Attestation of the Consolidated Financial Statements pursuant to art. 154-bis of legislative decree of 24
13 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
In Germany, Generali Vitality was launched, the first health and well-being programme in Europe designed to promote and incentivize healthy behaviour by members.
Generali supported the people impacted by the earthquake in central Italy and actively participated in several programmes for the management of the second phase of the emergency.
Potenziare il Focus Organizzativo sul Cliente l measuring and promoting engagement l creating and embedding a new global managerial system which equips our managers with the necessary mindset, skills and tools to effectively manage our people and the organization
With respect to the ratio of the main investment categories, the relative exposure of the fixed income instruments was up to 88.1% (87% at 31 December 2015). The ratio of investment properties is stable at 3.7% (3.7% at 31 December 2015), while the incidence of the equity instruments declined to 4.5% (4.9% at 31 December 2015) and that of other investments remained substantially stable, at 0.9% (0.9% at 31 December 2015). Other investments mainly include receivables from banks or banking customers, equity investments and derivatives. Lastly, the liquidity ratio decreased from 3.7% to 2.8% due to the planned gradual reinvestment of liquidity.
The current return recorded a modest decline, standing at 3.2% (3.4% at 31 December 2015), with a slight decrease in absolute terms in current income, amounting to € 12,469 million (€ 12.552 million at 31 December 2015). The reduction in the ratio is partly due to the significant increase in average investments, and also to the low interest rates that can be obtained when reinvesting.
In Italy we offer Generali qui per voi, a service to be used in the case of natural catastrophes which involve several people. A team specialized in Natural events is activated when the events occurs. It is made up of an event manager and of several teams which on one hand will help local agencies with the work-peaks in case of emergency and on the other hand it will identify and coordinate partners for the definition and settling of claims. A dedicated line and an operating unit are also set in case local agencies are unavailable because of the natural catastrophe. Generali Italia has also extended policies’ coverage for earthquake and flooding risks for the customers already insured against fire and other damages, not considering a possible State help in case of calamity.
Finally, the percentage of the total administration costs related to insurance business to the average insurance provisions stayed substantially stable at 0.26%.
(*) Commissions related to investments contracts, which amounted to € -74 million (€ -94 million at 31 December 2015), are included in net fee and commission income and net income from financial service activities.
(€ million) Savings and Pension Protection Unit/index linked Total 31/12/2016 31/12/2015 31/12/2016 31/12/2015 31/12/2016 31/12/2015 31/12/2016 31/12/2015
The exposure in absolute terms towards fixed income instruments is up, standing at € 313,660 million (€ 296,433 million at 31 December 2015), with an incidence increasing from 89.3% to 89.9%, while exposure to equity instruments decreased to € 13,109 million (€ 14,066 million at 31 December 2015). Investment properties of the Group in terms of book value rose to € 10,025 million (€ 8,912 million at 31 December 2015). Finally, there was a decrease in cash and cash equivalents, standing at 2.1% (2.6% at 31 December 2015).
Net income from financial instruments at fair value through profit or loss remained stable, amounting to € -110 million (€ -100 million at 31 December 2015), while the other non-operating income and expenses decreased to € -280 million (€ -435 million at 31 December 2015), of which € -51 million related to the amortization of the value of acquired portfolios (€ -55 million at 31 December 2015). This performance can substantially be ascribed to lower restructuring costs incurred with respect to last year.
The Internal Model is defined as Partial because it covers all risks except Operational risk and because the approval has been provided for the main Business Units at a first stage, with an extension plan to cover the other entities under implementation.
On the basis of IVASS Provvedimento n. 53, 2016, the SCR and MCR calculations to be disclosed in the Annual Report can rely on a preliminary estimate.
Following the Regulation, EOF are calculated as described hereafter: • Starting from the difference between assets and liabilities at fair value, foreseeable dividends are deducted and subordinated liabilities with adequate features prescribed by the Regulation as well as Ancillary Own Funds, already approved by the Authority, are added; • Availability constraints at Group level and limitations to transferability are taken into consideration and afterwards classification into Tiers, representing different level of quality of OF, is performed; • Within this process, entities belonging to other financial sectors, contribute with their sectoral available capital determined according to relevant sectoral regime (i.e. banks and pension business).
In compliance with IVASS Provvedimento n. 53, issued in December 2016, the SCR and Minimum Consolidated Group SCR (MCR) data hereby reported are based on a preliminary estimate.
(**) Within this category other regulated financial entities are included (e.g. IORP, Banking, Asset Management)
CAT risk. Non-life lapse risk contributes only for a marginal amount to the risk profile.
Additional indicators such as relevant exposures, risk concentration and risk capital figures are used for the purpose of P&C underwriting risk monitoring. The indicators are calculated on a quarterly basis to ensure alignment with the RAF.
Unit-Linked business typically does not represent a source of financial risk for insurers (except in case of guarantees issued), although market fluctuations typically have profitability implications.
To be noted is that the catastrophic events occurring all over the world in 2016 did not have a significant impact on the reinsurance industry. The continuing absence of economic impacts from significant catastrophic events has generated a prolonged reduction in reinsurance costs. Within a similar context, the Generali Group has benefited from the favourable market trend, obtaining competitive coverage renewals for the year 2017.
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Operating result Under CESR Recommendations on alternative performance measures (CESR/05 – 178b), the operating result cannot replace earnings before taxes calculated in accordance with IAS/IFRS. In addition, it should be read with the financial information and related notes on the accounts which are included in the audited financial statements.
The operating result of the life segment comprises a technical margin including insurance costs, a net investment result and a component that includes acquisition and administration costs related to the insurance business and other net operating expenses. The technical margin includes the loadings and the risk and profit from the surrender results for the period.
Result of the period attributable to the Group 2,081 2,030 Result of the period attributable to minority interests 158 229 16 EARNINGS PER SHARE Basic earnings per share (€) 1.34 1.30 From continuing operations 1.34 1.33 Diluted earnings per share (€) 1.32 1.29 From continuing operations 1.32 1.31
Loans and receivables from banks and customers -38 -137 Other financial instruments at fair value through profit or loss 0 0 NET CASH FLOWS FROM OPERATING ACTIVITIES 20,663 18,116 Net cash flows from investment properties -136 1,019 Net cash flows from investments in subsidiaries, associated companies and joint ventures(***) 36 929
Net cash flows from held to maturity investments -295 1,059 Net cash flows from available for sale financial assets -22,442 -13,961 Net cash flows from tangible and intangible assets -1,150 -151
Net cash flows from other investing activities 1,117 -8,609 CASH FLOW FROM INVESTING ACTIVITIES -18,170 -16,936 Net cash flows from shareholders' equity attributable to the Group 0 0 Net cash flows from own shares 0 0 Dividends payment -1,123 -934 Net cash flows from shareholders' equity attributable to minority interests(****) -93 -121 Net cash flows from subordinated liabilities and other similar liabilities -367 1,298 Net cash flows from other financial liabilities -2,497 -1,016 CASH FLOW FROM FINANCING ACTIVITIES -4,079 -774 Effect of exchange rate changes on cash and cash equivalents 4 134 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD(*) 9,025 8,484 CHANGES IN CASH AND CASH EQUIVALENTS -1,582 542 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD(**) 7,443 9,025 (*) Cash and cash equivalents at the beginning of the period include cash and cash equivalents (€ 9,044 million), liabilities to banks payables on demand (€ -7 million) and bank overdrafts (€ -13 million).
(***) Includes mainly proceeds arising from the disposal of two companies in Philippines (€ 36 million).
Any contingent consideration to be transferred or received by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognised either in either profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.
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In the Annexes to the consolidated financial statements the complete list of subsidiaries, associates and joint ventures included in the consolidated financial statements at 31 December 2016 is presented . Unless otherwise stated, the annex shows the share capital of each consolidated entity and the proportion of ownership interest held by the Group equals the voting rights of the Group.
The Group has launched a project in order to assess the requirements of the new standards and the roadmap of the phase of implementation of the standard, taking into account interactions with the implementation of IFRS 9.
The Group expects a very significant impact on financial reporting both in terms of valuation of the technical provisions in the balance sheet and in terms of performance reporting in the income statement and in the notes. Given the extent of the changes introduced by the standard, significant impact is expected in terms of resources, processes and information systems to support the valuation framework.
Amendments to IAS 19: Defined Benefit Plans: Employee Contributions 1 July 20141 November 2013
may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held to maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.
The item comprises income from investments in subsidiaries, associated companies and joint ventures, which are accounted for in the corresponding asset items of the balance sheet.
equity reserves (es. allocation of surplus capital, stock option exercise, transfer of revaluation reserves related to tangible and intangible assets to retained earnings in accordance with IAS 38.87 and IAS 16.41 etc.), the changes in gains and losses recognized directly in equity.
In the opposite case, the fair value of derivatives is determined using internal valuation models or provided by 171 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
Evidence of impairment includes, for example, significant financial difficulties of the issuer, its default or delinquency in interest or principal payments, the probability that the borrower will enter bankruptcy or other financial reorganisation and the disappearance of an active market for that financial asset.
The charge or credit to the profit or loss for a period represents the change in cumulative expense recognised as at the beginning and end of that period.
In accordance with IFRS 7 and IFRS 4, the information which enables the users of financial statements to evaluate the Group exposure to financial and insurance risks and how these risks are managed is disclosed in the section “Risk report” in the management report. It provides a description of the principal risks to which the Group is exposed and risk governance.
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31/12/2016 31/12/2015 31/12/2016 31/12/2015 3 AMOUNTS CEDED TO REINSURERS FROM INSURANCE PROVISIONS 2,704 2,895 1,229 1,199 4.1 Land and buildings (investment properties) 3,683 4,261 8,250 7,340 4.2 Investments in subsidiaries, associated companies and joint ventures 1,494 1,541 3,944 3,874 4.5 Available for sale financial assets 27,444 25,839 278,202 257,193 4.6 Financial assets at fair value through profit or loss 1,385 2,179 93,562 91,611 1 SHAREHOLDERS' EQUITY
At 31 December 2016, the consolidation area decreased from 435 to 428 companies, of which 393 are subsidiaries consolidated line by line and 35 associated companies valued at equity.
Furthermore Generali Group has entered into an agreement with Horse Capital I. an Irish designated activity company, to protect the aggregate motor third party liability (MTPL) loss ratio of 12 of its subsidiaries that write business in the 7 European countries in which Generali has a relevant market share in motor business (Italy, Germany, France, Austria, Czeck Republic, Spain and Switzerland ). The Group transfers,by this protection, part of the risk linked to unexpected fluctuations of the MTPL loss ratio.
The table below shows the details of the Group’s goodwill by cash generating unit: Goodwill by cash generating unit
Available for sale bonds represented 95.2% of total bonds with a rating higher or equal to BBB, class assigned to the Italian government bonds.
Carrying amount as at 31 December current year 1,806 1,722 277 278 2,083 2,000
With reference to non-life segment, the table below shows the amount of gross direct claims and unearned premiums reserves split by remaining maturity. The total 208 Generali Group Annual Integrated Report and Consolidated Financial Statements 2016
The reserve for other unrealised gains and losses though equity comprised, among other component, gains or losses on re-measurement of the net defined benefit liability in accordance with IAS 19, and gains or losses on hedging instruments accounted for as hedging derivatives (cash flow hedge), put in place in order to hedge interest rate change and British pound/Euro rate change on various subordinated bonds issued and the reserves belonging to disposal groups held for sale reclassified also for the comparative period. The item decreased mainly because of actuarial losses arising from the re-measurement of the liability for defined benefit plans for € -244 million, as a result of a decrease of the reference interest rates used to discount these liabilities.
Basic earnings per share are calculated by dividing the result of the period attributable to the Group by the weighted average number of ordinary shares outstanding during the period, adjusted for the Parent Company’s 215 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
Accumulated depreciation and impairment as at the end of the period 1,269 1,279
Fee and commission income related to pension funds management 19 18
Income from other financial instruments and land and buildings (investment properties)
Income from service and assistance activities and recovery of charges 559 604
Change in the provisions for outstanding claims 361 184 -22 -45 339 139
Change in the provisions for policies where the investment risk is borne by the policyholders and provisions for pension funds 3,404 5,564 5 4 3,409 5,568
In Italy, with respect to the 2016 fiscal year, income taxes are calculated by using the ordinary corporate income tax rate of 27.50%. Furthermore, income taxes of Italian companies include the regional tax on productive activities (IRAP), which was computed – in respect of insurance companies – at the ordinary tax rate generally equal to 6.82%.
Other assets at fair value through profit or loss 0 236 77 314
Financial liabilities at fair value through profit or loss 16,546 2,882 56 19,484
In addition, for certain securities the amortized cost is considered to be a reasonable proxy for fair value, and does not therefore apply a sensitivity analysis.
As far as the lock-up constraint, 50% of the shares are immediately available, 25% is subject to a one-year lockup period and the remaining 25% to a two year lock-up period, reduced to one year with the extent to the 25% of the equity instruments assigned in relation to LTI 2013 and 2014 plans.
Share-based compensation plans granted by Banca Generali At 31 December 2016, the share-based compensation plans granted by Banca Generali are composed of two stock option plans reserved respectively to financial promoters and network managers and Relationship Managers (employees) of Banca Generali, approved by Shareholder ’s meeting on 21 April 2010. These option plans are already vested and also the option exercisable period is near to end.
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De po sit s re ce iv ed fr om re ins ur er s
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Fi na nc ia l l iab ilit ies a t fa ir va lu e th ro ug h pr of it or lo ss A pp en di x 15
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Generali Deutschland Schadenmanagement GmbH 094 EUR 100,000 G 11 100.00 Generali Deutschland AG 100.00 100.00
Generali IARD S.A. 029 EUR 94,630,300 G 2 100.00 Generali France S.A. 100.00 98.86
SCI du Coq 029 EUR 12,877,678 G 10 0.81 Generali IARD S.A. 100.00 98.86 99.19 Generali Vie S.A.
SC Commerce Paris 029 EUR 1,746,570 G 10 100.00 Generali Vie S.A. 100.00 98.86
SCI Generali Carnot 029 EUR 10,525,000 G 10 100.00 Generali Vie S.A. 100.00 98.86
SCI Parcolog Combs La Ville 1 029 EUR 7,001,000 G 10 100.00 SC Generali Logistique 100.00 98.86
OPCI GB1 029 EUR 153,698,740 G 10 100.00 Generali Vie S.A. 100.00 98.86
SCI 28 Cours Albert 1er 029 EUR 14,629,770 G 10 100.00 OPCI GR1 100.00 98.86
Generali European Real Estate Investments S.A. 092 EUR 173,485,116 G 8 7.45 Generali Versicherung AG 100.00 99.51 7.45 Generali Real Estate Investments B.V.
Generali Real Estate Investments B.V. 050 EUR 250,000,000 G 10 100.00 Generali Belgium S.A. 100.00 99.99
Method(1) Activity(2) Shareholding % Group Equity Ratio(3)Direct Indirect Through Total 30.52 Generali Deutschland AG
Method(1) Activity(2) Shareholding % Group Equity Ratio(3)Direct Indirect Through Total 61.00 Generali Biztosító Zrt.
Palac Krizik a.s. 275 CZK 2,020,000 G 10 50.00 Ceská Pojištovna a.s. 100.00 100.00 50.00 Generali Real Estate Fund CEE a.s.
Generali Poist’ovňa, a.s. 276 EUR 25,000,264 G 2 100.00 Generali CEE Holding B.V. 100.00 100.00
Europ Assistance (Suisse) Assurances S.A. 071 CHF 3,000,000 G 3 100.00 Europ Assistance (Suisse) Holding S.A. 100.00 69.99
Generali Sigorta A.S. 076 TRY 272,485,822 G 3 99.95 Generali Turkey Holding B.V. 99.95 99.95
Generali Global Assistance Inc. 069 USD 5,000,000 G 11 100.00 Europ Assistance North America, Inc. 100.00 99.99
Tiberina S.r.l. Unipersonale 086 EUR 20,000 a 11 100.00 Generali Italia S.p.A. 100.00 100.00 933 3.76 Generali Italia S.p.A.
Metropole Assurances S.à r.l. 029 EUR 1,166,460 a 11 100.00 Generali IARD S.A. 100.00 98.86 gconcierges S.A.S. 029 EUR 50,000 a 11 100.00 Europ Assistance Holding S.A. 100.00 99.99 50
Bonus Pensionskassen AG (*) 008 EUR 5,087,098 b 11 50.00 Generali Holding Vienna AG 50.00 50.00 17,305
AUTOTÁL Biztosítási Szolgáltató Kft 077 HUF 104,000,000 a 11 100.00 Generali Biztosító Zrt. 100.00 100.00 1,036
CEABS Serviços S.A. 011 BRL 6,000,000 c 11 50.00 EABS Serviços de Assistencia e Partecipaçoes S.A. 100.00 26.50
VIETNAM 062 303 We, Generali Our performace OutlookRisk Report Appendices to the Management Report
• In June 2016, subsidiary Generali Finance B.V. exercised an early repayment option on two subordinated bonds, for € 1,275 million and £ 700 million.
5. Internal Control and Risk Management System, administrative accounting system and financial reporting process (points 13 and 14 of Consob Notice no. 1025564/01)
2014 and 2015 financial years. This plan involved a broader scope of action relating to anti-money laundering and anti-terrorism measures, including the adoption of a new Group Policy (“Group Anti-Money Laundering & Counter-Terrorism Financing (AML/CTF) Policy”) and the consequent activities required for its concrete implementation in each company belonging to the Group, having regard to the different and diversified legislative situations. When the plan had been substantially completed, the Group Compliance Officer confirmed that the procedures approved by the local companies were fully in line with the terms of the Group Anti-Money Laundering Policy, and also stated that the procedures adopted adequately monitor the risk, while taking account of some formal refinements which are still in progress. As regards Italy, which forms the subject of a specific programme of measures, the Board of Statutory Auditors of Generali Italia S.p.A. confirmed that such plan has also been substantially completed.
In 2016, the Group Compliance Function also coordinated the definition of the key controls in the process of management of insurance intermediaries designed to mitigate the risks correlated with anti-money laundering and counter-terrorism financing (having regard to the Fourth European Directive, which comes into force in 2017), and the international sanctions and related-party transactions.
The Board of Statutory Auditors has perused and obtained information about the organisational and procedural activities conducted pursuant to Legislative Decree 231/2001, as amended, regarding the administrative liability of organisations. The main aspects connected with the organisational and procedural activities conducted by the Company pursuant to Legislative Decree 231/2001 are illustrated in the “Corporate Governance and Share Ownership Report”. No noteworthy facts and/or circumstances emerged from the information communicated by the Surveillance Body regarding the activities performed.
Report on other legal and regulatory requirements Opinion on the consistency of the Management Report and of specific information of the Report on Corporate Governance and Share Ownership with the consolidated financial statements We have performed the procedures required under audit standard (SA Italia) n. 720B in order to express an opinion, as required by law, on the consistency of the Management Report and of specific information of the Report on Corporate Governance and Share Ownership, as provided for by article 123-bis, paragraph 4 of Legislative Decree dated 24 February 2005, n. 58/1998, with the consolidated financial statements. The Directors of Assicurazioni Generali S.p.A. are responsible for the preparation of the Management Report and of the Report on Corporate Governance and Share Ownership in accordance with the applicable laws and regulations. In our opinion, the Management Report and the specific information of the Report on Corporate Governance and Share Ownership are consistent with the consolidated financial statements of Generali Group as at December 31, 2016.
* The alternative performance measures illustrated in the financial statements are compliant to the ESMA “Alternative Performance Measures (APM) Guidelines”, effective from 3 July 2016. The Group APMs are in effect compliant and reconciliable with the applicable reporting framework. In particular the new business indicators of the Life segment are connected with the emedded value, indicator of the estimated future cash flows, included in IFRS 4 “Insurance contracts”.
Average duration: It is defined as the average residual economic maturity (considering the first call option date) of the financial debt outstanding as at the reporting date, weighted for the nominal amount.
Più di 108 mila chiamate a clienti che non consiglierebbero Generali optimize number of brands to maximize efficiencies shift to more coordinated media mix/spend favour common platforms and strategic partnerships to efficiently drive cost savings repackage our offering to prevent and protect what is most valuable for our clients
Non-executiveExecutive Independent as defined in the listed companies’ Corporate Governance Code
Nationality: Italian Professional background: Manager In office since 28 April 2007
Focus on the Board of Directors as at 25 January 2017
Operating return on investments: it is an indicator of both life segment and property&casualty segment, calculated as the ratio between the operating result and the average investments calculated based on the financial statement values, as described in the methodological notes.
(d) a contract that will or may be settled in the entity’s own equity instruments and is: (i) a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or
Share based compensation Lockup clause: it imposes the unavailability of the shares assigned with respect to some incentive plans (or a specific share) for a specific time horizon as defined by any individual plan. The clause provides for the commitment of the issuing Company and potentially of some shareholders not to pursue selected actions on the equity of the company itself in the period subsequent to a public offering.
Economic Solvency Ratio: it is defined as the ratio between Eligible Own Funds and the Group Solvency Capital requirement, both calculated applying the internal model also to all the companies for which at present the authorization was not obtained yet.