Assicurazioni Generali MANAGEMENT REPORT AND PARENT COMPANY FINANCIAL STATEMENTS th year 2009 MANAGEMENT REPORT AND PARENT COMPANY FINANCIAL STATEMENTS 2009 Registered Office and Central Head Office in Trieste Head Office for Italian Operations in Mogliano Veneto Capital (fully paid in) Euro 1,556,864,483.00 Fiscal code and Trieste Companies Register 00079760328 Company entered in the Register of Italian Insurance and Reinsurance Companies under no. 100003 Parent Company of Generali Group, entered in the Register of Insurance Groups under no. 026 CHAIRMAN Antoine Bernheim VICE-CHAIRMAN Gabriele Galateri di Genola MANAGING DIRECTORS Sergio Balbinot (*) / Giovanni Perissinotto (*) (*) He acts also as General Manager DIRECTORS Luigi Arturo Bianchi / Ana Patricia Botin (**) Directors who, together with the Chairman, Francesco Gaetano Caltagirone (**) / Diego Della Valle Vice-Chairman and Managing Directors, Leonardo Del Vecchio / Loïc Hennekinne / Petr Kellner form the Executive Committee Klaus-Peter Müller / Alberto Nicola Nagel (**) / Alessandro Pedersoli Lorenzo Pellicioli (**) / Reinfried Pohl / Kai Uwe Ricke Paolo Scaroni / Claude Tendil GENERAL COUNCIL Giorgio Davide Adler / José Ramón Álvarez Rendueles Comprising, besides the below listed elective José Maria Amusátegui de la Cierva / Francesco Maria Attaguile Members, the Members of the Board of Directors Claude Bébéar / Kenneth J. Bialkin / Gerardo Broggini and the General Managers Giacomo Costa / Maurizio De Tilla / Enrico Filippi Carlos Fitz-James Stuart y Martínez de Irujo / Albert Frère / Georges Hervet Dietrich Karner / Khoon Chen Kuok / Stefano Micossi Benedetto Orsini / Arturo Romanin Jacur / Guido Schmidt-Chiari Alejandro Valenzuela Del Río / Theo Waigel / Wilhelm Winterstein BOARD OF AUDITORS Eugenio Colucci, Chairman Giuseppe Alessio Vernì / Gaetano Terrin Maurizio Dattilo (substitute) / Michele Paolillo (substitute) GENERAL MANAGER Raffaele Agrusti (***) (***) Chief Financial Officer and Manager in charge of the preparation of the company’s financial reports DEPUTY GENERAL MANAGERS Lodovico Floriani / Andrea Mencattini Aldo Minucci / Valter Trevisani SECRETARY OF THE BOARD OF DIRECTORS Vittorio Rispoli CORPORATE BODIES AS OF 17 MARCH 2010 Cathedral San Jose, Antigua - Guatemala A marked presence across the world The pictures featured in this volume are of landmarks of cities in Latin America where Assicurazioni Generali is present. TABLE OF CONTENTS MANAGEMENT REPORT 10 Company highlights 11 Economic and insurance market developments 15 The Gnerali Group’s strategy for growth 16 The Generali’Group’s identity 19 PART A – INFORMATION ON THE OPERATIONS 62 PART B – RISK REPORT 73 Appendix to the Report PARENT COMPANY FINANCIAL STATEMENTS Parent company financial statements 81 Balance sheet 95 Profit and loss account Notes to the Parent company financial statements 107 Foreword 107 PART A – EVALUATION CRITERIA 116 PART B – INFORMATION ON THE BALANCE SHEET AND THE PROFIT AND THE LOSS ACCOUNT 186 PART C – OTHER INFORMATION 193 Cash flow statement 201 Appendices to the Notes 287 Statement relating to the solvency margin 289 Securities and urban real estate on which revaluations have been carried out 306 Companies in which an unquoted shareholding (which is higher than 10%) is held 371 Attestation on the financial statements in accordance with Art. 81-ter of Consob Regulation No. 11971 of 14 May 1999 and following amendments and integrations … Board of Auditor’s report … Independent Auditor’s report and Actuary’s report 9 . · Park Central, Antigua - Guatemala MANAGEMENT REPORT Company highlights 2009 2008 2007 (in million euro) Financial Statements Financial Statements Financial Statements Net profits 555.7 828.3 1,401.1 Aggregate dividend 544.9 203.4 1,269.0 Increase 167.9% -84.0% 32.4% Total net premiums 8,428.5 8,745.4 8,873.0 Total gross premiums 9,270.9 9,659.9 9,759.7 Total gross premiums from direct business 7,003.0 7,363.9 7,502.5 Increase on equivalent terms (a) -4.9% -1.8% 4.9% Total gross premiums from indirect business 2,267.9 2,296.0 2,257.2 Increase on equivalent terms (a) -1.6% 2.7% 6.1% Acquisition and administration costs 1,271.6 1,308.5 1,402.1 Expense ratio (b) 15.1% 15.0% 15.8% Life business Total net premiums 5,267.6 5,514.9 5,609.8 Life gross premiums 5,426.5 5,698.4 5,835.8 Increase on equivalent terms (a) -5.0% -1.7% 7.1% Life gross premiums from direct business 3,742.6 3,967.6 4,094.1 Increase on equivalent terms (a) -5.8% -2.8% 5.4% Life gross premiums from indirect business 1,683.9 1,730.8 1,741.7 Increase on equivalent terms (a) -3.4% 0.6% 11.2% Life acquisition and administration costs 569.7 572.6 615.2 Expense ratio (b) 10.8% 10.4% 11.0% Non life business Total net premiums 3,161 3,230.5 3,263.2 Non-life gross premiums 3,844.4 3,961.5 3,923.9 Increase on equivalent terms (a) -2.7% 0.7% 2.5% Non-life gross premiums from direct business 3,260.4 3,396.3 3,408.4 Increase on equivalent terms (a) -3.8% -0.7% 4.3% Non-life gross premiums from indirect business 584.0 565.2 515.5 Increase on equivalent terms (a) 4.1% 9.8% -8.1% Non-life acquisition and administration costs 701.9 735.9 786.9 Expense ratio (b) 22.2% 22.8% 24.1% Non-life loss ratio (c) 78.2% 77.1% 70.2% Non-life net combined ratio (d) 100.4% 99.9% 94.3% Current financial result 2,136.8 2,030.1 3,168.6 (continues) 10 (continues) 2009 2008 2007 (in million euro) Financial Statements Financial Statements Financial Statements Technical provisions 39,832.2 39,092.9 39,768.4 Technical provisions life 32,962.2 31,944.2 32,518.6 Technical provisions non life 6,870.0 7,148.7 7,249.8 Investments 63,588.2 57,220.0 56,891.3 Capital and reserves 13,247.4 9,798.9 9,513.6 (a) At equivalent exchange rates. (b) Acquisition and administration costs on total premiums. (c) Claims, maturities and surrenders on earned premiums. (d) Sum of (b) and (c). Economic and insurance market developments The reporting year was affected by the economic and financial crisis that had begun to require considerable efforts in terms of economic policy intervention on a global scale as early as late 2008. In the third quarter of 2009, the international economic scenario began to show the first signs of recovery, which were especially robust for the economies of Southeast Asia, but less so for developed nations, where unemployment and government debt remained high. In the United States, GDP is estimated to have fallen by 2.4% (up 0.4% in 2008). This contraction, especially in the first half of the year, was due to the drop in residential property prices and household spending, accompanied by rising job losses and a high level of unemployment. The government bail-out focused on financial institutions and industry stemmed the tide of the crisis, leading the economy to show the first signs of stabilisation under the influence of expansionary monetary policies in the third quarter of the year. Real-estate markets stabilised and capital markets displayed renewed vigour. Nonetheless, the signs of improvement in the North American economy in the second half of 2009 were not enough to alleviate the employment situation, and there was also slight deflation (down 0.4% in 2009, compared to inflation of 3.8% in 2008). In China, the decline in international trade led to a slowdown in economic growth and also had negative consequences for employment. However, domestic demand (long the target of fiscal stimulus measures) and an extensive government spending programme focused on infrastructure partially offset the decrease in exports, resulting in a rise of gross domestic product estimated to come to 8.7%, compared to 9.6% in 2008. Prices are estimated to have remained at the previous year’s levels (-0.1% compared to +5.9% in 2008). In Latin America, the economy contracted by 2.3% (up 4.2% in 2008) due to the decline in demand from around the world, and from the U.S. market in particular. However, the recovery of commodities prices provided some relief to exporting countries, while the region's largest 11 economy, Brazil (GDP: -0.4% in 2009 compared to +5.1% in 2008), benefited from the resumption of exports to the Far East, which represents one of its main trading partners. Although Mexico’s situation gradually improved in the second half of the year, tracking the progress of the U.S. market, 2009 remains a year of severe recession (down 6.8%). In the European Union, the first part of the year witnessed a decline in exports accompanied by falling domestic demand both in terms of consumption and investments. The second part of the year witnessed the stabilisation of the economy with signs of recovery, albeit modest in extent. Overall, the recession was severe, with a drop in GDP of 4.0% compared to slight growth (up 0.6%) in 2008. Germany (down 5.0%) was the first to benefit from the positive effects that occurred mid-year, while France (down 2.2%) was most successful at limiting the crisis from the beginning of the year on due to extensive government intervention. Italy, already in recession in 2008 (down 1%), suffered under economic policy constraints due to high government debt, resulting in a 5.0% drop in GDP. The European Union Member States of Eastern Europe suffered the effects of the crisis to an especially acute degree due to their heavy debt exposure in foreign currencies, which increased as local currencies depreciated.