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Results at 31 March 2011: net profit up 16.8% to € 616 million

Q1 net profit up 16.8% to € 616 million

OPERATING RESULT RISES TO € 1,256 MILLION (+6.6%) DRIVEN BY RESULT IN NON-LIFE AND ASSET MANAGEMENT

  • Excellent performance confirmed for Life result at € 881 million (+1.7%), one of the best quarterly performances of recent years
  • Strong progress in Non-Life result at € 393 million (+26%)
  • Non-Life combined ratio improves by 1.9 p.p. to 96.1% (98% in Q1 2010)
  • Result in financial services improves to € 115 million (+16.7%)
  • Life premiums € 12.3 billion (-13.2%), performance reflects high concentration of single premium income in Q1 2010. Growth continues in Life annual premiums (+3.2%)
  • Non-Life premiums progress to € 6.8 billion (+2.1%)

GROUP SHAREHOLDERS' EQUITY RISES TO € 17.7 BILLION (+1.3%)

Generali Group CEO Giovanni Perissinotto said: ”The excellent results in the first quarter demonstrate once again the validity of our geographical and distribution diversification strategy. We have improved results in all segments. In the Life business our goal is to raise our already high profitability still further, through a tighter product policy. In Non-Life we are achieving our planned profitability increase. I’m also very satisfied with our results in asset management thanks to a favourable balance between growth and profitability. So everything is in place for the Group to report another significant improvement in its net profit in 2011.”

Milan – At a meeting today chaired by Gabriele Galateri di Genola, the Assicurazioni Generali Board of Directors approved the consolidated results at 31 March 2011.

Generali closed the first quarter of the year with strong growth in net profit to616 million (+16.8%; € 527 million Q1 2010), driven in particular by operating profits in all three businesses: Life, Non-Life and asset management.
The Life segment posted a high operating result once again, one of the best quarterly performances of recent years, achieved thanks to the investment management result and also to the improvement in the technical margin. Strong progress was achieved in the Non-Life operating result (+26%), which reported excellent technical profitability, with the combined ratio improving by 1.9 p.p. to 96.1% (98% Q1 2010), thanks in particular to positive performances in Italy, France and Germany.
The contribution from the operating result in the financial segment also improved (+16.7%), driven by growth policies and by the improvement of the intermediation margin, due to the increase in net commissions and in the interest income.
The aggregate operating result thus rose by 6.6% to € 1,256 million (€ 1,178 million Q1 2010), reaching the levels reported before the financial crisis.

Operating profit
€ mln 31/03/2011 31/03/2010 Δ
Life operating profit 881 866 +1.7%
Non-life operating profit 393 312 26%
Financial segment operating profit 115 98 +16.7%
Total operating profit (*) 1,256 1,178 +6.6%
(*) Total operating result includes operating holding expenses (-€74 mln) and consolidation adjustments (-€59 mln)

With premium income focused on maximisation of yield on the capital backing Life activities, the Group generated Life premiums of € 12.3 billion, a decrease of 13.2%. Aggregate gross premiums totalled € 19.1 billion (-8.3%; € 20.9 billion Q1 2010). The trend was influenced by the high concentration of single premium income in the first quarter of 2010.
In the Life business, annual premium income – characterized by higher profitability – continued to grow (+3.2%). Life premium income in the first quarter, at the level of both aggregate premiums and new business in terms of APE, was therefore not only of excellent quality, but also one of the best first-quarter figures of the recent years. Non-Life premium income increased to € 6.8 billion (+2.1%), with growth in the Motor line (2.7%) as well as in the Non Motor lines (+1.3%).
With regard to distribution channels, direct-channel premiums increased in both the Life and the Non-life segments. In the Life business, direct-channel premiums increased by 19.1%, accounting for a larger share of the segment’s portfolio (6.7%, from 4.8%). In the Non-life business, the growth reached 6.4% and the contribution to the portfolio was 3.8% from 3.6% a year ago.
In asset management, third-party assets reached € 92 billion (+4% on a like-for-like basis from 2010 year-end).

The Group also confirmed the strength of its capital structure in the first quarter, with shareholders' equity rising to € 17,725 million (+1.3%; € 17,490 million at the end of 2010).
The Solvency I ratio rose to 133% (132% at 31 December 2010). Including off-balance sheet unrealized gains on real estate subject to Authorities’ authorization, the Solvency I ratio was 140%.

INVESTMENT POLICY

In the first quarter, the Group investment strategy prioritised investments supporting the current profitability of its insurance portfolios by selecting equities and fixed-income government and corporate securities from solid issuers. This kept current profitability stable on a quarterly basis (1%).

Own investment (*) 31/03/2011 31/12/2010
Fixed-income instruments 79.3% 79.2%
Equities 8.4% 8.5%
Real Estate 4.9% 4.9%
Other 7.3% 7.4%
Total €324.2 bln €321.7 bln
(*) Own investments include own capital and insurance funds (i.e. unit linked excluded)

As part of the strategy described above, the Group kept corporate and government securities in its bond portfolio stable (at 44.2% and 55.8% respectively), maintaining average duration at the 2010 end-of-year levels. With regard to the equities component, the portfolio was characterized by significant trading activity, generating an increase in capital gains with respect to the first quarter of 2010. Real estate investments accounted for a larger share of the quarter’s result, with current profitability up to 2% on a quarterly basis. 

OUTLOOK

In the Life sector, the Group expects to confirm the ambitious production levels of 2010, although it is giving priority to products with lower capital absorption and higher returns in terms of new business value. This, together with the cost containment policy, should enable it to maintain or improve new business margins.
In the Non-Life lines, the Group expects to confirm the premium growth rates of 2010, arising from performance in the Non Motor business and upturn in the Motor business. Assuming a normalized level of catastrophic events, an improvement is also expected in overall technical margins as a result of the shift in the portfolio composition towards Non Motor retail lines, the maintenance of current operating efficiency levels and the on-going effects of the Group tariff policies and claims management policies.

Given the scenario described above, the Group expects to report higher operating margins and a higher net profit compared with 2010.

LIFE SEGMENT

First quarter Life operating result remained at very high levels, at € 881 million (+1.7%; € 866 million Q1 2010). This was achieved through a higher technical and financial margin and control of operating expenses.

Life operating result
€ mln 31/03/2011 31/03/2010 Δ
Technical Margin 1,6 1,564 +2.3%
Investment Result 644 643 +0.3%
Expenses -1,363 -1,34 -1.7%
Life operating profit 881 866 +1.7%

On a country basis, Italy reported a 1.2% improvement in operating performance, confirming the excellent result of the 2010 first quarter, thanks to the improvement in the technical margin and containment of expenses; France made strong progress as a result of the positive performance of its financial operations. The result in the Central East European countries was steady, confirming the previous good levels.

Life operating result - Geographic breakdown
€ mln                31/03/2011 31/03/2010 Δ
Italy 354 350 +1.2%
France 196 130 +51.5%
Germany 103 129 -20%
CEE 58 59 -0.7%

Looking at production, Life premiums in the first quarter amounted to € 12,340 million, from € 14,214 million in Q1 2010 (-13.2%). As noted above, the downturn was due in particular to the high concentration of single premiums in Q1 2010, especially in Italy, France and Ireland. Production improved in Germany, with premiums rising to € 3,338 million (+5.7%) thanks to the performance of personal Life policies.

New business in terms of APE remained high, at € 1,311 million, confirming the period as one of the best first quarters of the last few years. Compared with the first three months of 2010 (€ 1,532 million), APE were down 14.4% as a result of the high concentration of single premiums in the first quarter of 2010 referred to above. Income from annual premiums in the first quarter maintained an excellent level, accounting for approximately 60.6% of total APE.

NON-LIFE SEGMENT

The Group reported excellent performance in the Non-Life segment, for both premium income and profitability. The Non-life operating result grew by 26% to € 393 million (€ 312 million in Q1 2010). On a country basis, the result was particularly strong in Germany (+173.6%), Italy (+18.7%), France (+9.9%), Spain (+78.7%) and Austria (+19.2%).

The segment’s high profitability is mirrored by the excellent combined ratio at 96.1% (98% Q1 2010), benefiting from both the growth in premium income and the lower loss ratio in the first quarter. The reduction in the loss ratio, from 70.2% to 68.3%, is mainly attributable, thanks to the Group’s geographic distribution and reinsurance structure, to the lower impact of claims for catastrophic events. Excluding catastrophic events, the current loss ratio improved by 0.9 p.p. reflecting the progress in the Motor business in the Group’s key markets and in the Non Motor lines, especially in Italy. Central Eastern European countries are once again the Group’s best markets in terms of technical margins, with a combined ratio of 87.6%.

Aggregate Non-Life premiums grew by 2.1% to € 6,792 million (€ 6,650 million Q1 2010), driven by higher premium income in all lines of business, with the exception of the corporate segment, which was affected more severely by the difficult macro-economic situation in some important countries where the Group operates.
Premium income reflected positive contributions from Germany (+2.6%), France (+3.3%), Central Eastern Europe (+0.7%) and Switzerland (+14.5%). In Italy, overall premium income was substantially stable (-0.9%), with growth in the Motor line (+1.7%).

Combined Ratio
% 31/03/2011 31/03/2010 Δ
Italy 96.2 97.6 -1.4 p.p.
France 98.2 99 -0.8 p.p.
Germany 95.3 99.5 -4.2 p.p.
CEE 87.6 87.1 +0.5 p.p.
Total 96.1 98 -1.9 p.p.

FINANCIAL SERVICES

The operating result in the financial services segment rose to € 115 million (+16.7%) thanks to healthy results at the BSI Group and Banca Generali.

The BSI Group’s expansion programmes, especially in the Far East, are beginning to produce improvements in operating results: the increase in assets under management and in the related profitability led to a 36.3% increase in the Swiss group’s operating income. Overall, Generali Group third-party assets under management increased to € 92 billion (+4% from the end of 2010 on a like-for-like basis).

The improvement in the operating result was driven by the net result on financial operations (intermediation margin less net operating measurement losses on financial instruments). Specifically, there was an increase in the intermediation margin, which is the sum of net commissions, net interest income and other financial components. The increase was generated by the rise in net commissions, buoyed in particular by higher third-party assets under management, and in the interest income, which benefited from the rise in market rates.

The Manager in charge of preparing the company’s financial reports, Mr Raffaele Agrusti, declares, pursuant to paragraph 2 article 154 bis of the Consolidated Law on Finance, that the accounting information in this press release corresponds to the document results, books and accounting entries.

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Results at 31 March 2011: net profit up 16.8% to € 616 million. 364 kb