2011–2014 There have been great changes in Generali over the past few years. The appointment of Gabriele Galateri di Genola as Chairman (2011) and Mario Greco as Group CEO (2012) have heralded a new phase of development. In addition to the corporate reorganization which led to being established (comprising three brands: General for the retail market and SMEs, Alleanza for the family sector and Genertel sector for alternative channels), the acquisition of the minority interests in Generali Deutschland Holding and Generali PFF Holding have been completed. The Group also disposed of certain noncore activities, as Banca della Svizzera Italiana (BSI). Finally, the Group has initiated the European partnership with Discovery to launch Vitality.
Generali announced in May a strategic business repositioning in Germany, consistently with Group strategy. The aim is to further enhance the competitive position of the Group in the German market by the end of 2018, through simpler, businessoriented governance, stronger focus on distribution strengths, a new business model in Life insurance to ensure long-term profitability, and a more modern, leaner operating platform. The repositioning will be based on the following key business strengths: ❚ simplified governance that is more business-focused by incorporating the most important operating entities into Generali Deutschland AG; ❚ multi-channel approach and customized services with Generali, AachenMünchener and CosmosDirekt.; New Generali strategy launched
On 23 October the rating agency AM Best confirmed Generali’s FSR (Financial Strength Rating) rating as A (Excellent). For the first time, AM Best assigned the same FSR rating also to the Generali Italia and Ceská Pojištovna. AM Best also confirmed the ratings of the debt instruments issued or guaranteed by Generali. The outlook was confirmed as stable. AM Best said that the rating reflects the Group’s very strong business position in continental Europe, solid operating performance and improving capitalization.
On 26th January 2016 the Group CEO, Mario Greco, has informed the Chairman of the Company, Gabriele Galateri di Genola, that he would be unwilling to serve another term as CEO of the company at the expiry of his current mandate, which is planned to coincide with the Annual General Meeting to approve the financial statements as of 31 December 2015. On 9th February the Assicurazioni Generali Board of Directors has approved the mutually agreed termination of all existing relations between the Company and Mario Greco, with immediate effect and in line with the Group’s remuneration policies.
In an economic environment characterized by uncertainty, consumer attitudes toward insurance products and services are changing. These changes have their roots in two global trends: digitalization, which introduced new options for selling and using insurance solutions, and economic uncertainty, which has impacted spending on certain forms of retirement savings and insurance. Today’s clients are increasingly attentive to quality of service and more independent in their decision-making thanks to a multitude of information sources available via the internet. They are no longer satisfied with simply consulting an agent and purchasing insurance products; they expect the same kinds of tailored services they find in other industries, as well as solutions that respond to their real life needs.
Insurance industry regulation is extremely active at national, European and international level. In particular the sector is influenced by the following initiatives: Solvency II, the European project aimed at reforming and harmonizing the prudential supervision of the insurance and reinsurance business, aiming, inter alia, at defining capital requirements in order to reduce insolvency risk; the new European Insurance Distribution Directive (IDD), which will introduce stricter rules on the distribution of insurance products in order to increase consumer protection, improve information transparency and reduce conflicts of interest. At the end of the negotiations among the European institutions, a political agreement was reached on 15 December 2015 regarding the European legislation regarding the protection of personal data which will become compulsory for all member states in 2018 and will regard all sectors, including insurance. This regulation was needed because of continuous technological developments, especially with respect to the protection and safeguarding of personal data. Furthermore, it is worth mentioning the Common Framework (ComFrame) Project launched by the International Association of Insurance Supervisors (IAIS) and designed as a set of international supervisory qualitative and quantitative requirements focusing on the effective group-wide supervision of all Internationally Active Insurance Groups (IAIGs).
Vision Our purpose is to actively protect and enhance people’s lives
These 4 components clearly set Generali solutions apart in the insurance market, and this should help it develop its cross selling activities and the acquisition of new customers.
+70,000 employees invited in 42 countries overall level of response +5% vs. global benchmark*
Subjects held - either directly or indirectly through third parties, trustees and subsidiaries - more than 2% of the share capital *
His mission is to guarantee a world class integrated risk management system through the definition of the risk strategy including risk appetite, limits and risk mitigation, and through the identification, monitoring and reporting of risks and the management of the risk capital model.
Committee (GMC); ❚ managers and executives directly reporting to the control functions, for whom specific and/or further provisions apply, in line with the regulatory requirements relating to those parties; ❚ other positions directly reporting to the CEO, with significant impact on the risk and strategic profile of the Group; In line with the strategy, which aims to increase the international integration of the Group and strengthen its role internationally, our remuneration policy principles, consistent at a global level, are stated within the organization and are in accordance with the laws and local specificities. In particular, the Group pays special attention to the governance issues concerning the members of the Global Leadership Group (GLG), representing about 200 roles who have significant organizational weight within the Group and effective impact on the results and on the process aimed at fostering the strategy.
Premiums collected from the insurance contracts are managed through specific asset – management policies in order to ensure the payment of claims and consideration to our policyholders or their beneficiaries in the event of death, accidents or upon occurrence of the insured event. The amounts received are invested in financial instruments.
Generali Investments Europe (GIE), our asset management company, has further focused attention on sustainable investments by creating a special team of ESG analysts and its own innovative, transparent selection process, applicable to different asset classes, which is based on: ❚ In-depth ESG analysis by the team
Switzerland Generali has been operating in Switzerland since 1987 and over the following decade its presence was consolidated by the acquisition and merger of many insurance companies. In accordance with the strategy recently presented and shared throughout the Group, Generali Switzerland focuses on the retail business and provides high quality and innovative services, through various distribution channels: agents, brokers, financial advisors and direct channels.
As for the market trend, the economic context remains overall quite complex, due to low interest rates, low inflation and a slightly increasing unemployment rate. As for the insurance market, price competition is very high, especially for the broker market, where the broker number is growing significantly; hiring financial advisors is presenting some difficulties and comparative web portals are increasing.
❚ Group Solvency I at 164% (156% at 31 December 2014; considering the disposal of BSI, the 2014 ratio on a pro-forma basis was 164%).
The profitability of new business (margin on APE) held up well, standing at 21.0% (24.0% as at 31 December 2014) due to the adverse economic climate where interest rates fell and the strong increase in volatility recorded in the second quarter of 2015. New business value (NBV) amounted to € 1,097 million (-13%).
Interest expense on liabilities linked to operating activities -411 -518 -103 -162
Result of the period attributable to the Group 2,030 1,670 304 81
Shareholders' equity attributable to the Group at the end of the previous period 23,204 19,778
These trends were only partly offset by the drop observed in EMEA as a result of the planned reduction of single premiums in Ireland and the slight increase in total capital outflow.
New business stood at € 5,210 million (-0.2% on equivalent exchange rates and portion attributable to the Group) in terms of annual premium equivalents (APE). Trends in single premiums were positive (+8.3%), especially in Italy, France and Asia, while the annual premiums fell (-6.8%) mainly following the drop in Italy which was only partially offset by the growth in France and Asia.
AMERICAS Gross written premiums in Latin America increased (22.2% ) amounting to € 312 million(€ 254 million at 31 December 2014).
Gross written premiums in Switzerland fell (-1.1% on a like-for-like basis), amounting to € 759 million (€ 675 million at 31 December 2014). The negative performance was due to the motor lines (-5.5%), affected by a reduction in the portfolio retention rates. On the other hand, non-motor lines increased (+2.6%), mainly due to progress in the accident and health line (+5.6%) thanks to the income protection products and the agreement of certain signifi cant contracts.
The gross written premiums from Latin America increased from € 1,057 million at 31 December 2014 to € 1,155 million (+7.3 % on a like-for-like basis).
The expense ratio increased with respect to the previous year, amounting to 22.5%, following the increase in the acquisition costs.
The combined ratio for the Central and Eastern European countries stood at 90.1% (87.7% at 31/12/2014). This was mainly due to the increase in claims for both catastrophic claims, which had a 1 pps weight compared to the 0.4 pps weight of 2014, and for non-catastrophic claims. The improvement in the loss ratio in the non-motor line was offset by trends in the motor line, especially in Bulgaria and Poland which were affected by regulatory changes on reservations.
(€ million) Combined ratio* Loss ratio Expense ratio 31/12/2015 31/12/2014 31/12/2015 31/12/2014 31/12/2015 31/12/2014
(*) CAT claims impacted on the Group combined ratio for 1.6 pps of which 2.1 pps in Italy, 1.9 pps in France, 2.3 in Germany, 1 pp in European Eastern Countries, 1 pp in EMEA and 4.1 pps in Asia (At 31 december 2014 CAT claims impacted on the Group combined ratio for 1.2 pps, of which 1.7 pps in Italy, 2.4 pps in France and 1.1 pps in Germany).
Specifically, the operating result represents earnings before taxes, gross of interest expense on liabilities linked to financing activities, specific net income from investments and non-recurring income and expenses. Starting from this report, the Group has reviewed the portrayal of its operating segments in order to provide disclosures which are more closely aligned with the new organizational structure of the Group and to ensure an improved economic representation of the performance of the individual business and geographical segments.
In the property&casualty segment, all profit and loss accounts are considered as operating items, except for the following which are represented in the non-operating result: ❚ realized gains and losses, unrealized gains and losses, net impairment losses on investments, including gains and losses on foreign currencies,
References: (€ million) 31/12/2015 31/12/2014 27 1.2 Fee and commission income and income from financial service activities 1,094 967 28 1.3 Net income from financial instruments at fair value through profit or loss 1,941 3,510 of which net income from financial instruments where the investment risk is borne by the policyholders and related to pension funds 29 1.4 Income from subsidiaries, associated companies and joint ventures 130 191 30 1.5 Income from other financial instruments and land and buildings (investment properties) 16,219 15,991 1.5.4 Unrealized gains and reversal of impairment losses 206 194 32 2.1 Net insurance benefits and claims -69,091 -67,003 2.1.1 Claims paid and change in insurance provisions -70,204 -68,280 33 2.2 Fee and commission expenses and expenses from financial service activities -586 -470 34 2.3 Expenses from subsidiaries, associated companies and joint ventures -16 -68 35 2.4 Expenses from other financial instruments and land and buildings (investment properties) -3,215 -3,461 2.4.4 Unrealized losses and impairment losses -1,035 -1,307 2.5.1 Commissions and other acquisition costs -8,179 -7,884
EARNINGS AFTER TAXES 2,295 1,921 4 RESULT OF DISCONTINUED OPERATIONS -35 -69
Investments in subsidiaries are consolidated line by line, whereas investments in associated companies and interests in joint ventures are accounted for using the equity method.
Generali Group has assessed the nature of its current joint arrangements and determined them to be joint ventures and none are joint operations.
‘Share of losses of an associate’ in the income statement. Where the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
The qualitative and quantitative disclosures required by IFRS 12 are provided in the paragraph “Information on consolidation perimeter and Group companies” in the Notes.
IFRS 4 – Insurance Contracts (Exposure draft) On 20 June 2013, the IASB published the exposure draft "Insurance Contracts" . The E.D. proposes a new model for the measurement of insurance contracts that will replace the current IFRS 4 - Insurance Contracts. The valuation method is structured on a Building Block Approach based on the expected value of future cash flows, weighted by the probability of occurrence, on a risk adjustment and on a margin for the services provided within the contract ("contractual service margin"). The contractual service margin is a component of the compensation that the insurer requires for its activity, that is characterized by uncertainty and various types of risk. A simplified approach ("Premium Allocation Approach") is permitted if the coverage period of the contract is less than one year, or if the model used for the assessment provides a reasonable approximation compared to the building block approach.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
 x\in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
Cash in hand and equivalent assets, cash and balances with banks payable on demand and with central banks are accounted for in this item at their carrying amounts.
As provided for by IAS 32, the item includes equity instruments of the Parent company held by the same company or by its consolidated subsidiaries
The item comprises realized gains and losses, interests, dividends and unrealized gains and losses on financial assets and liabilities at fair value through profit or loss.
If there isn’t an active market, a valuation technique should be used which shall maximise the observable inputs. If the fair value cannot be measured reliably, amortised cost is used as the best estimate in determining the fair value.
Fair value hierarchy Assets and liabilities measured at fair value in the consolidated financial statements are measured and classified in accordance with the fair value hierarchy in IFRS13, which consists of three levels based on the observability of inputs within the corresponding valuation techniques used.
A fair value measurement developed using a present value technique might be categorised within Level 2 or Level 3, depending on the inputs that are significant to the entire measurement and the level of the fair value hierarchy within which those inputs are categorised.
Estimates are periodically reviewed and are based on key management’s best knowledge of current facts and circumstances.
 the elimination in the non-life segment and holding and other businesses segment of realized gains and losses arising from intra-segment operations
2 Disclosures on interests in other entities 2.1 Interests in Subsidiaries
Carrying amount in investee at the end of the year 264 257 151 130
The following table shows a condensedincome statement of the BSI Group.
Financial assets at fair value through profit or loss 8,970 2.4% 8,667 2.4%
The debt securities of this category are almost entirely investment grade and more than 70% of the class boasts a rating greater or equal to A.
As already mentioned, available for sale financial assets are measured at fair value and unrealized gains and losses on these assets are accounted for in shareholders’ equity in an appropriate reserve. The amortized cost of the available for sale financial assets amounted to € 258,722 million.
Sales of the period refer to disposal of some investment properties, located mainly in Italy and France.
Bonds Group’s exposures to bonds - detailed by rating and maturity - are reported at book value in the following tables: Bonds: breakdown by rating
As far as Reverse REPO transactions are concerned, if all the underlying risks ad rewards are retained by the counterparty for the entire life of the transaction, the related financial asset is not recognised as an asset in the Group’s financial statements. The consideration paid is accounted for within the loans and receivable category.
During the financial year, the Group has activated a hedging strategy to neutralise the risk of fluctuations in the foreign exchange rates of its subsidiaries whose functional currency is the Swiss franc.
The investment contracts within the scope of IAS 39 remained stable at 6.2% of Life portfolio. They are mainly unit/index linked policies without significant insurance risk.
The table above shows a progressive shift of the exposures towards ‘less than 3%’ guarantee classes, also due to the new business. Lastly, the amount of provisions without guaranteed interest showed an increase amounting to € 78,213 million (€70,480 million as at 31 December 2014).
The following table shows the cumulative claim payments and the ultimate cost of claims by accident year and their development from 2006 to 2015. The ultimate cost includes paid losses, outstanding reserves on reported losses, estimated reserves for IBNR
Actuarial gains or losses arising from defined benefit plans -67 240
Total financial investments at fair value through profit or loss 31/12/2015 31/12/2014 31/12/2015 31/12/2014 31/12/2015 31/12/2014 31/12/2015 31/12/2014
Income from service and assistance activities and recovery of charges 604 461
Disposals through sales and settlements - Other available for sale financial assets 1,457 497 64 -64
Financial liabilities at fair value through profit or loss 45 106 0 0 - Financial liabilities related to investment contracts issued by insurance companies
The evaluation of the bonus right linked to market condition is made by multiplying the fair value of assignable shares (equal to the market price at grant date) with the determined pay-out by applying the linear interpolation of the probable position of rTSR estimated using a statistical model. The linear interpolation method is applied to a range between the maximum pay-out, recognized in the case of the TSR positioning at the first place, and a pay-out zero in the case where the TSR is in the last position with respect to selected peer or has a negative value.
The cost associated with all above mentioned outstanding plans recognised during the period amounted to € 43.9 million. The maximum number of shares that can be granted in relation to mentioned plans is approximately 16.2 million.
The Board of Directors is regularly informed by the Top Management of the Parent Company and by the Group Risk Management function on the Group risk exposures, through regular reporting or, in exceptional circumstances, in case of material changes in the risk profile, or when prompt intervention through corrective measures is required. The Board of Directors is also periodically informed by the ‘Dirigente Preposto’, Manager in charge of preparing the Company’s financial reports, also through the Risk and Control Committee, on the risk management and internal control related to the process of financial reporting. The Risk and Control Committee, holder of inquiry, consultative and advisory functions, assists the Board of Directors in carrying out the tasks related to the Internal Control and Risk Management System. The committee is composed of non-executive directors, the majority of whom being independent.
Risk measurement methodologies (both for qualitative and quantitative risks) are applied in order to provide an integrated measurement of risks at Group level.
In order to manage the Group exposure towards financial markets, while maintaining a perspective of risk/return, the management adopts procedures and actions at portfolio level including: − strategic and tactical asset allocation guidelines updated to changing market conditions and to the ability of the Group to assume financial risks; − matching strategies related to net cash flows and the duration of assets and liabilities, in order to manage interest rate risk; − dynamic hedging strategies through the use of derivatives instruments such as options, swaps, forwards and futures; − policies for managing policy portfolio and pricing consistent with sustainable guarantee levels.
As it can be seen, at 31 December 2015, the Company is subject to the effects of the decreasing interest rates. The reduction in embedded value is greater than the variation observed in the opposite case, that is in case of a rise in interest rates. The asymmetry above, albeit reduced from the previous year thanks to an increase in interest rates and a reduction in the volatility of the reference curve (the implied volatility of equity instruments remains about the same levels), recorded at the end of 2015, is mainly due to the presence of specific financial guarantees implied in contracts, in particular minimum return guarantees, the cost of which increases considerably because of the decrease, in the current level of rates.
Market risk evaluation has been performed, for non-life, Holding and other businesses segments, following a bottom up approach and using a full evaluation model, which calculates the change in value of each financial instrument caused by applied stress tests (+/- 50bp yield curve change, +/- 20% change for equity).
Ratings provided by the main rating agencies are used for the assessment of the creditworthiness of the individual issues and issuers. In cases where there are multiple and divergent agencies’ ratings, the second best rating among those available is chosen. An internal rating based on a detailed economic and financial analysis is assigned to certain investments for which no rating is 8 Sensitivity analysis does not assume the achievement of defined triggers for impairment.
AM Best stated that the rating reflects the Group’s very strong business position in continental Europe, solid operating performance and improving capitalization.
The Solvency II directive, entered into force at European level on 1/1/2016, implies a market consistent valuation of all balance sheet items and by the consideration of all risks the Group is exposed to. Risk calibration is performed according to the Value at Risk approach with a confidence level of 99.5% over a one-year period. The risk appetite defined at Group level gives due consideration to that calibration level, even increasing it for internal purposes.
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Company disposed of/wound up/merged in: 15. EOS Servizi Fiduciari S.p.A., Milan 16. Fond kvalifikovaných investoru GPH, Prague 17. Generali 7 S.A., Paris 18. Generali Belgium Real Estate FCP FIS, Luxembourg 19. Generali Corporate Services S.c.a.r.l., Trieste 20. Generali Habitat SCpI, Paris 21. Generali Innovation Center for Automobile Repairs S.c.a.r.l., Pero 22. Generali International Ltd (fusa in Generali Worldwide Insurance), St. Peter Port 23. Generali Pensionskasse AG (fusa in Bonus Pensionskasse AG), Vienna 24. Generali Realties Ltd, Tel Aviv 25. Generali Rückversicherung AG (fusa in Generali Versicherung AG), Vienna 26. Genertel Servizi Assicurativi S.r.l., Mogliano Veneto 27. Gensegur Agencia de Seguros S.A., Madrid 28. Iberian Structured Investments I B.V., Amsterdam 29. Ifa S.A., Paris 30. Kudough Credit Solutions (Pty) Ltd, Randburg 31. La Caja de Seguros de Retiro S.A., Buenos Aires 32. La Estrella Seguros de Retiro S.A., Buenos Aires 33. Labour Assist (Pty) Ltd, Constantia Kloof 34. MRS Bioul S.A., Bruxelles 35. NV Schadeverzekering Maatschappij De Nederlanden van Nu (fusa in Generali Schadeverzekering Maatschappij N.V.), Amsterdam 36. Oudart Gestion S.A., Paris 37. Oudart Patrimoine Sarl, Paris 38. Oudart S.A., Paris 39. Pankrac Services, s.r.o. (fusa in REFICOR s.r.o.), Prague 40. Participatie Maatschappij Transhol B.V., Amsterdam 41. Patrimony 1873 SA, Lugano 42. RVT Kortenaken SA, Bruxelles 43. RVT Oordegem SA, Bruxelles 44. RVT Zottegem SA, Bruxelles 45. Schloss Bensberg Management GmbH, Bensberg 46. SCI Eureka Nanterre, Paris 47. SIMGENIA S.p.A. SIM (fusa in Alleanza Assicurazioni S.p.A.), Trieste 48. Univerzální správa majetku a.s. (fusa in Direct Care s.r.o.), Prague 49. Victoria Insurance Company A.D. (fusa in Generali Insurance AD), Sofia
Fondo Immobiliare Toscanini 086 EUR 395,022,734 G 10 11.07 Generali Properties S.p.A. 100.00 100.00 0.41 Assitimm S.r.l.
GID Fonds AVRET 094 EUR 174,640,692 G 11 100.00 AachenMünchener Versicherung AG 100.00 100.00
Ocealis S.A.S. 029 EUR 300,000 G 11 75.00 Europ Assistance Holding S.A. 75.00 74.99
SCI Terra Nova V Montreuil 029 EUR 19,800,000 G 10 30.00 Generali Vie S.A. 100.00 98.93 70.00 Generali IARD S.A.
SCI Generali Commerce 2 029 EUR 100,000 G 10 100.00 Generali IARD S.A. 100.00 98.93
SCI Bureaux Paris 029 EUR 250 G 10 100.00 Generali Vie S.A. 100.00 98.93
Allgemeine Immobilien-Verwaltungs GmbH & Co. KG 008 EUR 17,441,553 G 10 100.00 Generali Versicherung AG 100.00 100.00
Generali North American Holding S.A. 092 USD 15,600,800 G 8 22.22 Alleanza Assicurazioni S.p.A. 100.00 100.00 10.56 Genertellife S.p.A.
Generali Europe Income Holding S.A. 092 EUR 39,235,001 G 8 4.52 Generali Immobilien GmbH 100.00 99.64
Generali Diversification USD Corporate Bond Fund AAA - A- 092 EUR 2,375,975,204 G 11 0.61 Generali Belgium S.A. 100.00 100.00
B.V. Algemene Holding en Financierings Maatschappij 050 EUR 4,696,625 G 9 100.00 Generali Holding Vienna AG 100.00 100.00 74.00 Generali Italia S.p.A.
Vàci utca Center Uzletközpont Kft 077 HUF 4,497,120 G 10 100.00 Generali Immobilien GmbH 100.00 100.00
Apollo Business Center IV, spol. s r.o. 276 EUR 25,000 G 10 100.00 Ceská Pojištovna a.s. 100.00 100.00
Europ Assistance North America, Inc. 069 USD 34,061,342 G 11 100.00 Europ Assistance Holding S.A. 100.00 99.99
Initium S.r.l. in liquidazione (*) 086 EUR 1,712,185 b 10 49.00 Generali Properties S.p.A. 49.00 49.00 3,500
Bois Colombes Europe Avenue SCI (*) 029 EUR 1,000 c 10 50.00 Generali Vie S.A. 50.00 49.46 7,394
Risk-Aktiv Versicherungsservice GmbH 008 EUR 35,000 a 11 100.00 Generali Versicherung AG 100.00 100.00 35
Generali Telefon- und Auftragsservice GmbH 008 EUR 35,000 a 11 100.00 Generali Bank AG 100.00 100.00 35
UBS (Lux) Euro Value Added Real Estate Fund 092 EUR 282,200,000 b 10 7.09
Europ Assistance Travel S.A. 067 EUR 60,101 a 11 100.00 Europ Assistance Servicios Integrales de Gestion, S.A. 100.00 99.98 219
IOCA Entertainment Limited (*) 031 GBP 10,000 b 11 35.00 Banca Generali S.p.A. 35.00 17.65 2,160
Europ Assistance SA 015 CLP 335,500,000 a 11 25.48 Europ Assistance Holding S.A. 50.96 38.98 176
(such as the mortality risk or similar insurance risks) cannot be classified as such. In line with the definitions of FRS 4 and IAS 39 these contracts are recognized as financial liabilities.
Operating earning per share is the ratio between:  total operating result net of interest on financial liabilities, taxes and third party interests (as defined in the section 3 of the methodological note), and
The new business Profitability in 2015 amounted to 21.0% with a drop of 3.1% explained by the overall unfavourable economic scenarios in respect of 2014. Being the full year new business value calculated as the sum of each quarter value (based on beginning of period economic assumptions), the averaged 2015 scenario, compared with the corresponding 2014, is characterized by the reduction of interest rates and the sharp increase in volatility, especially in the second quarter of 2015. Anyway the negative economic impact has been mitigated by the reduction in the level of guarantees and by the steering of the production towards more favourable business mix.
Adjusted value at 31/12/2014: this is the adjusted starting point of the movement, basis for the calculation of the return on EV.
The cost of capital reduced by 651mln due to the decrease of required capital underlying its calculation mainly on account of the Solvency II adjustment.
business profitability decreases by 3.1 percentage points on a comparable basis (i.e. neutralising the impacts of changes in perimeter and exchange rates), leading to a margin on APE of 21.0%, as illustrated in the table below.
The 2015 NBV decreases by 13.0% on a comparable basis and amounts to 1,097mln.
Finally, the table below shows the development from 2014 to 2015 of the main additional new business profitability indicators, obtained using “real-world” best estimate financial assumptions (see Annex B1).
Total Normalised EV earnings 2,647 1,148 Return on EV 30.4% 13.2%
As a result, operating EV earnings amount to 882mln, while normalised earnings (which exclude the other operating variances) equal to 1,148mln and lead to a normalised return on EV of 13.2%.
APE decreases by -6.8%, as a combined result of the decrease of annual premiums (-25.2%, mainly explained by one-off Group pension contract written in the first quarter of 2014) and the increase of single premiums (+17.7%). As a result of this decrease, annual premiums lose their dominant weight on APE dropping from 57.2% to 45.9%. In terms of lines of business, saving production decreases by -14.0% and represents 80.2% of total APE of the area. In addition, unit linked business reports a growth of +45.7% on account of the sales of the new and most profitable hybrid products: the weight of unit linked business on APE increases from 11.5% at year-end 2014 to 18.1% at year-end 2015.
The total new business strain amounts to -120mln, corresponding to the sum of the negative contribution to profit in the year of sale (-102mln) and the capital absorbed by the new business (-17mln). Despite the positive effect of a lower strain (from -16.2% to -13.3%, in terms of present value of new business premiums) the drop in the profitability lead the internal rate of return to decrease from 9.8% in 2014 to 8.0% in 2015, whilst the payback period increases from 6.4 years to 6.7 years.
The operating experience variance included in the operating EV earnings amounts to +141mln. Positive deviations come from the repricing of a part of health business portfolio in Austria (+46mln), mortality (+27mln, mainly in Spain, Netherlands and Switzerland), surrenders (+27mln, mainly in Netherlands) and from profit sharing (+21mln, mainly in Austria and Belgium); whilst negative deviation regards expenses (-11mln, mostly in Belgium).
New Business Value 2014 19 11.8% PVFP before Time Value of FG&O 70 31 Change in perimeter 0 0.0% Time Value of FG&O 0 0 Exchange rate fluctuation 3 0.5% PVFP after Time Value of FG&O 70 31 Products mix/volume 9 -2.2% Cost of Capital -28 -12 Profitability 10 3.4% Cost of NHR 0 0 New Business Value 2015 42 13.5% New Business Value 42 19
• 130% Solvency Capital Requirement: sensitivity to a modification of the required capital, which is set equal to the 130% of the Risk adjusted capital net of the admitted free coverage.
Par reference rates at 31 December 2015 - before application of volatility adjustment 1 year 2 year 5 year 10 year 20 year 30 year
calibration are the Euro Stoxx 50 for the EUR economy, SMI for the CHF economy and PX for the CZK economy.
ANAV can be broken down into required capital and free surplus.
It represents the additional cost to shareholders associated with financial guarantees and options, including dynamic policyholder behaviour, over and above the intrinsic value that is already reflected in the PVFP defined above; it is calculated on a market consistent basis.
Adjusted Net Asset Value (ANAV) corresponds to the consolidated market value of the assets backing the shareholders’ funds, net of taxes and policyholder interests on any unrealised capital gains and losses, after the elimination of goodwill and DAC, net of other adjustments required to maintain consistency with the valuation of the in-force business, and before the payment of dividends from profits of the year.
Operating Embedded Value Earnings correspond to Embedded Value Earnings, net of economic variances and other non operating variances.