Assicurazioni Generali MANAGEMENT REPORT AND PARENT COMPANY FINANCIAL STATEMENTS PROPOSAL th 8year0 201i MANAGEMENT REPORT AND PARENT COMPANY FINANCIAL STATEMENTS PROPOSAL 2011 ASPI ECPI Ethical Index Global, Euro, FTSE4Good (Advanced Sustainable EMU Equity FTSE ECPI italia SRI Global and Europe Index Performance Indices) Eurozone e Developed Ethical + Equity Benchmark e Leaders STOXX Europe Sustainability Registered Office and Central Head Office in Trieste Head Office for Italian Operations in Mogliano Veneto Capital (fully paid in) Euro 1,556,873,283.00 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 Gabriele Galateri di Genola VICE - CHAIRMEN Vincent Bolloré, Francesco Gaetano Caltagirone, Alberto Nicola Nagel MANAGING DIRECTOR AND GROUP CEO Giovanni Perissinotto (*) (*) He acts also as General Manager MANAGING DIRECTOR Sergio Balbinot (*) (*) He acts also as General Manager DIRECTORS Cesare Calari / Carlo Carraro / Diego Della Valle (**) Directors who, together with the Chairman, Petr Kellner / Angelo Miglietta (**) / Alessandro Pedersoli Vice-Chairmen and Managing Directors, form the Executive Committee Lorenzo Pellicioli (**) / Reinfried Pohl / Paola Sapienza Paolo Scaroni / Francesco Saverio Vinci 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 and the General Managers Claude Bébéar / Kenneth J. Bialkin / Gerardo Broggini Giacomo Costa / Maurizio De Tilla / Enrico Filippi Carlos Fitz-James Stuart y Martínez de Irujo / 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) / Francesco Fallacara (substitute) GENERAL MANAGERS Raffaele Agrusti (***), Paolo Vagnone (***) Chief Financial Officer and Manager in charge of the preparation of the company’s financial reports DEPUTY GENERAL MANAGERS Francesco Garello / Manlio Lostuzzi / Valter Trevisani SECRETARY OF THE BOARD OF DIRECTORS Oliviero Edoardo Pessi CORPORATE BODIES AS OF 20 MARCH 2012 SARAS - refinery plant in Sarroch, Cagliari, Italy The images published in this book refer to major Companies and works insured by Generali Group. Cover: collage of images provided by Fagioli, Erg, AIA, Benetton, Fiat S.p.A., Indesit Company, Consorzio Venezia Nuova, CEZ Group. TABLE OF CONTENTS MANAGEMENT REPORT Company highlights 10 Business environment 11 The Generali Group’s profile 19 The Generali Group’s strategy 21 Social and environmental commitment 22 Part A – Information on operations 26 Part B – Risk report 65 Appendix to the Report 79 MANAGEMENT REPORT AND PARENT COMPANY FINANCIAL STATEMENTS PROPOSAL Parent Company Balance sheet and Profit and loss account Balance sheet 87 Profit and loss account 101 Notes to the Parent Company financial statements Foreword 113 Part A – Summary of significant accounting policies 113 Part B – Information on the balance sheet and the profit and loss account 122 Part C – Other information 187 Cash flow statement 197 Appendices to the notes 205 Statement relating to the solvency margin 291 Securities and urban real estate on which revaluation have been carried out 295 Companies in which an unquoted shareholding (which is higher than 10%) is held 310 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 373 BOARD OF AUDITORS’ REPORT 377 INDEPENDENT AUDITOR’S REPORT AND ACTUARY’S REPORT 385 represent publication of the financial statements before the General Meeting of the Shareholders according to Article 154-ter of Legislative Decree no. 58 of 24 February 1998 - Consolidated Law on Financial Intermediation, pursuant to Articles 8 and 21 of Law 52 of 6 February 1996. The publication of the annual financial statements will be made according to the existing law provisions. 9 FAGIOLI - heavy transport MANAGEMENT REPORT MANAGEMENT REPORT Company highlights 2011 2010 2009 (in million euro) Financial Statements Financial Statements Financial Statements Net profits 325.5 633.8 555.7 Aggregate dividend 311.4 700.6 544.9 Increase -55.6% 28.6% 167.9% Total net premiums 8,475.8 8,731.4 8,428.5 Total gross premiums 9,429.9 9,617.5 9,270.9 Total gross premiums from direct business 6,925.2 7,114.0 7,003.0 Increase on equivalent terms (a) -2.8% 1.3% -4.9% Total gross premiums from indirect business 2,504.7 2,503.5 2,267.9 Increase on equivalent terms (a) -0.4% 6.9% -1.6% Acquisition and administration costs 1,277.5 1,273.1 1,271.6 Expense ratio (b) 15.1% 14.6% 15.1% Life business Total net premiums 5,182.8 5,499.0 5,267.6 Life gross premiums 5,416.1 5,689.6 5,426.5 Increase on equivalent terms (a) -5.1% 3.7% -5.0% Life gross premiums from direct business 3,645.9 3,867.6 3,742.6 Increase on equivalent terms (a) -5.8% 3.2% -5.8% Life gross premiums from indirect business 1,770.2 1,822.0 1,683.9 Increase on equivalent terms (a) -3.5% 4.9% -3.4% Life acquisition and administration costs 574.9 574.4 569.7 Expense ratio (b) 11.1% 10.4% 10.8% Non life business Total net premiums 3,293 3,232.4 3,160.9 Non-life gross premiums 4,013.8 3,927.9 3,844.4 Increase on equivalent terms (a) 2.0% 1.1% -2.7% Non-life gross premiums from direct business 3,279.3 3,246.4 3,260.4 Increase on equivalent terms (a) 0.7% -0.4% -3.8% Non-life gross premiums from indirect business 734.5 681.5 584.0 Increase on equivalent terms (a) 7.9%12.8% 4.1% Non-life acquisition and administration costs 702.6 698.7 701.9 Expense ratio (b) 21.4% 21.7% 22.2% Non-life loss ratio (c) 73.8% 77.5% 78.2% Non-life net combined ratio (d) 95.2% 99.2% 100.4% Current financial result 1,604.4 2,504.4 2,136.8 (continues) 10 (continues) 2011 2010 2009 (in million euro) Financial Statements Financial Statements Financial Statements Technical provisions 41,718.5 40,689.1 39,832.2 Technical provisions life 34,921.3 33,898.0 32,962.2 Technical provisions non life 6,797.2 6,791.1 6,870.0 Investments 64,443.5 64,505.2 63,588.2 Capital and reserves 14,259.5 14,324.8 13,247.4 (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). Business environment Macro-economic scenario 2011 was an especially difficult year for European economies due to the continuation of the financial crisis, which highlights risks relating to the sustainability of the sovereign debt of European countries with a high public sector debt. The scenario described above even called into question the survival of the euro. The crisis most severely affected peripheral countries (Greece, Ireland, Portugal, Spain and Italy), which saw significant increases, to record levels, in the spreads between the yields of their bonds and those of the German bund, which has now become the quintessential safe haven investment. This increase in debt financing cost forced most European countries to adopt exceptional fiscal policy and cost containment measures. Those local policies were in addition to the new agreement reached at a European level to encourage a return to greater discipline among European countries in the area of public spending. A new plan, known as the “fiscal compact”, was approved on 30 January 2012 with the aim of reinforcing the stability pact by setting limits for the deficit/GDP ratio (0.5%) and reducing debt to below 60% of GDP. Such disciplined government budget policies will need to be associated, as appropriate, with measures to stimulate economic growth, which remains one of the most critical issues still to be resolved. The Chinese economy also slowed, owing in part to a decline in foreign demand. A similar trend was also seen in emerging economies. In contrast, the United States was characterized by a positive development of its economy, which showed clear signs of a recovery. 11 MANAGEMENT REPORT GDP DEVELOPMENT 2010 2011 12% 10% 9.2% 10.4% 8% 6% 4% 3.0% 3.7% 1.7% 1.7% 2% 1.5% 3.0% 0.4% 1.5% 1.5% 2.0% 0% ITALY GERMANY FRANCE EUROZONE USA CHINA There was a trend towards an economic slowdown in the European Union following the situation of uncertainty in the Euro Area described above. The unemployment rate in the Euro Area also rose to 10.4%, compared to 10% in 2010. The Greek crisis remains one of Europe’s key critical issues, with the country’s public debt equal to nearly 160% of its gross domestic product, a deficit in excess of 10% of GDP, while the latter is expected to decline in GDP by nearly 7% in 2011. Resolution of the problem relating to the restructuring of its debt remains the main ongoing challenge in the Euro Area. The outcome of the agreements will also condition future actions to be taken towards Portugal, which showed a 1.7% decline in GDP through the third quarter and whose public debt could reach 112% in 2012, according to estimates by the IMF. Ireland stood out among the peripheral countries: although its economic recovery slowed considerably in the second half of the year, it reported an estimated GDP growth of 1.1% in 2011 compared to a contraction of 0.4% in 2010.