Operating result

The technical result was € 857 million, up 21.5% compared to the previous year. This result was achieved despite the greater impact of catastrophic events of around € 298 million which affected the Group, thanks to the tariff and claims settlement strategies of the Group in the main countries of operation. Without considering the weight of the catastrophic events in both periods under review the technical result increased by 31% on equivalent consolidation area.

While the expense ratio remained stable, the overall loss ratio improved, resulting in in a combined ratio of 95.7%, down by −0.8 pps compared to 31 December 2011. Compared to 30 September, the loss ratio considerably improved, amounting to 68.2%.

As mentioned above, this trend reflected the catastrophic events which affected the Group loss ratio by 1.4 pps. Without considering these events in both periods under review, the loss ratio was at 66.7%, down by 1.4 pps thanks to the improvement of the current year loss ratio excluding natural catastrophes, concentrated in the Motor business, mainly in Italy, France, Germany and Central and Eastern Europe countries. The improvement in the current loss ratio was partially offset by a lower contribution of prior years’ result, which was however obtained in the usual context of prudence in the reservation policy of the Group.

Acquisition and administration costs related to the insurance business totaled € 5,699 million, up 1.3% on equivalent terms. In detail, acquisition costs totalled € 4,453 million, with an increase concentrated in the Non motor retail segment observed mainly in Germany, Central and Eastern Europe and, to a lesser extent, in Austria and Spain. The impact of acquisition costs on net earned premiums remained stable at 21.5%.

Administration costs slightly increased, amounting to € 1,246 million. However their impact on net earned premiums remained at the same level as last year (6.0%).

The expense ratio remained also stable, amounting to 27.5%, thanks to the stability of both its components.

A breakdown by territory of the main indicators mentioned above is provided below:

The ratio in Italy improved (−1.6 pps), standing at to 95.2%. This trend reflected both the 0.5 pps reduction in the loss ratio and the improvement in the expense ratio (-1.1 pps) which totalled 20.9%, thanks to the decrease in acquisition costs recorded mainly in the Non motor lines and to lower administration costs. The loss ratio reflected the impact of catastrophic events (earthquakes in the north of Italy and heavy snowfalls) totalling € 193 million, which occurred in the first six months of the year mainly in the Non motor business, with an impact of 2.8 pps.

The combined ratio of France was 98,9% and remained at the same level as 31 December 2011 (+0.1 pps), due to the reduction in the loss ratio which amounted to 70.9% (-0.3 pps) owing to the improvement in the Motor lines, despite the impact of catastrophic events of around € 35 million, while the expense ratio worsened (+0.5 pps), standing at  28.0% because of the acquisition component.

The combined ratio of Germany is 94.5%, in line with 31 December 2011 (+0.1 pps). Specifically, the loss ratio increased by 0.5 pps, mainly in the Non motor lines and was offset by the improvement of the expense ratio (−0.4 pps), amounting to 28.9%. It should be noted that the loss ratio was negatively affected by catastrophic events of around € 26 million; at 31 December 2011 similar events had impacted for € 57 million.

The combined ratio of Central and Eastern European countries dropped by 1.0 pp, amounting to 88.5%. The improvement of the loss ratio by 3.9 pps, which amounted to 50.5%, was partially offset by the increase in the expense ratio by 2.9 pps, mainly attributable to the Non motor lines, whose percentage weight on the overall Property and casualty portfolio increased compared to 31 December 2011. These lines, which have higher commission levels and a lower loss ratio, in fact showed a further increase in acquisition costs, above all in Russia.

The combined ratio of the Rest of Europe was stable compared to 31 December 2011 and totaled 96.4% thanks to the improvement in the loss ratio (-0.2 pps), which offset the increase in the expense ratio (+0.2 pps).

The combined ratio of Spain recorded an improvement compared to 31 December 2011, amounting to 94.5%. The positive trend of the loss ratio (-1.7 pps) recorded in the Non motor lines, including 0.3 pps of catastrophic events, was partially offset by the increase in the expense ratio (+1.4 pps), amounting to 28.2% due to the higher acquisition costs.

The combined ratio of Austria improved to 94.8% (-0.5 pps), which was due to the 0.5% drop in the loss ratio, despite the impact of catastrophic events for around € 33 million at 31 December 2012. However, the expense ratio remained stable at 27.1%, since the drop in administration costs was offset by the rise in acquisition expenses.

Lastly, the combined ratio of Switzerland improved, totalling 95.1% (-0.4 pps), thanks to the positive trend of the expense ratio at 25.6% (-0.9 pps), which was mainly concentrated in the Non motor lines and which was partially offset by the worsening of the loss ratio, amounting to 69.5% (-0.5 pps), including the impact of catastrophic events of 0.5 pps.

The combined ratio of the Rest of World considerably improved, amounting to 99.5% (−4.6 pps), due to both the positive trend of the loss ratio at 62.0% (−3.4 pps) and the drop in the expense ratio (−1.3 pps) to 37.6%, both due to the excellent levels of production observed mainly in Argentina and Mexico. The improvement of the combined ratio declined to 1.3 pps without considering the contribution of the Migdal Group at 31 December 2011.

The investment result in the property&casualty segment went from € 1,127 million at 31 December 2011 to € 1,082 million. This trend was substantially due to the drop in current income from equity and real estate components caused by the reduction in the weight of these assets classes in the property&casualty segment as a result of the de-risking policy implemented by the Group.

However, the action undertaken by the Group aimed at sustaining adequate portfolio liquidity ensuring at the same time adequate coupon returns enabled it to collect current income from investments for € 1,515 million (€ 1,610  million at 31 December 2011), equal to a current return of 4.1%, showing a moderate downtrend compared to the previous year (4.3% at 31 December 2011).

In detail, current income deriving from investments in fixed income instruments went from € 927 million at 31 December 2011 to € 912 million, while equity current income fell to € 75 million (€ 104 million). Lastly, as a result of the policy aimed at reducing real estate exposure in this segment, income from real estate investments considerably decreased from € 497 million at 31 December 2011 to € 403 million.

Other operating net financial expenses, which include interest expenses for the liabilities relating to operating activities and investment management expenses, amounted to € −433 million (€−483 million at 31 December 2011).