The management model regarding the quality of services and products offered starts from a dialogue with customers, allowing the Company to connect with customers in order to identify and better meet needs over time. This attention is characterised by: � definition and monitoring of delivered quality indicators published in periodic reports shared with Top Management; � an approach aimed at protecting and satisfying customers, measured by the Net Promoter Score (NPS), which measures the propensity of customers to recommend the Company, carried out twice a year regarding the performance of the Business Units (BancoPosta; Posta Comunicazione e Logistica (Mail, Communication and Logistics) and Poste Vita). These are CATI (ComputerAssisted Telephone Interviewing) surveys, conducted by an external research institute with customer samples representative of the target universe. The Group further refined the model by spontaneously seeking out customers ’ opinions at several postal, financial and insurance services touch points. Once a year, the NPS is also measured for the most representative competitors of the Poste Italiane Group’s four businesses; � monitoring of satisfaction and gathering of opinions and suggestions to identify opportunities for improvement thanks to the Customer Effort Score (CES) indicator, applied to the channels (Post Offices, call centres and the web), which makes it possible to analyse how quickly and easily the Company solves problems; � adequate complaints handling, which for the Company is a fundamental and decisive activity of contact and dialogue with customers, with a view to identifying and resolving the causes of the inconvenience and implementing the necessary corrective measures to improve business processes.
“Dillo a Poste Italiane” (Tell Poste Italiane about it) - customers and employees, bearing witness to the customer-centric innovation path the Company has embarked on
“DilloaPosteItaliane” is the Group’s online community dedicated to the co-creation and improvement of the Company’s products and services. The initiative is part of the innovation process undertaken by the Group that intends to actively involve customers and employees so that they can become co-protagonists in the creation of new products and services, and help the Company to continue improving its current products and services.
Customers can participate in surveys, forums and discussion groups regarding Poste Italiane Group products and services via the online platform www.dilloaposteitaliane.it thus establishing a direct link between customers and Poste Italiane managers through periodic web chats on specific topics. Listening activities may be launched by Poste Italiane SpA, Banco Posta and PostePay, as promoters of the initiative. For this reason, various brands have been created - “Dillo a Poste Italiane”, “Dillo a Banco Posta” and “Dillo a Poste Pay” - to personalise the individual initiatives aimed at customers. With a view to valuing the contribution of customers and in the interests of maximum transparency regarding the results of the initiatives, customers will be able to view what the Group has achieved thanks to their contribution in the “Our projects” section of the www.dilloaposteitaliane.it website. During 2019, registered employees contributed to the co-creation of products with customers, providing important support in defining the characteristics of new offerings.
Dialogue with consumer associations In addition to promoting relations with the above institutions, the Group pays particular attention to dialogue with consumer associations, both at national and local level. In this regard, Poste Italiane has signed a Framework Agreement with 20 associations, with the aim of constantly improving the quality of products and services and generating constructive and transparent dialogue between the parties. In order to facilitate achievement of the set objectives, the Company set up the “Cantiere Consumatori” (Construction site for consumers). With regard to corporate initiatives that
have a significant impact on customers, this permanent working and advisory group - consisting of a spokesperson from each association and Poste Italiane representatives - identifies the best solutions to reconcile reciprocal needs.
In relation to the Consumer Site, in which the products and services of Poste Italiane are presented in preview to the Consumer Associations by collecting suggestions and comments, during 2019 the “Editorial Committee” was implemented, made up of representatives of the Company and the Consumer Associations.
The Company also provides the “E@sy commerce” manual, with the aim of guiding consumers in online purchases. The purpose of the Manual is to allow consumers to purchase online with ease and security, developed in collaboration with nineteen Consumer Associations and Netcomm, the Italian e-commerce Consortium to which the most important national e-commerce operators adhere.
The Group considers it strategically important to guarantee the protection of the information assets of the Company, and of its customers and other stakeholders, and to ensure the security of transactions. Data is one of the most valuable assets for any business because, if properly analysed and managed, it has a positive impact on many operational aspects. Consequently, it is necessary to implement timely IT security strategies in order to ensure the success of the Company.
The Group’s objective is to ensure the protection of its systems and information assets, adapting the security countermeasures to the minimum and/or appropriate measures provided for by the various reference regulations, with the aim of guaranteeing the mandatory levels of confidentiality, integrity, availability and continuity of the data, information and services provided to customers
the obligations deriving from the various regulatory areas of compliance. This objective also concerns the development of new digital services that are realised according to the principles of security by design and by default.
In a rapidly evolving market context in which the current technological revolution generates unimaginable opportunities, the Group’s Deliver 2022 Plan has set challenging objectives that require a profound transformation of the business and in particular of the IT function. The Board of Directors plays an important role in this evolutionary process as it is directly involved in the development of the IT strategy and is responsible for supervising cybersecurity information.
Computer Emergency Response Team (CERT) In order to combat cybercrime, a specific organisational reality is foreseen, the CERT (Computer Emergency Response Team) specialised in risk prevention, coordination on the management of cyber incidents of the Poste Italiane Group and response to cyber events. It is within a national and international network of similar structures with which it dialogues daily to share information, compromise indicators and attack models in general, a scenario which sees a strong collaboration with the CNAIPIC (National Centre Against Cybercrime for the Protection of Critical Infrastructure) structure of the Postal Police.
The main objective of these initiatives is to make employees informed and aware of the protection of the IT tools used every day, and to be able to immediately recognise and report anomalies and possible attempts to violate them.
The Business Control Center and the security agreement with the Postal Police are linked to the attention that Poste reserves for the protection of the security of all its customers and employees, in light of its leading role for the country and in constant synergy with the institutions, as evidenced also by the agreements signed and the prevention actions carried out daily.
In order to guarantee a single Group-wide control unit and the implementation of the framework, the Privacy Function operates with the task of ensuring the correct application of personal data protection principles and rules. The unit is also responsible for ensuring compliance with personal data protection legislation, with specific reference to the innovations introduced with the entry into force of the General Data Protection Regulation (GDPR). Moreover, senior management has appointed the Poste Italiane Group’s Data Protection Officer, a role introduced by the GDPR, who is an expert on privacy matters, with the task of promoting compliance with the law and verifying the effectiveness of personal data protection measures.
The aforementioned Privacy Function guarantees the impetus to continuous improvement by coordinating policy management and privacy by design and by default activities, providing constant support to the management of the register of processing activities and the related privacy impact assessment process. It also oversees the management review process at Group level pursuant to article 32 of the GDPR, the latter dedicated to the verification and assessment of the effectiveness and adequacy of the technical and organisational measures applied to processing. Within the Privacy Function operates the Privacy Service Centre, which acts as an interlocutor attentive to the needs of customers as well as a point of collection and efficient and centralised management of requests for access to personal data, rectification/integration, change of consent and other requests. This is also in order to counter the risks associated with possible unlawful processing of personal data. In 2019, the Centre certified ISO 27001 put in place a series of interventions aimed at ensuring increasing attention to the needs of those concerned.
Following the importance attributed to the theme of innovation and digitisation during the 2019 Multi-stakeholder Forum, and considering the centrality of this theme for the success of the Deliver 2022 strategy, the Company has planned to introduce a specific Pillar dedicated to the theme of innovation in such Report.
Integrated platform for automatic activation and invoicing of Business contracts digitisation of the procurement process and liabilities cycle
Various digital innovations have been introduced into the business processes. In recent years, natively digital, automated and streamlined processes have been developed so as to simplify customer interaction and internal operations. Customer relationships, information and contracts are increasingly digital, business processes are even more digital and real-time to simplify and improve customer service and internal operational processes are automated on a large scale with minimal manual operation.
During 2019, the digitisation of the liabilities cycle was started through the evolution of the BPM Workflow Management system, functional to the complete dematerialisation of the phases of the purchasing process.
Another enabling factor in the Digital Transformation path undertaken by the Company is the adoption of a state-ofthe -art IT system that guarantees the highest standards of efficiency, agility and quality. In particular, it adopts a Hybrid Cloud architecture based on two public cloud providers and three data centers.
In this context, the Group has expanded its collaboration with Microsoft to support its Digital Transformation plan.
This collaboration aims to develop the customer experience, by adopting a Customer Relationship Management (CRM) cloud platform. The project focuses on the amalgamation of the CRM platform for the Strategic Business Units and retail operations, and is in line with the Group’s wider Strategic Plan to maximise the value of Italy’s largest distribution network to achieve sustainable growth. Thanks to the strategic partnership with Microsoft, which primarily relies on the flexibility of the cloud platform, Poste Italiane will ensure a constantly updated overview of its customers and ongoing activities, in order to optimise the experience and offer increasingly integrated services.
In 2019, Poste Italiane joined the Hyperledger community, a global consortium of the Linux Foundation that brings together over 260 global players from different industries and united in the development of an open source standard for blockchain and Distributed Ledger Technologies (DLT). The adherence to Hyperledger is consistent with the strategic guidelines identified in the Deliver 2022 Business Plan, which aim to strengthen the digital leadership of Poste Italiane and to accelerate the acquisition of new skills and experimentation of blockchain technology and DLT to better understand the potential to generate innovation in business.
There have been many innovative solutions in recent years and close partnerships with companies in the digital sector and technology start-ups to encourage the development of new business initiatives, but also to promote a change in corporate culture. This open approach therefore favours the exchange of ideas oriented towards the progress and success of the Company.
In particular, in 2019, the Company entered into an agreement with Moneyfarm that provides for Poste Italiane to distribute an ETF asset management service with 7 investment lines (two of which developed exclusively for Poste Italiane’s customers). Moneyfarm will manage the definition and management of the most suitable investment portfolio for each investor. Poste Italiane will manage customer service and CRM, to ensure the best experience throughout the process. The partnership represents one of the major agreements based on API (Application Program Interface) integration in the European asset management sector in terms of customer base, based on an open innovation system that combines Moneyfarm’s innovative technology with the modularity and flexibility of Poste Italiane’s digital ecosystem. In addition, customer profiling, definition of new investment portfolios and real-time monitoring of performance at all times are entirely digital.
Secondly, the Company participated in the latest 90 million fund raising organised by Tink, an open banking platform that connects more than 2,500 banks to reach over 250 million customers. The start-up supports Poste Italiane for the opportunities from open banking, resulting from an ever-changing context determined by the new PSD2 regulation; for its part, the Group offers its status as a recognised brand which, combined with Tink’s analytical tools, will allow it to benefit from a future that will be digital, “data-driven”, transparent and “agnostic” with respect to the banking world.
Finally, by collaborating with Milkman, a home delivery start-up, the Group aims to improve the e-commerce customer experience by providing value-added, flexible and advanced delivery services, which are currently not offered by traditional couriers on the market. Specifically, Same Day and Scheduled Delivery services will be provided.
In 2019, Poste Italiane inaugurated in Bologna the largest hub in the country capable of sorting 34 thousand parcels every hour
In addition, the Hub allows the Company to respond more effectively to the growth in value and volume of online trade in Italy. Therefore, the new structure is able to double the volumes delivered by the Company, as it is equipped with an automatic system of the latest generation capable of processing 250 thousand parcels every day. In this perspective, the new logistics centre represents a strategic infrastructure to consolidate Poste’s leadership in the parcel express courier sector.
In this sense, innovative digital solutions have already been implemented in the Group’s various realities. These include, for example, the digital collection of undelivered registered mail, the electronic postman, the digital evolution of postal savings services, the PosteID digital identity service enabled by the Public Digital Identity System (SPID - Sistema Pubblico d’Identità Digitale), and the Postepay Connect service, the first integrated product in the payments and mobile field that, through a single app, enables users to manage their telephone and payment services in an intuitive and secure way.
In 2019, with regard to the fixed line market, PosteMobile provided for a specific tariff for the target Senior and for the target Families. The offer includes a voice-only profile (PosteMobile Casa) addressed to senior customers and a voice and internet profile (PosteMobile Casa Internet), created to meet the families’ needs.
In the area of business services, improvements have been made to the user experience of the BancoPosta Impresa Online site and the new BPIOLkey app, which authorises access to financial services for companies in line with the adjustments required by the European PSD2 regulations, has been published on the stores.
The growth in Poste Italiane’s digital payment services is also confirmed by the increase in digital portfolios (e-wallets ) in one year, which rose from 2.5 to 4.4 million in 2019.
A proof of the commitment to support innovation in the transformation plan of Customer Care in logistics and shipping, financial, insurance and digital payment services was the SMAU Innovation Award, received by Poste Italiane for the development of ChatBot customer care.
In line with these aims, Postepay, which has more than 11 million downloaded APPs, has developed the Postepay Code, which is configured as a new app based on the QR code.
The Code is part of the broader framework of Poste Italiane’s war on cash initiatives and aims to intercept the small consumer spending that today takes place mainly in cash, in line with government action and the social role of Poste Italiane that encourages the use of e-money in order to combat evasion.
The initiative also includes the expansion of the customer base with that of Alipay, world leader in digital payments, which will be able to use the QR code services offered by PostePay in Italy and leverage a potential pool of about 5 million Asian tourists who come to Italy every year.
To help consolidate the digital ecosystem of Poste Italiane, the development plan of the Postepay Code foresees a roll out with a geo-localised approach on about 100 districts located throughout the Italian territory. This phase will involve a relevant pool of merchants and customers interested in trying a new digital payment experience and will allow to test and develop the Postepay code acceptance network both from a technical and positioning point of view.
Other instruments supporting the Group’s inclusion policies include the p artnership with Western Union, one of the leaders in the international fund transfer service. Western Union is the world leader in Money Transfer services with more than 150 million customers, 2,000 banks and 100 Postal Partner organisations reaching about 200 countries and territories.
The objective of this proposal, in line with the digital push required by the market, is to expand and improve the range of services offered by Poste Italiane in digital mode while contributing to a progressive reduction in costs and making the international fund transfer service more accessible, especially to those sections of the population with lower spending capacity and therefore, from this perspective, the service can be considered a contribution to social inclusion.
For these characteristics, this service is mainly aimed at the so-called new Italian customers and offered in integrated mode through the Postepay app dedicated to individuals who own a Postepay Evolution.
From the point of view of development, it can be estimated that over the next 3 years, this service will lead to a significant increase in digital traffic and in the number of customers who will be able to use Poste Italiane’s digital services.
Consumers equal to 57.1 million 4.1 million of SPID-enabled digital identities
By 2022 tCO2e emitted by indirect energy consumed by properties -9,132 tCO2e -5,617 tCO2e
Certify Corporate processes in accordance with ISO 14001 and ISO 50001
The Company’s objective is to spread an environmental protection culture and a stimulus to conscious conduct in the use of energy whilst systematically drawing up sectoral action plans regarding the efficient management of energy resources, water resources and waste, from a circular economy perspective, in order to reduce its ecological footprint
Therefore, the quality of products and services also entails implementation of self-regulatory environmental and energy tools, in accordance with applicable laws and regulations, and also with Italian, European and international Sustainable Development Goals.
In terms of organisation, a single central Function is tasked with overseeing the areas of environmental responsibility relating to real estate assets, including ensuring compliance with current regulations regarding energy use, monitoring and measurement of consumption, identifying areas where savings can be made.
The Company’s approach to environmental sustainability is inspired by these principles: efficient use of natural resources; innovation to support a low-carbon economy; prevention and reduction of environmental impact, through analysis of potential environmental risks, reduction in the amount of waste produced and the elimination of waste; and promotion of an environmental culture, through the Company’s corporate voluntary network and collaboration with environmental associations.
Improved buildings in the field of environmental protection and decarbonisation of buildings
At the end of the survey, based on the score achieved, each participant obtained their own green profile. Overall, 3 different employee profiles emerged: “Green Lover” (47%), “Green yes, but without exaggeration” (49.2%), and “Green is not your color (3.8%). The survey returned positive results regarding the conduct of colleagues: 21% use public transport for homework trips. When using water, 97% said they use the shower rather than the bathtub, and 55% use it for 5 minutes. In addition, 8 out of 10 people close the water while brushing their teeth. As far as housing is concerned, 26% of respondents have equipped their homes with at least one solution based on the use of renewable energy, more than half (57%) set a temperature ≤ 20° in winter on the home thermostat, while 40% of those who have an air conditioner set it to temperatures ≤ 25°. Approximately 85% said they had at least 1 thermal insulation feature in their home and almost all respondents (94%) have most energy-efficient light bulbs at home. 71% say they always use the dishwasher at full load, 53% leave the electronic devices on stand-by and 79% of respondents let the laundry dry on the clothes rack. In the office, 9 out of 10 people sort paper and plastic from other waste, 7 out of 10 people in the office and/or at home always turn off the light and/or the PC when they leave a room.
In addition, in the second half of 2019, a project was launched for the procurement of materials generated from recycled plastic to replace virgin plastic materials used in logistics. With regard to paper destined for the Group’s bulk printing plants, during 2019, activities focused on FSC (Forest Stewardship Council) certified products for 11,000 tonnes of paper. The FSC certification mark guarantees environmentally friendly, socially useful and economically sustainable forest management.
Purchases of consumables relating to ream paper for internal use within the Group, supply of labels, various packaging, forms and cartons comply, where applicable, with the “Minimum Environmental Criteria” set by the Ministry of the Environment on 4 April 2013 and those relating to original and regenerated printer consumables comply, where applicable, with the “Minimum Environmental Criteria” updated by the Ministry of the Environment on 17 October 2019.
At the same time, the Company facilitates the new sensitivity to impact reduction by planning a plurality of initiatives. With regard to sustainable mobility: from the renewal and extension of agreements with local public transport companies, to the new section of the Poste Pedala portal with related app; from the dissemination of car/scooter sharing, to the promotion of eco-driving and dissemination of the culture of sustainable travel. In the field of logistics decarbonisation: from the completion of the supply of electric tricycles to the renewal of the electric quadri-cycle fleet, to the progressive replacement by 2022 of the current vehicles with the latest generation of limited emission vehicles. Finally, in the field of environmental protection and decarbonisation of buildings: from the entry into production of the first photovoltaic systems to the continuation of the conversion plan for LED lighting systems, to efficiency actions on boilers, heating, cooling and thermal insulation systems on more than 100 buildings; from the planting plan on the land owned by Poste, to the Green competition among the most energy-intensive buildings.
Between 41% and 60% of total points Your environmental impact is average. You are careful with what you do, and you know exactly that the future of the planet depends on our actions today. However, sometimes you get off your ecological track. Do not worry, with a little more effort, you can reach the green lover level.
Moreover, Poste Italiane identified three main areas of intervention regarding which projects and activities were launched to provide an effective response to the needs most felt by the community, taking into account the objectives of the major national and international public and private institutions, with particular reference to the United Nations and the Sustainable Development Goals. Specifically, the Group’s environmental priorities include: � reduction of the environmental impact of its operating activities: optimisation of energy consumption, reduction of atmospheric emissions from buildings and those linked to logistical activities and staff mobility, reduction of material consumption, and correct waste management and reduction of water consumption; � incorporation of environmental aspects into the products and services offered: implementation of digitisation processes regarding the goods and services offered, and assessment of environmental risks and opportunities relating to investment choices and the management of insurance activities; � raising the awareness of employees and third parties regarding the environmental culture: involvement of employees in programmes and initiatives aimed at safeguarding the natural environment and ecology, support for environmental heritage protection and recovery initiatives, dialogue and collaboration with national and international bodies and associations in order to combat climate change and inefficient consumption of resources, and assessment of risks and environmental management methods adopted by counterparties.
In line with the provisions of the law, the two Group companies have adopted these environmental policies: � Postel SpA’s Quality and Environment Policy, aimed at ensuring compliance with environmental legal requirements, sets out the objectives underlying its business conduct, namely respect for the environment, including pollution prevention and other specific commitments (responsible use of resources, protection of biodiversity ) relevant to its operating context; incorporation of the requirements of the Management System within business processes, taking into account the post-delivery impacts of a product or service at the design stage, in order to completely manage the product’s life cycle; definition of objectives compatible with strategic guidelines and the business context. In addition, during 2019, it pursued objectives to increase the efficiency of synergies with the Parent Company and other group companies, as well as strengthening actions on the three strategic business lines (Printing, Ged and DM).
With the aim of reducing the environmental impact of its activities, the Group has earmarked part of the loan for the installation of high-efficiency photovoltaic panels in 661 postal buildings and the adaptation of the buildings to the most advanced energy efficiency standards, with the aim of reducing carbon dioxide emissions.
In 2019, the joint venture between Poste Vita and Generali Real Estate, aimed at co-investing in the European real estate sector, announced a major acquisition. A binding agreement has been signed with Barings Real Estate GmbH for the acquisition of The Westlight, a new highend office building, currently under construction, located in the commercial and business area of City West in Berlin. The building will be characterised by a distinctive and transparent architecture, as well as great attention to energy efficiency, as demonstrated by the LEED Gold certification currently underway.
� Energy efficiencies at Sorting Centres (CMP). The objective of Poste Italiane is to reduce electricity and gas withdrawals in order to offset expected tariff increases and reduce overall procurement costs. With this in mind, an update of the BMS (Building Management System) installed on the CMPs was implemented and Dashboards were developed to analyse consumption and performance available to the headquarters and the territory. In addition, energy certifications were carried out on the 100 most energy-intensive sites by internal EGE technicians and an external company.
� Encouraging virtuous behaviour. The behaviour of our Group’s people can have a major impact on energy saving. With this in mind, during 2019, Poste Italiane confirmed its focus on environmental sustainability issues through a variety of initiatives aimed at raising employees’ awareness and orienting them towards virtuous conduct. Poste Italiane continues to participate in the “green month” project, which consists of thirty days of focus on the environment through participation in awareness initiatives such as “M’illumino di meno”, which launches the green month, and “Earth Hour”, which closes it. The first is a campaign to promote energy saving and a sustainable lifestyle, the second a worldwide event organized by WWF, which consists of turning off the lights for one hour, from 8:30 pm to 9:30 pm worldwide. In both cases, Poste Italiane participates by symbolically turning off or turning down the lights in various company offices throughout the country, accompanying the symbolic gesture with awareness campaigns aimed at employees and customers on the importance of rational use of energy and water resources. The main theme of the 2019 edition of Green Month was the circular economy.
Given the potential effect it may have on the reduction of environmental impacts, in providing its postal and logistics services the Company must take environmental sustainability into account by adopting lower-impact solutions.
and electric vehicles (for further details see the section on “Environmental impacts of real estate facilities”).
In order to indicate, manage and organise the company ’s strategies in the vehicle sector, in January 2019, the Company established the Fleet Management function. The function has the task of defining and ensuring governance, guidelines and suitable tools for obtaining the best services for the entire fleet of Poste Italiane and Group companies, as well as optimising the related operating costs and ensuring constant scouting of the reference sector, in order to seize the opportunities offered by the market and identify innovative solutions, in compliance with safety, sustainability and cost-effectiveness criteria.
With the aim of informing the main stakeholders about the initiatives carried out to reduce the environmental impact of its activities, in the logistics sector, Poste Italiane illustrated the main initiatives relating to sustainable mobility at the CSR Exhibition held in October 2019.
In addition, with the aim of raising awareness of sustainable travel among its employees, in 2019, the Company invited employees to participate in the traditional National Bike to Work Day, the national event aimed at promoting the use of bicycles, especially for home-office travel. The company’s commitment to promoting employee participation in such events testifies to the fact that environmental sustainability and employee wellbeing are two cornerstones of the Group’s philosophy.
Initiatives to encourage cycling in urban mobility are also included in the PostePedala programme.
In line with the Company’s approach to give priority to the efficient use of renewables and the rationalisation of energy consumption from fossil fuels, as of 2018, the two main corporate strategies that brought benefits in terms of environmental sustainability were the new Joint Delivery model and the plan relating to the green development of the corporate fleet.
The Group’s strong commitment to improving its environmental performance can also be seen in terms of its transport strategy. The Company, with 33,500 vehicles, motorcycles, three wheels, vans and service vehicles, has the largest “ground” fleet in Italy and among the largest in Europe and is committed to reducing its “ecological footprint ”. Attention to environmental protection and the transformation underway in logistics linked to e-commerce have also led Poste Italiane to reconfigure the mix of vehicles that make up the last mile fleet. Starting from the year 2000, the Company has provided for the introduction of 4-wheeled natural gas powered vehicles, followed by the introduction of “Free Duck” (electric quadricycles) and the full rent supply of 4-wheeled vehicles with alternative power supply (natural gas powered cars and vans, LPG/hybrid cars and electric vans). This plan continued in 2019 with interventions that concerned both its own logistics activities and those contracted out. With specific reference to the last mile fleet, between 2018 and 2019, about 550 Euro3 thermal mopeds were replaced with the same number of electric tricycles, providing for the installation of the relevant charging points. In addition, the fleet of motorcycles has been renewed with 2,000 units with Euro4 engines, with a greater volume and capacity than at present. At the same time, for contract logistics, the contract for secondary transport (carried out by third parties) has been revised, which introduces the obligation to use vehicles with an environmental class of not less than Euro 6 and a premium for bi fuel.
Framework agreement for the rental of 850 electric tricycles in 2019 and the purchase of 2000 Euro4 motorcycles owned by the Company
By 2022, the vehicle fleet will be renewed by replacing current vehicles with new-generation low-emission electric, hybrid and endothermic vehicles.
Finally, with a view to identifying suppliers and partners who may represent risks in terms of environmental protection, further proof of the Company’s commitment was demonstrated during the year by a review of tender specifications with reference to third-party companies that provide transport services to the Company. Specifically, in addition to meeting all the requirements imposed by current legislation, Poste Italiane also requires its suppliers to submit a quarterly report on the numbers of kilometres travelled and litres of fuel consumed. The Company also conducts technical checks on vehicles from third-party companies that carry out transport activities, in order, in the event of unsatisfactory assessments, to plan appropriate actions to be taken.
Request thirdparty managers to adopt Poste Vita’s Responsible Investment Policy by 2019 % of third-party managers involved
Development of a new health offer dedicated to employees and retirees of the Poste Italiane Group members of the Poste Italiane Fund by 2020 No. of products defined
With the aim of positively influencing management of the investment portfolio and, at the same time, providing a response to the social and environmental needs of society, the Policies establish a general principle requiring the systematic assessment of investment transactions that also takes into account the environmental, social and governance profiles of the corporate or government issuers of the assets included in financial portfolios and of the related managers. In addition, the policy specifies the sectors excluded from the range of potential investments as they violate the basic humanitarian principles defined in the United Nations Conventions (anti-personnel mines, cluster bombs, spent uranium, biological weapons, chemical weapons, invisible fragmentation weapons, blinding laser weapons, incendiary devices and white phosphorus). The Responsible Investment Policies also envisage the establishment of structured processes for effectively managing and monitoring the approach adopted through specific principles, activities, roles and tools.
The weighted average score of the portfolios assessed was 51/100 in relation to the assets managed by the Poste Vita Group and 52/100 for those managed by BancoPosta Fondi SGR for corporate issuers and 75/100 in relation to country issuers. This result was higher than the ESG score of a benchmark of MSCI World ETF shares, used for comparison, of 39/100 at the same date.
In addition, Poste Italiane has designed the new socially responsible mutual fund, Poste Investo Sostenibile, in line with the objectives set out in the ESG Strategic Plan. In line with the responsible investment policy, the basket of securities on which the fund directs investments is selected with specific attention to environmental, social and governance (ESG) factors, combining the best remuneration opportunities with the application of strict parameters linked to the sustainability profile of issuers. The fund is also distinguished by the presence of a benchmark composed of indices that are “sustainable”, as they consist of a limited number of securities selected on the basis of ESG criteria. This allows representing the reference universe of an investment in a clear, transparent and objective manner, without compromising the manager’s discretion. The fund is managed by BancoPosta Fondi SGR in partnership with Amundi which, in addition to being Europe’s leading asset manager in terms of assets under management and among the top ten in the world, has been active in the world of responsible investment for over 30 years and was one of the first signatories of the Principles for Responsible Investment (PRI) in 2006, the same signed by Poste Italiane through its subsidiaries BancoPosta Fondi SGR and Poste Vita.
In order to ensure a consistent approach to risk management at the Company, the Policy has established a principle requiring the systematic assessment of economic, social and environmental issues that may have an impact on people and, therefore, on the company’s long-term business. This process enables the Company to adequately mitigate potential threats and identify new business opportunities that could lead to the development of sustainable insurance products of high social and environmental value. The Policy also envisages the establishment of structured processes for effectively managing and monitoring the approach adopted through specific principles, activities, roles and tools.
The following tables show the indicators required by the Global Reporting Initiative standards, together with other indicators that Poste Italiane believes important in order to illustrate its performance. The indicators are presented on the basis of the 8 pillars of the Group’s ESG Strategic Plan.
Category Personnel Category Personnel Category Personnel * The figures refer to the Group company, SDA SpA.
Category Personnel Category Personnel Category Personnel * The figures refer to the Group company Postel SpA.
[GRI 205-1] Companies assessed for risks related to corruption* and percentage** of operations audited for risks related to corruption
Percentage of Group companies assessed for risks related to corruption 72 72 64
* Assessment of Group companies for risks related to corruption was conducted as part of the survey carried out in drawing up the Organisational, Management and Control Model required by Legislative Decree 231/2001.
[GRI 205-3] Reports managed by the Whistleblowing Committee of which relating to corruption 23 7 4*
of which confirmed - - of which in-depth relating to corruption - - 1 * For reports in area 4, they have been assessed as potentially relevant to corruption; in particular, 2 reports were found to be unfounded, 1 was rejected and 1 is under investigation at 31 December 2019.
Of which: * For 2017-2018, the anti-corruption training provided within the online course “Legislative Decree 231/2001” was considered. For the year 2019, the online course “The Integrated Management System for Quality and Corruption Prevention” was considered, to be provided starting from May.
Percentage of suppliers selected on the basis of social criteria 39.4 45.5 57.7 * The assessment regards tender processes for amounts above the EU thresholds and is functional to identify tenders that include specific social criteria in the subject, in the technical specifications or in the participation and/or assessment criteria (e.g. SA8000, OHSAS 18001).
Ink/toner (kg) 87,749 59,784 61,146 * The item “Other” contains the following materials: labels, bags and seals, parcel string and security pouches. ** For 2019, there was a reduction in paper consumption due to the digitisation process and the decline in the printing business.
Suppliers with an ISO 14001 or EMAS certified environmental management system
Percentage of qualified suppliers with an ISO 14001 or EMAS certified environmental management system % 49.1
[GRI 102-8] Number of personnel by type of employment and gender, by Strategic Business Unit *
Type of training 2017 2018 2019 * The figures have been rounded in line with the figures reported last year.
* This refers to executives. ** This refers to non-executive personnel.
The turnover rate, calculated on the basis of the number of FTEs leaving the Group as a proportion of the total workforce for year n, is 4.8 for 2017, 5.0 for 2018 and 7.5 for 2019. The voluntary turnover rate, showing the number of FTEs who voluntarily left during year as a proportion of the total workforce for year n, is 4.0 for 2017, 4.4 for 2018 and 7.0 for 2019.
Of which: Of which: * no. of workplace injuries divided by the number of hours worked multiplied by 1,000,000. The rate is calculated for permanent and flexible staff. ** no. of days of absence due to workplace injury divided by the number of hours worked multiplied by 1,000. The rate is calculated for permanent and flexible staff. *** no. of cases of occupational diseases divided by the number of hours worked multiplied by 1,000,000. **** no. of days of absence due to illness and injury divided by working days multiplied by 100. The rate is calculated for permanent staff only and does not include managers. The target set for 2019 is 4.70.
[GRI 405-1] Composition and breakdown of Poste Italiane SpA Board of Directors by gender and age*
Men Women Total Men Women Total Man Woman Total * The figures refer to the headcount.
[GRI 405-1] Classification of employee by category, gender and age group*
Men Women Total Men Women Total Men Women Total * The figures are shown in Full Time Equivalent (FTE) terms for both permanent and flexible personnel.
Revenue-generating functions**** 31.4 32.4 * The percentages regard the presence of women in formally designated organisational roles within Poste Italiane and Group Companies. ** Includes first and second level staff within Poste Italiane, the chief executive officers and general managers of the main Group companies and staff reporting directly to them.
*** Includes managers other than Top Management. **** Includes organisational roles within the Post Office Network and Business and Public Administration functions.
Men Women Total Men Women Total Men Women Total * Data reported refer to permanent staff, the exclusion of flexible staff from the performance assessment process is due to the fact that the annual life cycle of the performance assessment process cannot be reconciled with the timing of flexible contracts. The table also includes the data of Group companies with the exception of the data of Mistral Air (now Poste Air Cargo), as it is not possible to make a comparison of professional levels due to contract differences. The figures do not include approximately 4,000 personnel (the average for the year) who cannot be assessed due to a lengthy absence from work (over 6 months). These staff are, however, included in the process of assigning annual objectives for the coming year.
[GRI 203-1] Corporate giving and/or corporate citizenship initiatives33 33. Expenditure on corporate giving and corporate citizenship in 2019 amounted to approximately €320,000.
Of which: * Donations: one-off disbursements made to support charitable organisations. ** Community investments: spending on medium- to long-term initiatives supporting communities in collaboration with non-profit organisations and local authorities. *** Commercial initiatives: business initiatives that benefit the community (e.g. sponsorship, occasional donations of the Company’s property and other assets).
Settlements discussed regarding IRS real estate fund (no. of applications) 35 - -
New customers in the categories most at risk of financial exclusion as a percentage of total new acquisitions
Percentage of current account holders who are “new Italians” 17.6 17.9 16.4
Percentage of senior current account holders (over 65) 7 7.6 9.4
Percentage of current account holders who are “new Italians” 12.6 12.3 9.5
Percentage of young current account holders (under 35) 45.9 46.4 42.7
Percentage of senior current account holders (over 65) 5.5 5.6 6.9
Number of contacts handled (m) 26 24 28 * The upward trend in 2019 is due to the growth in contacts on financial and postal services.
Mainframe services (open services being processed) covered by disaster recovery plans (%) 100 100 100 * The figures refer to Poste Italiane SpA. (financial and insurance services segments), PostePay SpA, BancoPosta Fondi SpA SGR. ** Drills, which are conducted every quarter, involved all the applications hosted by Poste Italiane’s central mainframe system, in addition to applications hosted in OPEN environments included within the scope of Bancoposta’s financial services.
Of which: complaints received from third parties and recognised by the organisation 6 22 49 complaints received from regulatory bodies - - 1
Customers registered on Poste Italiane's digital channels (websites and apps) (millions) 15 17.6 20.8
Transactions carried out via consumer digital channels (websites and apps) (millions) 39.3 47.9 57.1
** Poste Italiane acquires renewable energy guarantee of origin certificates for approximately 95% of its electricity consumption. The GRI Sustainability Reporting Standards envisage two calculation methods for Scope 2 emissions – the location-based method and the market-based method. The market-based method (the method used by Poste Italiane) is based on CO2 emissions emitted by the energy suppliers from which, via a contract, the organisation purchases electricity (in this case renewable energy guarantee of origin certificates), and for the remaining 5%, emission factors from the national electricity grid (emission factor: 0.361 Kg CO2 e/kWh, source: ISPRA 2017 elaboration). The conversion factors used to convert thermal energy into CO2 e: 0.2 Kg CO2 e/kWh, for 2017, 0.19 Kg CO2 e/kWh and for 2018, 0.18 Kg CO2 e/kWh and for 2019, 0.17 Kg CO2 e/kWh.
*** The emission factors used to convert fuels into CO2 e are as follows: Jet fuel for 2017 2.54 kg CO2 e/l (source DEFRA 2017), for 2018 2.54 kg CO2 e/l (source DEFRA 2018) and for 2019 2.21 kg CO2 e/l (source DEFRA 2019).
Of which: from renewable sources (GJ) 1,810,741 1,741,421 1,696,697 from non-renewable sources (GJ) 821,577 768,405 766,312
Indirect emissions – Scope 2 (market based) (tCO2e) 10,647 9,266 8,176
Intensity of direct and indirect emissions GHG Scope 1 and Scope 2 9.764 9.571
Total expenditure on energy (€)* 98,393,160 95,380,683 101,273,851 * The target set for 2019 is €102,534,000.
Of which: Of which: hybrid motor vehicles 102 88 79 petrol-natural gas fuelled vehicles 2,173 1,705 1,726 petrol-LPG fuelled vehicles 979 1,070 1,080 diesel-natural gas fuelled vehicles - - -
[GRI 302-2; GRI 305-3] Energy consumption and CO2e emissions to contracted road logistics
Indirect emissions – Scope 3 (tCO2e) 117,444 98,808 131,575 * Road vehicles used by logistics contractors are diesel-fuelled. For 2019, the increase in consumption is in part justified by an increase in parcel volumes and traction.
Total Fuel emissions from non-renewable sources – Scope 1 (tNOx)* 365.47
Jet Fuel 40.38 * The emission factors used to convert fuels into NOx are as follows: natural gas 0.0249 t NOx/TJ. LPG 0.0299 t NOx/TJ. Diesel for cars 0.2557 t NOx/TJ, for light commercial vehicles 0.33 t NOx/TJ, for heavy trucks 0.4845 t NOx/TJ. Petrol for cars 0.0637 t NOx/TJ, for light commercial vehicles 0.0782 t NOx/TJ, for motorcycles 0.1250 t NOx/TJ. Source: ISPRA, database of average emission factors of road transport in Italy. Jet fuel 100 g NOx/GJ. source: ISPRA, Emission factors for stationary combustion sources in Italy.
Total Fuel emissions from non-renewable sources – Scope 1 (VOC)* 97.72
Total Fuel emissions from non-renewable sources – Scope 3 (tNOx) 789.70
Total Fuel emissions from non-renewable sources – Scope 3 (tSO2) 0.69
* The value indicated refers to the estimate of the polluting emissions generated by the home-work travel of Poste Italiane employees applied in the offices of more than 300 resources which, at present, amount to 38 located in 18 cities in Italy, for a sample of 26,466 total resources.
The Poste Italiane Group will continue to engage in implementing the objectives outlined in the five-year Deliver 2022 Plan, approved by the Board of Directors on 26 February 2018.
The Unit will also continue with the adoption of new automation technologies to support operating processes, with the aim of boosting the efficiency and quality of sorting processes.
The promotion of mobile telecommunications services as part of the integrated Postepay Connect offering will continue in 2020. The bundle offering aims to meet the needs of different customer target markets and take advantage of customer loyalty through innovative pricing strategies and by attracting new online customers via a fully digital acquisition process.
The year 2020 will also be an important one for debit cards, which it will be possible to manage in the Postepay app to make in-store payments using the Postepay Code. A new debit card will be launched as well, for use with BancoPosta accounts, giving current account holders access to the PostePay ecosystem.
With regard to consumer current accounts, in the first quarter of 2020 the commercial offering will be strengthened with the introduction of the possibility to make online requests to open current accounts.
With respect to Protection services, in 2020 the adoption of the tailor made model will result in a modular integrated offering strategy, superseding an approach focused on individual products, which will consist of personalised, modular protection, assistance and service solutions for individuals, assets and property that can be integrated with each other. In addition, the Group will be engaged in continuing to achieve growth in the welfare and non-vehicle P&C sectors by exploiting unrealised potential. The investment and protection insurance offer will be enhanced with functions that can be used from digital channels. The inclusion of ESG (Environmental, Social and Governance) Sustainability criteria is planned in all areas of the investment product offer, both mutual funds and insurance policies, in line with the orientations of the Group.
� 3. Corporate Governance Model ‐ Company Structure � 6. Board of Directors; 6.1 Current composition and term of office � 7. Committees � 8. Board of Statutory Auditors � 9. Internal Control and Risk Management System; 9.2 Organisational, management and control model pursuant to Legislative Decree 231/2001
� Sustainability topics relevant to Poste Italiane � Poste Italiane’s integrated internal control and risk management system
Efforts to combat active and passive corruption [Art. 3, paragraph 1]
Report on Corporate Governce and the Ownership Structure 9. Internal Control and Risk Management System
� Protection of human rights � Equal career development opportunities � Staff training and development � Staff welfare and wellbeing � Relations with social partners � Occupational health and safety
� Legality and incorporation of ESG criteria within the procurement processes � Protection of human rights � Equal career development opportunities � Integration of ESG factors into investment policies � Integration of ESG factors into insurance policies
In addition to the information included in the above table, the content of the NFS has been integrated in the paragraph “The Group’s Organisation and operating segments”.
34. The section includes other corporate documents used as reference and the corresponding chapters.
Poste Italiane’s Consolidated non-financial statement (NFS) has been prepared in compliance with Italian Legislative Decree 254/2016 and in accordance with the most widely used standards at international level: the Global Reporting Initiative (GRI) Standards, applied in accordance with the core option, published by the Global Reporting Initiative in 2016 and including the “Financial Services Sector Disclosures” issued by the GRI in 2013.
The Statement is included in the Report on Operations, which in turn is contained in the 2020 Annual Report and constitutes Poste Italiane’s Integrated Report, prepared in accordance with the principles included in the International Framework, published by the International Integrated Reporting Council (IIRC).
The NFS was approved by Poste Italiane SpA’s Board of Directors on 5 March 2020 and, pursuant to art. 3, paragraph 10 of the Decree, requires a separate assurance report from the independent auditor, PricewaterhouseCoopers SpA.
In order to define the contents of the NFS, the accounting principles of the GRI Standards were observed, among which the principle of materiality to identify the significant aspects to be disclosed (for further information refer to paragraph “ Sustainability topics relevant to Poste Italiane “) and to present the performances achieved by the Group with reference to such aspects and the sustainability goals. In particular, in relation to the materiality principle, the degree of detail regarding the various topics covered by the reporting process was defined according to the importance assigned to them in Poste Italiane Group’s business objectives and strategies and their relevance for the stakeholders, established via a structured process of materiality analysis.
The information and the figures reported refer to 2019, and where available to the 2017-2019 period as well. The qualitative and quantitative information derive from the Group’s information systems and from a non-financial reporting system specifically implemented in order to comply with the requirements of the “GRI Sustainability Reporting Standards”. The disclosures correspond with the scope of the Decree and are consistent with the activities conducted and the impacts produced by Poste Italiane. The data is based on punctual calculations and, where specifically indicated, on estimates. The estimated data regard certain items relating to energy consumption inside and outside the organisation - in particular, data regarding electricity consumption (for security purposes and relating to outsourced Data Centres), natural gas, diesel, LPG and district heating for the Group’s real estate facilities – and water consumption, which was calculated on the basis of the costs incurred and the average tariff payable. Consumption linked to logistics is estimated in terms of distance travelled and/or average consumption of the means and the transported load, except for motor vehicles used in last mile logistics.
The figures provided refer to the group companies consolidated with the integral method for financial reporting, as indicated in the table “List of the fully consolidated equity investments”. Exceptions to the perimeter included are explicitly reported in the document. The NFS includes term Poste Italiane, Group, or Company to indicate the Poste Itailane Group.
Scopes of Legislative Decree 254/2016 Material topics GRI Specific Standard Internal scope External scope
Integrity and transparency � GRI 205 Anticorruption Poste Italiane Group Suppliers and business partners
� GRI 403 Occupational Health and Safety Poste Italiane Group Suppliers and business partners
Environment Legality and incorporation of ESG criteria within the procurement processes
� GRI 301 Materials Poste Italiane Group Suppliers and business partners
� GRI 302 Energy � GRI 303 Water � GRI 305 Emissions � GRI 306 Effluents and Waste
Financial inclusion � FS 14 Initiatives to improve access to financial services for disadvantaged people
� FS 11 Percentage of asset positive and negative environmental/social screening
Organisational profile 102-1 Name of the organisation Report on Operations: Statement from the Chairwoman and the Chief Executive Officer 102-2 Activities, brands, products and services Report on Operations: The Group’s organisation and operating segments 102-3 Location of headquarters Annual Report: Introduction 102-4 Location of operations Report on Operations: Multichannel commercial strategy 102-5 Ownership and legal form Report on Operations: Chapter 4. Governance 102-6 Markets served Report on Operations: The Group’s organisation and operating segments; Multichannel commercial strategy 102-7 Scale of the organisation Report on Operations: Profit or loss, Financial position and cash flow of Poste Italiane SpA; Indicators tables - People development
Report on Operations: The management and reporting of climate change risks according to the indications of the Task Force on Climate-related Financial Disclosures 102-12 External initiatives Report on Operations: The Group’s Environmental Social and Governance (ESG) Strategic Plan 102-13 Membership of associations Report on Operations: The Group’s Environmental Social and Governance (ESG) Strategic Plan; Dialogue and transparency in relations with the authorities; Relations with social partners
Ethics and Integrity 102-16 Values, principles, standards and norms of behaviour
Report on Corporate Governance and the Ownership Structure: 6.6 Chief Executive Officer; 7.2 Audit, Risk and Sustainability Committee 102-27 Measures taken to develop and enhance the highest governance body’s collective knowledge of economic, environmental, and social topics
Report on Corporate Governance and the Ownership Structure: 6.3 Role and functions (pursuant to art. 123-bis, paragraph 2.d), Consolidated Law on Finance); 6.8 Independent Directors; 6.10 Assessment of workings of the Board of Directors and Board Committees 102-28 Processes for evaluating the highest governance body’s performance
102-36 Process for determining remuneration Report on Corporate Governance and the Ownership Structure: 6.12 Remuneration
Report on Operations: Stakeholder engagement 102-43 Approach to stakeholder engagement Report on Operations: Stakeholder engagement 102-44 Key topics and concerns that have been raised through stakeholder engagement and related actions
Report on Operations: 7. Consolidated non-financial statement 102-49 Significant changes in reporting compared with previous periods
Materiality matrix Poste Italiane’s sustainability strategy The economic value generated and distributed by the Poste Italiane Group 103-2 The management approach and its components 103-3 Evaluation of the management approach
GRI 201: Economic performance 201-1 Direct economic value generated and distributed
The economic value generated and distributed by the Poste Italiane Group
Materiality matrix Poste Italiane’s sustainability strategy Support for the socio-economic development of local communities 103-2 The management approach and its components 103-3 Evaluation of the management approach
Materiality matrix Poste Italiane’s sustainability strategy Legality and incorporation of ESG criteria within the procurement processes Environmental impacts of logistics 103-2 The management approach and its components 103-3 Evaluation of the management approach
Materiality matrix Poste Italiane’s sustainability strategy Environmental impacts of real estate facilities 103-2 The management approach and its components 103-3 Evaluation of the management approach
For Parent Company and its subsidiaries which are signatories of the Poste Italiane’s National Collective Labour Contract: four weeks (25 working days from the date of the first meeting with the Labour Unions, including Saturday) for talks at national level; a further 2 weeks (13 working days, including Saturday) is provided for in order to endorse any agreement reached by trade union representation (RSU) Coordination; an additional week (7 working days, including Saturday) for talks at local level. Poste Welfare Servizi: 4 (25 days) Poste Air Cargo: NIL
Materiality matrix Poste Italiane’s sustainability strategy Occupational health and safety 103-2 The management approach and its components 103-3 Evaluation of the management approach
Partially available indicator. The current reporting system did not allow reporting disclosure on contractors. We expect to report this information in the next cycles of disclosure.
Chapter 5. Indicators tables 404-3 Percentage of employees receiving regular performance and career development reviews
Materiality matrix Poste Italiane’s sustainability strategy Protection of human rights 103-2 The management approach and its components 103-3 Evaluation of the management approach
Materiality matrix Poste Italiane’s sustainability strategy Work with transparency and integrity Legality and incorporation of ESG criteria within the procurement processes 103-2 The management approach and its components 103-3 Evaluation of the management approach
Materiality matrix Poste Italiane’s sustainability strategy Cybersecurity, IT security and privacy 103-2 The management approach and its components 103-3 Evaluation of the management approach
Materiality matrix Poste Italiane’s sustainability strategy Financial inclusion103-2 The management approach and its components 103-3 Evaluation of the management approach
Taking into consideration the indications provided by the World Economic Forum, the table below shows the “material ESG metrics” outlined in this Integrated Report.
Pillar Topic Description GRI indicators in the Sections of the Report
People Health and Well Being Health and safety (%) GRI 403-2 a
� Poste Italiane’s sustainability strategy � Integration of ESG factors into investment policies � Integration of ESG factors into insurance policies � Percentage of assets subject to positive and negative environmental or social screening regarding social/environmental aspects
Policies Designed to Incentivize Responsible Behavior FN-IN-410b � Poste Italiane’s sustainability strategy � ESG investment products � Insurance products with social and environmental value
� Poste Italiane’s sustainability strategy � Quality and customer experience � Monthly complaints � Customer complaints by type
� Poste Italiane’s sustainability strategy � Relations with social partners � Protection of human rights � Number of disputes with employees
� Poste Italiane’s sustainability strategy � Occupational health and safety � Type of injury, injury rate, lost day rate, occupational disease rate, absentee rate and work-related fatalities at the Group
Supply Chain Management TR-AF-430a � Poste Italiane’s sustainability strategy � Environmental impacts of logistics � Other total indirect GHG emissions
� Poste Italiane’s sustainability strategy � Risk management and risk assessment � Cybersecurity, IT Security and Privacy � Privacy violations and data leaks � IT security and cybersecurity breaches � Number of customers involved in IT security breaches
Ensure availability and sustainable management of water and sanitation for all.
� Access to financial services � Diversity and equal opportunity � Earnings, wages and benefits � Economic performance � Employee training and education
Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation.
8. Summary of the resolutions of the ordinary Shareholders’ Meeting 35. The amount of €23,626,168 refers to the income not available for distribution recognised in profit and loss for the fair measurement of Visa Preferred Stock shares which - in application of Legislative Decree 38/2005 - cannot be the subject of distribution until actually realised.
3. appointed the new Board of Directors, which will remain in office until the approval of the financial statements for 2022, in the persons of: � Maria Bianca Farina, Chairwoman
� Roberto Rossi, Director setting the related compensation at euro 60,000 gross per year for the Chairwoman and euro 40,000 gross per year for the other Directors; 4. approved the Report on the policy regarding remuneration for the year 2020 – including the guidelines on the policies of remuneration and incentive plans of BancoPosta’s Ring-Fenced Capital, which are attached to the Report on the policy regarding remuneration – which explains (i) the Company’s policy regarding the remuneration for members of the Board of Directors, the general manager and other executives with strategic responsibilities, and the members of control body, as well as (ii) the procedures used for the adoption and implementation of such policy; 5. resolved in favor of the Report on amounts paid in the year 2019, which are provided (i) by name, for the members of the administrative and auditing bodies, and the general manager, and (ii) in aggregate form, for executives with strategic responsibilities; 6. approved the 2020 equity-based Incentive Plan for the material risk takers of the BancoPosta’s Ring-Fenced Capital, whose features are described in a document prepared pursuant to article 84-bis, paragraph 1, of CONSOB Resolution n. 11971 of May 14, 1999, attributing to the board of directors all the powers necessary to concretely implement such Incentive plan; 7. resolved, upon proposal formulated by the Board of Statutory Auditors, to supplement the fee for the assignment to perform the statutory audit of the accounts entrusted to PricewaterhouseCoopers SpA for the financial year 2019, following the entry into force of new accounting principles.
Events after 31 December 2019 36. Such transactions are defined as transactions that due to their significance/materiality, the nature of the counterparties, the purpose of the transaction, the manner of determining the transfer price and timing of the transaction may give rise to doubts over the correctness and/or completeness of the disclosures in the financial statements, over a conflict of interest, safeguards for the Company’s financial position and protections for non-controlling shareholders.
Within the scope of the transactions with Cassa Depositi e Prestiti authorised by the Board of Directors on 11 October 2016 and 27 June 2019, having obtained the consent of the Related and Connected Parties Committee, 2 repurchase agreements were entered into at 31 December 2019.
This indicator is also shown separately for each Strategic Business Unit.
CET 1 CAPITAL - this indicator includes initial capital and retained earnings (Tier 1 capital), applied on a transitional basis (EU Regulation 2017/2395).
CET 1 RATIO - this ratio measures the adequacy of Tier 1 capital with respect to Pillar 1 risks (operational, credit, counterparty and foreign exchange). It is the ratio of CET1 Capital to total Risk Weighted Assets (RWA).
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) - this is an indicator of operating profit before financial expenses and taxation, and depreciation, amortisation and impairments of non-current assets.
EXPENSE RATIO is calculated as the ratio of total expenses (operating costs and fees and commissions) and gross premium revenue.
LAPSE RATE - this is an indirect measure of customer loyalty. It is based on surrenders during the period as a percentage of mathematical provisions at the beginning of the period. It is calculated as Surrenders/Mathematical Provisions (on a linear basis over 12 months).
EBIT and ADJUSTED PROFIT - to provide an improved basis for assessment and comparison, the following statement shows the reconciliation of reported EBIT and net profit and adjusted EBIT and net profit: Reconciliation of values from reported to adjusted 2018 2019
Visa - Fair value measurement pursuant to IFRS 9 9 25
of which: of which ordinary personnel expenses 5,561 5,524 37 0.7% 1,452 1,401 51 3.6%
of which early retirement incentives 342 619 (277) -44.8% 328 590 (262) -44.4%
of which early retirement incentives 340 608 (268) -44.1% 328 589 (262) -44.4%
of which disputes and other extraordinary items (6) (5) (1) 14.5% (5) (5) (0) -1.1%
Statement of profit or loss for the Payments, Mobile and Digital Strategic Business Unit of which: of which ordinary personnel expenses 31 31 1 2.1% 7 8 (0) -3.6%
of which early retirement incentives 0 0 0 - 0 0 0 -
Distribution of third party products 313 263 51 19.3% 85 70 15 21.8%
of which: of which ordinary personnel expenses 42 70 (28) -40.3% 11 8 3 38.6%
of which early retirement incentives 2 10 (8) -82.9% 0 1 (0) -18.8%
Change in technical provisions and other claim expenses (66) (35) (30) -85.5% (20) (7) (13) -200.6%
of which: of which ordinary personnel expenses 40 37 3 8.8% 11 9 2 21.2%
of which early retirement incentives 0 1 (1) -100.0% 0 0 (0) -100.0%
Trade payables and Other liabilities (3,048) (398) (2,078) (984) 1,246 (5,262)
Trade payables and Other liabilities (3,259) (502) (1,917) (836) 1,231 (5,282)
Net technical provisions for insurance business - - - 125,076 - 125,076
Trade receivables, Other receivables and assets and Inventories 186 (149) 45 (5) (14) 64
Provisions for risks and charges 123 6 182 (10) 1 301
of which fair value reserve 2 - 1,042 42 - 1,087
Net technical provisions for insurance business - - - 15,127 - 15,127
Cash and deposits attributable to BancoPosta - - (985) - - (985)
Intersegment loans and receivables and financial liabilities 367 168 199 118.5%
** Premium revenue is reported gross of outward reinsurance premiums. *** At 31 December 2019, the company declared dividends totalling €285 million.
At 31 December 2019, the company declared dividends totalling €33 million. n/s: not significant
Poste Italiane’s shares have been listed on the Mercato Telematico Azionario (the MTA, an electronic stock exchange) since 27 October 2015. At 31 December 2019, the Company is 35% owned by CDP and 29.3% owned by the MEF, with the remaining shares held by institutional and retail investors. Poste Italiane SpA continues to be under the control of the MEF. At 31 December 2019, the Parent Company holds 5,257,965 of its treasury shares (equal to 0.4026% of the share capital).
The Group’s business is assessed and presented on the basis of four operating segments: (i) Mail, Parcels and Distribution, (ii) Payments, Mobile and Digital (PMD), (iii) Financial Services and (iv) Insurance Services.
The consolidated and separate financial statements contain notes applicable to both sets of financial statements, providing information on matters common to both the Group and Poste Italiane SpA. The relevant matters specifically regard
38. Under the indirect method, net cash from operating activities is determined by adjusting profit/(loss) for the year to reflect the impact of non-cash items, any deferment or provisions for previous or future operating inflows or outflows, and revenue or cost items linked to cash flows from investing or financing activities
The accounting standards described below reflect the Group’s and Poste Italiane SpA’s full operating performance in the foreseeable future and are applied on a going concern basis.
The statement of financial position has been prepared on the basis of the “current/non-current distinction”37. In the statement of profit or loss, expenses are classified according to their nature. The cash flow statement has been prepared under the indirect method38.
The Poste Italiane Group’s financial statements have been prepared on a historical cost basis, with the exception of certain items for which fair value measurement is obligatory.
Property, plant and equipment Property, plant and equipment is stated at acquisition or construction cost, less accumulated depreciation and any accumulated impairment losses. This cost is increased for charges directly related to the purchase or construction of the asset, including - where identifiable and measurable - that relating to employees involved in the planning and/or preparation for use phase. Interest expense incurred by the Group for loans specifically for the acquisition or construction of property, plant and equipment is capitalised together with the value of the asset; all other interest expense is recognised as finance costs in profit and loss for the year in question. Costs incurred for routine and/or cyclical maintenance and repairs are recognised directly in profit or loss in the related year. The capitalisation of costs attributable to the extension, modernisation or improvement of assets owned by Group companies or held under lease is carried out to the extent that they qualify for separate recognition as an asset or as a component of an asset, applying the component approach, which requires each component with a different estimated useful life and value to be recognised and amortised separately.
In particular, Industrial patents, intellectual property rights, licences and similar rights are initially valued at purchase cost. This cost is increased for charges directly related to the purchase or preparation for use of the asset. Interest expense that the Group may incur for loans specifically for the purchase of industrial patents, intellectual property rights, licenses and similar rights are capitalised together with the value of the asset; all other interest expense is recognised as finance costs in profit and loss for the year. Amortisation starts once the asset is available for use. Amortisation is applied on a straight-line basis, in order to distribute the purchase cost over the shorter of the expected useful life of the asset and any related contract terms, from the date the entity has the right to use the asset.
Industrial patents, intellectual property rights, licenses and similar rights include costs directly associated with the internal production of unique and identifiable software products that will generate future economic benefits with a time horizon of more than one year. Direct costs include - where identifiable and measurable - the charge related to employees involved in software development. Costs incurred for the maintenance of internally developed software products are charged to profit and loss for the year in question. Amortisation begins when the asset is available for use and extends, systematically and on a straight-line basis, over its estimated useful life (normally 3 years). Any research costs are not capitalised.
Among the Group’s intangible assets, Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets and liabilities of the company or business acquired, at the date of acquisition. Goodwill attributable to investments accounted for using the equity method is included in the carrying amount of the equity investment. Goodwill is not amortised on a systematic basis, but is tested periodically for impairment in accordance with IAS 36. This test is performed with reference to the cash generating unit (“CGU”) to which the goodwill is attributable. The method applied in conducting impairment tests and the impact on the accounts of any impairment losses are described in the paragraph “Impairment of assets”.
Leased assets The accounting treatment for lease arrangements, modified following the entry into effect of the new accounting standard IFRS 16 - Leasing, is described in note 3, “Changes to accounting policies”.
The Group avails itself of the option granted by the principle of non-application of the new provisions to short-term contracts (with a duration of no more than twelve months) and to contracts in which the individual underlying asset is of low value (up to $5,000); for these contracts, the Group continues to adopt IAS 17 by recognising on a straight-line basis in the profit and loss lease payments as matching entry to short-term trade payables.
Regardless of any impairment indicator, the assets listed below are tested for impairment every year: � intangible assets with an indefinite useful life or that are not yet available; the impairment test can take place at any time during the year, provided that it is performed at the same time in each of the following years; � goodwill acquired in a business combination.
40. If the amount of the impairment loss is greater than the carrying amount of the asset or CGU, in accordance with IAS 36, no liability is recognised, unless recognition of a liability is required by an international accounting standard other than IAS 36.
Investments In the Poste Italiane Group’s consolidated financial statements, investments in subsidiaries that are not significant (individually or in the aggregate) and are not consolidated, and those in companies over which the Group exerts significant influence (“associates ”) and in joint ventures, are accounted for using the equity method. See note 2.4 – Basis of consolidation
On initial recognition, financial assets are classified in one of the following categories, based on the business model adopted to manage them and the characteristics of their contractual cash flows.
� Financial assets measured at amortised cost This category reflects financial assets held to collect the contractual cash flows (the held to collect or HTC business model) representing solely payments of principal and interest (SPPI). These assets are measured at amortised cost, that is the value assigned to the financial asset or liability on initial recognition, net of any principal reimbursement, plus or minus the cumulative amortisation by using the effective interest rate method on the difference between the initial value and the value at maturity, after deducting any impairment. The business model on which the classification of financial assets is based permits the sale of such assets; if the sales are not occasional, and are not immaterial in terms of value, consistency with the HTC business model should be assessed.
41. This is possible for transactions carried out on organised markets (regular way).
� 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 and 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/liquidation 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: � 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); � 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); � 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), i.e. on the basis of the exposure value - determined on the basis of the effective interest rate - adjusted for expected losses.
In addition, for impaired financial assets, derecognition may take place following write-off thereof, following the acknowledgement that there are no reasonable expectations of recovery (e.g. prescription).
43. 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.
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.
Own use exemption The standards establishing the principles for the recognition and measurement of financial instruments are also applied to derivative contracts to buy or sell non-financial items that are settled net in cash or in another financial instrument, with the exception of contracts entered into, and that continue to be held, for the purpose of the receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale or usage requirements (the own use exemption). This exemption applies to the recognition and measurement of forward electricity contracts entered into by the subsidiary EGI SpA if the following conditions have been met: � the contract involves the physical supply of a commodity; � the entity has not entered into an offsetting contract; � the transaction must be entered into in accordance with expected purchase and/or sale or usage requirements.
Income tax expense Current income tax expense (IRES and IRAP) is based on the best estimate of taxable profit for the period and the related regulations, applying the rates in force. Deferred tax assets and liabilities are calculated on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts, using tax rates that are expected to apply when the related deferred tax assets are realised or the deferred tax liabilities are settled. Deferred tax assets and liabilities are not recognised if the temporary differences derive from investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary difference is controlled by the Group or it is probable that the temporary difference will not reverse in the foreseeable future (IAS 12 paragraphs 39 and 40). In accordance with IAS 12, deferred tax liabilities are not recognised on goodwill deriving from a business combination.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
In the case of contracts for separately managed accounts with discretionary participation features47 (as defined in Appendix A of IFRS 4), IFRS 4 makes reference to national GAAP. The contracts are classified as “financial”, but accounted for as “insurance” as follows: � premiums, movements in technical provisions and other claims expenses are recognised in the same way as the insurance contracts described above; � unrealised gains and losses attributable to policyholders are assigned to them and recognised in technical provisions (deferred liabilities payable to policyholders) under the shadow accounting method (IFRS 4.30).
Provisions for risks and charges Provisions for risks and charges are recorded to cover losses that are either probable or certain to be incurred, for which, however, there is an uncertainty as to the amount or as to the date on which they will occur. Provisions for risks and charges are made when the Group has a present (legal or constructive) obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation. Provisions are measured on the basis of management’s best estimate of the use of resources required to settle the obligation. The value of the liability is discounted at a rate that reflects current market valuesand takes into account the risks specific to the liability. With regard to the risks for which the occurrence of a liability is only possible, specific information is provided without making any provision. In those rare cases in which disclosure of some or all of the information regarding the risks in question could seriously prejudice the Group’s position in a dispute or in ongoing negotiations with third parties, the Group exercises the option granted by the relevant accounting standards to provide limited disclosure.
Employee benefits Short-term employee benefits are those that will be fully paid within twelve months of the end of the year in which the employee provided his or her services. Such benefits include wages, salaries, social security contributions, holiday pay and sick pay. The undiscounted value of short-term employee benefits to be paid to employees in consideration of employment services provided over the relevant period is accrued as personnel expenses.
48. 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.
Other long-term employment benefits consist of benefits not payable within twelve months of the end of the reporting period during which the employees provided their services. The net change in the value of any of the components of the liability during the reporting period is recognised in full in profit or loss. Measurement of the other long-term employee benefits liability is recognised in the financial statements also on the basis of calculations performed by independent actuaries.
Share-based payments Share-based payment transactions may be settled in cash, equity instruments, or other financial instruments. Goods or services received or acquired through a share-based payment transaction are recognised at their fair value.
In the case of cash-settled share-based payment transactions: � a liability is recognised as a matching entry at cost; � if the fair value of the goods or services received or acquired cannot be reliably determined, this value must be estimated indirectly on the basis of the fair value of the liability; � the fair value of the liability must be remeasured at the end of each reporting period, recognising any changes in fair value in profit or loss for the period.
Revenue is recognised on the basis of a 5-step framework, which consists of the following: � identify the contract with the customer (sales contracts except lease contracts, insurance contracts, financial instruments and non-monetary exchanges); � identify the performance obligations, which can be defined as the explicit or implicit promise to transfer a distinct good or service to the customer; � determine the transaction price; Financial statements of Poste Italiane at 31 December 2019 2. Basis of preparation and significant accounting policies
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)
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 and 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.
49. Diluted earnings per share are calculated by taking into account the potentially dilutive effect of all instruments which can be converted into ordinary shares issued by the Parent Company. The calculation is based on the ratio of profit attributable to the Parent Company, adjusted to take account of any costs or income deriving from the conversion, net of any tax effect, and the weighted average number of shares outstanding, assuming conversion of all convertible securities.
The Poste Italiane Group’s consolidated financial statements include the financial statements of Poste Italiane SpA and of the companies over which the Parent Company directly or indirectly exercises control, as defined by IFRS 10, from the date on which control is obtained until the date on which control is no longer held by the Group. The Group controls an entity when it simultaneously: � has power over the investee; � is exposed, or has rights to, variable returns from its involvement with the investee; � has the ability to influence those returns through its power over the investee.
The consolidated financial statements have been specifically prepared at 31 December 2019, after appropriate adjustment, where necessary, to align accounting policies with those of the Parent Company.
Other receivables and assets: Sundry receivables due from Public Administration entities 1 3
Total receivables due from MEF and the Public Administration 693 881
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: � estimates of ratings by counterparty; � estimation of the probability of default “PD” for counterparties.
The impairment tests at 31 December 2019 were performed on the basis of the five-year business plans of the CGUs (cash generating units) concerned or the latest available projections. 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).50
In particular, 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 2019 was determined (level 3 in the hierarchy) using market multiples. To identify the market multiple to use, reference was made to a study of a comparable company by a leading investment bank. The multiple used was 16.5 based on EV/EBITDA for 2020. Figures from the last year of the plan, or the latest available projections, were used in determining the terminal value.
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.
51. Approved by the Board of Directors of Poste Italiane SpA on 5 March 2020.
Share-based payments As further described in Note 14 - Additional information - Share-based payment arrangements, the valuation of the sharebased payment arrangements in place within the Poste Italiane Group at the close of these financial statements was based on the conclusions reached by actuaries external to the Group. The plan terms and conditions link the award of the related options to the occurrence of certain events, such as the achievement of performance targets and performance hurdles and, in certain areas of operation, compliance with certain capital adequacy and liquidity requirements. For these reasons, measurement of the liability, equity reserve and the corresponding economic effects involves the use of estimates based on current knowledge of factors that may change over time, potentially resulting in outcomes that may be significantly different from those taken into account in preparing these financial statements.
Accounting standards and interpretations applied from 1 January 2019 The following are applicable from 1 January 2019: � IFRS 16 - Leases, adopted with Regulation (EU) no. 2017/1986. The new standard intends to improve the accounting representation of lease contracts, giving a basis for users of financial statements to assess the effect on the financial position, operating performance and cash flows of the entity. The main change regards lease liability contracts by introducing, for the lessee, a unified model for the different types of leasing (both financial and operating). A detailed description of the main changes introduced by the standard is provided in the paragraph, “Changes to accounting policies”.
– IAS 12 - Income Taxes: an entity shall recognise the tax effects of dividends for income tax purposes in profit or loss, other comprehensive income or equity, depending on where the entity originally recognised the transactions that generated distributable profits.
� Amendments to IFRS 9 – Financial Instruments - Prepayment Features with Negative Compensation adopted with Regulation (EU) no. 2018/498. Some financial assets with negative compensation may be valued at amortised cost. The assets concerned, which include certain loans and debt securities, would otherwise be measured at fair value through profit or loss (FVTPL). Negative netting arises where the contractual terms allow early repayment of the instrument before the contractual due date, but the amount of the prepayment may be less than the unpaid principal and interest. However, to obtain the amortised cost valuation, the negative compensation must be ‘reasonable’ for early termination of the contract. An example of such reasonable remuneration is an amount reflecting the effect of the change in the reference interest rate. In addition, for the purpose of measurement at amortised cost, the asset must be held within a “Hold to collect” business model.
Accounting standards and interpretations soon to be effective The following are applicable from 1 January 2020: � 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 so that they refer to the revised Conceptual Framework or specify the version of the Conceptual Framework to which they refer.
� 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 Reform52. The purpose of the derogations is to avoid the effects of discontinuing due to the mere uncertainty of the interest rate reform. In particular, for the evaluation of the economic relation, the amendments introduced require that the entity must assume that the reference index for the determination of the interest rates of the hedged instrument and of the hedging instrument is not changed following the reform of the rates. The amendments in question, in force since 5 February 2020, must obligatorily be applied from 1 January 2020, unless applied in advance, which the Group has not made use of for the purposes of preparing the financial statements at 31 December 2019.
Lastly, as of the reporting date, the IASB has issued certain financial reporting standards, amendments and interpretations not yet endorsed by the European Commission: � IFRS 17 - Insurance Contracts; � Amendments to IFRS 3 - Business Combinations; � Amendments to IAS 1 - Presentation of Financial Statements: Classification of Liabilities as Current or Non-current.
52. The reform of reference indices for the determination of interest rates refers to the reform, which concerns the entire market, of a reference index for the determination of interest rates, including the replacement of a reference index for the determination of interest rates by an alternative reference rate, such as that resulting from the recommendations contained in the July 2014 report of the Financial Stability Board “Reforming Major Interest Rate Benchmarks”.
The initial assessment is only reviewed during the term of the contract if there are modifications to the contract conditions with substantial impact on the right to control the underlying asset. If the lease contract also contains a non-lease component, the Group separates and treats said component in accordance with the relevant accounting standard (for example, in the context of property leases, the lease component is separated from accessory/condominium or utility charges, which are classified in the accounts as service costs and recognised on an accruals basis). An exception is made for cases where separation cannot be achieved on the basis of objective criteria: in such cases, the Group does not separate the lease and non-lease components and submits them jointly to the accounting rules of the lease..
Right-of-use asset On the contract commencement date, a right to use the leased asset is recorded, equal to the initial value of the corresponding lease liability, plus payments due before or at the same time as the contract commencement date (e.g. agency fees). Subsequently, said right of use is measured less accumulated depreciation and any accumulated impairment losses. Depreciation starts on the commencement date of the lease and extends over the shorter of the lease term and the useful life of the underlying asset.
Lease liability The lease liability, which is in the nature of a financial liability, is initially recorded at the present value of the lease instalments not paid on the date the contract commences; for the purposes of calculating the present value, the Group uses the marginal lending rate, defined by loan period and for each Group company.
The payments included in the initial measurement of the lease liability include: � fixed payments, less any lease incentives receivable; � variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date (e.g. ISTAT indexes); � the exercise price of a purchase option if the lessee is reasonably certain to exercise that option.
The lease liability is subsequently reduced to reflect the lease payments made and increased to reflect interest on the remaining amount.
The following is a description of the main estimates used by the Poste Italiane Group at 31 December 2019 in accordance with IFRS 16.
The IBR associated with the commencement of the contract will be reviewed whenever there is a lease modification, meaning any 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.
Transition method At 1 January 2019, the Group recognised the following types of agreements/assets included within the scope of application of the standard: � Properties used in operations (e.g. those used as post offices or operational sites); � Properties not used in operations, providing accommodation for employees and executives; Financial statements of Poste Italiane at 31 December 2019 3. Changes to accounting policies
� Leased vehicles for personal use by staff; � Aircraft used by the Group’s airline; � IT equipment and devices of various type.
The approach does not require the restatement of comparative data and allows the use of practical expedients to calculate financial liabilities and right-of-use assets at the transition date.
Assets Balance at 31 December 2018 Effects of IFRS 16 Balance at 1 January 2019
Reconciliation of financial liabilities/commitments for leases at 1 January 2019 (€m)
The average incremental borrowing rate used at the date of first-time adoption is 2.2%.
Poste Italiane SpA At 1 January 2019, the Parent Company recognised right-of-use assets of €1,230 million, in relation to leases previously classified as operating leases under IAS 17, and financial liabilities totalling €1,230 million (equal to the present value of remaining payments). Deferred income or accrued liabilities that at 31 December 2018 related to leases recognised in accordance with IAS 17 at the date of first-time adoption of IFRS 16 have been adjusted to reflect the right of use.
The following statement shows the impact of first-time adoption on Poste Italiane SpA’s statement of financial position.
Balance at 31 December 2018 Effects of IFRS 16 Balance at 1 January 2019
The table below show the reconciliation between the lease commitments at 31 December 2018 and the amount of the lease liabilities recognised at 1 January 2019.
Exclusion from the scope of contracts for short-term leases at 31 December 2018 (5)
Lease liabilities resulting from application of IFRS 16 at 1 January 2019 1,230
Poste Italiane Group The following table shows the statement of financial position and profit and loss effects generated by lease contracts at 31 December 2019 for the Poste Italiane Group.
(€m) Properties used in operations Company fleet Vehicles for mixed use Other assets Total
Additions during the year primarily refer to the Parent Company (€95 million) and regard new property leases (€63 million), the lease of IT equipment (€18 million) and the lease of company vehicles (€14 million). The item adjustments refers to contractual changes during the year (changes in duration due to termination or extension, revision of economic conditions, etc.).
Total lease cash outflows, outgoing in 2019, amounted to €217 million, while the time distribution of the lease liability at 31 December 2019 is shown in the table below: 31/12/2019
Liquidity risk - lease liabilities (€m) Within 12 months Between 1 and 5 years Over 5 years Total
Financial statements of Poste Italiane at 31 December 2019 3. Changes to accounting policies
Partnership with MFM Investments Ltd (Moneyfarm) On 2 August 2019, Poste Italiane, in line with the Deliver 2022 Strategic Plan, launched a partnership with the digital asset management company MFM Investments Ltd (Moneyfarm) to offer innovative digital investment and asset management services. The agreement provides that Poste Italiane will distribute an asset management service in Exchange Traded Funds (ETF) with 7 investment lines of which 2 developed exclusively for its customers. 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 involves 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). The second phase will be finalised in the course of 2020 when the necessary authorisations will be obtained by the supervisory authorities of Germany (Bafin) and the United Kingdom (FCA).
� On 25 June, an agreement was signed that will result in the transfer of SDA Express Courier’s Information and Communication Technology business unit to Poste Italiane. The transfer, which came into effect on 1 July 2019, is aimed at improving the efficiency of subsidiaries’ ICT processes by centralising these activities within Poste Italiane.
� With effect from 1 October 2019, the company Mistral Air Srl, following the change of the corporate mission, changed its name to Poste Air Cargo Srl.
On 12 December 2019, the Board of Directors of Poste Italiane approved the acquisition of the business units of Poste Vita, Poste Assicura and Poste Welfare Servizi relating to ICT management activities. The operation, which has already been approved by the decision-making bodies, will take effect from 1 March 2020.
54. The purchases were made in execution of the shareholder resolution and in compliance with art. 144-bis, paragraph 1, letter B) of CONSOB Regulation 11971/1999 and the applicable provisions, so as to ensure equal treatment for all shareholders pursuant to art. 132 of the Consolidated Law on Finance, and in accordance with the operating procedures established in the organisational and management regulations of Borsa Italiana SpA.
5. Poste Italiane Group Financial statements for the year ended 31 December 2019 5.1 Consolidated financial statements
Investments accounted for using the equity method [A5] 617 617 497 497
(€m) Note 2019 of which, related party transactions 2018 of which, related party transactions
Revenue from Mail, Parcels & other [C1] 3,492 498 3,579 249
Profit/(Loss) on investments accounted for using the equity method [A5] 112 - (24) of which, non-recurring income/(expense) 88 -
Increase/(decrease) in fair value during the year [tab. B4] 1,767 (1,946)
Share of after-tax comprehensive income/(loss) of investees accounted for using equity method (1) -
Total comprehensive income for the year - - - - (1,673) 150 - - 1,411* (112) - (112)
Movements in working capital: (Increase)/decrease in Inventories [tab. A7] (4) (2)
Net cash generated by/(used for) financial assets attributable to financial activities, payments, cards and acquiring and insurance (10,904) (8,445)
(Increase)/decrease in cash and deposits attributable to BancoPosta [tab. A10] (984) (122)
Net cash flow from /(for) operating activities [d]=[a+b+c] 1,120 2,597 - of which related party transactions 248 (1,484)
Disposals: Property, plant and equipment, investment property, intangible assets and assets held for sale 4 2
Cash and cash equivalents at end of year [tab. A11] 2,149 3,195
A1 – Property, plant and equipment (€2,015 million) The following table shows movements in property, plant and equipment in 2019: tab. A1 - Movements in property, plant and equipment
At 31 December 2019, property, plant and equipment includes assets belonging to the Parent Company 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 €40 million.
(€m) Industrial patents and intellectual property rights, concessions, licences, trademarks and similar rights
Investment in Intangible assets during 2019 amounts to €342 million, including about €25 million in software and the related expenses developed within the Group, primarily relating to personnel expenses (€16 million). Development costs, other than those incurred directly to produce identifiable software used, or intended for use, within the Group, are not capitalised.
The balance of intangible assets under construction includes activities conducted by the Parent Company, primarily regarding the development for software relating to the infrastructure platform (€83 million), for BancoPosta services (€52 million ), for use in providing support to the sales network (€35 million), for the postal products platform (€24 million) and for the engineering of reporting processes (€17 million).
During the year the Group effected reclassifications from intangible assets under construction to industrial patents, intellectual property, rights, concessions, licences, trademarks and similar rights, amounting to €115 million, reflecting the completion and commissioning of software and the upgrade of existing software.
The item Goodwill refers to the subsidiary Poste Welfare Servizi Srl on which the analyses provided for by IAS 36 were carried out and, based on the information available and the impairment tests performed, there was no need to recognise impairment losses on the goodwill recognised.
A4 – Right-of-use assets (€1,254 million) Movements in this item during the year are shown in note 3 – Changes to accounting policies.
56. Value in use was determined using a cost of equity (Ke) of 7.54% (8.51% at 31 December 2018) and a growth rate of 1.14% (1.475% at 31 December 2018).
Risparmio Holding SpA - in liquidation 1 - (1) - - in joint ventures
� The changes in the year of the associate Anima Holding are due to the net positive adjustment to the carrying amount of about €7 million (including an increase of €13 million for the portion attributable to the investee company’s results earned between 30 September 2018 and 30 September 2019, the date of the last available financial statements, reduced by €6 million due to dividends received from the 2018 result). At 31 December 2019, given the performance of Anima Holding SpA’s shares, the value of goodwill implicit in the carrying amount of the investment was tested for impairment. Based on the prospective information available56, there was no need to recognise an impairment loss on the goodwill accounted for at the time of acquisition of the investment.
� The changes during the year of the associated company FSIA Investimenti are attributable to the net positive adjustment of the relative book value for the year: – €15 million to the capital contribution made by the Parent Company on 4 October 2019; – €61 million to the revaluation of the investment in SIA SpA, already held by FSIA Investimenti, following the acquisition of exclusive control (step up acquisition); – €27 million in income from the exercise of call options on 7.934% of SIA SpA shares held by UniCredit and Intesa Sanpaolo; – €11 million in the share of the joint venture’s results, after amortisation of the intangible assets identified at the time of the purchase price allocation; – €1 million in negative items recognised directly against shareholders’ equity.
The value of intangible assets and goodwill allocated to the investment in FSIA Investimenti Srl at the time of the purchase price allocation is shown below: FSIA Investimenti Srl
In order to qualify for the relief, in 2018, the Company paid substitute tax (IRES and IRAP) of approximately €32 million, equal to 16% of the amounts to which the relief applies, totalling approximately €198 million. Specifically, the amount qualifying for relief consists of the following: (€m)
The substitute tax paid has been accounted for in current tax assets. The asset in question will be deducted from 2020 within the deadline and according to the procedures for the deduction of amortisation relating to amounts qualifying for tax relief.
A list of subsidiaries, joint ventures and associates accounted for using the equity method is provided in Additional information – Key information on investments (note 14).
Financial assets at amortised cost 23,637 15,765 39,402 21,507 9,714 31,221
Payment services and card payments - 115 115 - 53 53
Changes in fair value through profit or loss - 1,902 1,902
Receivables include: � Amounts deposited with MEF, including public customers’ current account deposits, which earn a variable rate of return, calculated on a basket of government bonds and money market indices58. The deposit is adjusted by an impairment provision of around €3 million to take account of the counterparty default risk.
� Other financial receivables include: guarantee deposits of €5,660 million, including €5,181 million provided to counterparties with which there are interest rate swap transactions (with collateral provided by specific Credit Support Annexes), €208 million provided to counterparties with which there are repurchase agreements on fixed income securities (with collateral contemplated by specific Global Master Repurchase Agreements) and €271 million in collateral deposited with the Central Counterparty, in relation to the clearing system (i.e. the (Default Fund)59.
60. In terms of the fair value hierarchy, which reflects the relevance of the sources used to measure assets, €20,613 million of the total amount qualifies for inclusion in level 1 and €4,073 million for inclusion in level 2.
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 €31,201 million.
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 14 – Additional information.
In June 2019, the outstanding amount of €8 million due to the Parent Company following the sale of its Visa Europe Ltd. share to Visa Incorporated was collected.
In 2019, the Parent Company entered into a forward sale agreement for 400,000 ordinary Visa Incorporated shares at a price of US$153.46 per share and at an exchange rate of 1.2037. The total consideration is €51 million and the settlement date is 1 March 2021. The ordinary shares involved in the forward sale amount to approximately 28,810 Visa Incorporated (series C) preference shares held in portfolio at the applicable conversion rate at 31 December 2019. The fair value of the forward sale has decreased by €15 million in the reporting year, reflecting movements in both the price of the shares in US dollars and the euro/dollar exchange rate (tab. A6.4). This reduction has been recognised in profit or loss in “Expenses from financial activities”.
The following table shows movements in derivative instruments during the year: 61. Until the assigned shares are fully converted into ordinary shares, the share exchange ratio may be reduced if Visa Europe Ltd. incurs liabilities that, as of the reporting date, were considered as merely contingent.
Gains/(Losses) through profit or loss** - - - - - - - (4) - - - (4)
Cash flow hedges in the form of interest rate swaps and forward sales relate to instruments classified as FVTOCI, with nominal values of €1,670 million and €1,280 million, respectively.
Cash flow interest rate hedges recorded a total fair value gain of €98 million on the effective portion, reflected in the cash flow hedge reserve.
Fair value hedges recorded a net fair value loss on the effective portion of €3,971 million, whilst the hedged securities recorded a net fair value gain of €3,958 million, with the difference of €13 million due to paid differentials.
Financial receivables of €13 million regard receivables for management commissions of Poste Vita internal funds.
Movements in financial assets at fair value through other comprehensive income are shown below: 62. In terms of the fair value hierarchy, which reflects the relevance of the sources used to measure assets, €1,659 million of the total amount qualifies for inclusion in level 1 and €296 million for inclusion in level 2.
At 31 December 2019, fixed income instruments relate to investments primarily held by Poste Vita SpA for €101,712 million (a nominal value of €91,472 million) issued by European governments and European blue-chip companies. These instruments are mainly intended to cover products related to separately managed accounts, and therefore, the related gains and losses are transferred in full to policyholders and recognised in technical provisions using the shadow accounting method. These fixed income instruments comprise bonds issued by CDP SpA, with a fair value of €716 million.
At 31 December 2019, Cassa Depositi e Prestiti’s private placement of a Constant Maturity Swap, classified as at FVTOCI, amounts to €539 million. The increase in fair value of €14 million during the period was transferred to policyholders using the shadow accounting method.
Effects of sales on profit or loss - - 37 17 - 54
Sales, redemptions and settlement of accrued income (985) (1,437) (134) - (2,556)
This item referred to receivables for contributions made in the form of subscriptions and payment of mutual investment funds. At 31 December 2019, the corresponding units had been issued and the related receivables settled.
At 31 December 2019, the warrants executed by Poste Vita SpA to cover contractual obligations deriving from Class III policies amount to zero as the policies have been repaid in full.
Due from the purchasers of service accommodation 4 2 6 5 2 7
Other receivables for €50 million refer to the remaining amount due from Invitalia SpA as a result of the sale of Banca del Mezzogiorno-MedioCreditoCentrale SpA (BdM) on 7 August 201763. Following the finalisation of the agreement between the parties in January 2019, €20 million of this amount was collected on 27 February 2019.
Changes in fair value through profit or loss (10) - (10)
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 Notes64, whose value at 31 December 2019 is zero.
At 31 December 2019, derivative financial instruments include: � a cash flow hedging interest rate swap contract entered into in 2013 to protect the cash flows of the €50 million bond issued on 25 October 2013 (Note B.8 - Financial liabilities); with this transaction, the Parent Company assumed the obligation to pay the fixed rate of 4.035% and sold the floating rate of the bond, which at 31 December 2019 was 0.953%; � nine interest rate swaps used as fair value hedges in 2010 to protect the value of BTPs with a nominal value of €375 million against movements in interest rates. These instruments have enabled the Parent Company to sell the fixed rate on the BTPs of 3.75% and purchase a variable rate.
Financial assets at amortised cost refer solely to financial receivables due to the ring-fenced EMI, amounting to €115 million.
Description (€m) Balance at 31/12/2018 Increase / (decrease) Balance at 31/12/2019
Work in progress, semi-finished and finished goods and goods for resale 8 1 9
Receivables due from Parent company (MEF) - 45 45 - 68 68
Parcel express courier and express parcel services - 327 327 - 352 352
– Reimbursement of the costs associated with the management of property, vehicles and security incurred on behalf of the Ministry for Economic Development, totalling €79 million67, including €62 million involved in legal action brought by Poste Italiane in order to claim sundry costs resulting from the use of properties. At the hearing of 13 November 2019, the Judge held the case back in judgement with the allocation of time limits for closing arguments and replies. The judgement is therefore expected to be filed by the first half of 2020.
� Receivables due from Cassa Depositi e Prestiti refer to fees for BancoPosta’s deposit-taking activities during 2019.
� Receivables for parcel, express courier and express parcel services refer to services provided by SDA Express Courier SpA, and to the mailing of parcels by the Parent Company.
� Receivables from overseas counterparties relate to postal services carried out by the Parent Company for overseas postal operators.
� Receivables arising from unfranked mail delivered and other value added services refer to bulk mail services and other added value services.
In general, there are delays in collecting amounts due from central and local government entities due primarily to the fact that no provision has been made in the related budgets or to the execution of contracts or agreements. In this regard, actions continue aimed at renewing expired agreements68 and soliciting requests for appropriations.
67. See “Revenue and receivables due from the State”, showing overall amounts due from the Ministry for Economic Development (€80 million), including amounts due for postal and other services.
68. The principal agreements that have expired regard those governing relations with the tax authorities in relation to the collection and reporting of payments.
Specifically: � Universal Service compensation includes: tab. A8.3.1 - Universal Service compensation receivable
Receivables due from social security agencies and pension funds (excl. fixed-term contract settlements)
Receivables for amounts that cannot be drawn on due to court rulings - 79 79 - 78 78
Interest accrued on IRAP refund - - - - 3 3
� Amounts due from staff under 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 staff previously employed on fixed-term contracts. This item refers to receivables with a present value of €148 million from staff, from INPS and pension funds recoverable in the form of variable instalments, the last of which is due in 2042. The item includes €42 million receivable from INPS (formerly IPOST), covered by a specific agreement with IPOST dated 23 December 2009. Payment of this amount consists of six instalments of €6.9 million each, falling due between 30 June 2012 and 31 December 2014 and deemed to be collectible in full. Negotiations for the recovery of the same are underway and, in the event of a negative outcome, Poste Italiane reserves the right to take all necessary measures to better protect its rights.
� Amounts that cannot be drawn on due to court rulings include €66 million in amounts seized and not assigned to creditors, in the process of recovery, and €13 million in amounts stolen from the Parent 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.
� Accrued interest on IRES refund, refers to interest accruing up to 31 December 2019 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 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. The introduction of the new and additional elements of uncertainty regarding the final outcome of the case was taken into account in the determination of the provision for doubtful debts with an allocation of €46 million, recorded in profit and loss under the item Impairment losses/(reversals of impairment losses) on financial assets (Table C.13). Provisions for doubtful debts due from others are described in note 7 – Risk management.
Bank deposits and amounts held at the Italian Treasury 1,638 1,877
The balance of cash and cash equivalents at 31 December 2019 includes restricted cash and cash equivalents totalling about €885 million, including €856 million in liquid assets held to cover insurance technical provisions, €20 million restricted as a result of court decisions concerning other types of disputes and €9 million for cash on hand and other restrictions.
Actuarial gains and losses on employee termination benefits of investee companies (5) (1) - (4)
Effects of contributions and transfers of business units between Group companies (70) - (1) (69)
Amortisation until 1 January 2004/Impairment of goodwill (138) - - (138)
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.
At 31 December 2019, the Parent Company holds 5,257,965 of its treasury shares (equal to 0.4026% of the share capital). All the shares in issue are fully subscribed and paid up. No preference shares have been issued.
B3 – Shareholders transactions As resolved at the General Meeting of shareholders held on 28 May 2019, on 26 June 2019, the Parent Company paid dividends totalling €574 million, based on a dividend per share of €0.441. In addition, on 5 November 2019, the Board of Directors of Poste Italiane resolved to advance part of the ordinary dividend for 2019 as an interim dividend. The interim dividend of €200 million was distributed on 20 November 2019 (unit dividend of €0.154).
Increase/(Decrease) for expected credit loss - - (2) - - - (2)
� the Incentive Plans reserve includes the estimate of the valuations for the period relating to the long-term “ILT Performance Share” incentive plan, carried out on the basis of the provisions of IFRS 2.
Technical provisions where investment risk is transferred to policyholders 3,930 2,652
The provisions for deferred liabilities due to policyholders include portions of gains and losses attributable to policyholders under the shadow accounting method. In particular, the value of the provisions reflects the attribution to policyholders, in accordance with the relevant accounting standards (to which reference is made for more details), of unrealised profits and losses on financial assets at FVTOCI at 31 December 2019 and, to a lesser extent, on financial instruments at fair value through profit or loss.
Provisions for disputes with third parties 335 42 1 (35) (30) 313
Other provisions for risks and charges 106 15 - (13) (9) 99
� 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 2021. The provisions made at 31 December 2018, amounting to €396 million, were utilised during the year.
� Other provisions cover probable liabilities of various type, including: estimated liabilities deriving from the risk that specific legal actions undertaken in order to reverse seizures of the Parent Company’s assets may be unable to recover the related amounts, charges to be incurred for reclamation works on owned land, claims for rent arrears on properties used free of charge by the Parent Company, claims for payment of accrued interest expense due to certain suppliers and frauds.
B7 – Employee termination benefits (€1,135 million) The following movements in employee termination benefits took place in 2019: tab. B7 - Movements in provisions for employee termination benefits
Rate of employee turnover Specific table with rates differentiated by length of service
Actuarial gains and losses are generated by the following factors: B7.3 - Actuarial gains and losses 31/12/2019
MEF account, held at the Treasury - 4,542 4,542 - 3,649 3,649
Loans Other than the guarantees described in the following notes, borrowings are unsecured and are not subject to financial covenants, which would require Group companies to comply with financial ratios or maintain a certain minimum rating.
A five-year bond issue with a nominal value of €750 million, issued by Poste Vita on 30 May 2014, matured and was repaid in May 2019.
An EIB loan of €200 million granted to the Parent Company at the time, reached maturity and was repaid in March 2019, whilst an EIB credit facility granted in 2016, amounting to €173 million, was used in full. The new loan is subject to a fixed rate of interest of 0.879% and matures in March 2026. At 31 December 2019, the fair value74 of this loan is €185 million.
Amounts payable for operational risks - 34 34 - 35 35
The balance of cash flows for advances, represents the net amount payable as a result of advances from the MEF to meet the cash requirements of BancoPosta. These break down as follows: tab. B8.2.1 - Balance of cash flows for advances
MEF postal current accounts and other payables - 670 670 - 670 670
Derivative financial instruments Movements in derivative financial instruments during 2019 are described in note A6 – Financial assets.
Payables for items in process - 246 246 - 85 85
Liabilities for prepaid card management refer to the subsidiary PostePay SpA.
Amounts payables for guarantee deposits refer to amounts received from counterparties in repurchase agreements on fixed income instruments (collateral provided by specific Global Master Repurchase Agreements).
Changes in liabilities arising from financing activities The following reconciliation of financial liabilities is provided in accordance with IAS 7, following the amendments introduced by EU Regulation 1990/2017 of 6 November 2017.
Overseas counterparties* 111 110 * The amount due to overseas counterparties relates to fees payable to overseas postal operators and companies in return for postal and telegraphic services received.
Advances from the Cabinet Office - Publishing and Information department - 72
Other amounts due to subsidiaries - - - - 1 1
Accrued liabilities and deferred income 10 32 42 10 58 68
The reduction in the item Incentives is mainly due to the combined effect of the settlements made and the new liabilities which, recorded at 31 December 2018 in the provisions for early retirement incentives, can be determined with reasonable certainty during the year.
The increase in payables to INPS is partly due to the one-off contribution component mentioned above.
Withholding tax on postal current accounts - 10 10 - 3 3
� Withholding tax on employees’ and consultants’ salaries relates to amounts paid to the tax authorities by Group companies in January and February 2020 as withholding agents.
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] 3,492 3,579 of which Revenue from contracts with customers 3,439 3,504 recognised at a point in time 509 605 recognised over time 2,930 2,899
Revenue from Payments, Mobile and Digital [C2] 664 628 of which Revenue from contracts with customers 664 320 recognised at a point in time 287 87 recognised over time 377 233
Revenue from Financial Services [C3] 5,213 5,186 of which Revenue from contracts with customers 3,033 3,388 recognised at a point in time 412 513 recognised over time 2,621 2,875
Movement in technical provisions for insurance business and other claims expenses (21,463) (17,111)
Revenue from contracts with customers breaks down as follows: � 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.
� Revenue from payments, mobile and digital refers to: – 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 telecommunications contracts used are in the form of bundles combining two performance obligations to which the implicit discount is allocated on the basis of the related fair value. The revenue from this type of offer, however, is not significant in terms of total revenue from payments, mobile and digital.
During the year under review, to allow easier reading of the item Revenue from mail, parcels and other, a different breakdown of this item is provided to allow a more immediate assessment of the economic and financial performance by segment of operations.
C2 – Revenue from Payments, Mobile and Digital (664 milioni di euro) This item breaks down as follows: tab. C2 - Revenue from Payments, Mobile & Digital
This item primarily regards revenue from the mobile telecommunications services and card payment and payment services provided by Postepay SpA.
Interest income (expense) on asset swaps of CFH on securities at FVOCI and CA 4 9
Interest income (expense) on asset swaps of FVH on securities at FVOCI and CA (27) (2)
Income from investments in securities relates to interest earned on investment of deposits paid into postal current accounts by private customers. The total includes the impact of the interest rate hedge described in note A6 – Financial assets. Income from deposits held with the MEF primarily represents accrued interest for the year on amounts deposited by Public Administration entities.
A breakdown of insurance premium revenue, showing outward reinsurance premiums, is as follows: tab. C4.1 - Insurance premium revenue
Life gross premiums totalled €17,732 million, up 7% on the previous year, with a significant contribution from Multi-class products.
The movement in technical provisions for the insurance business and other claims expenses primarily reflect: � claims paid, policies redeemed and the related expenses incurred by Poste Vita SpA during the period; � the change in mathematical provisions reflecting increased obligations to policyholders; � the change in technical provisions where investment risk is transferred to policyholders so-called Class D.
The reduction in expenses from insurance activities (€1,483 million compared with 2018) is linked to the positive performance of the financial markets at 31 December 2019, compared with 31 December 2018.
Raw, ancillary and consumable materials and goods for resale tab. C5.3 - Raw, ancillary and consumable materials and goods for resale
Change in inventories of raw, ancillary and consumable materials [tab. A7] - 1
C7 - Personnel expenses (€5,896 million) Personnel expenses include the cost of staff seconded to other organisations. The recovery of such expenses, determined by the relevant chargebacks, is posted to other operating income. Personnel expenses break down as follows: tab. C7 - Personnel expenses
Other personnel expenses/(cost recoveries) include the release of liabilities of €45 million allocated in previous years to support unprotected early retirement.
Furthermore, taking account of staff on flexible contracts, the average number of full-time equivalent staff is 129,243 (in 2018: 134,360).
Depreciation, amortisation and impairments are up €204 million compared with 2018, due to depreciation of right-of-use assets (IFRS 16).
C9 - Capitalised costs and expenses (€31 million) Capitalised costs and expenses break down as follows: tab. C9 - Increases relating to assets under construction
C10 - Other operating costs (€200 million) Other operating costs break down as follows: tab. C10 - Other operating costs
Net provisions for risks and charges made/(released) 21 81 for disputes with third parties [tab. B6] 7 7 for operational risks [tab. B6] 12 78 for expired and statute barred postal certificates [tab. B6] - (15)
For the purposes of reconciliation with the statement of cash flows, in 2019 finance income after both realised gains and foreign exchange gains amounted to €94 million (€95 million in 2018).
Finance costs on financial liabilities 41 38 on borrowings from financial institutions 2 1 on lease payables 28 on derivative financial instruments 1 1
77. 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).
tab. C13 - Impairment losses/(Reversals of impairment losses) on financial assets
C14 – Income tax expense (€530 million) The nominal IRES rate has been 24% since 1 January 2017, while the Group’s theoretical average IRAP rate is 5.84%77. The breakdown of income taxes for the year is as follows.
Assessment of deferred tax assets on non-deductible change in technical provisions - 0.00% (351) -23.53%
Net provisions for risks and charges and bad debts 7 0.38% 4 0.25%
Realignment of tax bases and carrying amounts and taxation for previous years (1) -0.05% (2) -0.16%
payments on account for the current year 180 47 227 balance payable for the previous year 11 14 25
At 31 December 2019, current tax assets/(liabilities) include: � the liability of €263 million determined by IRES and IRAP provisions for the year net of IRES and IRAP advances paid and IRES receivables from the previous year; � the substitute tax credit of €32 million relating to the redemption carried out by the Parent Company during 2018, pursuant to art. 15, paragraph 10 ter of Law Decree 185 of 29 November 2008, of goodwill and other intangible assets relating to the acquisition of the investment in FSIA Investimenti Srl (as further described in note A4 - Investments accounted for using the equity method); � the remaining IRES receivable of €8 million to be recovered on the failure to deduct IRAP resulting from the requests filed pursuant to art. 6 of Law Decree 185 of 29 November 2008 and art. 2 of Law Decree 201 of 6 December 2011, which provided for a partial deductibility of IRAP for IRES purposes (in this regard, see as reported on receivables for related interest in Note A9).
Movements in deferred tax assets and liabilities are shown below: tab. C14.5 - Movements in deferred tax assets and liabilities
The Payments, Mobile and Digital segment includes the activities of PostePay SpA and the mobile telecommunications services.
The Insurance Services segment includes the activities carried out by the Poste Vita Group.
Net external revenue from ordinary activities 3,492 664 5,213 1,669 - 11,038
Net intersegment revenue from ordinary activities 4,723 375 713 1 (5,812) -
Investments accounted for using the equity method 3 393 221 - - 617
(Impairment loss)/reversal on debt instruments, receivables and other assets 20 - - - - 20
Investments accounted for using the equity method 3 281 214 - - 498
Recognition at a point in time 605 87 513 - - 1,205
Impact of related party transactions on statement of financial position and profit and loss The impact of related party transactions on the financial position and profit or loss is shown below.
Impact of related party transactions on profit or loss in FY 2018
The nature of the Parent Company’s principal transactions with related parties external to the Group is summarised below in order of relevance: � 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.
Provisions for risks and charges 1,218 70 5.7 1,519 70 4.6
Revenue from Payments, Mobile & Digital 664 59 8.9 628 30 4.8
Net cash flow from /(for) investing activities (732) 3 n.a. (281) 254 n.a.
Net cash flow from/(for) financing activities and shareholder transactions (1,434) (492) 34.3 (1,549) (405) 26.1
Transactions with staff 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.
Cash and deposits attributable to BancoPosta [A10] - 4,302,784,484 - 4,302,784,484
Cash and deposits attributable to BancoPosta [A9] - 3,318,398,871 - 3,318,398,871
Impairment loss/(reversal) on financial instruments [C11] 45,457,823 32,571 19,878,102 19,885,407 of which, non-recurring costs 45,443,654 -
Increases/(decreases) in fair value during the year [tab. B3] 1,703,465,640 (1,897,523,762)
Use of provisions for risks and charges [tab. B4] (680,613) (669,368)
Losses and impairment losses/(Reversals of impairment losses) on receivables [tab. C9] 43,843 20,649
Net cash flow from /(for) operating activities [d]=[a+b+c] 49,479 1,974,379 - of which related party transactions 780,467 2,607,150
Cash and cash equivalents at end of year [tab. A11] 1,206,344 2,127,300
Amounts that cannot be drawn on due to court rulings (18,140) (17,910)
78. As revised on the issuance of Law Decree 179 of 18 October 2012 converted into law with amendments by Law 221 of 17 December 2012.
As required by art. 2, paragraphs 17-octies et seq. of Law 10 of 26 February 2011, converting Law Decree 225 of 29 December 2010, in order to identify ring-fenced capital for the purposes of applying the Bank of Italy’s prudential requirements to BancoPosta’s operations and for the protection of creditors, at the General Meeting held on 14 April 2011 Poste Italiane SpA’s shareholder approved the creation of ring-fenced capital to be used exclusively in relation to BancoPosta’s operations (BancoPosta Ring-fenced Capital or BancoPosta RFC), as governed by Presidential Decree 144 of 14 March 2001, and established the assets and contractual rights to be included in the ring-fence as well as By-laws governing its organisation, management and control. BancoPosta RFC was provided originally with an initial reserve of €1 billion through the attribution of Poste Italiane SpA’s retained earnings. The resolution of 14 April 2011 became effective on 2 May 2011, the date on which it was filed with the Companies’ Register. Following on from the Board of Directors’ resolution of 25 January 2018 and the subsequent Extraordinary General Meeting of Poste Italiane SpA’s shareholders, on 27 September 2018, Poste Italiane injected €210 million of fresh capital of into BancoPosta RFC.
Nature of assets and contractual rights and authorisations BancoPosta’s assets, contractual rights and authorisations pursuant to notarial deed were conferred on BancoPosta RFC exclusively by Poste Italiane SpA without third-party contributions. BancoPosta’s operations consist of those listed in Presidential Decree 144 of 14 March 2001, as amended78, with the exception of activities linked to card payments and payment services, carried out by the subsidiary, PostePay SpA. More details on this aspect are provided below: � the collection of all forms of savings deposit from the public in accordance with art. 11, para. 1 of Legislative Decree 385/1993 of 1 September 1993 - Consolidated Banking Law (Testo Unico Bancario, or TUB) - and all related and consequent activities; � the collection of savings through postal securities and deposits; � payment services, including the issuance, administration and sale of prepaid cards and other payment instruments pursuant to art. 1, para. 2, letter f) numbers 4) and 5), TUB; � foreign currency exchange services; � promotion and arrangement of loans issued by approved banks and financial brokers; � investment and related services pursuant to art. 12, Presidential Decree 144/2001; � debt collection services; � professional gold trading, on own behalf or on behalf of third parties, in accordance with the requirements of Law 7 of 17 January 2000.
All of the assets and rights arising out of various contracts, agreements and legal transactions related to the above activities have also been conferred on BancoPosta RFC.
BancoPosta RFC’s operations BancoPosta RFC’s operations consist of the investment of cash held in postal current accounts, in the name of BancoPosta but subject to statutory restrictions, and the management of third parties’ collections and remittances. This latter activity includes the collection of postal savings (Postal Savings Books and Interest-bearing Postal Certificates), carried out on behalf of Cassa Depositi e Prestiti and the MEF, and services delegated by Public Administration entities. These transactions involve the use of cash advances from the Italian Treasury and the recognition of financial items awaiting settlement. The specific agreement with the MEF requires BancoPosta to provide daily statements of all cash flows, with a delay of two bank working days with respect to the transaction date.
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: � 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.
� 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.
� Settlement of all incoming and outgoing third party payments by Poste Italiane SpA’s Chief Financial Office.
80. 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.
BancoPosta RFC may therefore both outsource operating activities, entering into agreements with third parties, and contract out certain operating or control activities to Poste Italiane functions, agreeing “Specific Operating Guidelines” with the heads of the various functions. The Operating Guidelines establish, among other things, the applicable levels of service and transfer prices and are effective following an authorisation process involving the relevant functions, the Chief Executive Officer and, where required, the Company’s Board of Directors. The transfer prices set out in the Operating Guidelines are determined according to objective criteria that reflect the real contribution of the various functions to BancoPosta RFC’s results. The transfer prices paid, inclusive of commissions and any other form of remuneration due, are determined on the basis of market prices and tariffs for the same or similar services, identified, where possible, following a benchmarking process. When the specifics and/or the particular nature of a service provided by one of the Issuer’s functions do not allow the use of a comparable market price, a cost-based method is used, again with the support of benchmarking to ensure that the price charged is adequate for the service provided. In such a case, an adequate mark-up, defined on the basis of appropriate analyses of comparable subjects, shall be applied. The prices set in each Operating Guidelines can be reduced in the presence of operating losses of the activities outsourced or in case of penalties due to the failure to achieve pre-established service levels, as measured by specific performance indicators. The Disciplines, in force until 31 December 2020, are reviewed every two years.
Post Office Network Percentage of net income generated by product/service category
The Regulation approved at the Extraordinary General Meeting of Poste Italiane SpA’s shareholder on 14 April 2011, and subsequently amended on 31 January 2019, provides that, where necessary, BancoPosta RFC’s equity shall be sufficient to ensure that it is able to comply with supervisory capital requirements and is aligned with the risk profile of its operations.
In this regard, the following table shows a reconciliation of the components of BancoPosta RFC’s equity, as shown in the Company’s statement of financial position and in the Separate Report83.
Further regulatory aspects Pursuant to art. 2, paragraph 17-undecies of Law Decree 22584 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.
Capital expenditure of €339 million in 2019 consists largely of: � €105 million relating to plant, of which €44 million was for plant and equipment related to buildings, €24 million for the purchase of equipment for use in the sorting of letters and processing of parcels, €22 million for the purchase of telecommunications infrastructure and €11 million for the installation of ATMs (Automated Teller Machines); � €61 million relating to Other assets, including €49 million for the purchase of new computer hardware for Post Offices and head offices and the consolidation of storage systems; � €51 million invested in the upgrade of plant (€28 million) and the structure (€23 million) of properties held under lease; � €43 million relating to extraordinary maintenance of Post Offices and local head offices around the country (€26 million) and mail sorting offices (€14 million).
Investments in progress amount to €61 million, including €25 million for restyling work on the Post Offices, €14 million for the purchase of hardware and other technological equipment not yet included in the production process and €13 million for renovation work on the CPD (Primary Distribution Centres).
Reclassifications from property, plant and equipment under construction amounted to €25 million and refer mainly to the purchase cost of assets that became available and ready for use during the year; in particular, they refer to the completion of restyling work on leased and owned buildings and the activation of hardware stored in warehouse.
85. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, service accommodation qualifies for level 3, while the other investment property qualifies for level 2.
Investment in Intangible assets during 2019 amounts to €303 million, including €20 million in internal software development costs and the related expenses, primarily relating to personnel expenses (€16 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 €126 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.
A4 – Right-of-use assets (€1,119 million) Movements in this item during the year are shown in note 3 – Changes to accounting policies.
A5 – Investments (€2,205 million) This item includes the following: tab. A5 - Investments
Changes in equity investments in subsidiaries and associates are shown below: Tab. A5.1 - Change in investments in FY 2019
Poste Tributi ScpA (in liquidation) - - - - - - - - - in associates
Finally, with effect from 1 October 2019, the company Mistral Air Srl, following the change of the corporate mission, changed its name to Poste Air Cargo Srl.
The main corporate actions during 2019, are described in notes 4.1 – Principal corporate actions.
Poste Italiane SpA has committed to providing financial support to the subsidiaries, SDA Express Courier SpA and Poste Air Cargo Srl, for 2020 and Poste Tributi ScpA throughout its liquidation.
in associates * Consortium fund in the case of consortia. The registered offices of all the companies are located in Rome, with the exception of Anima Holding SpA and FSIA Investimenti Srl, whose registered offices are in Milan, and Conio Inc., whose registered office is in California (USA).
*** Data derived from the accounts for the period ended 30 June 2019, the latest approved by the company. **** Figures of the reporting package of the company at 31 December 2019, as approved by its board of directors, and including measurement of the SIA group using the equity method and recognition of the related effects with regard to Purchase Price Allocation.
87. The Central Counterparty is an entity that acts as an intermediary in a transaction between two parties, avoiding the parties’ exposure to the risk that one of the counterparties to the agreement may default and guaranteeing successful completion of the transaction.
Financial assets at amortised cost Movements in financial assets measured at amortised cost are shown below: tab. A6.1 - Movements in financial assets at amortised cost
Effects of sales on profit or loss - - - (11) (11)
� Other financial receivables include (i) guarantee deposits of €5,660 million, of which €5,181 million provided to counterparties for interest rate swap transactions (with collateral provided by specific Credit Support Annexes), €208 million provided to counterparties for repurchase agreements on fixed income securities (with collateral contemplated by specific Global Master Repurchase Agreements) and €271 million in collateral deposited with the Central Counterparty, in relation to the clearing system (i.e. the Default Fund)89 and (ii) €50 million in amounts due from the subsidiary PostePay SpA, primarily in the first few days of 2020.
These regard investments in fixed income euro area government securities, consisting of bonds issued by the Italian government and securities guaranteed by the Italian government, having a nominal value of €21,175 million. At 31 December 2019, the balance of €25,064 million refers to the amortised cost of unhedged fixed income instruments, totalling €10,047 million, and fair-value hedged fixed income instruments, totalling €12,146 million, increased by €2,871 million to take into account the effects of the hedge (€1,902 million in 2019). The value of these securities was adjusted to take into account the related impairments. Accumulated impairments at 31 December 2019 amount to approximately €8 million (€9 million at 31 December 2018). At 31 December 2019, the fair value90 of these securities was €24,686 million (including €177 million in accrued income).
This category of financial asset includes fixed rate instruments, for a total nominal amount of €3,750 million, issued by Cassa Depositi e Prestiti SpA and guaranteed by the Italian government (at 31 December 2019, their carrying amount totals €3,946 million).
In June 2019, the outstanding amount of €8 million due following the sale of Visa Europe Ltd. share to Visa Incorporated was collected.
Forward purchases Forward sales Interest rate swap Asset swap Forward purchases Forward sales nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value nominal fair value
Cash flow hedge transactions refer to interest rate swaps for a nominal value of €1,670 million (securities hedged at FVTOCI) and forward sales with for nominal value of €1,280 million; the instruments in question underwent an overall net positive change in fair value during the year, due to the effective component of the hedge of €98 million reflected in the cash flow hedge reserve.
Total assets at fair value 36,506 366 71 36,943 31,780 641 45 32,466
Financial assets at amortised cost Movements in financial assets measured at amortised cost are shown below: tab. A7.1 - Movements in financial assets at amortised cost
* 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.
The item includes: � €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; � €21 million for a loan granted to the subsidiary SDA Express Courier SpA in 2019 and repayable in a single instalment on 2 August 2027, to support the construction of the new plant for the automated HUB in Bologna; � €65 million regarding overdrafts on intercompany current accounts granted to subsidiaries, paying interest on an arm’s length basis.
92. 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.
Guarantee deposits relate to collateral provided to counterparties for interest rate swap transactions.
Other receivables, 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 201792. Following the finalisation of the agreement between the parties in January 2019, €20 million of this amount was collected on 27 February 2019.
Movements in financial assets at fair value through other comprehensive income (FVTOCI) are shown below: tab. A7.2 - Movements in financial assets at FVTOCI
Corporate actions during 2019, are described in note 4.1 – Principal corporate actions.
Specifically94: � 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 bodies, amounting to €177 million.
– Unfranked mail services provided on credit, totalling €73 million, to central and local government entities. – Compensation for the discounts applied to publishers, due from the Presidenza del Consiglio dei Ministri - Dipartimento dell’Editoria (Cabinet Office – Publishing department), amounting to €50 million, of which €45 million accrued during the year. Of these receivables, approximately €13 million were not covered in the State’s Budget and were written down at 31 December 2019. On 22 July 2019, pursuant to EU state aid regulations, the European Commission approved public service compensation for the years 2017 to 2019, of €171.74 million, in line with the related state appropriations, acknowledging that the level of compensation had not exceeded the amount necessary to cover the net cost incurred by the Company in providing the service. Following the decision of the European Commission on 6 September 2019, collections for offsetting purposes relating to the financial years 2017-2018 for a total amount of €99 million, which up to that date were recorded under other liabilities, were offset against the related receivables as a result of the disappearance of the unavailability constraint. A further €26 million were collected in February 2020.
– The payment of pensions and vouchers on behalf of INPS (the National Institute of Social Security), totalling €12 million. Moreover, in February 2019, having conducted a joint assessment, Poste Italiane and INPS signed an agreement that, among other things, has settled the respective past outstanding trade receivables (note B4). These positions were settled in April 2019.
Receivables due from subsidiaries and joint ventures 96. The principal agreements that have expired regard those governing relations with the tax authorities in relation to the collection and reporting of payments.
tab. A8.2 - Receivables due from subsidiaries, associates and joint ventures
Receivables from parent company This item relates to trade receivables due from the Ministry of the Economy and Finance: tab. A8.3 - Receivables due from the Parent Company
� Universal Service compensation includes: tab. A8.3.1 - Universal Service compensation receivable
In the year under review, the Group received €262 million in accrued compensation for the period. With reference to the amount receivable for 2012, AGCom has recognised a net cost incurred by the Company of €327 million, compared with compensation of €350 million originally recognised. Provision has not been made in the state budget for the remaining €23 million. The Company appealed AGCom’s decision on 13 November 2014 before the Regional Administrative Court (TAR).
� Receivables arising from electoral subsidies refer to compensation for previous years, for which no provision has been made in the state budget.
A9 – Other receivables and assets (€2,455 million) This item breaks down as follows: 97. 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 201 of 6 December 2011, on stamp duty on current accounts and financial products (Official Gazette 127 of 1 June 2012).
Interest accrued on IRAP refund [C12] - - - - 3 3
Specifically: � Substitute tax paid, attributable to BancoPosta RFC, primarily regards: – €1,357 million charged to holder of Interest-bearing Postal Certificates for stamp duty at 31 December 201997; this amount is balanced by a matching entry in “Other taxes payable” until expiration or early extinguishment of the Interest-bearing Postal Certificates, i.e. the date on which the tax is payable to the tax authorities (tab. B9.3); – €312 million relating to stamp duty to be paid in virtual form in 2020 and to be recovered from customers; – €120 million relating to stamp duty to be charged to Postal Savings Book holders, which the Company pays in virtual form as required by law; – €8 million in withholding tax on interest paid to current account holders for 2019, which is to be recovered from customers.
The item includes €42 million receivable from INPS (formerly IPOST), covered by a specific agreement with IPOST dated 23 December 2009. Payment of this amount consists of six instalments of €6.9 million each, falling due between 30 June 2012 and 31 December 2014 and deemed to be collectible in full. Negotiations for the recovery of the same are underway and, in the event of a negative outcome, the Company reserves the right to take all necessary measures to better protect its rights.
� Accrued interest on IRES refund, refers to interest accruing up to 31 December 2019 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 201/2011; 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. The introduction of the new and additional elements of uncertainty regarding the final outcome of the case was taken into account in the determination of the provision for doubtful debts with an allocation totalling €45 million, recorded in profit and loss under the item Impairment losses/(reversals of impairment losses) on financial assets (Table C.11).
The cash and cash equivalents on hand are derived from deposits made in postal current accounts and postal savings products (subscription of postal savings bonds and payments into Post Office savings books), or from advances withdrawn from the State Treasury to guarantee the operations of Post Offices. These funds, which are held at Post Offices (€853 million) and at service98 companies (€2,634 million), may not be used for purposes other than to repay obligations contracted in the transactions described above. Bank deposits include amounts deposited in an account with the Bank of Italy to be used in interbank settlements (€814 million).
Tax effect of changes in fair value - - 541 (55) - - 486
Injection of fresh capital into BancoPosta RFC - 210 - - - - 210 of which attributable to BancoPosta RFC - 1,210 (71) 88 - - 1,227
Tax effect of changes in fair value - - (486) (28) - - (514)
Increase/(Decrease) for expected credit loss - - (1) - - - (1)
B3 – Availability and distributability of reserves The following table shows the availability and distributability of Poste Italiane SpA’s reserves. Retained earnings include the profit for 2019 of €661 million
Provisions for disputes with staff * 64 8 - (1) (17) 54
Other provisions for risks and charges 79 12 - (2) (3) 86 of which attributable to BancoPosta RFC 511 42 - (25) (201) 327
Specifically: � The provisions for operational risk, relating to liabilities arising from BancoPosta’s operations, mainly reflects the definition of items arising from the reconstruction of the operating accounts at the date of incorporation of the Company, risks associated with the distribution of postal savings products issued in past years, risks associated with customer requests for investment products whose performance is not in line with expectations, adjustments and settlements of income from previous years and estimated risks for charges and expenses to be incurred as a result of foreclosures suffered by BancoPosta mainly as a third party. Provisions for the year, totalling €33 million, mainly reflect risks associated with the distribution of postal savings products issued in previous years and the adjustment of liabilities due to adjustments and settlements to income from previous years. Utilisations totalling €193 million refer for €100 million to liabilities defined in favour of customers subscribing to the Immobiliare Obelisco (due to expire on 31 December 2018) and Europa Immobiliare I funds, in relation to the voluntary protection initiatives approved by the Board of Directors of Poste Italiane and undertaken during 2019, and for €67 million to liabilities defined in favour of INPS, following the agreement signed between the parties in February 2019.
� 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 2021. The provisions made at 31 December 2018 were utilised for €394 million.
Balance at 31 December 1,107 of which attributable to BancoPosta RFC 3
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 provisions for employee termination benefits amount to €135 million, €3 million to substitute tax and €2 million to transfers from a number of Group companies (of which €1 million from the partial de-merger of the business unit of the subsidiary SDA Express Courier SpA).
The sensitivity of employee termination benefits to changes in the principal actuarial assumptions is analysed below: tab. B5.4 - Sensitivity analysis
99. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Fair value through profit or loss 15 - 15 - - - * In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
Borrowings Other than the guarantees described in the following notes, borrowings are unsecured and are not subject to financial covenants, which would require the Company to comply with financial ratios or maintain a certain minimum rating. Standard negative pledge provisions do apply100.
Borrowings from financial institutions 101. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 102. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2. 103. In terms of fair value hierarchy, which reflects the relevance of the sources used to measure assets, this amount qualifies for level 2.
EIB fixed rate loan maturing 12/03/2026 173 - 173 - - -
EIB fixed rate loan maturing 23/03/2019 - - - - 200 200
On 3 October 2019, a new loan of €400 million was signed with the EIB. The loan disbursed on 18 October 2019 provides interest at a fixed rate of 0.29% and matures in October 2026. At 31 December 2019, the fair value103 of this loan is €413 million.
At 31 December 2019, the uncommitted credit lines for short-term loans have not been used. Unsecured guarantees with a value of €275 million have been used on behalf of Poste Italiane SpA and with a value €47 million, on behalf of Group companies. No collateral has been provided to secure the lines of credit obtained.
The existing lines of credit and medium/long-term borrowings are adequate to meet expected financing requirements.
Advances from the Cabinet Office - Publishing and Information department [tab.A7.1] - 72
Amounts due to staff These items primarily regard accrued amounts that have yet to be paid at 31 December 2019. The breakdown is as follows: tab. B9.1 - Amounts due to staff
The reduction in the debt for Incentives is due to the combined effect of the settlements made and the new liabilities which, recorded at 31 December 2018 in the provisions for early retirement incentives, can be determined with reasonable certainty during the year.
During 2019, the amount due to the subsidiary, PostePay SpA, of €72 million generated by the transfer of the monetics and payment services business unit to the latter on 1 October 2018, was settled.
Sundry payables This item breaks down as follows: tab. B9.5 - Sundry payables
� 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.).
Other sales of goods and services 177 75 of which Revenue from contracts with customers 177 75 recognised at a point in time 1 1 recognised over time 176 74
Revenue from contracts with customers breaks down as follows: � Revenue from Postal Services 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.
� Revenue from BancoPosta Services, which breaks down as follows: – 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 fees on the processing of payment slips: 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.
104. Law Decree 162 of 30 December 2019 - as converted by 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 subsidies104 relate to the amount receivable by the Company 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 2019 State Budget.
Revenue from BancoPosta Services, substantially in line with 2018, include the decrease in commissions on the issue and use of prepaid cards due to the transfer of products in the monetics and payments segment to the subsidiary PostePay, with effect from 1 October 2018. This decrease is offset by the commissions received from the same following the contract entered into on the same date for the placement of payment products and services.
Remuneration of current account deposits (deposited with the MEF) 64 63
Income from investments in securities relates to interest earned on investment of deposits paid into postal current accounts by private customers. The total includes the impact of the interest rate hedge described in note A6 – Financial assets attributable to BancoPosta.
� Revenue from insurance brokerage derives from fees receivable from the subsidiaries, Poste Vita and Poste Assicura, in return for the sale of insurance policies.
� Income from delegated services primarily regards amounts received by the Company for the payment of pensions and vouchers issued by INPS (€36 million), and for the provision of treasury services on the basis of the agreement with the MEF (€58 million).
The increase in Other operating income is due to the recognition of income deriving from non-existent liabilities defined as a result of analyses carried out on the transitional accounts used as part of the operations of BancoPosta RFC.
For the purposes of reconciliation with the statement of cash flows, in 2019 this item amounts to €1 million, after losses of €1 million. In 2018, this item, after losses of €2 million, amounted to €115 million.
The increase of €129 million compared with 2018 is mainly due to higher service costs, partly offset by the decrease in Lease and rental costs (following the application from 1 January 2019 of IFRS 16 - Leases).
The increase in Outsourcing fees and external service charges is primarily due to the cost of services provided by the subsidiary PostePay SpA, which in 2018 will only be affected from 1 October 2018, the effective date of the contract to outsource the management of service products.
Charges from financial operations increased by €50 million compared to 2018 mainly due to the increase in interest expense (+€44 million) and valuation charges on forward sales of preference shares of Visa Incorporated (+€15 million) partly offset by the decrease in realised losses from financial assets at FVTOCI (-€19 million).
Total employees on permanent contracts* 117,865 122,821 115,463 119,323 * Figures expressed in full-time equivalent terms.
Furthermore, taking account of staff on flexible contracts, the average number of full-time equivalent staff is 125,894 (in 2018: 130,867).
The decrease of €110 million compared with 2018 is mainly due to lower net provisions for risks and charges (-€56 million), lower operating losses on BancoPosta RFC (-€10 million) and lower impairment of investments (-€62 million), partly offset by higher costs for non-deductible VAT on lease agreements, reclassified by nature at 31 December 2019, as a result of the application of IFRS 16.
C9 – Impairment losses/(reversals of impairment losses) on debt instruments, receivables and other assets (€41 million)
The increase of €19 million compared with 2018 is mainly due to higher impairment of trade receivables (+€29 million), offset in part by lower impairment of other receivables (-€8 million).
Foreign exchange gains* 5 4 * For the purposes of reconciliation with the statement of cash flows, in 2019 finance income after foreign exchange gains and dividends from associates amounts to €59 million (€23 million in 2018).
** Finance income on discounted receivables regards interest on amounts due from staff and INPS under the fixed-term contract settlements of 2006, 2008, 2010, 2012, 2013, 2015 and 2018.
The increase of €26 million compared with 2018 is due mainly to commissions for non-utilisation of committed credit lines provided to certain subsidiaries, offset in part by lower dividends received from associates.
The tax rate for 2019 is 19.7% and consists of: tab. C12.1 - Reconciliation between theoretical and effective IRES rate
Net provisions for risks and charges and bad debts 6 0.73% 3 0.37%
Current tax assets/(liabilities) for the year ended 31 December 2019 primarily regard: � a tax liability of €190 million relating to all the companies participating in the tax consolidation arrangement and reflecting payments of IRES and IRAP on account and refundable IRAP from the previous year, after provisions for IRES and IRAP for 2019; � the substitute tax credit of €32 million relating to the redemption carried out by the Company during 2018, pursuant to art. 15, paragraph 10 ter of Law Decree 185 of 29 November 2008, of the higher values resulting from the notes to the consolidated financial statements at 31 December 2017, of goodwill and other intangible assets relating to the acquisition of the investment in FSIA Investimenti Srl; � the remaining IRES receivable of €4 million to be recovered on the failure to deduct IRAP resulting from the requests filed pursuant to art. 6 of Law Decree 185 of 29 November 2008 and art. 2 of Law Decree 201 of 6 December 2011, which provided for a partial deductibility of IRAP for IRES purposes (in this regard, see as reported on receivables for related interest in Note A9).
Deferred tax assets and liabilities Details of this item at 31 December 2019 are shown in the following table: tab. C12.4 - Deferred taxes
Movements in deferred tax assets and liabilities are shown below: tab. C12.5 - Movements in deferred tax assets and liabilities
Income/(expense) recognised in equity - (137) - - 17 - - (120)
Poste Tributi ScpA (in liquidation) - - 5 - - 2 - - -
Consorzio Servizi Telef. Mobile ScpA - - - - - 1 - 14 -
Consorzio Servizi Telef. Mobile ScpA - - - - 2 23 - - - - -
Consorzio Servizi Telef. Mobile ScpA - - - - 2 24 - - - - -
At 31 December 2019, total provisions for risks and charges made to cover probable liabilities arising from transactions with related parties external to the Company and primarily attributable to trading relations amount to €1 million (€2 million at 31 December 2018).
� 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.
Financial assets attributable to BancoPosta 76,396 11,203 14.7 63,863 10,684 16.7
Provisions for risks and charges 1,130 70 6.2 1,431 71 5.0
Financial liabilities attributable to BancoPosta 77,937 10,518 13.5 66,759 8,923 13.4
Net cash flow from /(for) operating activities 49 780 n.a. 1,974 2,607 n.a.
Net cash flow from /(for) investing activities (736) (50) 6.8 (399) 130 n.a.
No loans were granted to key management personnel during the year and, at 31 December 2019, the Company does not report receivables in respect of loans granted to key management personnel.
Transactions with staff pensions funds Poste Italiane SpA and the subsidiaries that apply the National Collective Labour Contract 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.
Introduction 105. The funds raised by private customers on postal current accounts must be used in euro area government securities and, for a portion not exceeding 50% of the funds raised, in other securities backed by the Italian government guarantee.
106. See in particular the provisions laid down in Part I – Section IV – Chapter 3. 107. The RAF consists of a framework that defines, in keeping with the maximum acceptable risk, the business model and strategic plan, the risk appetite, risk tolerance thresholds, risk limits, and risk management policies, together with the processes needed to define and implement them.
The note on Risk management is common to both the Group and Poste Italiane SpA. It deals with both financial risk (as defined by IFRS 7) and other types of risk that the Group deems it appropriate or necessary to disclose. Quantitative disclosures for Poste Italiane SpA alone are provided in the specific section of this note, unless otherwise indicated.
� 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 euro zone government securities105, 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, required to establish a system of internal controls in line with the provisions of Circular 285106, which, among other things, requires definition of a Risk Appetite Framework (RAF107), the containment of risks within the limits set by the RAF, 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 and the change in the market scenario, the Leverage Ratio fell during the year to 3.0% at 31 December 2019, taking into account the increase in capital deriving from the calculation of part of the 2019 profits, no subject to distribution.
� Financial instruments held by the insurance company, Poste Vita SpA, primarily relate to investments designed to cover its contractual obligations to policyholders on traditional life policies and unit-linked policies. Other investments in financial instruments regard investment of the insurance company’s free capital.
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 22 May 2019. 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: � the Audit, Risk and Sustainability 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 Poste Italiane SpA’s internal control and risk management system and, from February 2018, issues relating to Poste Italiane SpA’s sustainability.
� an Investment Committee established at the Group’s insurance Company, Poste Vita SpA, which, based on analyses by the relevant functions, provides advice to senior management on the development, implementation and oversight of investment strategy; � appropriate functions established within the Parent Company and the subsidiaries providing financial and insurance services (BancoPosta Fondi SGR SpA and Poste Vita SpA) that perform Risk Measurement and Control activities, ensuring the organisational separation of risk assessment from risk management activities; the results of these activities are examined by the relevant advisory Committees, which are responsible for carrying out an integrated assessment of the main risk profiles.
The table below shows the sensitivity analysis for the fair value interest rate risk at 31 December 2019 for the Poste Italiane Group’s positions.
Nominal Fair value +100bps -100bps +100bps -100bps +100bps -100bps +100bps -100bps 2019 effects
Fair value though profit or loss - - - - - - - - - 2018 effects
Within the context of derivative financial instruments, the risk in question primarily concerns: � forward sales of government bonds with a nominal value of €1,280 million, classified as cash flow hedges, entered into by BancoPosta RFC; � a derivative contract entered into by the Parent Company to protect cash flows relating to the €50 million variable rate bond; � forward sale of a government bond with a nominal value of €120 million, classified as fair value hedge and entered into during the year by Poste Vita SpA.
The performance of the Group’s portfolio in the period under review is as follows: i. the portfolio of financial assets at fair value through other comprehensive income held by Poste Italiane SpA (notional amount of approximately €32 billion) has undergone an overall net increase in fair value of approximately €3.7 billion: this change was partly recognised in the profit and loss for a positive amount of approximately €2 billion relating to the change in the fair value of securities hedged against interest rate risk, whilst the positive change in the fair value of unhedged securities and the spread risk component (not hedged) was reflected in consolidated equity for approximately €1.7 billion; ii. an overall net increase of approximately €7.7 billion in the Poste Vita Group’s financial assets at fair value through other comprehensive income (a nominal value of the fixed income instruments of approximately €92 billion), almost entirely passed on to policyholders and recognised in specific technical provisions under the shadow accounting mechanism.
108. Duration is the indicator used to estimate the percentage change in price in response to a shift in market returns. 109. The Coherent Duration of assets and liabilities is defined as changes in the value of assets and liabilities, in proportion to the total amount of assets exposed to interest rate risk, following parallel shocks raising and lowering interest rates by 10 basis points.
The table below shows the results of the analysis of sensitivity110 to spread risk of the most significant positions in the portfolios of both the Parent Company and the Poste Vita Group at 31 December 2019.
110. For sensitivity purposes, the swap rate curve and the BTP curve were used (10-year swap rate of 21 bps and the spread of the BTP compared to the 10-year swap rate of 120 bps).
Notional Fair Value +100bps -100bps +100bps -100bps +100bps -100bps +100bps -100bps 2019 effects
Financial assets * 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.
In addition to using the above sensitivity analysis, Poste Italiane SpA and the Poste Vita Group monitor spread risk by calculating its maximum potential losses, through an estimate of Value at Risk (VAR) on statistical bases, over a 1-day time horizon and at a 99% confidence level. Risk analysis performed through VAR takes into account the historical variability of the risk (spread) in question, in addition to modelling parallel shifts of the yield curve.
The following table shows the maximum potential loss computed at 31 December 2019, limited, in terms of materiality, to the financial assets held by the Parent Company and the Poste Vita Group.
Financial assets at FVTOCI 30,729 32,572 380 * 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.
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.
The following analysis refers to the uncertainty over future cash flows generated by variable rate instruments and variable rate instruments created through fair value hedges following fluctuations in market interest rates.
Sensitivity to cash flow interest rate risk relating to these instruments is calculated by assuming a parallel shift in the yield curve of +/- 100 bps.
Specifically, with respect to financial assets, the cash flow interest rate risk primarily relates to: � investment by the Parent Company of the funds deriving from the current account deposits of Public Administration entities in the following: deposits with the MEF, with a nominal value of €7,066 million; � receivables of €5,683 million, reflecting collateral posted to secure liabilities arising in relation to derivative financial instruments and repurchase agreements held by BancoPosta RFC, amounting to €5,660 million; � a portion of the securities portfolio held by Poste Vita SpA, with a total nominal value of €9,253 million; � fixed rate government bonds held by the Parent Company and swapped into variable rate through fair value hedges, with a total nominal amount of €6,400 million (including €4,385 million in securities hedged against changes in fair value, where the hedges will begin to have an effect on profit or loss in the 12 months after the end of the period under review); in addition to an inflation-linked bond issued by the Italian Republic, with a nominal value of €100 million, both of which have been hedged against changes in its fair value.