2019 Annual Report Graphic design by Mercurio GP Srl UnipolSai Assicurazioni UnipolSai Assicurazioni Annual Report 2019 Translation from the Italian original solely for the convenience of international readers. EVOLVING. GOING BEYOND. Financial year 2019 is the starting point for a new and ambitious mission: evolution. In the current economic scenario, in which the entire insurance sector is undergoing extensive changes, we want to continue looking forward, backed by our role as market leader, which we have built over time alongside our stakeholders. Evolving with a change in pace that enables the UnipolSai and the Unipol Group to become leader in three major ecosystems: Mobility-Welfare-Property. The strength of our assets - people, technology and sustainability - will allow us to overcome the single concept of insurance in order to evolve together, continuing to create shared value. CONTENTS Company bodies 7 3. Notes to the Financial Statements 101 Foreword 102 Introduction 8 Part A: Measurement criteria 103 Macroeconomic background and market performance 8 Part B: Information on the Statement of Financial Position and Main regulatory developments 11 Income Statement 115 1. Management Report 15 Part C: Other Information 170 Information on significant events 16 Statement summarising the key figures of the financial statements of Unipol Gruppo at 31 December 2018 and Insurance business highlights 21 31 December 2017 170 Share performance 22 Consolidated Financial Statements 171 Shareholding structure 22 Information on public funds received 171 Operating performance 23 Fees for audit and non-audit services 172 Non-Life insurance business 28 Proposed allocation of profit for the period and relevant Life business and Pension Funds 36 effects on the shareholders' equity 173 Sales and settlement organisation 39 4. Tables appended to the Notes to the Financial Reinsurance 42 Statements 177 Operations to combat fraud and claims management 43 5. Additional tables appended to the Notes to the Asset and financial management 44 Financial Statements 249 Investments and cash and cash equivalents 44 Reclassification statement of financial position at 31 December 2019 and at 31 December 2018 250 Risk management policies (Art. 2428 of the Civil Code) 50 Reclassified income statement 252 Treasury shares and shares of the holding company 51 Statement of changes in shareholders’ equity occurred during Performance of Group companies 52 the years ended 31 December 2019 and 31 December 2018 253 Transactions with Group companies and transactions with Analysis of the shareholders’ equity pursuant to Art. 2427, related parties 54 number 7 bis of the Civil Code 254 Transactions with Group companies (Art. 2497-bis of the Civil Statement of cash flows at 31 December 2019 255 Code) 54 Statement summarising write-backs 256 Transactions with related parties 56 Statement of changes in property, plant and equipment and Disclosure about Solvency II prudential supervision 62 intangible assets 257 Other Information 65 Subordinated Bonds 258 Human resource management and development 65 List of properties 264 Research and development activities 67 6. Statement on the Financial Statements in IT services 68 accordance with Art. 81-ter of CONSOB Regulation Communications 69 no. 11971 of 14 May 1999 and subsequent Statement pursuant to Art. 2.6.2, paragraph 9 of the amendments and additions 285 Regulation governing markets organised and managed by Borsa Italiana S.p.A. 70 7. Board of Statutory Auditors’ Report 289 Report on corporate governance and ownership structures for 2019 70 8. Independent Auditors’ Report 307 Significant events after the reporting period. 71 Business outlook 72 2. Financial Statements for the year 2019 75 Statement of financial position 78 Income statement 90 UnipolSai Assicurazioni 2019 Annual Report Company bodies CHAIRMAN Carlo Cimbri BOARD OF DIRECTORS VICE CHAIRMEN Fabio Cerchiai Pierluigi Stefanini DIRECTORS Fabrizio Chiodini Nicla Picchi Lorenzo Cottignoli Giuseppe Recchi Ernesto Dalle Rive Elisabetta Righini Cristina De Benetti Antonio Rizzi Massimo Masotti Barbara Tadolini Maria Rosaria Maugeri Adriano Turrini Maria Lillà Montagnani Francesco Vella SECRETARY OF THE BOARD Alessandro Nerdi OF DIRECTORS GENERAL MANAGER Matteo Laterza BOARD OF STATUTORY CHAIRMAN Paolo Fumagalli AUDITORS STATUTORY AUDITORS Giuseppe Angiolini Silvia Bocci ALTERNATE AUDITORS Domenico Livio Trombone Luciana Ravicini Sara Fornasiero MANAGER IN CHARGE OF Maurizio Castellina FINANCIAL REPORTING INDEPENDENT AUDITORS PricewaterhouseCoopers S.p.A. 7 UnipolSai Assicurazioni 2019 Annual Report Introduction Macroeconomic background and market performance Macroeconomic background In 2019, global growth came to around 2.5% (3.2% in 2018). The main economic areas experienced a slowdown in GDP growth, in particular in the second half, due to the reduction in trade triggered by US trade policies and continuing elements of uncertainty, such as Brexit and geopolitical risks in the Middle East. The United States grew at a rate of 2.3% (2.9% in 2018). The growth was primarily supported by private consumption, whilst the contribution to growth from investments and public spending reduced. Against a moderate slowdown in economic activity and a job market that is remaining robust (unemployment rate of 3.5% in December) and despite the December inflation rate of 2.3%, the Federal Reserve cut the Fed Funds rate three times during the year (the rate reaching 1.75% in October), suspending the reduction in the amount of bonds held starting from the end of August. In addition, so as to overcome a strong liquidity draining in the Repo market, the Federal Reserve introduced a short- term bond buying programme with a view to bringing the level of bank reserves back to around $1,500bn and maintaining them at that level. These moves did not change the tone of the monetary policy however. China continues to slow, with GDP growth in 2019 coming in at 6.1% on an annual basis. This was the slowest growth rate recorded since 1992 (6.5% in 2018). The slowdown is in large part attributable to the slowdown in international trade and the trade war with the United States, which hit the manufacturing sector hard, causing a significant slip in production. The difficulties in that sector led to a drop in private demand, and in particular investments, only partially offset by the positive contribution of investments of public companies. In December, the inflation rate stood at 4.2%. Emerging markets were also impacted by the global slowdown, as well as substantial stability in the price of commodities. In 2019, growth of roughly 4% was observed, against 4.7% in 2018. Japan should achieve weak growth, estimated at +1.0%, thanks to the contribution of unconventional, highly expansionary monetary policies and domestic demand, which offset a considerable decline in exports. Despite higher tax on consumption and expansion of the assets held by the Bank of Japan, inflation remains modest (0.8% in December), although within a context of close to full employment (unemployment at 2.2% in December). The Euro Area achieved GDP growth of +1.1% (+1.8% in 2018). The drop in growth can be attributed to multiple factors, such as slowing international trade, uncertainty with respect to Brexit developments and the slowdown in the manufacturing sector (which particularly impacted Germany and Italy). The unemployment rate continued to decline, reaching 7.4% in December 2019. Given the economic slowdown and inflation significantly lower than the 2% target (1.3% in December), the ECB modified the tone of its monetary policy and adopted additional expansionary stimulus measures. In particular, as of September the following measures were adopted: - launch of a new quantitative easing bond buying plan amounting to €20bn per month, plus the full reinvestment of the capital from maturing bonds; - cut in the deposit rate to -0.5%, while at the same time introducing a tiering system to mitigate the effect of negative rates on bank profitability; - adoption of a new plan of auctions for financing the banking system (TLTRO III). In 2019, the Italian economy slowed further compared to the previous year, with a GDP growth rate of +0.2% on an annual basis (+0.7% in 2018), resulting from a number of factors: the reduced contribution of net exports due to the above-mentioned slowdown in international trade, the modest trend in investments and the slowdown in private consumption. Nonetheless, the job market remained solid, with an unemployment rate of 9.8% at year-end, down compared to 2018. The inflation rate in December was 0.6% (1.2% in 2018). 8 UnipolSai Assicurazioni 2019 Annual Report Financial markets The monetary expansion manoeuvres announced by the ECB in September 2019, implemented starting last November, drove all European interest rate curves down. The 3-month Euribor rate closed 2019 down by 7 basis points versus the same figures at the end of 2018, while the 10-year Swap rate declined in the same period by 82 basis points. The German government yield curve showed modest volatility on maturities up to 3 years and a reduction in long-term rates in 2019. The 10-year Bund returned to negative values from May 2019 and amounted to -0.17% at the end of 2019, down by 45 basis points compared to the values at the end of 2018. In Italy, the ECB expansion manoeuvres compressed the returns on government bonds. The 10-year spread between Italian and German rates was 157 basis points at the end of 2019, down by 95 basis points compared to the end of 2018. 2019 closed on a positive note for the European equity markets after the losses recorded in 2018. The Eurostoxx 50 index, referring to the Euro Area prices, achieved a 25% upturn in 2019 compared to the values at the end of 2018, whilst the FTSE Mib, referring to Italian listed companies, rose by 28% in the same period. In the course of 2019, the Fed suspended the normalisation of its monetary policy, cutting the Fed Funds rate three times and injecting liquidity into the US interbank markets.