The table below shows the development of NBV from 2011 to 2012, together with the usual main profitability indicators.

New Business Value 2012 and 2011 (€ mln)
  2012 2011 Change
APE4,5084,787 -1.4%
Annual premiums2,7453,094 -5.1%
Single premiums17,62816,933 5.0%
PVNBP42,57243,197 1.7%
NBV 863 976 -9.5%
Profitability on APE 19.2% 20.4% -1.2 pts
Profitability on PVNBP2.0%2.3% -0.2 pts

Despite the negative economic environment, on a comparable basis (i.e. neutralising the effect of minorities and foreign exchange rate variations) APE remains broadly stable (-1.4%). Annual premiums show a moderate decline (-5.1%), but still represent the predominant part (60.9%) of total APE production (64.6% in 2011). The increase in single premiums (+5.0%) is driven by the production recorded in Germany in the second half of 2012.

Saving business increases by 5.2%, whereas protection business slightly decreases (-2.0%) mainly on account of the health business fall in Germany (-65.6%), where the production in less profitable product segments has been deliberately closed. The volatility of the financial markets has negatively impacted the unit linked business production, which declines by 23.4%.

2012 NBV, calculated as the sum of the each quarter NBV evaluated with beginning of period operating and economic assumptions, amounts to 863mln decreasing by 9.5%, with a corresponding profitability (margin on APE) of 19.2% (20.4% in 2011).

The profitability decrease is mainly explained by the negative impact of the lowering of the reference rates throughout the year, which has been only partially offset by the more favourable product mix, mitigating the effect of the lower volumes on NBV, as reported in the following table.

Movement of New Business Value (€ mln) and NBM (%)
New business value 2011 97620.4%
Change in perimeter -250.5%
Exchange rate fluctuation 20.0%
Products mix/volume -40.2%%
Profitability -85-1.9%%
New business value 201286319.2%

The following table shows the breakdown of NBV into its components, highlighting the weight of both the allowance for cost of capital and non hedegable risks (which in aggregate reduce the profitability on APE by 6.5 percentage points).

Breakdown of New Business Value 2012 and 2011 (€ mln)
  2012 2011
PVFP before Time Value of FG&O 1,637
Time Value of FG&O -481
PVFP after Time Value of FG&O 1,156
Cost of capital -117
Cost of NHR -175
New Business Value 863

Finally, the table below shows the development from 2011 to 2012 of the main additional new business profitability indicators, obtained using “real-world” best estimate assumptions.

New Business Value 2012 and 2011 (€ mln)
  2012 2011
1st year NB strain
o/w industrial strain
o/w capital strain
1st year NB on PVNBP
o/w industrial strain -2.2%-2.3%
o/w capital strain -1.6%-1.8%
Payback period (yrs)7.67.4

The 2012 new business strain (i.e. the investment made by the shareholder into the new business in the first year) amounts to -1,624mln, corresponding to the sum of the negative contribution to profit in the year of sale (-945mln) and the capital absorbed by the new business (-678mln). In terms of ratio over the present value of new business premiums (PVNBP), from 2011 to 2012 the first year strain improves from -4.0% in 2011 to -3.8% in 2012, thanks to the improvement of both industrial and capital strain.

The slight deterioration of the internal rate of return implicit in the new business sold in 2012 (from 12.6% to 12.3%) and of the payback period (from 7.4 to 7.6 years) is mainly explained by the lower “real-world” best estimate assumptions (with investment returns based on actual local government bond returns) used in 2012 to project future profits.