EV

The following table shows the main results of the life, health and pension perimeter, in terms of EV.

Main results at 31 December 2012 and 2011 (€ mln)
  2012 2011
EV 21,400
19,372
EV earnings 3,774
-4,408
Return on EV   20,4% -18.1%
Normalised Return on EV 14,7%
11.7%

From year-end 2011 to year-end 2012 EV moves from 19,372mln to 21,400mln.

Total EV earnings (3,774mln, corresponding to 20.4% overall return on EV) comprise solid operating EV earnings (2,690mln, leading to 14.7% normalised return on EV) and positive economic variances (1,084mln).

The positive economic variances mainly result from the narrowing of the spread between Italian government bonds and swap rates, which together with the good equity market performance and the reduction in market volatility has, in aggregate, offset the negative impact arising from lower  risk free reference rates.

The volatility of the EV valuation to the movements of government spreads is due to the current market consistent methodology, which creates a gap between the valuation of assets (highly dependant on government bond rates) and the valuation of liabilities (based on swap rates). In case the Euro reference rates, instead of being based on the swap rates plus the liquidity premium, were based on an average government bond return in the Euro area (i.e. using the government spread premium adjustment) the EV would increase from 21.4bln to 27.2bln.