, 28 April 2028 and 16 April 2029 respectively; z €21 million for a loan granted to the associate FSIA Investimenti Srl in 2020 and repayable in a single instalment on 29 September 2023, in order to repay the Bank Loan subscribed by the company and finance current operations; Financial statements of Poste Italiane at 31 December 2020 5. Poste Italiane SpA Financial Statements for the year ended 31 December 2020
These loans have been adjusted to reflect accumulated impairments of approximately €1 million, to reflect the risk of counterparty default (€0.4 million at 31 December 2019).
Due from the purchasers of service accommodation 3 2 5 4 1 5
Receivables for Guarantee deposits include €11 million for amounts paid to counterparties for interest rate swap transactions and €4 million for amounts paid to counterparties with whom repurchase transactions on fixed-income securities are in place.
Amounts due from others, with a nominal value of €50 million, regard the remaining amount due from Invitalia SpA as a result of the sale of Banca del Mezzogiorno-MedioCreditoCentrale SpA on 7 August 2017132.
Changes in fair value through equity - (6) 7 - 1
Changes in fair value through profit or loss - (11) - - (11)
Effects of sales on profit or loss - - - - -
Sales, redemptions and settlement of accruals (100) (105) - (100) (105)
* The item, “Changes in cash flow hedges”, relates to the purchase of forward contracts in relation to cash flow hedge transactions and reflects changes in the fair value of these forward contracts between the date of purchase and the settlement date, with a matching entry in equity, in the cash flow hedge reserve.
Certain securities are encumbered as they have been delivered to counterparties for use as collateral in connection with loans, as described in note 13 – Additional information.
Financial assets at fair value through profit or loss This item consists of equity instruments (as defined by art. 2346, paragraph 6 of the Italian Civil Code) resulting from the conversion of Contingent Convertible Notes133, whose value at 31 December 2020 is zero.
133. These are Contingent Convertible Notes with an original value of €75 million, a twenty-year term to maturity and issued by Midco SpA, which in turn owns 51% of the airline Alitalia SAI SpA. The Notes were subscribed for by Poste Italiane SpA on 23 December 2014, in connection with the strategic transaction that resulted in Etihad Airways’ acquisition of an equity interest in Alitalia SAI, without giving rise to any involvement on the part of Poste Italiane in the management of the issuer or its subsidiary. Interest and principal payments were provided for in the relevant terms and conditions if, and to the extent that, there was available liquidity. On the fulfilment of certain negative pledge conditions, in 2017 the loan was converted into equity instruments (as defined by art. 2346, paragraph 6 of the Italian Civil Code), carrying the same rights associated with the Notes.
A8 - Inventories (€21 million) The item Inventories relating to Raw, ancillary and consumable materials refers to protective equipment, disinfectant gel and other materials purchased during the year and which will be used in 2021.
A9 - Trade receivables (€2,984 million) tab. A9 - Trade receivables
Due from subsidiaries and associates - 890 890 - 481 481
Ministries and Public Administration entities - 464 464 - 513 513
Specifically134: z Amounts due from Ministries and Public Administration entities refer mainly to the following services: – Integrated Notification and mailroom services rendered to central and local government authorities, amounting to €108 million.
z Receivables for overdrawn current accounts derive almost exclusively from overruns due to the debiting of BancoPosta’s periodic fees.
135. See “Revenue and amounts due from the State”, showing overall amounts due from the Ministry for Economic Development (€82 million), including amounts due for postal and other services.
Due to subsidiaries and associates tab. A9.2 - Due to subsidiaries and associates
Poste Welfare Servizi Srl 2 rovisions for doubtful debts (1) of which attributable to BancoPosta RFC 470 239
These trade receivables include: z Poste Vita SpA: primarily regarding fees deriving from the sale of insurance policies through post offices and attributable to BancoPosta RFC (€214 million); z PostePay SpA: primarily for product placement services relating to the payments business (€215 million), payment transactions (€130 million), the delivery service for bulk mail (€64 million) and commercial and call centre services (€18 million).
Amounts due from parent company This item relates to trade receivables due from the Ministry of the Economy and Finance: tab. A9.3 - Due from the Parent Company
Provision for doubtful debts due from the Parent company (33) (32)
of which attributable to BancoPosta RFC 35 45 z Universal Service compensation includes: tab. A9.3.1 - Universal Service compensation receivable
Receivables relating to fixed-term contract settlements 57 79 136 66 82 148
Receivables for amounts that cannot be drawn on due to court rulings
Interest accrued on IRES refund [C12] - 46 46 - 46 46
Accrued income and prepaid expenses from trading transactions - 7 7 - 5 5
z Amounts that cannot be drawn on due to court rulings include €65 million in amounts seized and not assigned to creditors in the process of recovery, and €13 million in amounts stolen from the Company in December 2007 as a result of an attempted fraud and that have remained on deposit with an overseas bank. The latter sum may only be recovered once the legal formalities are completed. The risks associated with collection of these items are taken into account in the provisions for doubtful debts due from others.
z Interest accrued on IRES refund, refers to interest accruing up to 31 December 2020 in relation to the tax credit determined by an unreported deduction from the IRES tax base of IRAP paid on personnel expenses. With regard to the remaining overall tax credit, amounting to €50 million, two disputes were brought before the Provincial Tax Tribunal of Rome, which upheld Poste Italiane’s appeals, ordering the tax authorities in Rome to refund the amounts claimed. The tax authorities have appealed both rulings before the Regional Tax Tribunal and, on 23 March 2018, the Tribunal upheld the tax authorities’ appeal against one of the rulings. Poste Italiane has appealed this ruling before the Supreme Court of Cassation. In the last quarter of 2019, however, the Supreme Court of Cassation had the opportunity to rule on other proceedings concerning the operation of the reimbursement pursuant to Law Decree no. 201/11; with respect to the judgement issued, there is a homogeneity of legal-formal circumstances that lead to the conclusion that the principle of law, referred to in the aforementioned judgement of the Court of legitimacy, can also have its effects in existing judgements. Elements of uncertainty about the final outcome of the case are taken into account in the provision for doubtful debts due from others.
A12 - Cash and cash equivalents (€4,029 million) This item breaks down as follows: tab. A12 - Cash and cash equivalents
Increase/(decrease) in fair value during the year - - 1,705 96 - - 1,801
Transfers to profit or loss - - (243) (59) - - (302)
Tax effect of transfers to profit or loss - - 69 17 - - 86
Increase/(decrease) for expected losses - - (1) - - - (1)
Gains/(losses) recognised in equity - - 1,044 26 - - 1,070 of which attributable to BancoPosta RFC - 1,210 970 115 - - 2,295
Tax effect of changes in fair value - - (553) 8 - - (545)
Transfers to profit or loss - - (260) 4 - - (256)
- cash flow hedge reserve 99 - - - merger surplus 15 A B D
Overall analysis of provisions: * Net provisions for Personnel expenses amount to €7 million. Service costs (legal assistance) total €4 million.
z Provisions for personnel expenses are made to cover expected liabilities arising in relation to the cost of labour, which are certain or likely to occur but whose estimated amount is subject to change. They have increased by €220 million to reflect the estimated value of new liabilities and decreased as a result of past contingent liabilities that failed to materialise (€29 million) and settled disputes (€27 million).
z Provisions for early retirement incentives reflect the estimated costs to be incurred as a result of the Company’s binding commitment to pay early retirement incentives on a voluntary basis, under the current redundancy scheme agreed with the labour unions for a determinate number of employees who will leave the Company by 31 December 2022. The provisions made at 31 December 2019 were utilised for €259 million.
z Provisions for taxation have been made to cover estimated tax liabilities.
The interest component is recognised in finance costs. The current service cost, which from 2007 is paid to pension funds or third-party social security agencies and is no longer included in the employee termination benefits managed by the Company, is recognised in personnel expenses. Net uses of personnel termination benefits regard disbursements of €116 million, the levying of substitute tax of €2 million and transfers from Poste Vita SpA, Poste Welfare Servizi Srl and PostePay SpA amounting to €1 million following the sale of Information Technology business units during the year.
The main actuarial assumptions applied in calculating provisions for employee termination benefits, are as follows: tab. B5.1 - Economic and financial assumptions 31/12/2020 31/12/2019
Fair value through profit or loss - 20 20 15 - 15 * In terms of fair value hierarchy, w hich reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Postal current accounts These payables include net amounts accrued at 31 December 2020 and settled with customers in January 2021. The balance includes amounts due to Poste Italiane Group companies, totalling €7,619 million, of which €7,044 million relating to postal current accounts in the name of PostePay SpA mainly relating to the deposit of income from prepaid cards and €484 million deposited in postal current accounts by Poste Vita SpA.
MEF account held at the Treasury tab. B6.1 - MEF account held at the Treasury
Balance of cash flows for advances - 3,602 3,602 - 4,397 4,397
Amounts payable due to theft - 159 159 - 158 158
Amounts payable for operational risks - 19 19 - 34 34
The decrease in the item Net advances, compared to 31 December 2019, is mainly due to the advance payment, made in the last working days of December, of the January pension accrual due to the provisions of the Ordinance of the Head of the Civil Protection Department no. 723 of 10 December 2020 in order to comply with the measures to contain the spread of the COVID19 virus.
The balance of cash flows from the management of postal savings, amounting to a positive €192 million, represents the balance of withdrawals less deposits during the last two days of the year and cleared early in the following year. The balance at 31 December 2020 consists of €146 million receivable from Cassa Depositi e Prestiti, and a receivable of €46 million from the MEF for Interest-bearing Postal Certificates issued on its behalf.
Derivative financial instruments Changes in derivative financial instruments during 2020 are described in note A6.
Payables for items in process - 191 191 - 139 139
Amounts payable for guarantee deposits refer to amounts received from counterparties in repurchase agreements on fixed income instruments (collateral provided by specific Global Master Repurchase Agreements).
140. A commitment given to creditors by which a borrower undertakes not to give senior security or other restrictions on assets to other lenders ranking pari passu with creditors, unless the same degree of protection is also offered to them.
Financial liabilities due to subsidiaries - 729 729 - 505 505 * In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Loans Loans are unsecured and are not subject to financial covenants, which would require the Company to comply with financial ratios. EIB loans are subject to the maintenance of a minimum rating level of BBB- (or equivalent) by the two rating agencies of Poste Italiane, without prejudice to the bank’s right to request guarantees or an increase in the margin, or in the event of failure to agree immediate early repayment of the loan. Standard negative pledge provisions do apply, however140.
Bonds The item Bonds refers to two loans issued by Poste Italiane SpA as part of the €2 billion Euro Medium Term Notes (EMTN) Programme promoted by the Company during the 2013 financial year on the Luxembourg Stock Exchange. Specifically: z a senior unsecured loan with a total nominal value of €1 billion issued on 10 December 2020 in two tranches, placed in public form with institutional investors. The first tranche of €500 million matures on 10 December 2024, has an above-par issue price of 100.10 with fixed annual coupon of 0.00% and an effective yield to maturity of -0.025%; the second tranche of €500 million matures on 10 December 2028, with an issue price below par of 99.758, a fixed annual coupon of 0.50% and an effective yield to maturity of 0.531%. At 31 December 2020, the fair value141 of the loan was €1,004 million; z a loan with a nominal value of €50 million, privately placed and issued at par on 25 October 2013. The term to maturity of the loan is ten years and the interest rate is 3.5% for the first two years and variable thereafter (EUR Constant Maturity Swap rate plus 0.955%, with a cap of 6% and a floor of 0%). The interest rate risk exposure was hedged as described in note A7 – Financial assets. At 31 December 2020, the fair value142 of the loan was €51 million.
EIB fixed rate loan maturing 16/10/2026 400 - 400 400 - 400
At 31 December 2020, the fair value144 of the medium/long-term loan, repaid in advance in January 2021, was €258 million and the fair value145 of the two EIB loans totalling €573 million was €604 million.
Unsecured loans* 352 322 * At 31 December 2020, unsecured loans have been used for €295 million on behalf of Poste Italiane SpA and for €57 million on behalf of Group companies.
No collateral has been provided to secure the credit lines available.
In addition, from 26 June 2020, BancoPosta’s assets may access a 3-year committed facility granted by Cassa Depositi e Prestiti for repurchase agreements up to a maximum of €4.25 billion, unused at 31 December 2020.
Financial liabilities due to subsidiaries These liabilities relate to intercompany current accounts paying interest at market rates and break down as follows: tab. B7.2 - Financial liabilities due to subsidiaries
B8 - Trade payables (€2,121 million) tab. B8 - Trade payables
These trade payables include: z PostePay SpA: mainly for collection and payment services under the service contract (€349 million) and for acquiring services (€24 million); z SDA Express Courier SpA: mainly for the pick-up, sorting and delivery service of products in the domestic and international express range following the agreement signed on 1 November 2019.
This item refers to amounts received from customers as prepayment for the following services to be rendered: tab. B8.3.1 - Prepayments and advances from customers
B9 - Other liabilities (€2,990 million) tab. B9 - Other liabilities
Accrued liabilities and deferred income 7 2 9 10 2 12 of which attributable to BancoPosta RFC 1,476 80 1,556 1,434 62 1,496
Other amounts due to staff - 56 56 - 147 147 of which attributable to BancoPosta RFC 1 4 5 3 5 8
Withholding tax on employees' and consultants' salaries - 91 91 - 87 87
z Stamp duty payable represents the amount payable to the tax authorities for stamp duty in virtual form, before the adjustment applied in 2021 pursuant to note 3-bis to art. 13 of the Tariff introduced by Presidential Decree 642/1972. The non-current portion of stamp duty payable primarily regards the amount due at 31 December 2020 on interest-bearing postal certificates in circulation, in compliance with the legislation referred to in note A10 – Other receivables and assets.
This item regards the amount due to subsidiaries by Poste Italiane SpA, as the consolidating entity in the tax consolidation arrangement (note 2.3 – Summary of significant accounting policies and measurement criteria), to whom the subsidiaries have transferred tax assets in the form of payments on account, withholding taxes and taxes paid overseas, after deducting IRES payable to the Parent Company by the subsidiaries. In addition, the amount due to the subsidiary, Poste Vita SpA, includes the receivable transferred to Poste Italiane as a result of the agreement reached with the tax authorities, in December 2020, regarding recognition of a financial contribution in the event of direct use of intangible assets (Patent Box); see in this regard as outlined in note C12 - Income Tax Expense.
Sundry payables attributable to BancoPosta - 6 6 74 8 82 of which attributable to BancoPosta RFC - 6 6 74 8 82
The decrease in the item Sundry payables attributable to BancoPosta compared with 31 December 2019 is due to the settlement of prior year items resulting from a comprehensive review of estimates completed during the year, with the resulting positive impact recognised in the statement of profit or loss (tab. C3 - Other operating income).
C1 - Revenue from sales and services (€8,226 million) tab. C1 - Revenue from sales and services
Other sales of goods and services 203 177 of which Revenue from contracts with customers 203 177 recognised at a point in time 1 1 recognised over time 202 176
z Revenue from BancoPosta Services refers to: – revenue from placement and brokerage: these are recognised over time and measured on the basis of the volumes placed, quantified on the basis of commercial agreements with financial institutions. In terms of payment for the collection of postal savings, the agreement entered into with Cassa Depositi e Prestiti envisages payment of a variable consideration on achieving certain levels of inflows, determined annually on the basis of the volume of inflows and expected redemptions; certain commercial agreements, entered into with leading financial partners for the placement of financial products, envisage the return of placement fees in the event of early termination or surrender by the customer; – revenue from current account and related services: these are recognised over time, measured on the basis of the service rendered (including the related services, e.g. bank transfers, securities deposits, etc.) and quantified on the basis of the contract terms and conditions offered to the customer; – revenue from commissions on payment of bills by payment slip: these are recognised at a point in time given the number of transactions handled by post offices and quantified on the basis of the terms and conditions in the contract of sale; – revenue not from contracts with customers accounted for in accordance with IFRS 9 - Financial Instruments.
External revenue shows a decrease due to the decrease in revenue from Mail, partially offset by the increase in revenue from Parcels. This trend reflects the critical issues that emerged as a result of the health emergency that has affected Italy since March 2020 and has had a significant impact on normal operations.
Other products and services 17 16 146. Law no. 8 of 28 February 2020 - ordered that reimbursements of publishing tariff subsidies to Poste Italiane continue “for a duration equal to that of the universal postal service” (i.e. until April 2026). The application of the regulation is subject to approval by the European Commission.
Specifically: z Fees for collection of postal savings deposits relates to remuneration for the provision and redemption of Interest-bearing Postal Certificates and payments into and withdrawals from Postal Savings Books. This service is provided by Poste Italiane SpA on behalf of Cassa Depositi e Prestiti under the Agreement expired 31 December 2020 and being renewed.
z Income from investment of postal current account deposits breaks down as follows: tab. C1.2.1 - Income from investment of postal current account deposits
Remuneration of current account deposits (deposited with the MEF) 32 64
z Revenue from the distribution of payment products and services regards fees received in return for distributing and promoting the products issued by the subsidiary, PostePay SpA.
z Income from delegated services primarily regards amounts received by the Company for the payment of pensions and INPS direct debit transfers (€37 million), and for the provision of services on the basis of the agreement with the MEF (€61 million).
Other sales of goods and services The main revenue items include: income from the subsidiary PostePay SpA, for cash and payment transactions (€122 million) and income from call center services (€10 million).
Negative accounting effects of the discharge of sundry payables relating to BancoPosta operations
C4 - Cost of goods and services (€2,318 million) tab. C4 - Cost of goods and services
The increase in Costs of goods and services of a total of €464 million compared to 2019 is mainly due to extraordinary expenses incurred to deal with the health emergency of €106 million for the purchase of personal protective equipment, plexiglass screens, sanitation expenses, extraordinary cleaning of premises, communication expenses, etc.) and costs incurred for services rendered by the subsidiary SDA Express Courier SpA following the agreement signed on 1 November 2019, relating to products in the domestic and international express range.
Change in inventories of raw, ancillary and consumable materials (21) -
C5 - Expenses from financial activities (€235 million) tab. C5 - Expenses from financial activities
Expenses from financial activities increased by €135 million compared to 2019 mainly due to higher realised losses from financial assets at FVTOCI (+€94 million), and at amortised cost (+€27 million).
Net provisions (reversals) for disputes with staff [tab. B4] 7 4
Personnel expenses decreased by €256 million overall compared to 2019, mainly due to the ordinary component of personnel expenses, which was affected by the reduction in the average workforce during the year (approximately 4.4 thousand FTE less than 2019). The reduction is also affected by the mobilisation of the Solidarity Fund, the estimated effects of which amount to about €57 million. The decrease in the ordinary component was partly offset by the increase in the cost of early retirement incentives.
Net provisions for disputes with staff and provisions for restructuring charges are described in note B4 – Provisions for risks and charges.
for operational risks [tab. B4] (64) 10 for other risks and charges [tab. B4] 7 10
The decrease of €129 million in Other operating costs is due mainly to the net reversal of provisions for risks and charges (-€62 million), for which reference is made to note B4 - Provisions for risks and charges.
Impairment losses/(reversals of impairment losses) debt instruments at FVTOCI 7 (1)
Foreign exchange gains* 12 5 * For the purposes of reconciliation with the statement of cash flows, in 2020 finance income after foreign exchange gains and dividends from associates amounts to €62 million (€59 million in 2019).
** Finance income on discounted receivables regards interest on amounts due from staff and INPS under the fixed-term contract settlements.
Finance costs on financial liabilities 36 29 on lease payables 23 25 on due to financial institutions 11 2 on derivative financial instruments 1 1
Foreign exchange losses* 12 4 * For the purposes of reconciliation with the statement of cash flows, in 2020 finance costs after foreign exchange losses amounted to €56 million (€55 million in 2019).
The increase of €20 million compared to 2019 is mainly due to higher impairment losses on investments in associates (+€11 million), higher interest on amounts due to financial institutions (+€9 million), partly offset by the reduction in financial expenses on the provision for employee termination benefits.
147. The nominal tax rate for IRAP is 3.90% for entities as a whole and 4.20% for entities that hold concessions other than those relating to the construction and operation of motorways and tunnels (+/–0.92% resulting from regional surtaxes and/or relief and +0.15% as a result of additional surtaxes levied in regions with a health service deficit).
Effective tax (before recognition of the Patent Box and ACE tax effect) 30 9.10% 118 14.32%
Patent Box and ACE tax effect (34) -10.35% - tab. C12.2 - Reconciliation between theoretical and effective IRAP rate
Net provisions for risks and charges and doubtful debts 1 0.13% 6 0.73%
for payments on account for the current year 428 13 441 for balance payable for the previous year 197 - 197
for Patent Box and ACE tax effect 34 4 38 of which: Current tax liabilities (1) (4) (5)
Income/(expense) recognised in equity - (159) - - - - - (159)
At 31 December 2020, deferred tax assets and liabilities recognised directly in equity are as follows: tab. C12.8 - Income/(expense) recognised in equity
Consorzio Servizi Telef. Mobile ScpA - - - 1 - - - 43 -
Provisions for doubtful debts from related parties (6) (21) (40) - - - - - -
Other related parties external to the Group - - 12 - - - 5 15 64
(Reversals of impairment losses) on debt instruments, receivables and other assets
Impact of related party transactions or positions The impact of related party transactions on the financial position, profit or loss and cash flows is shown in the following table: Impact of related party transactions
Revenue from sales and services 8,226 3,436 41.8 8,541 3,524 41.3
Net cash flow from /(for) investing activities (630) (41) 6.5 (736) (50) 6.8
Information on financial risk management at 31 December 2020 is provided below, in accordance with the requirements of the international financial reporting standard, IFRS 7 – Financial Instruments: Disclosures.
Responsibility for coordinating and managing investment and hedging strategies related to BancoPosta RFC and Poste Italiane has been assigned to BancoPosta Fondi SpA SGR.
z Poste Italiane SpA’s financial transactions primarily relate to BancoPosta’s operations, asset financing and liquidity investment. BancoPosta RFC’s operations consist in the active management of liquidity generated by postal current account deposits, carried out in the name of BancoPosta but subject to statutory restrictions, and collections and payments on behalf of third parties. The funds deposited by private account holders in postal current accounts are invested in Eurozone government bonds149, whilst deposits by Public Administration entities are deposited with the MEF. The investment profile is based on the constant monitoring of habits of current account holders and the use of a statistical/econometric model that forecasts the interest rates and maturities typical of postal current accounts. Accordingly, the portfolio composition aims to replicate the financial structure of current accounts by private customers. Management of the relationship between the structure of deposits and investments is handled through an appropriate Asset & Liability Management system. The above-mentioned model is thus the general reference for the investments, in order to limit exposure to interest rate risk and liquidity risks. The prudential requirements introduced by the third revision of the Bank of Italy Circular 285/2013 require BancoPosta to apply the same regulations applicable to banks in terms of its controls, establishing that its operations are to be conducted in accordance with the Consolidated Law on Banking (TUB) and the Consolidated Law on Finance (TUF). BancoPosta RFC is, therefore, 148. ESMA Notice of 25 March 2020 “Public Statement 32-63-951. Accounting implications of the Covid-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9”.
required to establish a system of internal controls in line with the provisions of Circular 285150, which, among other things, requires definition of a Risk Appetite Framework (RAF), the containment of risks within the limits set by the RAF151, protection of the value of assets and against losses, and identification of material transactions to be subject to prior examination by the risk control function.
With reference to BancoPosta RFC, following the positive development in revenue volumes, mainly due to the effect of the pandemic that resulted in an increase in account balances, and the change in the market scenario, the Leverage Ratio fell during the year to 2.65% at 31 December 2020, taking into account the increase in capital deriving from the calculation of part of the 2020 profits, not subject to distribution.
Unit-linked products, relating to Class III insurance products, regard policies where the premium is invested in mutual investment funds. The Company constantly monitors the evolution of the risk profile of individual products.
Poste Assicura SpA’s investment policies are designed to preserve the Company’s financial strength, as outlined in the framework resolution approved by the Board of Directors of Poste Vita SpA on 28 July 2020. Regular analyses of the macroeconomic context and market trends for the different asset classes, with the relevant effects on asset-liability management, are conducted. For the Non-life business, the focus is on the management of liquidity in order to meet claims
From an organisational viewpoint, the model consists of: z the Control and Risk Committee, established in 2015, whose role, based on adequate research activity, is to act in an advisory capacity and make recommendations to support the Board of Directors in assessing and making decisions regarding the internal control and risk management system and regarding the approval of financial and non-financial periodic reports.
Nominal Fair value +100bps -100bps +100bps -100bps +100bps -100bps +100bps -100bps 2020 effects
Financial assets at fair value through profit or loss, which are recognised at risk, are held almost entirely by Poste Vita SpA and are primarily used to cover commitments to policyholders. These relate to a portion of investments in fixed income instruments totalling €1,992 million and the position in Other investments consisting mainly of units in mutual funds amounting to €1,347 million.
Within the context of derivative financial instruments, the risk in question primarily concerns: z forward sales of government securities with a nominal value of €1,800 million, classified as cash flow hedges, entered into by BancoPosta RFC; z a derivative contract entered into by the Parent Company to protect cash flows relating to the nominal value €50 million variable rate bond; z five fair value hedge forward sales transactions on the “BTPS 0.85%” government bond with a nominal value of €1,260 million entered into by Poste Vita SpA during the year.
Spread risk This is the risk of a potential fall in the value of bonds held, following deterioration in the creditworthiness of issuers. This is due to the importance that the impact of the spread of returns on government securities had on the fair value of Eurozone government and corporate securities, reflecting the market’s perception of the credit rating of issuers.
Due to the monetary policy measures adopted by the ECB to mitigate the impact of the Coronavirus pandemic on the Eurozone economy, financial year 2020 was characterised by a reduction in yields on Italian government securities (the 10-year BTP fell from 1.4% to 0.5%), which brought the BTP-Bund spread to 111 basis points compared to 160 last year. These changes led to an increase in the price of the securities and a consequent reduction in their yield
The sensitivity to the spread has been calculated by applying a shift of +/- 100 bps to the yield curve for Italian government bonds.
154. For sensitivity purposes, the swap rate curve and the BTP curve were used (10-year swap rate of -26.4 bps and the spread of the BTP compared to the 10-year swap rate of 80.7 bps
Financial liabilities * For Other investments relative to Mutual investment funds, the nominal value indicates the number of units held without taking into account the face value of the equity security.
For the purposes of full disclosure, following an increase in the spread of 100 bps, the Poste Vita Group’s fixed income instruments measured at amortised cost, which at 31 December 2020 amounted to €1,858 million (nominal value of €1,794 million) and have a fair value of €2,191 million, would be reduced in fair value by approximately €175 million, with the change not reflected in the accounts.
Financial assets at FVTOCI* 31,670 37,323 308 * The VAR indicated for derivative financial instruments only refers to forward purchases, whilst the VAR relating to fixed income instruments also takes into account forward sales.
Financial assets at FVTPL 1,431 2,459 8 * The VAR indicated for derivative financial instruments refers solely to forward purchases while the VAR related to fixed-income bonds takes into account also forward sales. ** For Other investments relative to Mutual investment funds, the nominal value indicates the number of units held without taking into account the face value of the equity security.
Cash flow interest rate risk This is defined as the uncertainty related to the generation of future cash flows, due to interest rate fluctuations. It may result from the misalignment – in terms of interest rates, indexation methods and maturities – of financial assets and liabilities that tend to remain in place until their contractual and/or expected maturity (so-called banking book) which, as such, generate economic effects in terms of net interest income, reflecting on the income results of future periods.
Sensitivity to cash flow interest rate risk at 31 December 2020 on the Poste Italiane Group’s positions is shown in the table below.
With regard to trade receivables, in order to reflect the effects of the Covid-19 pandemic, the following steps were taken: z for trade receivables subject to analytical impairment, the level of PD was increased in line with the increase in sectoral risk recorded by the rating agencies in 2020; z for trade receivables subject to on flat-rated basis, on the other hand, in order to calculate expected losses, homogeneous customer clusters representing the composition of the receivable portfolio were identified. Each cluster was associated with different on flat-rated basis percentages, broken down by past due age bands, which varied on the basis of the increase in risk historically recorded during phases of acute stress.
The impairment model applicable to financial instruments measured at amortised cost and at fair value through other comprehensive income is based on Expected Credit Losses (ECL). Below, the methods adopted to manage credit risk are described.
z a judgmental factor to be used only in the presence of sudden changes in the creditworthiness not yet reflected by the rating156.
The ratings used in stage allocation derive from internal models in the case of banking, sovereign and corporate counterparties, and external infoproviders in the case of Public Administration and Central Counterparties. Based on the above information, the Poste Italiane Group rebuts the presumption that there have been significant increases in credit risk following initial recognition, when financial assets are more than 30 days past due.
The Poste Italiane Group incorporates forward looking information directly in the PD estimation. In particular, the internal approach adopted allows completion of the input dataset necessary to calculate PD starting from a number of scenario values related to the approach. The objective of the approach is to estimate the unknown variables by using the historical correlation of the available information157.
156. The judgmental factor can summarise significant aspects in determining the significant increase of credit risk, considering such elements as: • an actual or expected significant change of the internal/external credit rating of the financial instrument; • actual or expected negative changes in economic, financial or business conditions that might cause a significant change in the borrower’s ability to honour its obligations, such as an actual or expected increase in interest rates or an actual or expected significant increase in the unemployment rate. 157. In particular, the use of such approach is limited to situations where, actually, the final figures are deemed to be no longer representative of the counterparty’s risk.
Estimation techniques used Since events of default cannot be used, as they are not very frequent, to develop credit scoring models for Sovereign, Banking and Corporate counterparties, a shadow rating approach has been adopted.
The target was constructed on the basis of a rating agency selected as reference, considering both the large number of counterparties rated and the availability of historical data over a time horizon considered adequate.
The models have been constructed by extracting and utilising the following types of data for each country in the sample: z macroeconomic data; z market data: domestic equity indices, global energy/non-energy indices, Eurostoxx and S&P 500; z financial statement data.
ECL measurement Expected credit losses (ECL) are determined over a time horizon consistent with the stage level (12 months or lifetime) on the basis of the following factors: z Probability di Default (PD); z Loss Given Default (LGD); z Exposure at Default (EAD); z Time Factor (TF).
Trade receivables The Group adopts the simplified approach to test for the impairment of trade receivables, on the basis of which provisions for credit losses are determined for an amount equal to expected losses throughout the lifetime of the receivable. Such approach is implemented through the following process: z based on total revenue or the historical credit exposure, all receivables or credit exposures exceeding a certain pre-established credit threshold are assessed analytically. The analytical evaluation of the exposures entails an analysis of the borrower’s credit quality and solvency, as determined on the basis of internal and external supporting evidence; z for receivables falling below the threshold set, through the preparation of a matrix with the different impairment percentages determined on the basis of historical losses, or on the historical pattern of collections. In constructing the impairment matrix, receivables are grouped by homogeneous categories, based on their characteristics, to take into account the historical loss experience.
Provision to cover expected losses - - (40) - - - (40)
Total amortised cost at 31 December 2020 827 - 44,827 - - - 634 4,389 50,677 2019 effects
Total amortised cost at 31 December 2019 1,532 - 34,926 - 265 - 569 2.871 40,163
The Poste Italiane Group uses instruments to mitigate credit risk and counterparty risk. Specifically: z as regards Poste Italiane SpA, primarily in relation to BancoPosta RFC, the credit and counterparty risks associated with hedging derivatives and repurchase agreements are mitigated by entering into a master netting agreement and requiring collateral in the form of cash or government securities; z the Poste Vita group invests in, among other things, corporate bonds that are guaranteed in order to mitigate the overall exposure to credit risk; z in terms of trade receivables, the Poste Italiane Group credit terms are extended for customers, requesting, in certain cases, guarantees or sureties issued by prime banks or insurance companies.
At 31 December 2020, the Group does not hold financial assets secured by guarantees or other risk mitigation instruments for which no loss provisions have been made (except for the temporary use of liquidity in repurchase agreements).
The main types of instrument used to mitigate credit risk are described below: Fixed income instruments Debt instruments held by the Group and secured by guarantees or other risk mitigation instruments are as follows: z bonds issued by CDP SpA guaranteed by the Italian State and subscribed by BancoPosta RFC, amounting to a nominal value of €3,000 million at 31 December 2020. These are recognised as financial assets measured at amortised cost and, in determining the associated expected credit losses, account was taken of the PD of the Italian Republic; z bonds held by the Poste Vita Group, amounting to a nominal value of €4,352 million at 31 December 2020. In these cases, the guarantee covers 100% of the nominal value of the securities. The guarantees securing these financial instruments are as follows: – corporate bonds backed by personal guarantees provided by the parent company or another associate, amounting to a nominal value of €3,708 million; – covered bonds backed by mortgages, primarily property mortgages, amounting to a nominal value of €256 million; – bonds guaranteed by sovereign states, amounting to a nominal value of €388 million.
The Poste Italiane Group accepts mainly guarantees issued by primary banks or insurance companies. Alternatively, upon request of the customer and after a risk analysis, it accepts sureties issued by other institutions, security deposits or the opening of a postal escrow account.
Poste Italiane Group – Credit risk – Details of the provision to cover expected losses on financial instruments at amortised cost
Impairment of securities / receivables purchased/paid in the period - 5 5
At 31 December 2020, estimated expected losses on financial instruments measured at amortised cost amount to approximately €40 million. The increase in the provision to cover expected losses takes account of the increased risk caused by the current pandemic.
Poste Italiane Group – Credit risk – Details of the provision to cover expected losses on financial instruments at FVTOCI
Impairment of securities / receivables purchased/paid in the period - 4 4
The value of ECL recorded in the financial statements derives mainly from exposures to the Italian Republic. In the calculation of the ECL, the sensitive parameter is the Probability of Default (PD) which, in the case of the Italian Republic, is estimated through the application of an internal model dedicated to sovereign counterparties that uses macroeconomic variables as inputs. The sensitivity of the PD, and therefore of the ECL, to these macroeconomic factors can be assessed by comparing the PD value of the Italian Republic in two forecast scenarios for 2021. At 31 December 2020, the following sensitivity analysis was performed on financial instruments relating to BancoPosta RFC: z the application of the model to a scenario characterised by an increase in the Debt/GDP ratio of 4% would result in an increase in the PD of the Italian Republic of 9%, with a negative effect on the Fund to cover expected losses of approximately €3 million; Annual Report 2020 Poste Italiane Group
z the application of the model to a scenario characterised by a decrease in the Debt/GDP ratio of 4% would determine a decrease in the PD of the Italian Republic of 19% with a consequent positive effect of approximately €6 million on the Fund to cover expected losses.
The above sensitivity analysis was not carried out on the financial instruments relating to the Poste Vita insurance group, as the related provision to cover expected losses is almost entirely passed on to policyholders via shadow accounting.
Trade receivables The Poste Italiane Group’s exposure to credit risk, in relation to each class of trade receivables at 31 December 2020, is shown separately depending on whether or not the model used to estimate ECL is based on an individual or a collective assessment.
Poste Italiane Group – Credit risk – Trade receivables impaired on the basis of the simplified matrix
Positions subject to legal recovery and/or insolvency proceedings 136 116 138 114
In particular, the disclosures in question concern the following positions relating to Poste Italiane SpA at 31 December 2020: z derivative assets and liabilities and related collateral, represented both by cash and government securities; z repurchase agreements and reverse repurchase agreements and the related collateral, represented both by cash and government securities.
The positions in question are subject to standard bilateral netting agreements that allow, in the event of the counterparty’s default, the offsetting of debit and credit positions covered by ISDA contracts and repurchase agreements, for which GMRA agreements have been entered into.
Financial liabilities * The gross amount of financial assets and liabilities includes the financial instruments subject to offsetting and those subject to master netting agreements or similar arrangements, regardless of whether the financial instruments have been offset.
Liquidity risk This is the risk that an entity may have difficulties in raising sufficient funds, at market conditions, to meet its obligations deriving from financial instruments.
At 31 December 2020, unrestricted cash and cash equivalents amounted to €2.3 billion (of which €2.2 billion related to the Parent Company). The committed and uncommitted credit lines available to the Group and the related utilisations are summarised in the table below.
Unsecured loans 383 356 * At 31 December 2020, the Parent Company had €620 million in unsecured loans (€675 million at 31 December 2019).
In addition, from 26 June 2020, BancoPosta’s assets may access a 3-year committed facility granted by Cassa Depositi e Prestiti for repurchase agreements up to a maximum of €4.25 billion.
The existing credit lines and medium/long-term loans are adequate to meet expected financing requirements.
The above table shows expected cash outflows at the date of the financial statements, broken down by maturity, while the maturities of postal current account deposits are reported on the basis of the estimates made with a statistic/econometric model. Repayments of principal at nominal value are increased by interest payments calculated, where applicable, on the basis of the yield curve applicable at 31 December 2020. The liabilities of Poste Vita SpA and Poste Assicura SpA are reflected in “Flows from Poste Vita Group’s policies”.
Cash and deposits attributable to BancoPosta 6,391 - - 6,391 4,303 - - 4,303
As to the policies sold by Poste Vita SpA, in order to analyse its liquidity risk profile, the company performs Asset/liability management (ALM) analysis to manage assets effectively in relation to its obligations to policyholders, and also develops projections of the effects deriving from financial market shocks (asset dynamics) and of the behaviour of policyholders (liability dynamics).
The sensitivity analysis at 31 December 2020 took into account positions potentially exposed to fluctuations in value. Financial statement balances have been subjected to a stress test, based on actual volatility during the year, considered to be representative of potential market movements. The results of the sensitivity analysis carried out at 31 December 2020 for the Poste Italiane Group are shown in the following table.
Lastly, during 2019 and in the first months of 2020, shares in Moneyfarm, sennder GmbH, Milkman, Tink and Volante, classified as financial assets measured at fair value through other comprehensive income and not subject to sensitivity in the table above, were acquired by the Parent Company and PostePay, as described in further detail in the table above.
Cash flow inflation risk This is defined as the uncertainty related to future cash flows due to changes in the rate of inflation observed in the market.
The table below analyses the sensitivity of future cash flows for the Poste Italiane Group’s financial assets at 31 December 2020.
Financial assets at amortised cost 243 264 - - - - - 2019 effects
Financial assets at amortised cost 127 156 - - - - - -
At 31 December 2020, cash flow inflation risk relates to inflation-linked government securities not subject to cash flow hedges or fair value hedges. Of the total nominal value, securities totalling €9,805 million are held by Poste Vita SpA and securities totalling €2,143 million by BancoPosta RFC.
Fair value through profit or loss - - - - - - - - -
Nominal Fair Value +100bps -100bps +100bps -100bps +100bps -100bps 2020 effects
Provision to cover expected losses - - (19) - - - - - - (19)
Total amortised cost at 31 December 2020 823 - 42,874 - - - - 577 4,390 48,664 2019 effects
Provision to cover expected losses - - (11) - - - - (11)
Provision to cover expected losses - OCI - - (18) - - - - (18)
Carrying amount - Fair value at 31 December 2020 - - 42,638 - - - - - - 42,638 2019 effects
Stage 1 Stage 2 Stage 1 Stage 2 Stage 1 Stage 2 Stage 3 2020 effects
Total amortised cost at 31 December 2019 - - 381 - 8 - - 5 - 394
Carrying amount - Fair value at 31 December 2020 - - 407 - - - - - - 407 2019 effects
Impairment of securities / receivables held at the beginning of the period 1 3 4
Reversal of securities / receivables held at the beginning of the period - - -
Capital outside the ring-fence – Credit Risk – Details of the provision to cover expected losses on financial instruments at amortised cost
Impairment of securities / receivables held at the beginning of the period 1 - - 1
Reversal of securities / receivables held at the beginning of the period - - - -
Credit Risk – Trade receivables impaired on the basis of the simplified matrix
Details of the provision to cover expected credit losses due from others
+ Vol - Vol + Vol - Vol + Vol - Vol
Fair value through profit or loss (20) (31) 31 (31) 31 - -
Fair value through profit or loss (15) (12) 12 (12) 12 - -
In 2020, activities continued to refine the operational risk management framework, with the aim of making the process of recording operational losses more efficient, monitoring, reporting and mitigating such risks by cross-functional working groups. Support has also been provided to the specialist units and the owner of the process of analysing and assessing IT risk, in keeping with the approach adopted in 2019.
At 31 December 2020, the risk map prepared in accordance with the aforementioned framework shows the type of operational risks BancoPosta RFC products are exposed to. In particular: Event Type Number of types
Poste Vita SpA and Poste Assicura SpA have also drawn up and finalised their own framework for identifying, assessing and managing operational risks. The adopted approach reflects the specific nature of the processes and operational risk events typical of an insurance company. The process of assessing operational risk exposure is carried out in keeping with the related solvency requirements, and involves both qualitative and quantitative analysis, conducted through a structured process for identifying internal losses and assessing potential risks in terms of frequency, impact and mitigation. Overall, the exposure to risks is in line with that recorded in 2019 and the main operational losses relate to customer litigation expenses.
Insurance risks Insurance risks derive from the stipulation of insurance contracts and the terms and conditions contained therein (technical bases adopted, premium calculation, terms and conditions of cash surrender, etc.). Mortality, longevity and surrender risks are relevant here.
As Poste Vita’s mixed and whole-life policies have mostly cash value build-up features, accumulating in accordance with a technical rate of zero, the technical basis adopted does not affect premium calculation (and/or the insured capital). In fact, there is nearly no pricing risk associated with the choice between technical bases in Poste Vita’s portfolio, except for the term life insurance products discussed above.
The options embedded in the policies held in the portfolio include: z Surrender option; z Guaranteed minimum return option; z Annuity conversion option
Poste Assicura SpA is exposed to the following insurance risks: z Underwriting risk: the risk deriving from the conclusion of insurance contracts associated with the events insured, the processes followed when pricing and selecting risks and unfavourable claims trends compared with previous estimates. This risk can be divided into the following categories: – Pricing risk: the risk linked to the company’s pricing of its policies which depends on the assumptions used in order to calculate premiums. If prices are based on inadequate assumptions, the insurer may be exposed to the risk of being unable to meet its contractual obligations to policyholders. These risks include those related to disability-morbidity, or the risk associated with the payment of benefits or claims for illness and/or injury. Pricing risk also includes the risk that the premiums charged are not sufficient to cover the actual costs incurred in the management of the contract and the risk of excessive growth in operations associated with poor selection of risks or the absence of resources sufficient to keep up with the pace of growth.
z Catastrophe risk: the risk that extreme and exceptional events have a negative impact that has not been taken into account when pricing the policies.
Poste Assicura defines, on each occasion, the risk quota and reinsurance structure deemed most appropriate in relation to the characteristics of the risk in question.
Reputational risk The main element of reputational risk to which the Group is, by its nature, exposed is linked to market performance and primarily associated with the placement of postal savings products and investment products issued by third-party entities (bonds, certificates and real estate funds) or by Group companies (insurance policies issued by the subsidiary, Poste Vita SpA, and mutual funds managed by BancoPosta Fondi SpA SGR).
Bonds either quoted on inactive markets or not at all: z Straight Italian and international government and non-government bonds: valuation is based on discounted cash flow techniques involving the computation of the present value of future cash flows, inputting rates from yield curves incorporating spreads reflecting credit risk that are based on spreads determined with reference to quoted and liquid benchmark securities issued by the issuer, or by other companies with similar characteristics to the issuer. Yield curves may be slightly adjusted to reflect liquidity risk relating to the absence of an active market.
z Structured bonds: valuation is based on a building block approach, entailing decomposition of a structured position into its basic components: the bond and option components. The bond component is measured by discounting cash flows to present value in line with the approach applicable to straight bonds, as defined above. The option component - which considering the features of the bonds included in the portfolio of the Poste Italiane Group relates to interest rate risk - is measured in accordance with a standard closed form expression as with classical option valuation models with underlyings exposed to such risks.
Derivative financial instruments: z Interest Rate Swaps: Plain vanilla interest rate swaps: valued using discounted cash flow techniques, involving the computation of the present value of future differentials between the receiver and payer legs of the swap. The construction of yield curves to estimate future cash flows indexed to market parameters (money market rates and/or inflation) and computation of the present value of future differentials are carried out using techniques commonly used in capital markets.
Interest rate swaps with an embedded option: valuation is based on a building block approach, entailing decomposition of a structured position into its basic components: the linear and option components. The linear component is measured using the discounted cash flow techniques described for plain vanilla interest rate swaps above. Using the derivatives held in Poste Italiane’s portfolio as an example, the option component is derived from interest rate or inflation rate risks and is valued using a closed form expression, as with classical option valuation models with underlyings exposed to such risks.
z Currency forwards: valuation is based on the differential between the reciprocal currency registered at the measurement date and the reciprocal currency fixed at the trade date.
Reverse Repos: are valued using discounted cash flow techniques involving the computation of future contractual cash flows. Repos may also be used for collateral and in such cases fair value need not be adjusted for the counterparty’s credit risk.
Financial liabilities either quoted on inactive markets or not at all: z Straight bonds: these are measured by discounting their future cash flows using as input a yield curve reflecting the spread applicable to the issuer’s credit risk.
z Repurchase agreements: are valued using discounted cash flow techniques involving the computation of future contractual cash flows. Repos may also be used for collateral and in such cases fair value need not be adjusted for the counterparty’s credit risk.
Closed-end unquoted funds: these include funds that invest mainly in unquoted instruments. Their fair value is determined by considering the latest NAV (Net Asset Value), available at least every six months, reported by the fund manager. This NAV is adjusted according to the capital calls and reimbursements announced by the managers which occurred between the latest NAV date and the valuation date.
Investment property (excluding former service accommodation) and inventories of properties held for sale: the fair value of both investment property and inventories has been determined mainly by discounting to present value the cash flows expected to be generated by the rental agreements and/or proceeds from sales, net of related costs. The process uses a discount rate that considers analytically the risks typical of the property.
Investment property (former service accommodation): the value of this investment property is determined on the basis of the applicable law (Law 560 of 24 December 1993), which sets the selling price in case of sale to the tenant or the minimum selling price if the property is sold through a public auction.
162. A relevant transaction in this context is defined as a minimum investment of €10 million or at least 5% of the share capital of the investee entity over the last twelve months from the reporting date.
Transfers between levels 1 and 2, relating entirely to the Poste Vita insurance Group, are shown below: Transfers from Level 1 to Level 2
Movements in level 3 during the year are shown below: Changes in financial instruments – level 3
Gains/Losses in profit or loss due to sales - - - -
Other changes (including accruals at end of period) (5) - - (5)
With respect to the Parent Company, as a result of the 24 September 2020 conversion of a portion of the Visa Series C shares into Visa Series A Preferred Stock, approximately 31 million of the C shares were reclassified from Level 3 to Level 2.
Hedging transactions on fixed income and inflation-linked government securities The Poste Italiane Group has a government bond portfolio – made up of fixed-rate BTPs and inflation-linked BTPs – subject to movements in fair value due to changes in interest rates and in the inflation rate.
The retrospective effectiveness test is run by utilising the “dollar offset approach through the hypothetical derivative164”. With this approach, consideration is given to the hedge ratio of the change in fair value of the actual derivative to the change in fair value of the hypothetical derivative occurred between inception and the valuation date. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%. The hypothetical derivative and the actual hedging instrument have a settlement date consistent with the hedge inception (spot or forward start) and differ solely in their spread which is considered, as already indicated, the main source of ineffectiveness165. The partial ineffectiveness of the hedge, equal to the difference between the changes in value of the two derivatives (hypothetical and actual) represents the net effect of the hedge recognised separately in profit or loss.
163. IAS 39 requires two effectiveness tests: • prospective effectiveness test: attests that the hedging relationship is expected to be highly effective in future periods; • retrospective effectiveness test: attests that the hedging relationship has been effective from inception to the reporting date. For a hedge to be effective, the prospective effectiveness test must show that the hedge is highly effective in offsetting fair value or cash flow movements attributable to the hedged instrument during the designation period, while the result of the retrospective test must show offset ratios ranging from 80% to 125%. A hedge can be ineffective when the hedging instrument and the hedged item: are in different currencies; have different maturities; use different underlying interest rates; are exposed to different counterparty risks; and when the derivative is not equal to zero at inception.
For the purposes of the prospective effectiveness test, different approaches have been adopted, depending on the characteristics of the hedging instrument. Specifically: z the “Critical terms166“ approach for swap spot start, for which it has been determined at inception that the characteristics of the fixed leg make it possible to replicate exactly the fixed cash flows generated by the hedged item; z the “Dollar offset through the hypothetical derivative” approach for forward start swaps and forward sales of the subsidiary Poste Vita, for which the prospective effectiveness test is performed by calculating the hedge ratio between the change in fair value of the hypothetical derivative and the change in fair value of the actual derivative167. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%.
Finally, the Poste Vita Group has entered into forward sales agreements in order to protect unrealised gains on government bonds held by the Separately Managed Account, Posta ValorePiù, against unexpected changes in interest rates and/or credit risk. For the retrospective and prospective effectiveness test, the company adopts the “dollar offset through the hypothetical derivative” approach”.
The Group evaluates the effectiveness of every hedging relationship in offsetting movements in fair value through a retrospective effectiveness test and a prospective effectiveness test, using the approaches illustrated in the following notes.
For the retrospective effectiveness test, the Group adopts the “dollar offset through the hypothetical derivative” approach. With this approach, consideration is given to the hedge ratio of the change in fair value of the actual derivative to the change in fair value of the hypothetical derivative occurred between inception and the valuation date. The hedge is considered effective if the hedge ratio falls in the interval between 80% and 125%. The hypothetical derivative and the actual hedging instrument have a settlement date consistent with the hedge inception and differ solely in the fixed rate component which is therefore considered the main source of ineffectiveness168. The partial ineffectiveness of the hedge, equal to the difference between the changes in value of the two derivatives (hypothetical and actual) represents the net effect of the hedge recognised separately in profit or loss.
166. The critical terms approach involves a comparison between the critical terms of the hedging instrument with those of the hedged item. The hedging relationship is highly effective when all the critical terms of the two instruments match perfectly and there are no features or options that might invalidate the hedge. Critical terms include, for example: notional amount of the derivative and principal of the underlying, credit risk, timing, currency of the cash flows.
Hedging transactions on inflation-linked government securities and forecast transactions To limit the exposure to interest rate risk deriving from the need to reinvest the cash generated by maturing bonds held in portfolio, BancoPosta RFC enters, if necessary, into forward purchases. In addition, to pursue the stabilisation of returns, forward sales are entered into. These derivatives qualify as cash flow hedges of forecast transactions.
To limit the effects of interest rates on cash flows, the Group enters into OTC interest rate swaps or inflation swaps to hedge the cash flows of the bonds held in portfolio. The objective of these transactions is to stabilise until maturity the return of the instrument, regardless of movements of the variable parameter.
The Group evaluates the effectiveness of the designated derivative in every hedging relationship through a retrospective effectiveness test and a prospective effectiveness test.
170. The notional amount of the forward contract must be set, at the settlement date, as equal to the nominal amount of the instrument in case of purchase, and equal or lower than the nominal amount of the instrument in case of sale. The underlying of the forward contract must coincide with the instrument that must be purchased or sold (in this case it must be an instrument in the portfolio) at the settlement date. The settlement date must be the same as the date on which the cash flow to be hedged is expected, in case of forward purchase, or must be related to the year in which the total return must be stabilised, in case of forward sale.
171. The hypothetical derivative uses the fixed rate, which makes the present value at the settlement date equal to zero, while the actual derivative uses the interest rate agreed upon with the counterparty.
Variable rate bond hedges The Poste Italiane Group is exposed to the risk of cash flow volatility in relation to the €50 million bond issue of 25 October 2013, which calls for annual variable interest payments.
Effects of hedging transactions on profit or loss and financial position
The table below shows the hedging instruments time distribution based on the remaining contract duration. The average interest rate of the interest rate swaps shown represents the contractually expected average fixed rate of the hedging transaction by maturity band.
Time distribution based on remaining duration of fair value hedge contracts
Accumulated amount of fair value hedge adjustments on the hedged item in case of discontinuing
Fixed income instruments, of which: 44,105 - 4,389 - 3,255 -
Nominal Carrying amount Change in value use to recognise ineffective portion of hedge
The table below shows the effects of cash flow hedges on other comprehensive income.
A reform of the main interest rate benchmarks known as the “IBOR (InterBank Offered Rate) Reform” is underway globally, involving the replacement of certain interbank rates with alternative risk-free rates. Regulatory bodies in various jurisdictions around the world, have initiated a substitution process and working groups have developed the alternative reference rates as well as guidelines to update the contract models.
The Group has financial instruments indexed to EURIBOR, which continues to be quoted daily and the related cash flows continue to be exchanged with counterparties as usual. There is therefore no uncertainty regarding this parameter resulting from the IBOR reform at 31 December 2020. These instruments are subject to daily collateralisation remunerated to EONIA which, as mentioned above, will be replaced from next year by ESTR.
In November 2011, the tax authorities notified EGI SpA of three notices of assessment for the years 2006, 2007 and 2008, resulting in the identification of the same irregularity in each of the three years. This concerned the application, for the purposes of IRES, of art. 11, paragraph 2 of Law 413/1991 to properties of historical and artistic interest owned by EGI and leased by it to third parties.
On 30 January 2019, the Board of Directors of the Company resolved to adhere to the facilitated definition pursuant to art. 6 of Law Decree no. 119 of 2018 converted into Law no. 136 of 2018 with a tax charge of €0.367 million, paid on 19 April 2019. On 15 May 2019, the documentation certifying the settlement of the dispute and the relative request for suspension of proceedings was filed at the Registry of the Tax Section of the Court of Cassation until 31 December 2020. As of today, the Court of Cassation has not set a hearing for the purpose of declaring the discontinuance of the matter in dispute.
claim on 10 June 2019, at the same time provisionally paying a sum equal to approximately half the tax claimed. At the hearing held on 30 September 2020, the Provincial Tax Tribunal of Rome, having acknowledged the measure of full annulment in self defence issued by the Revenue Agency to annul the contested assessment notice in its entirety with a concurrent request for the extinction of the proceedings due to the discontinuance of the dispute and compensation for litigation expenses, reserved the right to decide. With a ruling dated 22 October 2020, the Regional Tax Tribunal of Rome fully upheld the appeal filed on behalf of the Company and cancelled the assessment notice issued in relation to the 2014 tax year.
Since 2012 and until 31 December 2020, the Istituto Nazionale per la Previdenza Sociale (INPS, the National Institute of Social Security) office at Genoa Ponente has issued Postel some payment orders, for a total amount payable of €25.1 million. According to INPS, this amount represents social security contributions funding income support, extraordinary income support, unemployment benefit and family benefits not covered by the contributions paid to IPOST. Appeals against these requests were brought before the Court of Genoa. In support of the arguments of Postel in a memo issued on 20 October 2016, the Ministry of Labour stated that the social security contributions system applicable to Poste Italiane also applies to all the other Group companies, with the sole exception of those that provide air transport, banking and express delivery services.
Taking into account the judgements at the first instance, the reasons given for the judgements and the latest appeals brought by INPS, the Company has adjusted its provisions for risks and charges also based on the opinion of its legal advisors.
Provisions recognised in the financial statements at 31 December 2020 amount to €11.25 million.
Financial statements of Poste Italiane at 31 December 2020 9. Proceedings pending and principal relations with the Authorities
On 6 April 2020, pursuant to art. 9, paragraph 3-bis of Law 192/98 and art. 14 of Law 287/90, the AGCM initiated proceedings A539 against Poste Italiane, following a complaint by a third-party supplier that Poste Italiane had presumably imposed unjustifiably burdensome contractual clauses. In particular, following the termination of contractual relations in mid-2017, the supplier was not, in fact, able to otherwise offer the services it was providing on the market because of the obligation to comply with rules and organisational parameters considered such as to make the company structure excessively rigid, making it unsuitable to operate with parties other than Poste Italiane. A hearing was held on 8 June 2020 at which Poste Italiane stated its position and, subsequently, the Authority requested the delivery of documentation. Additional hearings were held on 30 November 2020 and 3 February 2021. The proceedings are still in the pre-trial phase.
Following transposition into Italian law of the third European postal services directive (Directive 2008/6/EC), the so-called “net avoided cost” method has been applied in quantifying the cost of the universal service”173. In this regard: i. During 2020, the procedure for verifying the net cost of the universal postal service for the year 2019 was launched. In particular, with a communication dated 8 July 2020, AGCom extended to 2019 the objective scope of the net cost verification procedure of the universal postal service for the years 2017 and 2018, previously initiated with Resolution 215/19/CONS of 2 July 2019.
On 8 October 2020, with Notice of Objection 30/20/DSP, AGCom notified Poste Italiane that it had breached its obligation to provide continuity in the provision of the universal service, in relation to the failure to open certain Post Offices, concentrated almost entirely in Trentino Alto Adige, due to the sudden absence of personnel, in the period from 1 January to 21 February 2020. Poste Italiane sent its defence briefs to the Authority on 6 November 2020. By way of Resolution 48/21/CONS, published on 8 March 2021, at the conclusion of the proceedings in question, the Authority imposed an administrative fine of €1.06 million (€10 thousand for each of the disputed events), equal to the same amount that the Company would have paid if it had availed itself of reduced payment. At 31 December 2020, the Company has taken into account the penalty in the determination of the Provisions for risks and charges, the payment of which is due by 5 April 2021.
173. This method defines the cost incurred as the difference between the net operating cost incurred by a designated universal service provider when subject to universal service obligations and the net operating cost without such obligations.
IVASS – Istituto per la Vigilanza sulle Assicurazioni (the insurance regulator) On 19 February 2020, IVASS notified Poste Vita of a complaint concerning the alleged delay in the liquidation of life insurance policies. The Company filed its defence briefs, the filing deadline for which, set at 60 days from the date of notification, was suspended from 23 February to 15 April 2020 and further extended to 15 May 2020 due to the entry into force of Law Decree no. 23 of 8 April 2020, published in the Official Gazette no. 94 of 8 April 2020. Subsequently, on 25 August 2020, IVASS notified Poste Vita of a further complaint regarding the alleged delay in settling life insurance policies. The Company filed its defence briefs within the prescribed time.
Garante per la protezione dei dati personali (the Data Protection Authority) On 15 January 2014, at the end of an investigation launched in 2009, the Authority imposed a fine of €0.34 million on Postel, which the Company accounted for in its financial statements for 2013. The company appealed the Authority’s ruling before the Civil Court of Rome, requesting an injunction suspending its implementation, which was accepted by the judge with a ruling on 16 June 2014. On 21 January 2016, the designated judge reduced the fine by €0.1 million, rejecting the other preliminary exceptions raised on the merits. The Company appealed against the above judgement, for the part of the fine not annulled by the Court, to the Court of Cassation, which rejected the appeal filed by the Company and upheld the fine of €0.34 million. We are waiting for the Data Protection Authority to summarise the judgement before the Court of Rome, as pronounced by the Court of Cassation.
Despite the pending judgement at the Court of Cassation referred to above, the Tax Authorities notified the company of a payment order in which, in addition to requesting payment of a fine of €0.24 million, as reduced by the judgement from the Court of Rome, it also applied, among other things, an additional amount of €0.12 million. Postel appealed the order, resulting in cancellation of the fine of €0.12 million by the Court of Rome. The Authority appealed against this judgement to the Court of Cassation, notified on 3 August 2018, and Postel took steps to duly institute legal proceedings. The Court of Cassation, fully adhering to the Company’s arguments, declared the appeal filed by the Authority inadmissible, also ordering it to reimburse the legal costs.
A brief summary of the impact of material non-recurring events and transactions174 involving the Poste Italiane Group in 2019, is provided below, as required by Consob ruling DEM/6064293 of 28 July 2006: z income of €96 million relating, for €81 million, to the “Patent Box”, covering the years 2015-2019, of which €58 million recognised by Poste Vita and Poste Assicura and €23 million by the Parent Company. Agreements to recognise the economic contribution were entered into with the Revenue Agency on 16 December 2020 for Poste Vita, 21 December 2020 for Poste Italiane and 22 December 2020 for Poste Assicura. The remaining €15 million refers to the tax benefit for the Parent Company related to the Aid to Economic Growth (ACE), referring to the 2015-2016 financial years for which, in the year under review, the uncertainties associated with the quantification no longer exist.
As part of the agreement between Poste Italiane SpA and the Dutch company PostNL European Mail Holdings B.V. (“PostNL”) and the German company Mutares Holding - 32 GmbH (“Mutares Holding”), on 29 January 2021, Poste Italiane acquired from PostNL and Mutares the entire share capital of Nexive at a price of €34.4 million, based on an Enterprise Value of €50 million and net debt of €15.6 million.
On 19 January 2021, Poste Italiane SpA and Cloud Seven Holding Limited entered into a framework agreement under which Poste Italiane will acquire 51% of the voting capital of Sengi Express Limited (“Sengi Express”), a company wholly owned by Cloud Seven Holding Limited based in Hong Kong. The closing of the transaction was completed on 1 March 2021.
Financial statements of Poste Italiane at 31 December 2020 12. Events after the end of the reporting period
This note provides information applicable to both the Poste Italiane Group’s consolidated financial statements and Poste Italiane SpA’s separate financial statements, including qualitative and quantitative disclosures on matters residually required by accounting standards, not specifically dealt with in the previous notes.
The net debt/(funds) of the Poste Italiane Group and Poste Italiane SpA at 31 December 2020 are analysed below.
MEF account held at the Treasury - - 3,588 - - 3,588 3,588
Financial liabilities for purchase of minority interests 46 - - - - 46 -
Technical provisions for insurance business - - - 153,794 - 153,794 -
Financial instruments at amortised cost (75) (133) (48,590) (1,879) - (50,677) (10,934)
Technical provisions attributable to reinsurers - - - (54) - (54) -
MEF account held at the Treasury - - 4,542 - - 4,542 4,542
Technical provisions for insurance business - - - 140,261 - 140,261 -
Financial instruments at amortised cost (62) (115) (38,244) (1,742) - (40,163) (11,181)
Technical provisions attributable to reinsurers - - - (58) - (58) -
Total net debt/(funds) at 31 December 2020 showed funds of €6,820 million, up €1,153 million from 31 December 2019 (€5,667 million). This change was primarily attributable to positive operating income of €2.1 billion (including €1,206 million attributable to profit for the period) and the increase in the fair value of investments classified as FVTOCI held by the Financial Services SBU relating to the portion not hedged by fair value hedges amounting to €1.7 billion, partially offset by the negative change in working capital of about €1 billion, investments for €680 million and the distribution of dividends totalling €613 million.
An analysis of the net funds of the Mail, Parcels and Distribution segment at 31 December 2020, in accordance with ESMA recommendation 319/2013, is provided below: ESMA net debt/(funds)
MEF account held at the Treasury - 3,588 - 3,588 3,588
Financial instruments at fair value through profit or loss - (71) - (71) -
Cash and deposits attributable to BancoPosta - (4,303) - (4,303) -
Total net funds of the Company at 31 December 2020, as described above, amounted to €3,460 million, up €852 million compared to 31 December 2019 (funds of €2,608 million). The main factors contributing to this change were a positive operating result of approximately €1 billion and an increase in the fair value of financial instruments at FVTOCI of €1.7 billion partially offset by investments of €612 million, distribution of dividends totalling €613 million and a negative change in net working capital of €377 million.
An analysis of the net funds of the Parent Company outside the ring-fence at 31 December 2020, in accordance with ESMA recommendation 319/2013, is provided below: ESMA net financial indebtedness for capital outside ring-fence
Net debt/(funds) for capital outside ring-fence including intersegment transactions 2,206 1,254
In accordance with IFRS 7 - Financial Instruments: Disclosures, this section provides additional information on the transfer of financial assets that are not derecognised (continuing involvement).
At 31 December 2020, these assets concern reverse repurchase agreements entered into with primary financial intermediaries and entirely attributable to the Parent Company.
Financial liabilities arising from repos (414) (412) (412) - - -
Receivables in the form of guarantee deposits (Clearing House margin requirements)
Securities used as collateral provided by CSAs and GMRAs 172 178 - -
Receivables used as collateral provided by CSAs 11 11 23 23
Receivables used as collateral provided by GMRAs 4 4 - -
Financial assets at amortised cost 3 3 4 3 3 4
In order to make investments as consistent as possible with the risk-return profiles of the policies issued, ensuring management flexibility and efficiency, in certain cases Poste Vita SpA has purchased over 50% of the assets managed by certain investment funds. In these cases, tests have been performed in keeping with IFRS to determine the existence of control. The results of the tests on such funds suggest that the company does not exercise any control within the meaning of IFRS 10 – Consolidated Financial Statements. However, these Funds fall within the definition of unconsolidated structured entities: a structured entity is an entity designed in such a way as not to make voting rights the key factor in determining control over it, as in the case where voting rights refer solely to administrative activities and the relevant operations are managed on the basis of contractual arrangements
Invests in the Shopping Property Fund 2: master fund which invests primarily in commercial properties and, marginally, in office buildings and alternative sectors. It does not invest in property debt
Financial assets at FVTPL 5,129 919 4,209 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 4,321 645 3,676 Annual VaR 99.5% over a 5-year time horizon and 1-year half life
Financial assets at FVTPL 495 174 322 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 328 82 246 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 156 47 109 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 140 55 85 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 135 52 84 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 100 45 54 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Financial assets at FVTPL 77 42 35 VaR at 99.5% over a time horizon of 1 year calculated from SII sensitivity markets
Poste Italiane Group The Annual General Meeting of Poste Italiane SpA’s shareholders held on 24 May 2016 approved the information circular for the “Long-term Incentive Plan for 2016-2018 (LTIP) – Phantom Stock Plan”, prepared in accordance with art 84-bis of the Regulations for Issuers. The LTIP, set up in line with market practices, aims to link a portion of the variable component of remuneration to the achievement of earnings targets and the creation of sustainable shareholder value over the long term.
Beneficiaries The Beneficiaries are: Poste Italiane’s Chief Executive Officer, in his role as General Manager, certain managers within the Poste Italiane Group, including key management personnel, Risk Takers who work for BancoPosta RFC and personnel belonging to the Poste Vita insurance group.
Executive Officer) and BancoPosta RFC’s Risk Takers, vesting of the Phantom Stocks is also subject to achievement of Qualifying Conditions, designed to ensure the stability of BancoPosta RFC’s capital and liquidity position, as follows: z Indicator of capital adequacy, based on CET 1 at the end of the period; z Indicator of short-term liquidity, based on LCR at the end of the period; z Indicator of risk-adjusted earnings, based on RORAC at the end of the period; this indicator has been introduced from the 2017-2019 cycle and only for the General Manager (and Chief Executive Officer).
The Phantom Stocks will be awarded by the end of the year following the end of the Performance Period, and immediately converted into cash. In the case of the General Manager, BancoPosta RFC’s Risk Takers and the Poste Vita Insurance Group’s personnel, they are subject to a one-year retention period, before they can be converted into cash, following confirmation that the Qualifying Conditions for each plan have been met.
Financial statements of Poste Italiane at 31 December 2020 13. Additional information
Poste Italiane SpA The effects on profit or loss of the above Long-Term Incentive scheme at 31 December 2020 for Poste Italiane SpA are shown below.
First Cycle 2016-2018 At the end of the one-year retention period to which the 100,683 Phantom Stocks deriving from the finalisation of the Plan, which matured in 2018, were subject, the cash equivalent of the units fully paid out during the year amounted to approximately €1.1 million. The cost recognised for the first half of the year was about €0.1 million.
Vesting of the Rights and the awarding of the Shares is subject to achievement of the Performance Hurdle, designed to ensure sustainability of the Plan at Group level. The Performance Hurdle corresponds with achievement of a certain target for the Group’s cumulative EBIT over a three-year period at the end of each Performance Period. In addition, in the case of the General Manager (and Chief Executive Officer) and BancoPosta RFC’s Beneficiaries, vesting of the Phantom Stocks is also subject to achievement of Qualifying Conditions, designed to ensure the stability of BancoPosta RFC’s capital and liquidity position, as follows: z Indicator of capital adequacy, (CET 1) at the end of the period; z Indicator of short-term liquidity, (LCR) at the end of the period; z RORAC risk-adjusted earnings at the end of the period.
176. The objective linked to the “relative Total Shareholder Return” (rTSR) includes a “negative threshold” provision: if Poste Italiane’s TSR is negative, despite being higher than the TSR registered by the index, the number of vested Rights (linked to rTSR) is reduced to the minimum threshold of 50%.
Second Cycle 2020-2022 The total number of Rights to receive Shares assigned for the Second Cycle of the Plan concerns 113 Beneficiaries and was 931,041 units, whose unit fair value at the grant date (5 March 2020 for the General Manager and 12 November 2020 for the BP Beneficiaries and Other Beneficiaries) was €5.42, €3.91 and €4.64, respectively. The cost recognised for 2020 was approximately €1.5 million, equivalent to the equity reserve specifically created. The unit fair value of each Right at the valuation date is equal to its nominal value at the grant date (determined on the basis of stock market prices), discounted by the expected dividend rate and the risk-free interest rate and updated taking into account the best estimate of service conditions and performance (non-market based performance conditions) considering the best estimate of the service conditions and performance conditions (non-market based performance conditions).
Second Cycle 2020-2022 The total number of Rights to receive Shares assigned for the Second Cycle of the Plan concerns 108 Beneficiaries and was 909,910 units, whose unit fair value at the grant date (5 March 2020 for the General Manager and 12 November 2020 for the BP Beneficiaries and Other Beneficiaries) was €5.42, €3.91 and €4.64, respectively. The cost recognised for 2020 was approximately €1.5 million, equivalent to the equity reserve specifically created. The unit fair value of each Right at the valuation date is equal to its nominal value at the grant date (determined on the basis of stock market prices), discounted by the expected dividend rate and the risk-free interest rate and updated taking into account the best estimate of service conditions and performance (service conditions) considering the best estimate of the service conditions and performance conditions (non-market based performance conditions).
The most recent short-term management incentive schemes (MBO 2019 and MBO 2020) provide, where the incentive exceeded a materiality threshold, for the payment of a portion of the bonus accrued in the form of shares in Poste Italiane SpA and the application of deferral mechanisms: z 60 % of the incentive over 5 years pro-rata, for the General Manager and the head of the BancoPosta function; z 40% over 5 years pro-rata for the Senior Management Beneficiaries; z 40% over 3 years pro-rata for the Other Beneficiaries.
The allocation of Phantom Stocks (MBO 2017 and 2018) and Rights to receive Shares (MBO 2019 and 2020) is subject to the existence of a Performance Hurdle (Group Profitability: EBIT) and Qualifying Conditions as follows: z Capital adequacy: CET 1, risk tolerance level approved in the Risk Appetite Framework (RAF); z Short-term liquidity: LCR, risk tolerance level approved in the Risk Appetite Framework (RAF).
Shares allocated in the form of Phantom Stock or Shares are subject to a Retention Period for both up-front and deferred shares.
The number of Rights to receive Shares, deriving from the new short-term MBO 2019 and 2020 incentive plan (the latter estimated on the basis of the best information available, pending the actual finalisation of the system in order to record the cost of the service received), was 89,133, mainly relating to personnel employed by the Parent Company. During the year, a cost of approximately €0.2 million was recognised and at 31 December 2020, a specific Shareholders’ Equity reserve of approximately €0.4 million and a liability of approximately €0.3 million were recognised.
Severance payments on termination of employment Severance payments to BancoPosta RFC Risk Takers on early termination are paid in accordance with the same procedures applied to short-term variable remuneration (MBO 2017) as regards deferral, payment in financial instruments and verification of the minimum regulatory capital and liquidity requirements for BancoPosta RFC.
The number of phantom stocks outstanding at 31 December 2020 totals 117,725. During the year, a cost adjustment of approximately €0.3 million was recognised, payments of €0.5 million were made and the liability recognised amounted to approximately €0.9 million.
Key information on investments This item breaks down as follows: List of investments consolidates on a line-by-line basis
SDA Express Courier SpA (Rome) 100.00% 5,000 45,457 59,488 sennder Italia Srl (Milan) 75.00% 40 929 5,266
Conio Inc. (San Francisco) (b) Associate 382 17.62% 1,611 551 1,060 180 (1,155)
FSIA Investimenti Srl (Milan) (c) Associate 402,212 30.00% 1,418,869 80,821 1,338,048 26,623** 26,165
Uptime SpA - in liquidation (Rome) (b) Subsidiary - 100.00% 3,147 2,972 175 - (2)
Poste Italiane Vicariato di Roma Fondo Gesù Divino Salvatore Donation 30
Assets under management by BancoPosta Fondi SpA SGR, measured at fair value using information available on the last working day of the year, amount to €10,063 million at 31 December 2020 (€9,442 million at 31 December 2019).
Description (€m) 31.12.20 related to Group companies 31.12.19 related to Group companies
Unsecured guarantees issued by the Group and Poste Italiane SpA are as follows: Guarantees
Sureties and other guarantees issued: by banks/insurance companies in the interests of Group companies in favour of third parties 391 357 by the Group in its own interests in favour of third parties 55 55
Sureties and other guarantees issued: by banks in the interests of Poste Italiane SpA in favour of third parties 295 275 by Poste Italiane SpA in the interests of subsidiaries in favour of third parties 57 47 letters of patronage issued by Poste Italiane SpA in the interests of subsidiaries 55 55
The Group’s third-party assets include, in addition to the amounts detailed in the table below for the Parent Company, material for the Covid-19 emergency within the scope of the Civil Protection contract for €3 billion, held in the warehouses of the subsidiary SDA Express Courier SpA.
In addition to the above, at 31 December 2020, Poste Italiane SpA holds a further €2 million in assets belonging to Group companies.
Disclosure of fees paid to independent auditors pursuant to art. 149-duodecies of the CONSOB Regulations ror issuers
177. Auditing services are expensed as incurred and reported in the audited financial statements. Any attestation services relating to accounts prior to the reporting date are recognised on an accruals basis, following engagement of the auditor, in the year in which the services are rendered, applying the percentage of completion method.
Part E – Information on risks and related hedging policies 720
Assets 10. Cash and cash equivalents 6,404,127,761 4,313,694,951 20. Financial assets measured at fair value through profit or loss 72,352,360 70,661,465 a) financial assets held for trading - b ) financial assets designated at fair value - c ) other financial assets mandatorily measured at fair value 72,352,360 70,661,465 30. Financial assets measured at fair value through other comprehensive income 42,638,326,216 36,798,745,848 40. Financial assets measured at amortised cost 52,028,321,401 39,792,034,639 a) due from banks 6,344,289,302 4,694,045,131 b) due from customers 45,684,032,099 35,097,989,508 60. Adjustments for changes in hedged financial assets portfolio (+/-) - 80. Property, plant and equipment - 110. Non-current assets and disposal groups held for sale - -
Financial liabilities held for trading 19,813,389 14,701,804 30. Financial liabilities designated at fair value - 50. Adjustments for changes in hedged financial liabilities portfolio (+/-) - 70. Liabilities associated with non-current assets held for sale and discontinued operations - 100. Provisions for risks and charges: 213,498,475 327,258,828 a) commitment and guarantees given - b ) pensions and similar obligations - 180. Profit/(Loss) for the year (+/-) 628,795,707 610,685,913
a) commitment and guarantees given - b ) other net provisions 69,288,109 (16,219,668)
Items (figures in €) FY 2020 FY 2019 10. Profit/(Loss) for the year 628,795,707 610,685,913
Other components of comprehensive income after taxes not reclassified to profit or loss 20. Equity instruments measured at fair value through other comprehensive income - 30. Financial liabilities designated at fair value through profit or loss (changes in own credit rating)
Financial assets (other than equity instruments) measured at fair value through other comprehensive income 150. Non-current assets and disposal groups held for sale - 160. Share of valuation reserve attributable to equity-accounted investments - 170. Total other components of comprehensive income after taxes 1,195,136,047 1,068,312,592
Equity at 31/12/2019 ** This item represents the Reserve for BancoPosta RFC of €1,210 million and also includes the Incentive Plans Reserve of €0.1 million.
1. Cash flow from operations 689,520,140 754,202,690 - profit/(loss) for the year (+/-) 628,795,707 610,685,913 - gains/(losses) on financial assets held for trading and on assets and liabilities measured at fair value through profit or loss (-/+)
- gains/(losses) on hedging activities (-/+) 2,146,775 4,496,098 - net losses/recoveries due to credit risk (+/-) 22,043,397 9,234,870 - net losses/recoveries on property, plant and equipment and intangible assets (+/-) - - - net provisions and other expenses/income (+/-) (53,807,805) 136,284,751 - unpaid taxes and duties (+) 200,577,777 233,524,282 - net losses/recoveries on discontinued operations after tax (+/-) - 2. Cash flow from/(used for) financial assets (13,230,158,860) (5,479,781,588)