Other assets

Intangible assets

(€ million)  31.12.2012 31.12.2011
Goodwill 7,222 7,394
Other intangible assets 2,681 3,039
Software 426 516
Value of in-force business arising from insurance business combination 1,479 1,628
Other intangible assets 776 896
Total 9,902 10,434

Goodwill

(€ million) 31.12.2012 31.12.2011
Carrying amount as at 31 December previous year 7,394 7,415
Changes in consolidation scope -137 -19
Other variations  -36 -2
Carrying amount as at the end of the period 7,222 7,394

At 31 December 2012 Group’s goodwill amounted to € 7,222 million (- 2.3% if compared to the same period of last year).

The table below details the goodwill by relevant companies:

(€ million) 31.12.2012 31.12.2011
Alleanza - Toro Group 2,793 2,793
Generali Deutschland Holding 2,179 2,179
Generali PPF Holding Group 616 656
BSI - Banca del Gottardo Group 553 550
Generali France Group 415 417
Generali Schweiz Holding AG 289 288
Generali Holding Vienna AG 153 153
Migdal Insurance Holding 0 135
Europ Assistance Holding 82 82
Other 140 140
Total goodwill 7,222 7,394

The decrease was mainly driven by the disposal of Israeli Migdal Group (€ -135 million) and to the devaluation of goodwill belonging to Russian companies (€ -50 million), the latter linked with the buyout of minorities’ interests in Generali PPF Holding deeper described in the “Other information – Related parties disclosure”. The residual change of the period was mainly attributable to foreign exchange adjustments on the goodwill share calculated on entities that have reporting currencies other than Euro.

Cash generating units were established in accordance with the Group’s participation structure and considering the IFRS 8 requirements about operating segments, which Assicurazioni Generali identified as Life, Non-Life and Financial.

The table below shows the detail of the Group's goodwill by cash generating unit:

(€ million) Life Non Life Financial Total
Generali Deutschland Holding 562 1,617   2,179
Alleanza Toro Group 2,101 692   2,793
Generali PPF Holding Group 218 398   616
BSI – Banca del Gottardo Group     553 553
Generali France Group 319 97   415
Generali Schweiz Holding AG 81 208   289
Generali Holding Vienna AG 77 77   153
Europ Assistance Group   81   81
Other       141
Total 3,357 3,170 553 7,222

The cash generating units have been defined consistently with IAS 36; with regard to the measurement of the recovery value, as described in the basis of presentation and accounting principles, the Dividend Discount Model (DDM) and the Embedded Value or Appraisal Value have been used.

Specifically, the Dividend Discount Model (DDM) was used for the determination of the recovery value for the following cash generating unit (CGU): Alleanza Toro, Generali Deutschland Holding, Ceska Group, BSI Group, Generali Schweiz Holding SA, Migdal Group, Europ Assistance, Generali Holding Vienna and Generali France

This method represents a variant of the method of cash flows. In particular, the Excess Capital variant, defines the entity’s economic value as the discounted dividend maintaining an appropriate capital structure taking into consideration the capital constraints imposed by the Supervisor as the solvency margin. This method results in the sum of discounted value of future dividends and the cash generating unit terminal value.

The application of this criterion entailed in general the following phases:

  • explicit forecast of the future cash flows to be distributed to the shareholders in the planned time frame, taking into account the limit due to the necessity of maintaining an adequate capital level;
  • calculation of the cash generating unit’s terminal value, that was the foreseen value of the cash generating unit at the end of the latest year planned.

The expected cash flows used in the analysis for each CGU, were those detailed in the Strategic Plan 2013-2015, presented to the Board of Directors on 14 December 2012 and subsequent amendments. In order to extend the analysis horizon to a 5 years period, the main economic and financial data were calculated for further two years (2016 and 2017). More in detail, required and available solvency margins for 2016 and 2017 were determined on the basis of the growth of the last year of plan (2015), whereas the net result for 2016 and 2017 were calculated using a sustainable growth rate for each CGU.

A) Nominal growth rate (g):

  g
Generali Deutschland Holding 2.0%
Alleanza Toro 2.5%
Generali PPF Holding Group 3.0%
BSI Group – Banca del Gottardo 1.5%
Generali Schweiz Holding AG 1.0%
Europ Assistance Group 2.0%
Generali Holding Vienna AG 2.0%
Generali France 2.0%

B) Cost of equity (Ke) of the company net of taxes:

  Ke
Generali Deutschland Holding  
- Life 6.6%
- Non Life 6.4%
Alleanza Toro  
- Life 10.0%
- Non Life 9.8%
Generali PPF Holding Group  
- Life 7.4%
- Non Life 8.1%
BSI Group – Banca del Gottardo 6.2%
Generali Schweiz Holding AG  
- Life 5.7%
- Non Life 5.5%
Europ Assistance Group  
- Non Life 7.8%
Generali Holding Vienna AG  
- Life 7.1%
- Non Life 6.9%
Generali France  
- Life 7.4%
- Non Life 7.1%

The cost of equity (Ke) for each entity is extrapolated based on the Capital Asset Pricing Model (CAPM) formula. More in detail:

  • the risk free rate was defined as the average value - observed during the last three months of 2012 - of the 10-years government bond of the reference country of operation of the CGU, on which the goodwill has been allocated;
  • the Beta coefficent was determined based on a homogeneous basket of securities of the non-life insurance, life insurance and banking sectors, which was compared to market indexes. The observation period was 5 years with weekly frequence;
  • the market risk premium amounts to 5% for all Group’s CGUs.  In the CGUs located in countries where significant decreases in current market yields were observed (Austria, CEE, Germany and Switzerland), the market risk premium to determine the terminal value has been set equal to 6%. This latter adjustment has been required by a prudential estimate on the long run sustainability of the reference country government bonds’ current yields.        

All CGUs passed the impairment test, being their recoverable amounts higher than their carrying amounts. Furthermore a sensitivity analysis was performed on the results changing the cost of own capital of the company (Ke) (+/-1%) and the perpetual growth rate of distributable future cash flows (g) (+/-1%). This sensitivity highlightened that some negative changes included in the choosed sensitivity's bucket could lead the recoverable value of some Group CGUs under the corresponding carrying amounts.

For other minor CGUs the Embedded Value Method and, if necessary, the Appraisal value were adopted. These methodologies are linked to definition logics of fair value net of costs of sale.

The Embedded value method consists in the restatement at current values of all the assets and liabilities of the company as well as the valuation of the value of in force business according to actuarial methodology.

Appraisal value represents the company's economic value determined by the adjusted net asset value and the present value of future profit arising from both the in force business and a fixed generations of new business.

Appraisal value is therefore defined as the sum of the embedded value and the fixed generations of new business, corresponding to the goodwill.

Also these CGUs passed the impairment test being their recoverable amount, calculated on the basis of  the Embedded value, greater than the carrying amount.

Tangible assets

Lean and buildings (self used)

The main changes occurred in the period and the fair value of the properties used for own activity by the Parent Company and its subsidiaries to run the activity are shown in the table below.

(€ million) 31.12.2012 31.12.2011
Gross bookvalue as at 31 December previous year 4,025 4,164
Accumulated depreciation and impairment as at 31 December previous year -954 -952
Carrying amount as at 31 December previous year 3,072 3,212
Foreign currency translation effects 2 7
Increases 29 65
Capitalized expenses 51 65
Changes in consolidation scope -91 -8
Reclassifications 0 -204
Decreases -9 -14
Depreciation of the period -52 -52
Net impairment loss of the period 0 0
Carrying amount as at the end of the period 3,002 3,072
Accumulated depreciation and impairment as at the end of the period 977 954
Gross bookvalue as at the end of the period 3,979 4,025
Fair value 3,477 3,542

The fair value of land and buildings (self used) at the end of the reporting period was mainly based on external appraisals.

Other assets

(€ million)  31.12.2012 31.12.2011
Non-current assets or disposal groups classified as held for sale 15 148
Deferred acquisition costs 2,323 2,013
Tax receivables 2,686 2,737
Deferred tax assets 2,314 6,843
Other assets 6,998 6,828
Accrued interest income 4,067 4,164
Other accrued income 391 372
Deferred income 355 357
Deferred commissions for investment management services 42 69
Other assets 2,143 1,865
Total 14,336 18,569
Deferred acquisition costs
  Segment Life Segment Non Life Total
(€ million)  31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011
Carrying amount as at 31 December previous year 1,568 1,454 445 431 2,013 1,886
Acquisition costs deferred 466 498 466 218 932 717
Changes in consolidation scope 0 0 0 4 0 4
Amortization of the period -409 -379 -258 -189 -667 -568
Other movements 3 -5 41 -20 44 -25
Carrying amount as at 31 December current year 1,628 1,568 694 445 2,323 2,013

The other tangible assets amounted to € 2,016 million (€ 1,835 million at 31 December 2011). It mainly includes property inventories (€ 1,525 million mainly allocated in Citylife) and furniture, fittings and office equipment (€ 443 million).

Cash and cash equivalents

(€ million ) 31.12.2012 31.12.2011
Cash and cash equivalents 7,490 6,452
Cash and balances with central banks 3,156 9,486
Cash at bank  11,000 9,622
Total 21,647 25,560

The decrease of the period was substantially attributable to the decrease in deposits with the European Central Bank.