The Italian Insurance Market 2017 figures + 9M18 overview Italian insurance market snapshots
The Italian Insurance Market • 2017 figures + 9M18 overview PwC 1 Section 1 – Italian insurance market snapshots
Italian insurance market Key Messages • In 2017, Italian GWP declined by 2.4% to €131bn with life business falling by 3.6%, partially compensated by non-life increasing by 1.2%. Premiums represented ca. 8% of FY17 Key-data Italian GDP, representing the 4th highest ratio in Europe • Technical results decreased by 10.9% from 2017 higher incidence of cost over lower volumes in life and impact of catastrophic events for non-life Italian insurance market GWP €131bn, -2.4% vs. FY16 • After the adoption of Solvency II in 2016, insurers are putting great effort on capital o/w Life: €99bn (-3.6% vs. FY16) management, reflected by the increase of the market Solvency ratio to 241% in 2017 (221% Non-life: €32bn (+1.1% vs. FY16) in 2016) • Fintech (33 insuretech entities in Italy) and healthcare represent major disruptions for the Largest Italian insurance insurance sector with businesses affected recording double digit growth companies: • Proper investments in cyber insurance risk management may guarantee to insurers a o Life: Poste Vita (market share equal significant advantage towards competitors, as the Italian industrial 4.0 framework will to 17.5%) demand protection from cyber attacks o Non-life: UnipolSai Assicurazioni • Interim figures lead to a forecast for 2018 of an increase to ca. €134bn GWPs due to (market share equal to 18.8%) growth in both life, as traditional products will be supported by rising interest rates, and Largest Italian insurance groups: non-life, driven by demand for innovative products 2013/2017 Technical result of Italian insurers (1) o Life: Intesa Sanpaolo Group (market share equal to 19.4%) € million FY13 FY14 FY15 FY16 FY17 o Non-life: Unipol Group (market Gross written premiums 118,787 143,318 146,951 134,209 130,947 share equal to 21.2%) Change in reserves (29,174) (59,579) (52,844) (48,559) (38,932) Incurred claims (89,188) (85,778) (91,219) (82,936) (91,395) General expenses (11,971) (12,411) (12,672) (12,614) (12,836) Investment income 19,611 21,866 17,172 17,705 19,324 Other technical income (charges) (930) (908) (987) (926) (979) Technical result 7,135 6,508 6,401 6,879 6,129 Reinsurance result (403) (217) (98) (288) 37 Net technical result 6,732 6,291 6,303 6,591 6,166 Source: PwC analysis on ANIA data (1) Direct and ceded business, excluding business underwritten in freedom of service
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 2 Section 1 – Italian insurance market snapshots Italian insurance market trend
2013/2017 Italian insurers GWP (1)
143.3 147.0 134.2 131.0 118.8 32.8 32.0 32.0 32.3 33.7
Non-Life
€ million € Life 110.5 114.9 102.3 98.6 85.1
FY13 FY14 FY15 FY16 FY17
In 2017 Italian GWP decreased by -2.4%, continuing the 2017 Breakdown by distribution channel reduction recorded in 2016 (-8.7%), after years of uninterrupted growth, with an opposite performance of 23% <1% life and non-life businesses. 79% 61% Life business has declined, falling from the record level of 15% Life Non-Life €114.9bn in 2015 to €98.6m in 2017 (-7.4% in 2 years), as a consequence of low market interest rates and new €99bn €32bn Non-life capital requirements. Despite the decrease, Italy still 6% represents the third European life market by GWP, after UK 15% and France.
1% Non-life premiums on the other hand increased by +1.2% Brokers and direct sales to €32.3bn, thanks to the growth in non-motor premiums Source: PwC analysis on IVASS and ANIA data partially off-set by the decrease in motor business. (1) Direct and ceded business, excluding business underwritten in freedom of service
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 3 Section 1 – Italian insurance market snapshots
Top Italian insurance players Companies Groups
2017 top 5 ranking of life insurance companies and groups by GWP Market share 19.4% 25,000 20% 17.5% 17.5% 18% 22,515 20,000 44% 15.0% 66% 16% 20,263 20,263 Top 5 companies Top 5 groups 14% market share 17,405 market share 15,000 12%
8.5% 9.6% 10% share share 10,000 6.9% 6.8% 8% Market 11,161 GWP (€ million)(€ GWP 9,798 4.3% 4.5% 6% 8,036 7,929 5,000 4% 5,026 5,244 2% - 0% Poste Vita Intesa Sanpaolo Generali Intesa Creditras Intesa Sanpaolo Poste Vita Generali Allianz Aviva Vita Italia Sanpaolo Life Vita Group Group Group Group Group
2017 top 5 ranking of non-life insurance companies and groups by GWP
15,000 30%
51% 62% 25% 12,000 21.2% 18.8% Top 5 companies Top 5 groups 20% market share market share 9,000 15.7% 13.4% 13.3% 15%
7,790 share 6,000 6,901 9.8% Market
GWP (€ million)(€ GWP 5,760 10% 4,936 6.0% 5.5% 4.6% 4,879 3,000 4.1% 3,594 5% 1,691 1,491 2,200 2,017 - 0% Unipol Sai Generali Allianz Società AXA Unipol Generali Allianz Reale Mutua Cattolica Italia Cattolica Assicurazioni Group Group Group Group Assicurazioni Group Source: PwC analysis on ANIA data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 4 Section 1 – Italian insurance market snapshots Investments
2013/2017 breakdown of investments (not related to investment contracts) In 2017, investments of Italian insurers reached €624bn, with fixed-income assets representing ca. 76% of 625 602 76% Bonds total portfolio. 564 18 18 60 521 20 57 12% Funds 466 19 57 73 Italian government bonds in particular remain the 62 10% Equity 19 56 50 primary form of investment (ca. 45% of assets), as they 35 57 3% 26 Other combine low capital absorption with a higher return in comparison to other Euro-area govies. Consequently, share
€ in billions € in 465 473 410 437 Other prices of listed Italian insurers are affected by spread 364 Equities between Italian and German government bonds’ yields. Mutual funds Mutual funds have progressively increased their weight Bonds in the market’s portfolio (12% in 2017 vs. 6% in 2013) due to FY13 FY14 FY15 FY16 FY17 the reduction of government bond yields started in Source: PwC analysis on ANIA and IVASS data 2012 and the need to grant higher returns to policyholders.
2012/2018 main 5 European Government Bonds yield to maturity 2018 Italian insurance stock index and spread BTP - Bund
8% 18,000 3.5%
17,500 3.0% 6% Italy 17,000 2.5% Spain 16,500 5% 2.0% UK 16,000 1.5%
3% France 15,500 Spread Yield to maturity to Yield 1.0% Germany 15,000 2% FTSE All Insurance Share All FTSE 14,500 0.5%
0% 14,000 0.0% Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Source: Bloomberg
FTSE All Share Insurance Spread BTP-Bund PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 5 Section 1 – Italian insurance market snapshots The negative trend in motor premiums continues, but signs suggest the decrease in volumes could end
2013/2017 Italian market non-life GWP Average motor premium continued in 2017 the six-years-long decrease, reaching in the last quarter of 2017 €417 for a private contract (-0.7% vs. 2016). This reduction has been driven by factors 33,690 32,800 32,002 31,953 32,340 related to both tighter competition and a reduction in information asymmetries, such as: • Competition increase due to online aggregators and innovative Total € million € 18,644 players 17,567 16,642 Motor 16,128 16,003 • Telematics (i.e black boxes, pay as you drive) • Actions from the Regulator to reduce frauds (i.e. “Archivio integrato antifrode”) • Stricter rules on claims compensation of micro-damages FY13 FY14 FY15 FY16 FY17 In comparison to previous years however, the variation of GWPs and average premiums in 2017 has been limited, as margins for pricing strategies are narrow. Moreover, loss ratio has benefitted in 2017 from a reduction in cost of claims and decreased for the first time since 2013. Constant average prices and margins could end in 2018 the reduction of motor premiums and represent a new equilibrium. Motor (7.7%) (5.8%) (5.3%) (3.1%) (0.8%) GWP Focus on MTPL Other € in millions FY13 FY14 FY15 FY16 FY17 GWP (€ millions) 16,230 15,180 14,187 13,494 13,203 (1.2%) 1.2% 0.8% 3.0% 3.2% LoBs Average price per policy (€) 506 470 439 420 417 GWP # of policies (millions) 32.1 32.3 32.3 32.1 31.7 Claims frequency (%) 5.7% 5.5% 5.6% 5.7% 5.6% FY13 FY14 FY15 FY16 FY17 Loss ratio (%) 68.7% 69.5% 72.1% 76.1% 75.1%75.9% Source: PwC analysis on IVASS and ANIA data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 6 Section 1 – Italian insurance market snapshots Solvency II
2014/2017 Solvency II ratios
250% 255% 250% 241% 233% 233% 230% 232% 221% 210% 208% 212% 179% 163% 161% 134%
2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017 Life Non-life Composite Total market
2017 Composition of Basic Solvency Capital Requirement (BSCR)
13% (21%) The introduction of Solvency II regulatory framework in 18% 3% January 2016 has put the focus of insurers on capital 100% management, reflected by a general improvement 6% 80% between 2016 and 2017 in the coverage of capital requirements across different lines of business. Overall, the Solvency II ratio reached in 2017 ca. 241%, with life and composite insurers showing higher coverage, in order to prevent fluctuations in the bond market.
The main source of risk is represented by market risk Market Counterparty Life Health Non-life Diversification BSCR (ca. 80% of the Basic Solvency Capital Requirement), in particular due to the significant exposure of life insures to Source: PwC analysis on ANIA and IVASS data (1) 2014 and 2015 figures are derived from the preliminary and Day-one reports spread risk.
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 7 Italian life insurance market
The Italian Insurance Market • 2017 figures + 9M18 overview PwC 7 Section 2 – Italian life insurance market
Italian life insurance market Key Messages
• GWP of the Italian life insurance market decreased by 3.6%, reaching €99bn (€102bn in 2016) and net inflows of €27bn (€39bn in 2016) FY17 Key-data • 2017 technical result was positive (€2.9bn), reduced by 13.4% from 2016 (€3.4bn) as a consequence of lower net inflows Italian life insurance market GWP • The market still shows a strong predominance of traditional products (64% vs. 72% €99bn, -3.6% vs. FY16 in 2016). The low interest rate environment and Solvency II still represent strong incentives Life products distributed mainly for insurance companies to boost unit-linked and hybrid contracts and such through banking channel (61%) products, after a slowdown in 2016, increased by +25% in 2017 Largest life insurance company: • Life premiums penetration in Italy is 5.7% (premiums/GDP), higher than European Poste Vita (market share equal to 17.5%) average of 4.4% as a consequence of conservative savings’ approach of Italian Largest life insurance group: households • The average Solvency II ratio in the life sector increased to 233% (210% in 2016) as Intesa Sanpaolo Group (market share equal to 19.4%) additional emphasis has been put by the market on strengthening the capital position 72 insurance companies operating in the life business (71 in 2016) 2013/2017 Life business technical result (1)
2017 # of players by GWP € million FY13 FY14 FY15 FY16 FY17 Gross written premiums 85,110 110,515 114,950 102,257 98,610 Changes in technical provisions (29,928) (59,967) (53,024) (48,453) (38,427) 29 Lapses (Surrenders/ Maturities/ Claims) (66,788) (64,577) (71,196) (62,931) (71,154) General expenses (3,538) (3,812) (3,970) (3,844) (3,918) 20 Investment income 18,409 20,588 15,976 16,657 18,166 Other technical income (charges) (325) (381) (388) (328) (369) 12 Technical result 2,929 2,369 2,347 3,357 2,908 5 6 Reinsurance result 369 383 312 289 289 €5bn €1bn €100m €50m Net technical result 3,298 2,752 2,659 3,646 3,197 Source: PwC analysis on ANIA data and Insuranceeurope GWP (1) Direct and ceded business, excluding business underwritten in freedom of service
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 8 Section 2 – Italian life insurance market Italian life business distribution
2013/2017 Italian market life GWP (€mn) Product mix In 2017 total life GWP decreased by 3.6%, with a performance highly differentiated among lines of 110.5 114.9 102.3 98.6 business. 85.1 27.9 37.0 28.5 35.7 Traditional life business, connected to segregated funds, is € million € 20.1 Investment contracts still the core of the market (64% of total GWP), but
Traditional decreased in 2017 by 14.7% and is now at the lowest level 82.6 78.0 73.7 65.0 62.9 contracts since 2012, as a consequence of low market interest rates and Solvency II capital requirements introduced in January 2016. FY13 FY14 FY15 FY16 FY17 On the other hand, sales of investment contracts (i.e. unit- linked products) are close to the record level of 2015, as 2017 GWP by distribution channel they provide higher opportunities for return to policyholders and limit the capital absorption of insurers. 1% Main distribution channels 15% Banks Agents In line with other EU countries such as France and Spain, Financial promoters banks represent the most important distribution channel Others for life insurance (61% of total premiums), followed by agents €99bn (23% of premiums). Both networks focus their product mix 23% 61% on traditional contacts, whereas financial promoters, usually part of banking groups, offer a product mix more focused on investment products.
Source: PwC analysis on IVASS and ANIA data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 9 Section 2 – Italian life insurance market Breakdown of net inflows
Breakdown of net inflows Net inflows breakdown by LoB
11,749 27,425 16,711 ( 1,035 )
Traditional Unit & Pension- Capitalisations- Total Net Inflows 4,676 14,408 products Funds 79,515
€ million € (44,055)
(17,902) 27,425 (9,217)
Single Premiums Recurring Premiums Recurring Premiums Surrenders Maturities & Yields Claims Total Net Inflows 1st year
Written premiums Amounts paid
Sales continue to be dominated by single premium business (81% of total business underwritten), confirming the Italian trend of investing a lump-sum instead of paying premiums annually. This trend also confirms that life insurance policies are sold more for their saving characteristics than protection.
In line with GWPs, main net inflows are represented by traditional business (€16.7bn) and investment products (€11.7bn), whereas capitalization continued in 2017 to represent a net outflow of funds.
Source: PwC analysis on ANIA data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 10 Section 2 – Italian life insurance market Investments overview
Asset allocation of life products The investment strategy of Italian life insurers remains 2% 2% o/w 56.2% concentrated on fixed-income assets. 18% govies 21% Class C ‘Class C’ portfolios in particular, related to insurance own Life market investments 80% investments and profit sharing products portfolios, have investments €540bn o/w 20.9% the highest exposure to government bonds (56% of total govies 4% assets). €694bn 4.3% 62% ‘Class D’ portfolios related to unit and pension products - though 76% Class D 34% investments limited in their overall size - show a different asset allocation, 34.2% €154bn as they provide a higher risk-return trade-off: Government 61.5% Bonds Equities and mutual funds shares bonds represent only 21% of total assets, whereas equities and Liquidity, Fixed assets and others corporate bonds represent main investments (75% of the portfolio). Italian segregated funds’ composition (€bn) and yield
3.77% 3.56% Focus on segregated funds 3.24% 3.13% Italian life insurance remains centered on segregated funds 2.11% 1.99% 1.89% Equity 1.58% (in 2017 ca. 72% of investments) linked to traditional policies, as 502 Funds & oth. these products offer policyholders the protection of invested 471 8 431 8 75 capital, a minimum guaranteed yield and fiscal benefits. 388 8 62 52 Other bonds 14 115 Strict regulation of these funds determines that the investment 33 112 88 108 Gvmt. bonds strategy has historically been based on a ‘hold-to-collect’
Avg. Segreg. funds approach. In 2017 IVASS amended rules applicable to such 304 yield 253 263 289 funds in order to promote a more active management and Italy - BTP 10y provide policyholders with more stable returns. In particular, new funds can now accrue a reserve of undistributed earnings from sales 2014 2015 2016 2017 and smooth the distribution of benefits. Source: PwC analysis on IVASS and ANIA data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 11 Section 2 – Italian life insurance market Hybrid products
2015/2017 New business by Lob in hybrid products €22bn €20bn €26bn In a market characterized by low interest rates, dominated by both saving products offering a minimum guaranteed return and a stricter solvency regulation:
44% 43% 50% • Insurance companies have been pushed to commercialize less capital intensive products Unit & Index Linked • Policyholders have been demanding more sophisticated solutions combining features of protected investments and Traditional attractive returns 56% 57% 50% In such a context the introduction of hybrid life policy products splitting the investment in two parts - one linked to a
FY15 FY16 FY17 segregated fund and the other to a unit fund - has been extremely successful. In 2017, the new business of hybrid products 2015/2017 Multiline breakdown by hybrid channel amounted to €26bn (26% of total GWP) increasing by 30% year-on- year.
FY15 11% 72% 17%
FY16 18% 69% 13%
FY17 22% 63% 15%
Agencies & others Banks Financial promoters Source: ANIA
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 12 Italian non-life insurance market
The Italian Insurance Market • 2017 figures + 9M18 overview PwC 14 Section 3 – Italian non-life insurance market
Italian non-life insurance market Key Messages
• Increase of 1.2% in GWP (€32.3bn vs. €32.0bn in 2016) was driven by the growth of non-motor business (3.2%), partially offset by the reduction -0.8% of motor GWP, still FY17 Key-data representing the primary business (49% of total non-life) • In 2017, technical result amounted to €3.2bn, 8.6% lower than 2016, mainly affected by Italian insurance market GWP higher cost of claims related to catastrophic events affecting combined ratios of property €32bn, 1.2% vs FY16 business. The underwriting result was 10.0% of total non-life written premiums (slight Non-life products distributed mainly decrease compared to FY16) through agents (78.9%) • Non-life business still shows a lower penetration when compared to main EU Largest non-life insurance company: countries (1.9% in comparison to 3.3% in Germany and France) UnipolSai Assicurazioni (market share • Domotics and services (such as assistance and health insurance) are driving production equal to 18.8%) in non-motor LoBs and driving strategic investments of main insurers Largest non-life insurance group: • The average Solvency II ratio in non-life sector was 179%, increased significantly from Unipol Group (market share equal to 21.2%) 161% in 2016, showing the focus that the market has put on strengthening the capital position 122 insurance companies operating in (1) the non-life business (126 in FY16) 2013/2017 Non-life business technical result € million FY13 FY14 FY15 FY16 FY17 2017 # of players by GWP Gross written premiums 33,687 32,800 32,002 31,953 32,337 Earned Premium 34,441 33,188 32,182 31,847 31,832 Incurred claims (22,400) (21,201) (20,023) (20,005) (20,241) General expenses (8,433) (8,599) (8,702) (8,770) (8,918) Investment income 1,202 1,278 1,196 1,049 1,158 57 Other technical income (charges) (605) (527) (599) (598) (610) Technical result 4,205 4,139 4,054 3,522 3,221 24 Reinsurance result (772) (600) (410) (578) (252) 17 15 9 Net technical result 3,433 3,539 3,644 2,945 2,969
€50m €100m €300m €1bn Source: PwC analysis on ANIA data and Insuranceeurope GWP (1) Direct and ceded business, excluding business underwritten in freedom of service
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 13 Section 3 – Italian non-life insurance market Italian non-life insurance at a glance
2013/2017 Italian market non-life GWP by LoBs (€bn)
33.7 32.8 32.0 32.0 32.3 2.2 2.3 2.4 2.4 2.6 2.8 2.8 2.9 2.9 2.9 Total 4.9 Non-Motor 5.1 Other 5.0 5.1 5.2 CAGR 13-17 5.0 +2.1% General TPL 5.0 5.1 5.4 5.7 Fire & other damages Accident & Sickness Motor Motor 18.6 17.6 16.6 16.1 16.0 CAGR 13-17 -3.7%
FY13 FY14 FY15 FY16 FY17
2017 Breakdown of GWP by distribution channel In 2017 non-life GWP increased by 1.2%, with a differentiated performance between Motor and Non-Motor.
0.2% Motor-related business still represents ca. 49% of the market,
15% Banks but continued to decrease in 2017 by -0.8%, as insurers are Agents diversifying away from a highly competitive market with reduced 79% €32bn Financial promoters margins (MTPL combined ratio of 97.1% in 2017). On the other hand, sales of non-motor products grew by 3.2% in Brokers and direct sales 6% line with the increase started in 2013. In particular, health premiums (included primarily under Accident LoB) increased for the second consecutive year at almost +10%. In terms of distributive approach, agents remain the primary
Source: PwC analysis on IVASS data channel, although banks are setting as a strategic target for next years a strong growth in non-life products distributed.
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 14 Section 3 – Italian non-life insurance market Direct sales premiums are stable
2017 Non-life GWP of main companies distributing primarily via direct sales Zurich Total € million Genialloyd Verti Genertel Linear Quixa In 2017, relevance of sales Connect by LoB through internet and telephone channels decreased from 4.7% to MTPL 513.9 211.0 278.5 122.5 101.7 73.8 1,301 4.4% of total non-life GWP (7.9% to Other 88.1 214.5 60.3 12.1 5.4 28.0 408 7.5% if considering motor business Motor only) Accident & Sickness 22.7 42.5 20.0 8.7 2.7 3.1 100 Main companies selling primarily Fire & other 4.4 0.5 10.9 0.3 0 0.4 17 through direct channel accounted damages GWP equal to €1,929m, of which 2.2 0.2 3.8 0.1 0 0.1 6 €1,712m (or 88.6%) related to motor GTPL business. Direct companies Other 40.6 10.3 6.3 6.3 3.8 4.0 97 operating in the Italian market are Total by usually part of leading insurance company 672.1 479.0 405.4 150.0 113.6 109.5 1,929 groups. Ranking non-life # 11 # 15 # 19 # 37 # 43 # 47 insurance market 2013/2017 Trend of direct sales over distributed GWP
€1.4bn €1.4bn €1.3bn €1.2bn €1.2bn €1.6bn €1.6bn €1.5bn €1.4bn €1.4bn
7.9% 7.9% 7.7% 7.5% 7.5%
4.8% 4.8% 4.7% 4.4% 4.3%
FY13 FY14 FY15 FY16 FY17 Source: PwC analysis Motor LoBs Total Non-life market PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 15 Section 3 – Italian non-life insurance market Expense, loss and combined ratios
2013/2017 Combined ratio Loss ratio increased by 0.8% (63.6% vs. 62.8% in 2016), influenced in particular by Fire and Other Damages LoBs 90.1% 90.1% 89.4% 90.3% 91.2% where the ratio increased by +10 and +11 percentage points respectively, as a consequence of higher seismic and 25.0% 26.2% 27.6% 27.0% 27.4% atmospheric damages. Expense ratio increased by +0.2 percentage points, primarily due to the +0.3 increase in acquisition costs in non-motor 65.0% 63.9% 62.4% 62.8% 63.6% business as a consequence of the expansion in these Lines of Business. On the other hand, in motor-business acquisition costs are decreasing in respect to GWP, reducing the ratio by -2 FY13 FY14 FY15 FY16 FY17 percentage points. Loss ratio Expense ratio As a consequence of the above, combined ratio increased in 2017 by +0.9 percentage points.
2017 Expense, loss and combined ratios by LoB
97.1% 103.8% 105.0% 97.1% 90.4% 91.3% 83.4% 18.9% 32.4% 75.6% 33.7% 21.2% 75.4% 70.1% 71.4% 22.9% 30.7% 18.9% 64.4% 65.4% 62.1% 58.4% 55.1% 36.4% 33.1% 34.0% 30.5% 12.2% 34.7% 38.7% 37.4% 78.2% 70.1% 72.6% 75.9% 30.1% 67.5% 60.6% 24.3% 64.5% 46.2% 39.2% 42.3% 35.4% 37.4% 15.0% 33.9% 25.0% 26.7% 24.7% 9.3% Accident Sickness Land Railway Aircraft Ships Goods in Fire and Other Motor Aircraft General TPL Credit Suretyship Financial Legal Assistance vehicles rolling transit natural damage to vehicle + liability loss expenses stocks forces property Ships liability
Source: ANIA Loss ratio Expense ratio
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 16 Section 3 – Italian non-life insurance market MTPL shows a declining trend
2008/2017 MTPL GWP of Italian insurers Average MTPL tariffs Black box contracts by Region (2017) diffusion by Region (2017)
CAGR: -3.1% 17,605 17,760 17,542 17,007 16,964 16,230 15,180 14,187 13,494 13,203
Average premium<€380 Black box agreement rate <10% €380
Evolution of average MTPL tariffs (2007=100)
“Normal” insurance economic cycle The fall of average MTPL tariffs (-4.7% vs. 2016) is mainly due to: Progressive diffusion of (increasing tariffs along telematics products with decreasing Combined Ratio) • Rising competition and customers churn rate which resulted in: 108% 107 106% 106 a) Diffusion of online aggregators (helping comparability 101% 103% 102 101 between different offers) Combined 98% 97% 96 95 ratio (%) 100 94% b) Introduction of new rules on agency distribution (multi- 92% firm agents) 90% 90 Average 88% • Technological innovations such as telematics black box Price 84 products (as of IV quarter 2017, ca. 419 thousand contracts (Indexed, 80 2008=100) included black box in 2017, c.a. 21% of total) and pay-as-you drive 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • Decrease in the use of motor vehicles due to car sharing Source: PwC analysis on IVASS, ANIA, Insurance Europe and European Automobile initiatives, pollution and increase of congestion restricted areas Manufacturers' Association
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 17 Section 3 – Italian non-life insurance market Elderly insurance, new services to meet increasing needs of people Focus by Luigi Barcarolo | Insurance Analytics and Business Architecture | Cattolica Assicurazioni
The offer towards elderly is integrating worldwide, while in Demand for services and Seniors demand a positive Italy several players offer products towards elderly perspective for life, in order to Average age in Italy increases fragmented assistance in already represents a market fulfill their goals, by staying yearly by 2.5 months; the various areas and no provider of €30bn, including assisted healthy and socially share of over-85 people is offers an integrated service to living, home care, nursing active. Higher savings and expected to double from address needs of elderly and homes and financial services. spending capacity than current 6% (as of 2017), to their families. Such market is expected to average enable them to 13% in 2050. grow by +35% by 2025. purchase a wide range of products and services with the support of their family.
The strategic view of Cattolica Group Cattolica Group aims in its 2018-2020 Business Plan to invest and increase its market share in prevention and protection to elderly and their caregivers. The first step in this direction has been the financial and industrial partnership with Coopselios, the main cooperative nursing home (‘RSA’) in Italy. The transaction has taken place through the set-up of a Real Estate fund “Fondo Innovazione Salute” and, as a second step, foresees the integrated offer of services and insurance products to meet the need of assistance, health, care and support to elderly and their families.
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 18 Section 3 – Italian non-life insurance market Health insurance confirms growth and future potential
2013/2017 Italian ‘LoB – Sickness’ GWP (€m) In 2017, Italian health insurance GWP (included mainly 9.6% 9.53% 4.2% under Sickness LoB*) continued to grow (+€222m compared to 2016 or +9.5%), reaching the highest recorded level (0.8%) -0.2% 1.2% (3.0%) -2.4% 2,571 -2.6% 2,349 Group policies, such as medical expenses coverage offered to -4.9% 2,143 2,073 2,056 employees by employers, represent the most common distribution model (in 2017 ca. 74% of GWP); such model offers a mutuality benefit for both insurers and policyholders, spreading the cost of risk to a wider population.
Traditionally the market is fairly concentrated, with 5 main players making up 79% of GWP in 2017. 2013 2014 2015 2016 2017 LoB 2 GWP(€m) % Growth Non-life (y/y) % Growth Health (y/y) The average loss ratio for the LoB in 2017 was 66.5%, significantly lower than Motor (73.2%), but higher than the average in the Non-Motor business (51.9%) Top 5 ‘LoB – Sickness’ Insurance groups by GWP (€m), 2017 2012/2016 ‘LoB – Sickness’ Loss Ratio 73.1% 73.2% 71.1% 1 Unipol Group €632m 4 Allianz Group €262m 70.1% 68.3% 68.4% 66.9% 66.5% 67.8% 59.3% 65.5% 2 Generali Group €575m 5 Reale Mutua €139m 57.3% Group 51.8% 51.9% 49.8% RBM 3 Assicurazione €430m Other €533m & Slaute 2013 2014 2015 2016 2017 Health Motor (MTPL & Other motor)
(*) Coverage of healthcare expenses is also provided by parts of ’01-Accidents’ and ’18-Assistance’ businesses Other Non-Motor business Source: ANIA
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 19 Section 3 – Italian non-life insurance market Evolution of the Italian healthcare system
Historically low coverage levels Italian and French private medical expenditure in 2017 In 2017 in Italy, 22% of the cost of medical treatments is Italy France covered by private individuals, as ‘out-of-the-pocket’, while 4% 13% only 4% of the cost is covered by insurance. In comparison, in France, a country with a comparable significant share of 22% 6% public healthcare, insurance covered 13% of expenses
Demographic trends €154bn €262bn Italian population is subject to an aging process, ongoing since previous decades. Over-65 year old people were estimated to 74% 81% account for ca. 22% of the population in 2017. Consequently, medical expenditure has risen in the last 10 years at a 1.5% CAGR, up to €154bn in 2017
2007/2017 Italian medical expenditure (€bn) Connected Health and Big Data CAGR: Technological innovation (e.g. wearable devices, +1,5% 154 electronic medical folders) is providing major benefits: 146 147 146 147 149 149 141 142 134 138 • Better assessment of client risk profiles, reflected 33 33 34 35 40 31 31 33 33 in a higher client retention 30 31 • Change of the type of offered services, tending towards an integrated service of prevention and continuous monitoring 114 114 115 114 104 107 110 111 113 113 113 Demands unaddressed by the public sector In 2017, periodic monitoring from the Italian Ministry of Health showed that 5 out of 16 analyzed regions in Italy 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 could not fully reach minimum standards of Public medical expenditure Private medical expenditure healthcare services required Source: “VIII Rapporto RBM - Censis” - 2018, ISTAT, OECD
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 20 9M18 overview & industry outlook
The Italian Insurance Market • 2017 figures + 9M18 overview PwC 24 Section 4 – 9M18 overview & industry outlook 9M18: Insurance market trend update
9M14/9M18 Italian market GWP 105.5 108.7 99.8 99.9 95.1 23.2 22.6 22.5 23.1 22.6 Non-Life
Life
86.1
€ million € 82.4 77.3 72.5 76.8
9M14 9M15 9M16 9M17 9M18
Source: PwC analysis on IVASS data 9M18 Italian Life & non-Life GWP breakdown per LoB 9M18 total GWP (life and non-life) increased by €4.8bn compared to the previous year with a growth of 5.1%, in line with forecasts of +5% for 2018. The increase in GWP is pushed in particular by life business, 63% Non-life market - Breakdown per motor and non-motor growing by +6.0% with respect to the same period of 2017. 3M13 30% In specific, sales in life investment products grew by 9.0% compared to Life Non-life 48% 9M17, combined with a solid growth also on traditional products €77bn 52% €23bn +4.4% compared to 9M17. 42% 58% For what concerns non-life business, Sickness (+7.9% compared to 4% 9M17), Land-vehicles (+5.8% compared to 9M17) and Other Damages 2% (+5.8% compared to 9M17) coverages are leading the +1.7% growth in Traditional products Unit & Index linked the portfolio, in line with 2018 forecasts. Capitalisations Motor Others (Mutual funds & Sickness) Non-Motor
Source: PwC analysis on IVASS data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 21 Section 4 – 9M18 overview & industry outlook 9M18: life insurance market update
Life GWP quarter breakdown per LoB
62,750 57,75256,796
46,604 48,718
24,414
€ million € 22,658 23,274 15,147 17,241
3,482 2,775 1,965 1,684 3,255 976 1,167 1,267 1,433 1,563
Traditional products Unit & Index linked Capitalisations Others (Mutual funds & Sickness)
9M14 9M15 9M16 9M17 9M18 Source: PwC analysis on IVASS data
Breakdown per type of policies Breakdown per channel
8.5% 16.8% 14.4% 15.3% 14.0% 9M18 64% 36%
FY17 64% 36% 69.9% 62.0% 62.3% 61.0% 63.0% FY16 72% 28%
FY15 68% 32% 1.0% 0.5% 1.2% 1.3% 2.0% FY14 75% 25% 20.2% 21.2% 22.1% 22.4% 21.0%
0% 20% 40% 60% 80% 100% FY14 FY15 FY16 FY17 9M18
Traditional contracts Investment contracts Agents Others Banks Financial promoters
Source: PwC analysis on IVASS data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 22 Section 4 – 9M18 overview & industry outlook 9M18: non-life insurance market update
GWP breakdown per motor and non-motor Breakdown per distribution channel
0.2% 0.2% 0.2% 0.2% 0.2% 4.3% 4.7% 5.5% 6.2% 6.7% 14.0% 23,153 22,619 22,470 22,604 23,090 18.4% 14.4% 14.7% 17.4%
10,083 10,259 10,556 10,838 11,192
81.1% € million € 77.0% 79.9% 78.9% 75.7%
13,070 12,360 11,914 11,766 11,898
9M14 9M15 9M16 9M17 9M18 FY14 FY15 FY16 FY17 9M18
Motor Non-Motor Agents Brokers and direct sales Banks Financial promoters
Source: PwC analysis on IVASS data Source: PwC analysis on IVASS data
GWP breakdown per main LoB
13,070 12,360 11,91411,766 11,898
€ million € 3,782 3,912 3,367 3,450 3,615 3,275 3,254 3,325 3,337 3,477 1,808 1,853 1,866 1,872 1,922 1,634 1,702 1,750 1,848 1,882
Motor Accident & Sickness Fire & other damages General TPL Other
9M14 9M15 9M16 9M17 9M18 Source: PwC analysis on IVASS data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 23 Section 4 – 9M18 overview & industry outlook Industry outlook
In 2017, Italian GDP increased by 1.5%, with the expectation for 2018 Life GWP outlook
2018 of a lower growth by 1%. 98,610 101,085 According to the Italian Association of Insurance Companies (ANIA), the Italian insurance market will return to a generalized 76% of growth by +2.4% in 2018. 2018 forecast
Life business in particular will grow by +2.5% and reach ca. 76,81 € € million €101bn, pushed by traditional products (+3.0%) as sales will 0 +6.0% be supported by the growth in bond interest rates. Investment vs. 9M17 products on the other hand are expected to decrease by -2.5% as a consequence of volatility in 2018 in the Italian financial Actual 2017 Forecast 2018 Actual 9M18 market. Source: PwC analysis on ANIA data Italian non-life GWP is expected to increase by 2.1% in 2018, as non-motor LoBs are expected to benefit from the economic 2018 Non-life GWP outlook outlook. In particular, health insurance is expected to continue growing by +7%, while property businesses will be supported by fiscal benefits introduced in 2018 and would 32,340 33,027 grow by +6%. With regards to motor business, sales on MTPL 69.9% of
are expected to remain stable with constant average € million 2018 forecast premiums, whereas Land Vehicles would grow by +6%. 23,090 +2.2% vs. 9M17
Actual 2017 Forecast 2018 Actual 9M18
Source: PwC analysis on ANIA data
Source: OCSE, ANIA
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 24 M&A activity
The Italian Insurance Market • 2017 figures + 9M18 overview PwC 29 Section 5 – M&A activity M&A Transactions
Life market – Recent Italian transactions Recent deals PwC has assisted clients on most of the deals in Stake Deal Size the life and non-life Italian markets # Year Target Bidder % (€m) 1 2 01 8 Pramerica Life SpA Global Bankers Insurance LLP * 1 00.0% 85 In specific, the team advised on the following: 2 2 01 7 Popolare Vita SpA Cattolica Assicurazioni SCpA 6 5 % 5 4 5 3 2 01 7 Eurov ita Assicurazioni SpA Cinven Partners LLP nd nd Equity Transactions (buy-side and sell-side) 4 2 01 6 UNIQA Protezione SpA Societa Reale Mutua di Assicurazioni SpA1 00% 2 9 5 Processes related to renovation of existing 5 2 01 6 Old Mutual Wealth Italy SpA Cinven Partners LLP 1 00% 2 7 8 bancassurance agreements or signing of new 6 2 01 5 C.B.A. Vita SpA HDI Assicurazioni SpA 1 00% nd distribution partnerships 7 2 01 5 ERGO Prev idenza SpA Cinven Partners LLP nd nd 8 2 01 4 Carige Vita Nuova SpA Apollo Global Management LLC 1 00% 1 7 0 Supporting in the development of several 9 2 01 3 Eurov ita Assicurazioni SpA JC Flowers & Co. LLC 80% 47 business plans for both life and non-life 10 2 01 2 Chiara Vita SpA Helvetia Holding AG 3 0% 23 insurance companies
* Global Bankers Insurance and Pramerica Life agreed on 8th February 2019 not to complete the acquisition. Feasibility studies related to the launch of Non-life market - Recent Italian transactions new products
Stake Deal Size # Year Target Bidder % (€m) 1 2 01 8 Prima Assicurazioni SpA Blackstone Group / Goldman Sachs nd 1 00 2 2 01 8 IMA italia Assistance SpA Cattolica Assicurazioni SCpA 3 5 % 9 3 2 01 8 Net Insurance SpA Archimede SpA 3 0% 9 4 2 01 7 Av ipop Assicurazioni SpA Cattolica Assicurazioni SCpA 6 5 % 3 09 5 2 01 7 Av ipop Assicurazioni SpA Gruppo Banca Popolare di Milano 5 0% 2 6 5 6 2 01 6 UNIQA Assicurazioni SpA Societa Reale Mutua di Assicurazioni SpA1 00% 2 9 5 7 2 01 6 ERGO Assicurazioni SpA Dar ag A G nd 50 8 2 01 6 Filo diretto Assicurazioni SpA Gruppo Intergea SpA 5 1 % 7 9 2 01 5 InChiaro Assicurazioni SpA HDI Assicurazioni SpA 49% nd 10 2 01 5 ERGO Assicurazioni SpA Cinven Partners LLP nd nd
Source: PwC analysis on Mergermarket and Bankit data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 25 Section 5 – M&A activity Return On Equity historical trend
Life market (€bn)
2.5 -1.8 3.8 0.3 -2.6 5.1 3.1 3.5 3.8 3.5 Net Income
12.7% 15.2% 8.2% 9.2% 9.6% 9.2% 9.1% 1.0%
-8.2% -9.3% 38.1 37.8 38.9 39.1 38.1 33.7 30.0 29.3 28.2 22.0 ROE Equity
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Non-Life market (€bn)
-0.2 0.1 -1 -1 0.6 2.1 2.4 2 2.1 2.4 Net Income
8.2% 9.2% 7.2% 7.8% 8.7% 2.2% -0.9% 0.3% -4.8% -5.1%
28.9 25.8 26.6 27.3 27.3 ROE 21.8 21.0 20.6 18.9 20.0 Equity
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Source: PwC analysis on IVASS Data
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 26 Our contacts
Marco Falchero Gabriele Picuti Associate Partner | Financial Services Manager| Financial Services
M: +39 335 8086953 M: +39 344 1530845 [email protected] [email protected]
Davide Bigatti Senior Associate | Financial Services
M: +39 340 5872955 [email protected]
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