Significant events and opinions

Significant Events after 31 December 2012

As part of the growth strategy in high-growth markets, on 8 January 2013 the Group concluded the agreement with the PPF Group N.V. for the sale of 49% of the company Generali PPF Holding (GPH), which will give the opportunity to Assicurazioni Generali to acquire shareholder and management control of the joint venture. Generali, which already holds 51% of GPH, will acquire the remaining 49% of the share capital in two tranches from PPF Group N.V. Finally, at the same time GPH will sell to the PPF Group N.V. the insurance business for consumer credit in Russia, Ukraine, Belarus and Kazakhstan.

On Investor Day of 14 January 2013 Assicurazioni Generali presented its Group transformation strategy aimed at improving shareholder return and maximizing the value of its business. The new strategy is focused on the insurance core business, on strengthening financial soundness and profitability and on a customer-oriented business approach.

On 23 January 2013 the rating agency Standard & Poor’s confirmed Assicurazioni Generali’s A rating and removed the negative creditwatch as a result of the Group’s undertaking to strengthen the capital adequacy in relation to its risk profile and to increase profits in 2013 and in 2014.

Assicurazioni Generali still have a higher rating on average than its main operating Country thanks to its ability to generate operating profit, its solid business foundations and geographical diversification.

Outlook for Generali Group

The expectations of the world economy recovering are remote but are gradually increasing. In 2013 the Euro Area economy will continue to contract (0.2% decrease in GDP expected by the International Monetary Fund) in particular in Italy (down 1.0), due to restrictive tax policies. However, the Euro Area countries should begin a new growth trend from 2014 (up 1.0%, 0.5% for Italy), which will depend to a large extent on the upturn of the banking sector and greater cash, which should increase investments.

In the United States economic growth in the short to medium term (2.0% and 3.0% increase in GDP expected for 2013 and 2014) will be linked to containing public debt and tax policy measures.

China should slowly return to a rate of growth of 8.5% in 2014, while for other emerging countries weak international demand will continue to be a barrier to expansion, which will continue at rates lower than 6%.

With reference to financial markets the interventions of the European Union in favor of the banking system and countries in the Euro Area with high public debt partly reduced tensions concerning securities issued by certain European countries. In this context it is nonetheless likely that a volatile market situation will remain.

In view of this macroeconomic and financial scenario, written premiums are expected to decrease in the life segment in 2013,  which reflects the persistent climate of uncertainty on the financial markets.

The Property&Casualty businesses on the other hand are expected to see an increase in written premiums owing to the trend of the non motor and motor businesses, as well as a further increase in technical margins thanks to the continuation of the high levels of operating efficiency and ongoing effects of the pricing and loss management policies implemented by the Group.

On the whole, there was a very positive trend for reinsurance operations since, despite the rather high level of worldwide catastrophic events which took place in the period, these did not prove particularly burdensome for reinsurers due to their size and the areas affected. Stable costs or slightly lower costs were recorded, with the exception of the Transport sector(1).

On 1 January 2013 the Generali Group saw the completion of the process to centralize the purchase of contractual reinsurance cover of all the operating entities within the Parent, which will enable the terms and conditions of reinsurance cover programsr to be improved further. The centralization also enables counterparty risk to be better managed and controlled.

The Group’s investment policy will continue to be based on prudent asset allocation with the aim of consolidating current returns and reducing the absorption of capital. In the Euro Area the Group also continues its objective of maintaining the current levels of cross-border exposure, by matching the liabilities of each country of operations with securities from that same country, without prejudice to the principle of matching assets and liabilities by currency.

The Group’s investment strategy will be aimed at reducing real estate exposure in the Property & Casualty segment in order to limit the absorption of capital and at the same time gradually increasing real estate investments in the life segment to support returns in the long term and to provide protection from the risk of inflation. The share component will be reduced in the Property&Casualty segment to achieve lower absorption of capital and will be kept stable in the life segment, however reducing exposure to the financial segment. The Group will continue its objective of gradually using cash in order to exploit new investment opportunities.

Considering the initiatives undertaken by the Group, despite the still uncertain macro-economic environment, the Group expects for 2013 that the total operating result will improve and that the capital strengthening process and the cost reduction plan – which has been announced in January – will continue.

Milan, 13 March 2013    


(1) This sector was affected by the hurricane Sandy, which occurred at the end of October, and the sinking of the Costa Concordia; the combined effect of these two extraordinary events, along with a general negative trend, resulted in generalized increases in reinsurance costs.