31/07/2014 CNBC Europe Interview with the Group CEO Mario Greco Journalist (replying to the colleague in the studio launching the report): I think they look pretty solid Jeff to be honest, you mentioned the net profit data if you strip out some of the exceptionals and actually far fewer exceptionals this quarter, I have to say, than what I’ve seen in previous quarters, operating profit grows in the life segment and the non-life segment coming in better than expected. It’s been a two- year process of a tense business around, stripping out some of the non-core Media Relations assets, streamlining the business and improving the capital ratio. I think one of the T +39.040.671085 key things to point out is the Solvency I ratio in particular better than expected on [email protected] this level too, 162% versus 160% expected. If we look specifically at their life Investor Relations insurance business, which is 70% right now of their revenues, they saw premium T +39.040.671202 growths of a 27% in Italy, so seeing a turnaround as far as this business is +39.040.671347 concerned and that also about some of the regional changes that they’ve made [email protected] there too. A significant decline in Germany and we talked about just what was www.generali.com going on there in particular. But if we look at the non-life segment, the combined ratio, they’re again much better than expected, 92.8% better than the 93.7%, so this is a measure of the profitability. In France so they’re not profitable and this is one of the other concerning questions I’ve asked him. But listen to what he has to says anyway about where they are as far as the transformation of the business is concerned and how they did on the half. Mario Greco: It shows that the profits and the shift of production towards profitable products is working and the nice increase of profit in Italy is really reaffirming that we are doing the right things. Life is doing quite well in Italy, it’s also doing well in Germany although Germany has a one-off effect last year because production was extremely strong in Q1, because of the tactical product that we launched last year. So all in all I’m very proud and pleased with these results. J: Do you expect a resumption in German activity once that quarter effects…taking out? MG: Yes, absolutely. And Germany also is having a very healthy production because they are developing unit-linked products and protection products much more than the market is doing, so the balance of our production in Germany is much more profitable than the average of the market. J: Than Mario Greco has said that when they get that Solvency ratio above 160% they’d look perhaps to adjusting the dividend pay-out ratio, right now it is kept at 40%. I asked him about this, he was quite cohesive. “Look, we were thinking about it, we will look at it, but right now I’ve no further details as far as that is concerned”. He also did talk about other risks as far as the Italian economy is concerned, remember this is someone that owns a lot of sovereign debt here, they are very leveraged to the economy here and about the risks so far as Russia and Ukraine is concerned so I’ll bring you more details on that later on the show guys but for now I’ll hand back to you. (Second report) J (replying to the colleague back in the studio): They’re getting there Steve. Remember our low interest rate environment also hurt, some particularly saw their Life premium to concern, but you’re right, very different days. It’s also been 2 years of reshaping this business, stripping out non-core assets, improving their capital position, too. And that’s currently where they fit: they’ve got knowledge that they’ve got more work to do but if you look at the life of it Solvency ratio right now, they’re above estimates, the operating profit this quarter is for the first half of this year, better than analysts expected. So to see a bit of a pick-up in their share prices, there’s I think no surprise, but for many analysts out there this is a case of: look, we’ve seen how you reshaped the balance sheet, now how do you boost growth, now how do you boost profitability - particularly at a time when we are still seeing globally zero interest rate policy, or very close to it? One of the key risks of course is the geopolitical risk out there and I talked him about their leverage to the Italian economy and the risks right now of a deterioration in the relationships with Russia, not just as far as trade and energy is concerned, but also about, more crucially, confidence. Listen in. MG: Well, I mean… this war risks, like what’s going on in Ukraine but also what’s going on more in the South, in the Gaza region, don’t help at all. I mean, we are living in a subdued economic situation and the economies make it even worse. So the only thing I can say on that is that we all wish that the situation stabilises and that this population can get a much better situation in their own countries for the future. Also, it’s impressive to see how much these people are suffering, so also, turning for a second outside of economy, it’s impressive to see what’s going on there and how much sorrow and pain is there for these people. J: Italy was seen as one of the countries that was most reticent to push for further sanctions on Russia - because of the trade links, because of the energy dependence - but it’s now starting to filter into the numbers less thoughts for Russians here in Italy, in particular. It’s the same for you, isn’t it, giving how leveraged you are to the consumer and the economic performance here? MG: Well again, it’s always difficult when you have a trade partner and the country which you do a lot of business with, on many different respects: tourism, energy, financial services… And then you see this war exploding. It’s very difficult to find a balanced solution for that. On one side you need to be firm on principles and values; on the other side, you don’t want to destroy a goodwill and also the friendship that was developed. And I think this is not just about one European country, I saw exactly the same issues recently at the meeting with the German Government and there was the same issue. Germany is much closer than Italy to Russia and on one side, principles are principles and values are values, but on the other side, there are people there, people who are quite friendly – we got to know them quite well over the past years in many respects. How do you treat this and how do you balance this out? J: Wolfgang Schäuble said that peace has to come before economics. Do you stand with him on that? MG: I think that we need to have… I mean, Europe has been built around peace and around the concept that the European countries have to live in peace and have to avoid fighting each other. So I do buy the concept that peace is the most important thing but then we should be careful in not being just dogmatic and we should find practical solutions. .