directors’ report on operations - poste italiane · million, is 1.27 % at 31 december 2014 (1.22%...
TRANSCRIPT
Poste Vita SpA
Consolidated Annual Report Directors’ Report on Operations
2
CORPORATE OFFICERS
BOARD OF DIRECTORS (1)
Chairman Luigi Calabria Chief Executive Officer Maria Bianca Farina Director Antonio Nervi Director Pasquale Marchese Director Bianca Maria Martinelli Director Dario Frigerio Director Salvatore Militello
BOARD OF STATUTORY AUDITORS (1)
Chairman Stefano Dell’Atti Auditor Marco De Iapinis Auditor Simona Arduini Alternate Franco Pichiorri Alternate Teresa Naddeo
INDEPENDENT AUDITORS (2) BDO SpA
1. The Board of Directors and the Board of Statutory Auditors were appointed by the shareholders at the General Meeting held on 4
August 2014 and will serve for three-year terms of office, until approval of the financial statements for 2016. The Board of Directors
appointed the Chief Executive Officer at their meeting of 5 August 2014.
2. Appointment approved by the shareholders at the General Meeting of 29 April 2014.
3
CONTENTS
GROUP STRUCTURE
DIRECTRORS’ REPORT ON OPERATIONS
Reclassified financial statements and key performance indicators
Economic and market environment
Operating review
Financial position
Organisation of the Poste Vita Group
Corporate governance and risk management
Relations with the parent and other Poste Italiane Group companies
Other information
Events after 31 December 2014
Outlook
CONSOLIDATED FINANCIAL STATEMENTS
Statement of financial position
Income statement
Statement of comprehensive income
Statement of changes in equity
Statement of cash flows
NOTES
Basis of preparation and accounting policies - Part B
Notes to the consolidated statement of financial position - Part C
Notes to the consolidated income statement - Part D
Other disclosures – Part E
Related party transactions – Part F
REPORT OF THE BOARD OF STATUTORY AUDITORS
REPORT OF THE INDEPENDENT AUDITORS
ATTESTATION OF THE MANAGER RESPONSIBLE FOR FINANCIAL REPORTING
ANNEXES TO THE FINANCIAL STATEMENTS
GROUP SOLVENCY MARGIN
4
GROUP STRUCTURE
The Insurance Group’s current structure and its scope of consolidation are briefly described below.
The Parent Company, Poste Vita, almost exclusively operates in the life insurance sector, and only
marginally in the non-life sector.
The scope of consolidation includes solely Poste Assicura SpA, an insurance company founded in
2010 and that operates in non-life insurance, excluding motor insurance. This company is a wholly
subsidiary of the Parent Company, Poste Vita, and is consolidated on a line-by-line basis.
The Parent Company also holds a non-controlling interest in Europa Gestioni Immobiliari SpA, a
real estate company tasked with the management and development of Poste Italiane’s properties
no longer used in operations. This investment is accounted for using the equity method.
5
In 2014, the Poste Vita Insurance Group continued to pursue the following strategic and business
priorities:
• to consolidate and strengthen the Company's position in the life insurance and pensions
market, with a particular focus on the supplementary pension segment and new emerging
needs (primarily welfare and longevity).
• to grow the non-life insurance business, with a view to positioning the subsidiary Poste
Assicura as a leading player in this market.
Profit before tax for the year amounts to €540.1 million, up €33.5 million on the €506.6 million for
the previous year. Profit for the year amounts to €324.8 million, compared with €256.1 million for
the previous year. This performance is due to satisfactory product sales and greater investment
income from traditional products, reflecting positive trends in financial markets.
The after-tax result for 2014 also benefitted from reduced income tax expense compared with the
previous year, reflecting the changes in tax legislation introduced at the end of 2013, which, for the
2013 tax year, resulted in an increase in tax expense of approximately €50.5 million.
The Group engages mainly in the life insurance business where, thanks partly to a constant
focus on products, the stepping up support for the distribution network and growing customer
loyalty, its marketing efforts concentrated almost exclusively on the offer of Branch I investment
and savings products (traditional separately managed accounts) with inflows of around €14.7
billion (up 19.9% on 2013), while a marginal contribution was made by the sale of Branch III
products.
RECLASSIFIED INCOME STATEMENT 2014 2013
Net premium revenue 15,473.2 13,200.2 2,273.0 17.2%
Gross premium revenue 15,509.3 13,234.4 2,274.9 17.2%
Outward reinsurance premiums (36.1) (34.2) (1.9) 5.5%
Fee and commission income 0.0 0.0 0.0 0.0%
Net financial income from assets related to traditional
products2,778.7 2,195.1 583.6
26.6%
Net financial income from assets related to index- and
unit-linked products539.0 717.2 (178.2)
-24.8%
Net change in technical provisions (17,893.4) (15,275.3) (2,618.1) 17.1%
Claims paid (5,301.1) (5,178.5) (122.6) 2.4%
Change in technical provisions (12,614.7) (10,116.8) (2,497.9) 24.7%
Share attributable to reinsurers 22.3 20.0 2.3 11.7%
Investment management expenses (32.8) (26.5) (6.3) 23.8%
Acquisition and administration costs (425.9) (369.9) (56.0) 15.1%
Net commissions and other acquisition costs (378.6) (329.8) (48.8) 14.8%
Operating costs (47.4) (40.2) (7.2) 17.9%
Other revenues/(costs), net (17.9) (17.0) (0.9) 5.2%
EBITDA 420.8 423.8 (2.9) -0.7%
Net financial income attributable to free capital 151.0 101.3 49.7 49.1%
Interest expense on subordinated loans (31.8) (18.5) (13.3) 72.1%
PROFIT BEFORE TAX 540.1 506.6 33.5 6.6%
Income tax expense (215.3) (250.5) 35.2 -14.1%
PROFIT FOR THE PERIOD 324.8 256.1 68.7 26.8%
Increase/(decrease)
(€m)
6
Sales of Branch V capital redemption policies, distributed directly by the Company to large
customers (banks, companies, foundations, wealthy individuals, etc.), also performed well,
amounting to €0.7 billion in 2014. Profit before tax is up approximately €34.1 million to €528.3
million, thanks also to positive results from treasury management and net returns on free capital.
While the contribution of the non-life business to the Group’s results is still limited, sales in this
area have performed well, with net premium revenue of €88.4 million (€56.6 million on an accruals
basis), up 24% on 2013.
With an economic picture still marked by uncertainty, in Italy and in Europe, and low interest rates,
the Company continued to pursue an investment strategy for separately managed accounts with
a view to increasingly match investments to insurance obligations and, at the same time, running a
portfolio that can provide stable returns in line with the market. Investment policy was marked by
maximum prudence, with a portfolio primarily invested in Italian government securities and highly-
rated corporate bonds. In the second half of 2014, the Parent Company, Poste Vita, also launched
a process of diversifying its investments, whilst maintaining a moderate risk appetite, via
investments in a multi-asset, harmonised open-ended fund of the UCITS (Undertakings for
Collective Investment in Transferable Securities) type. Returns on investment from separately
managed accounts (4% for PostaValorePiù and 5% for PostaPrevidenza), as well as from the
Company's free capital, both registered good performances, partly due to gains realised during the
period.
In terms of organisational aspects, in 2014 the Company continued to expand and develop the
quality of its workforce, in step with its growing size and the increase in business. This has enabled
it to follow up on the large number of projects in pursuit of growth and achieve continuing
functional/infrastructural improvements in key business support systems.
In particular, the Group launched all the functional activities required to comply with the Solvency II
regulations planned for 2016, including adaptation of its governance model and organisational and
operating structure, with a view to strengthening decision-making processes and optimising risk
management procedures, in order to increase and safeguard value creation. Moreover, given that
May 2015 will see the start of the preliminary phase of the Solvency II Directive, during which
insurance companies will be obliged to meet the initial requirements under the new regulations, the
Poste Vita Insurance Group also conducted significant planning, with organisational and IT
implications, aimed at meeting the objectives set out in the regulations from the beginning of the
preliminary phase. Finally, planning activities were launched at the end of 2014 aimed at creating
and implementing a more up-to-date integrated administrative and accounting system. This will
enable more efficient and automated management of data production processes and all the
documentation connected with mandatory requirements, at the same guaranteeing the
completeness, accuracy and quality of data.
Once again in 2014, administrative costs continued to be far lower than the market average (0.3%
of earned premiums and 0.1% of provisions).
The Parent Company is currently engaged in strengthening the operational and organisational
procedures designed to combat money laundering and the financing of terrorism, accompanied by
investment in the relevant staff and tools.
In terms of capital, it should be noted that, on 30 May 2014, the Parent Company, Poste Vita,
completed the issue of subordinated bonds with a total nominal value of €750 million, placed in
their entirety with institutional investors. The transaction forms part of an overall plan to strengthen
7
the Company’s financial position, primarily in view of expected growth and the aim of maintaining a
solvency ratio of at least 120% until the entry into effect of the new capital requirements, contained
in the Solvency II Directive, in 2016. In addition, on 11 December 2014, a General Meeting
attended by the Parent Company’s shareholder approved payment of a dividend of €80 million to
the sole shareholder, Poste Italiane, with this amount to be distributed from retained earnings.
The Group’s solvency I ratio, taking into account payment of the dividend for the year of €100
million, is 1.27 % at 31 December 2014 (1.22% at 31 December 2013).
Life business
With regard to operations and portfolio performance, as noted above, in 2014 net premium
revenue, net of outward reinsurance premiums, amounted to €15,417 million, up 17% on the
€13,162 million of 2013.
These results have enabled the Company to consolidate its growth trend over the last four years,
although its market share may well decline as the overall market picks up again after the not
particularly positive performances of 2010 and 2011.
Net financial income from assets related to traditional products totals €2,775 million, up on the
€2,192 million of 2013. This is mainly due to an increase in assets under management and greater
investment income from traditional products, reflecting positive trends in financial markets.
Regarding investments linked to index and unit-linked products, net financial income from these
assets for 2014 is approximately €539.0 million, with the change in technical provisions totalling
approximately €528.3.
8
The change in technical provisions amounts to €12,350 million (compared with €10,107 million in
2013), due mainly to an increase in insurance liabilities determined by the above-mentioned policy
and investment product sales and the corresponding increase determined by the positive
investment performance. Whilst the sale of Branch III products made a very marginal contribution,
the change for the period in technical provisions for this class of product is primarily linked to cash
outflows for surrenders and policy maturities, only partially offset by revaluations following positive
movements in financial markets.
Claims paid to customers during the period amount to approximately €5,530 million, inclusive of
policy expirations of approximately €2,335 million. Policy surrenders total approximately €2,397
million, in line with 2013. Total surrenders accounted for 3.7% of initial provisions, down from 4.3%
for 2013 and much lower than the industry average.
Commissions and other acquisition costs, net of costs ceded to reinsurers, amount to
approximately €368 million, reflecting the increase in policy sales, compared with the €325 million
of 2013.
Operating costs amount overall to €35.8 million, up 10% on the 32.5 million of 2013. This reflects
the above-mentioned increase in staff and the costs incurred during the year for major IT projects
aimed at achieving functional/infrastructural improvements in key business support systems.
Non-life business
Gross premium revenue in the non-life business, generated by policies sold in the year under
review, totals approximately €88.4 million. After deducting the change in technical provisions
(which is calculated, on an accruals basis, based on the length of the contracts for each product as
a percentage of premiums earned, less acquisition costs, for the period), net premium revenue
amounts to approximately €80.6 million (€56.6 million, net of outward reinsurance premiums).
9
In September 2014, as part of the process of rationalising and optimising operations, designed to
achieve synergies within the Insurance Group, the transfer for consideration of the non-life
insurance portfolio to the subsidiary, Poste Assicura, was completed. The transfer regards non-life
insurance products for the retail market, especially the Postapersona Infortuni, Postapersona
infortuni senior and Postapersona Salute products. The total value of the portfolio was assessed as
€292 thousand plus VAT. The transaction is reported in the consolidated financial statements,
applying the continuity of interest method.
In 2014, total claims expenses (amounts paid and the change in technical provisions) amounted to
€35.6 million. This item refers to the change in technical provisions for the year (inclusive of
provisions for late lodgements), totalling €19.3 million, and claims paid, inclusive of settlement
costs, of approximately €16.3 million for the period. Considering the reinsurer’s share of €11.5
million, the net change in technical provisions amounts to €24.1 million at the end of the period,
compared with €14.7 million in 2013.
This resulted in an increase of the loss ratio (up from 37% at 31 December 2013 to 42.8% at 31
December 2014). However, this ratio continued to be lower than the average for the industry
(60.5% in 2013), even though the gap is increasingly narrowing as Poste Assicura grows. The
increase in the loss ratio was due mainly to the rise in claims, which was not offset by a
proportional increase in total premium revenue. In addition, it is worthy of note that in the first half
of the previous year the loss ratio benefited from the release of approximately €1.5 million from
technical provisions in 2012, due to excess provisions made in relation to the earthquake in Emilia
Romagna. Lastly, a number of large claims in 2014 have led the Company to make provisions of
approximately €1.8 million, which drove the loss ratio up by about two percentage points; however,
in connection with these events, reinsurance coverage has allowed the company to recoup
approximately €1.3 million.
The intermediary, Poste Italiane, received commissions for distribution and collection activities of
approximately €20.7 million (€15.3 million in 2013), which, net of commissions received from
reinsurers and the change in deferred acquisition costs registered in the period, amounts to a total
of €10.4 million (€4.7 million in 2013).
Operating expenses amount to €11.5 million (€7.6 in 2013). The increase reflects the expansion of
the non-life business, which has required a major upgrade of the IT systems used in operations
and the recruitment of additional staff.
10
RECLASSIFIED FINANCIAL STATEMENTS AND KEY PERFORMANCE INDICATORS
Key performance indicators and the reclassified income statement and statement of financial
position are shown below:
Reclassified statement of financial position
FINANCIAL AND OTHER INDICATORS at 31 December 2014 at 31 December 2013
Technical provisions 3,084.2 2,763.5 320.7 11.6%
Equity 87,219.5 68,005.2 19,214.4 28.3%
Workforce 336 317 19 6.0%
Solvency ratio 1.26 1.22 0.04
OPERATING AND OTHER INDICATORS at 31 December 2014 at 31 December 2013
Premium revenue 15,509.3 13,234.4 2,274.9 17.2%
Profit for the period 324.8 256.1 68.7 26.8%
ROE 1 11.1% 10.5% 0.6%
Costs as a percentage of provisions 0.06% 0.06% 0.0%
Costs as a percentage of premiums 0.31% 0.30% 0.01%
Increase/(decrease)
(€m)
Increase/(decrease)
ASSETS at 31 December 2014 at 31 December 2013
Investments 90,263.9 69,852.2 20,411.7 29.2%
Investments in subsidiaries, associates and joint ventures 163.3 197.0 33.7- -17.1%
Loans and receivables 726.4 11.5 714.9 6239.4%
Available-for-sale financial assets 77,012.8 59,159.9 17,853.0 30.2%
Financial assets at fair value through profit or loss 12,361.4 10,483.8 1,877.6 17.9%
Cash and cash equivalents 655.9 804.9 148.9- -18.5%
Technical provisions ceded to reinsurers 54.4 40.3 14.1 34.9%
Other tangible and intangible assets 20.8 13.5 7.3 54.5%
Receivables and other assets 1,329.4 1,292.8 36.6 2.8%
TOTAL ASSETS 92,324.4 72,003.6 20,320.8 28.2%
LIABILITIES AND EQUITY at 31 December 2014 at 31 December 2013
Equity 3,084.2 2,763.5 320.7 11.6%
Technical provisions 87,219.5 68,005.2 19,214.4 28.3%
Provisions for risks 10.7 10.1 0.6 6.0%
Payables and other liabilities 2,009.9 1,224.9 785.1 64.1%
TOTAL LIABILITIES AND EQUITY 92,324.4 72,003.6 20,320.8 28.2%
(€m)
Increase/(decrease)
Increase/(decrease)
(€m)
11
ECONOMIC AND MARKET ENVIRONMENT
Growth in the global economy and in international trade was limited and uncertain in 2014,
reflecting divergent trends in the major economies. The United States recorded a positive upturn in
economic activity, whilst the euro area and Japan continued to struggle, the Chinese economy
slowed and Russia recorded a sharp fall in GDP. The drop in the price of oil, which has been falling
since mid-2014, led in turn to a sharp decline in consumer prices.
The US economy grew by 2.4% in 2014, the fastest rate in the last 5 years. After negative growth
in the first quarter (-2.1% on a quarterly basis), due to the intense cold of the North American
winter, the US economy picked up steam again and recorded a strong performance in the second
and third quarters of the year (growing by 4.6% and 5.0%, respectively), reflecting increased
consumer spending. Growth then slowed in the fourth quarter of the year (2.2% on a quarterly
basis), after a decline in exports due to the stronger dollar and the declining competitiveness of US
goods.
Japan is coming out of recession, but at a slower pace than expected, highlighting the
government’s difficulties in relaunching the world’s third biggest economy. In the first quarter of
2014, real GDP grew by 0.6% on a quarterly basis, whilst growth for the full year is 0.03%.
The UK recorded GDP growth of 2.6% in 2014. Despite a slowdown in the pace of growth in the
last two months of the year, the country’s performance in 2014 was the best since 2008. Growth
was driven by strengthening internal demand, thanks to improving labour and credit markets.
After two years of negative economic growth, euro area GDP rose 0.9% in 2014. Among the core
economies, growth remained sluggish in France (0.4%, compared with the 0.2% of 2013), whilst
economic expansion more than doubled in Germany (1.6%, up from 0.4% in 2013). In the
periphery, Italy was the only country to record negative growth in 2014 (Italy -0.4%, Portugal
+0.9%, Spain +1.4% and Greece +0.7%).
Euro area: real GDP (2008-14)
RECLASSIFIED INCOME STATEMENT 2014 2013
Net premium revenue 15,473.2 13,200.2 2,273.0 17.2%
Gross premium revenue 15,509.3 13,234.4 2,274.9 17.2%
Outward reinsurance premiums (36.1) (34.2) (1.9) 5.5%
Fee and commission income 0.0 0.0 0.0 0.0%
Net financial income from assets related to
traditional products2,778.7 2,195.1 583.6
26.6%
Net financial income from assets related to index-
and unit-linked products539.0 717.2 (178.2)
-24.8%
Net change in technical provisions (17,893.4) (15,275.3) (2,618.1) 17.1%
Claims paid (5,301.1) (5,178.5) (122.6) 2.4%
Change in technical provisions (12,614.7) (10,116.8) (2,497.9) 24.7%
Share attributable to reinsurers 22.3 20.0 2.3 11.7%
Investment management expenses (32.8) (26.5) (6.3) 23.8%
Acquisition and administration costs (425.9) (369.9) (56.0) 15.1%
Net commissions and other acquisition costs (378.6) (329.8) (48.8) 14.8%
Operating costs (47.4) (40.2) (7.2) 17.9%
Other revenues/(costs), net (17.9) (17.0) (0.9) 5.2%
EBITDA 420.8 423.8 (2.9) -0.7%
Net financial income attributable to free capital 151.0 101.3 49.7 49.1%
Interest expense on subordinated loans (31.8) (18.5) (13.3) 72.1%
PROFIT BEFORE TAX 540.1 506.6 33.5 6.6%
Income tax expense (215.3) (250.5) 35.2 -14.1%
PROFIT FOR THE PERIOD 324.8 256.1 68.7 26.8%
(€m)
Increase/(decrease)
12
As a result of falling energy prices and the continuing weakness of consumer spending, disinflation
took progressively greater hold during the year, turning into deflation by the end of the year, when
the Eurozone Harmonized Index of Consumer Prices: All Items recorded a decline of 0.6%. On the
other hand, annual growth of the core index, which measures inflation after stripping out the more
volatile components (energy and food prices), was between +0.7% and +1.0%, as shown below:
Euro area: annual inflation (aa%)
In Italy, the economic cycle continues to suffer the effects of weak investment and a slow recovery
in consumer spending. Growth continues to be export-driven, as the weaker euro has made the
country’s goods more competitive. Although at a progressively slower pace than in the period
2012-13, the decline in lending to companies continues to decline, reflecting low demand and weak
investment, on the one hand, and ongoing concerns about credit risk, on the other. The
unemployment rate has continued to rise, reaching 12.9% in December, as the number of people
looking for work, particularly among the young, has increased. Finally, in line with the rest of the
euro area, consumer prices fell considerably over the year, resulting, in certain months, in negative
annual growth in the second half of the year. In this context, GDP has stopped falling on a
quarterly basis, even though 2014 ended with a decline of 0.4%. Compared with the same quarter
of the previous year, annual economic growth remained negative, however.
13
For the period 2015-16, major international bodies forecast a gradual return to growth in 2015,
following by a stronger improvement in 2016.
Italy: estimated real GDP
Emerging economies saw weakening growth. Among the BRIC countries (Brazil, Russia, India and
China), economic growth was robust in India, but slowed in China, despite remaining above 7%,
whilst Brazil stagnated (growth became negative in the second quarter of the year), and the
Russian economy went into sudden decline, hit by the sanctions imposed by the West at the end of
July, the sharp fall in the oil price and the collapse of the rouble. As a result of both the weaker
currency and higher food prices, due to the sanctions, annual inflation in Russia rose rapidly from
6.1% in January to 11.4% in December.
With regard to the monetary policies of the most important Western central banks, whilst interest
rate rises are expected in the US and UK, monetary stimulus was increased in Japan and the euro
area. As expected, in October 2014, the Federal Reserve halted its purchases of Treasury and
Mortgage Backed Securities, letting it be known that a “normalisation” of monetary policy is, at the
moment, on an irreversible track. However, despite ongoing falls in unemployment, the Federal
Reserve has stated that it will continue to take a very cautious approach, thanks to the absence of
inflation risk, with regard to raising interest rates. At the moment, the financial markets appear to
expect a hike in interest rates between June and August 2015. In the euro area, the European
Central Bank (ECB) has responded to falling growth and a worsening outlook for
disinflation/deflation by continuing to with its extremely easy monetary policy: in June, the Bank
launched its Target Long Term Refinancing Operations (TLTROs), offering banks very low interest
rates in order to lend to businesses and households; at the September meeting, interest rates and
interest on banks’ deposits were reduced to 0.05% and -0.20%, respectively (from 0.25% and
0.00% at the beginning of the year); in October, the Bank launched its ABS (Asset Backed
Securities) Purchase Programme and Covered Bonds Purchase Programme; and, finally, the
ground was progressively prepared for a programme of Quantitative Easing, eventually launched
on 9 March 2015, and which will inject €60 billion into the economy through to September 2016.
Accelerating growth in the US economy and the slow pace of recovery in the euro area, expected
in 2015, should confirm the current decoupling of the Federal Reserve’s monetary policy, on the
one hand, from the approach adopted by the ECB, on the other.
Emerging countries have adopted diverging monetary policies. The central banks have eased
monetary policy in India and China (where, however, the authorities are keeping a close eye on the
14
situation in order to limit financial leverage and reduce the size of the “shadow” banking sector),
whilst a restrictive approach have been adopted in Brazil and Russia (where, in response to rising
consumer prices and to contain capital flight, the central banks have raised interest rates by 115
basis points).
Financial market trends
2014 saw a significant decline in the yields on government bonds issued by advanced nations,
reflecting the abundance of liquidity in circulation, the resulting demand for high returns from
investors and the impact of declining inflation expectations. At the end of the year, the yields on
ten-year government bonds in the USA, Germany, the UK and Japan stood at 2.17%, 0.54%,
1.75% and 0.33%, respectively. The aggregate average yield for the euro area as a whole had
fallen from 2.43% at the beginning of the year to 1.26% at the end of 2014.
Yield on ten-year government bonds
In the euro area, in part due to the impact of Quantitative Easing by the ECB, so-called core yields
fell to record lows and in some cases (e.g. Germany and Finland) short-term yields became
negative. The periphery (Italy, Spain and Portugal) witnessed a significant flattening of curves and
a reduction in spreads over German Bunds. Overall, this trend was not affected by either
geopolitical events or the general election in Greece, which led investors to seek safe-haven
investments in government securities only on a temporary basis.
As specifically regards Italian government bonds, 2014 proved to be an extremely positive year,
both the Italian State, thanks to the significant fall in the cost of debt, and for investors, in terms of
returns on investment. Compared with 2013, the decline in yields on Italian government bonds not
only continued, but also strengthened, supported by low economic growth and falling inflation
expectations, demand for higher returns, an improvement in Italy’s perceived credit risk and a
larger presence among overseas investors. Against this backdrop, the downgrade of Italy’s
sovereign debt rating by Standard & Poor’s, on 5 December, had only a marginal impact on the
spread between Italian and German government bonds. At the end of 2014, the spread on ten-year
Italian and German bonds was 134 basis points, compared with 210 basis points at the end of
2013, as the following graph shows:
15
10-year BTP/Bund spreads
Despite a few blips, caused by political and financial issues, the decline in yields was substantially
continuous throughout the year, resulting in a flattening of the yield curve, due to a decidedly
sharper fall in yields for medium to long terms to maturity (with reductions of between 150 and 250
basis points). The decline in shorter term yields was less marked (between 50 and 100 basis
points), given that, at this part of the curve, yields had already fallen a long way from the 2012-13
period. All the principal terms to maturity (2, 5, 10 and 30 years) have registered record lows since
the birth of EMU, as the following graph shows:
Yield on Italian government bonds
The risk premium on euro-denominated investment grade corporate bonds has fallen
approximately 20 basis points, returning to November 2007 levels. In the high-yield segment, credit
spreads on corporate bonds issued by companies with low credit ratings rose substantially in the
second part of the year, in the case of dollar issues, primarily due to those issued by energy
companies, whose ratings were affected by the falling oil price.
All the main equity indices in advanced countries rose in 2014, in a context in which volatility,
despite the rises at the beginning of September and at the end of December, remained
substantially unchanged overall compared with the end of 2013. Peripheral stock markets in Spain
(IBEX 50 Index up 11%.) and Italy (FTSE MIB up 16%) also rose, despite the share price falls seen
at the end of the year due to the political uncertainty in Greece.
During the second half of the year, emerging markets saw a decline in capital inflows targeting
both equities and, to a lesser extent, bonds. This resulted in a weakening of local currencies
against the US dollar, increased stock market volatility and high sovereign spreads, reflecting the
0
200
400
600
16
impact of the crisis in Russia, the falling oil price and the macroeconomic outlook. The assets and
currencies of oil-exporting countries were particularly hard hit.
The insurance market
2014 was a record year for the Italian life insurance market. Whilst the final official data is not yet
available, the estimated figure for premium revenue, at the end of the year, is approximately €116
billion, up by over €28 billion in absolute terms and equal to growth of approximately 32% on 2013.
This figure also includes premium revenue reported by overseas companies from both inside and
outside the EU, as well as around €11 billion in “premium instalments” (new premiums collected in
2014 on policies sold in previous years).
New business, which alone amounted to €106 billion (up 44.4%), was essentially driven by sales of
single premium policies which, at approximately €100 billion and having risen by approximately
48%, represent almost 95% of total inflows. Growth in forms of regular premium insurance was
lower, though still significant at approximately 20%. The driving force behind the Italian insurance
market was demand for investment-linked insurance policies, partly due to the continued weakness
of the economy that has led savers to shy away from traditional forms of investment, such as
government securities, offering low rates of return.
Inflows into Branch I policies accounted for approximately 63% of the total, whilst Branch III
accounted for 33% and inflows into Branch V policies 3%. The percentage growth in Branch I and
III policies was 45% in both cases, whilst Branch V policies are up approximately 115%, driven by
inflows into capital redemption policies linked to separate pools of assets and sold to customer
segments (corporate and private) that have rediscovered this form of insurance as an important
means of stabilising their investment portfolios. Of the approximately €35 billion in total inflows
recorded for Branch III policies, just under half is attributable to overseas companies.
All the inflows into Branch III products regarded unit-linked policies. 85% regards “classical”
policies, whilst the remaining 15% relates to “protected or guaranteed benefit” policies.
As noted above, new investment-linked insurance policies drove the Italian market in 2014,
representing 75% of total sales, after growth of 21% (total sales amounted to approximately €3.8
billion). Risk policies achieved good growth, rising10% and accounting for 17% of the total, whilst
inflows into new pension plans remained at low levels, with growth of only 4% and accounting for
8%. Inflows into Branch IV policies remained more or less insignificant, with the number of policies
sold again failing to exceed 40 thousand.
Turning to the various forms issued, single premium policies accounted for approximately 97% of
the total, as a logical result of the progressive financialisation of life policies in 2014. The average
premium rose, moreover, to approximately €50 thousand, no less than 20% up on the previous
year.
As regards distribution, overseas companies, who primarily distribute their products through banks
and financial promotors, have seen growth of 34% in terms of new business, accounting for around
15% of the total, which is substantially in line with the previous year. The banking channel saw
growth of 51.7%, increasing its share of the total by 2 percentage points to approximately 61%,
again in terms of new business. Financial promoters saw the fastest rate of growth in 2014, at
almost 60%, with their share of the total up to approximately 12%. On the other hand, outside
17
agents underperformed the market, growing by approximately 26% and thus seeing their market
share fall by around 12%, even after including the strong performance of in-house agents, where
growth was 46%.
The non-life insurance market recorded a 3.5% decline in premium revenue in the first nine
months of 2014, compared with 2013, with a portfolio of €23.15 billion. The reduction was primarily
driven by the weakness in land vehicle insurance and third-party liability insurance for sea, lake,
river and canal vessels, which is down 7.3% (accounting for 49.1% of total non-life business, down
on the 51.2% recorded at the end of September 2013).
Non-life premium revenue, excluding third-party liability vehicle insurance, amounts to €10.05
billion, up 1.1% in the first nine months of 2014. Other Damage to Property (up 6%), Financial Loss
(up 11.5%) and Assistance (up 8.5%) saw the highest rates of growth. Accident and Medical
insurance, on the other hand, recorded falls of 0.6% and 0.4%, respectively.
In terms of distribution channel, outside agents handled 80.4% of non-life premiums written (81.2%
in the first nine months of 2013) and 86.7% of third-party liability vehicle insurance premiums
(86.4% in the same period of 2013). Direct sales (over the phone and on line) accounted for 5.7%
of total non-life business (down on the 6.2% of the previous year), whilst 4% of policies were sold
through banks and post offices (up on the 3.7% of the first nine months of 2013).
18
OPERATING REVIEW
Total premiums continued to grow in 2014, with total premium revenue, net of outward reinsurance
premiums, totalling €15,473.2 million at the end of the year, up 17.2% on the €13,200.2 million of
the previous year. The table below breaks down premiums by life and non-life businesses:
The Company’s positive performance is shown also by the increase in the number of customers,
up from 3.0 million at 31 December 2013 to 3.2 million at the end of the period under review.
Life business
Total premium revenue continued to grow in 2014, reaching a total of €15,428.7 million (€13,172.6
million in 2013).
The following tables show a breakdown of new business, which totals €14,922 million, up 17.9%
on the €12,662 of 2013.
19
Thanks partly to a constant focus on products, the stepping up support for the distribution network
and growing customer loyalty, the Group’s marketing efforts during the year concentrated almost
exclusively on the offer of Branch I investment and savings products (traditional separately
managed accounts), while a marginal contribution was made by the sale of Branch III products.
The period under review saw sales of Branch I products rise faster than for the market as a whole,
thanks to a product offering more attuned to the needs of post office customers, who showed a
preference for the risk/return trade-off typical of these products. Sales of Branch V capital
redemption policies for corporate customers, distributed directly by the Company to large
customers (banks, companies, foundations, wealthy individuals, etc.), also performed well,
contributing €687 million to premium revenue.
The Group’s commercial strategy focused primarily on regular premium products. In the period
under review, these premiums amounted to approximately €1.1 billion, up 37% on 2013. The
Company also firmed up its leadership in the retirement market, with the total number of members
for the Postprevidenza Valore fund exceeding 711 thousand by the end of the year (over 86
thousand new members signed up during the period).
Sales of pure risk policies (term life insurance) also performed well. These are sold in stand-alone
versions (therefore, not bundled with investment products), with over 26 thousand new policies
sold during the year, whilst around 123 thousand were new policies, again of a pure risk nature,
were sold bundled together with financial obligations deriving from mortgages and loans sold
through Poste Italiane’s network.
At 31 December 2014, the number of policies sold amounts to approximately 5.9 million,
registering an increase of 11% on 2013 (when the figure was 5.3 million).
20
Non-life business
In the period under review, around 347 thousand new non-life contracts were sold, marking a 7%
increase compared with the previous year and an approximate daily average of 1,148 contracts
sold. The table below shows new business for the period, by line of business:
At 31 December 2014, gross premium revenue amounts to approximately €88.4 million (up 24%
on the previous year).
Payments and change in technical provisions
Claims paid during the period amount to a total of €5,301.1 million, compared with €5,178.5 million
in the previous year, as shown below:
Non-life insurance2014 2013
Claims paid 14,2 10,9 3,3 30,3%
Costs of settling claims 2,1 1,6 0,5 31,2%
Total non-life insurance claims
paid 16,3 12,5 3,8 30,4%
Life insurance
Amounts paid 5.276,7 5.157,6 119,1 2,3%
of which:
Surrenders 2.388,8 2.356,1 32,7 1,4%
Maturities 2.108,5 2.145,1 (36,6) -1,7%
Claims 779,3 656,4 122,9 18,7%
Costs of settling claims 8,1 8,4 (0,3) -3,8%
Total life insurance amounts
paid 5.284,7 5.166,0 118,7 2,3%
Totale 5.301,1 5.178,5 122,6 2,4%
Increase/(decrease)
(€m)
21
Total claims paid during 2014 on life policies amount to €5,285 million, compared with €5,166
million in 2013.
Surrender costs amount to approximately €2,388.8 million, in line with 2013 (€2,356.1 million),
representing 3.7% of initial provisions, compared with 4.3% in the previous year, which was still
much lower than the industry average.
The change in technical provisions, equal to €12,614.7 million (€10,116.8 million in 2013), refers
mainly to a corresponding increase in liabilities due to the above-mentioned operating
performance.
The change in life technical provisions, amounting to €12,595.4 million, includes the change in
mathematical provisions for Branch I, IV and V products, totalling €12,915.4 million, the change in
mathematical provisions for Branch III products (a decrease of €686.7 million), the change in
outstanding claims provisions (€245.4 million), reflecting index-linked policies maturing in the last
quarter, the change in the deferred policyholder liability (DPL) reserve (€111.9 million), due to fair
value gains recognised in the period, and the change in other mathematical provisions (€9.4
million).
Considering that volumes during the year were very limited, the change in technical provisions for
Branch III products should be attributed to cash outflows for surrenders and policy maturities, only
partially offset by revaluations following positive movements in financial markets.
22
With reference to policies ceded to reinsurers, claims paid in the period under review, inclusive of
the change in technical provisions, amount to €22.3 million, compared with €20.0 million in the
previous year, including €10.8 million relating to the life business (€12.3 million in 2013). Details
are shown below:
Reinsurance strategy
Life insurance
With reference to Life insurance, reinsurance policies adopted in the past years remained
essentially unaltered in 2014 and therefore the effects of ongoing treaties continued. In particular,
the Parent Company, Poste Vita, cedes life and long-term care (LTC) policies under quota-share
treaties. In addition, it reinsures life and permanent disability policies covering executives of Medio
Credito Centrale in optional reinsurance arrangements.
Ceded life policies showed a positive result of €0.6 million (€3.2 million at 31 December 2013). The
effects of these reinsurance policies on the Company’s results are described in the notes.
Non-life insurance
In 2014, the Group – through its Poste Assicura subsidiary – adopted a reinsurance policy for its
non-life business consistent with the strategy set for the 2013-2015 three-year period, which was
ratified in 2013.
Briefly, the reinsurance strategy adopted in 2014:
Non-life insurance 2014 2013
Claims paid 5.4 4.9 0.5 11.0%
Costs of settling claims 0.3 0.2 0.1 25.9%
Total non-life insurance claims paid 5.6 5.1 0.6 11.5%
Change in technical provisions 5.8 2.6 3.2 122.7%
Total non-life insurance 11.5 7.7 3.8 49.5%
Claims paid 3.4 2.8 0.6 21.5%
Costs of settling claims 0.0 0.0 0.0 n.s
Total life insurance claims paid 3.5 2.8 0.6 21.6%
Change in technical provisions 7.4 9.5 (2.1) -22.1%
Total life insurance 10.8 12.3 (1.5) -12.0%
Total claims paid and change in technical provisions22.3 20.0 2.3 11.6%
(€m)
Increase/(decrease)
Life insurance
23
regards gross premium revenue as the basis for reinsurance cession in the Fire, Other
Damage to Property and General Liability classes, with a further increase of commissions paid
by reinsurers based on underwriting results;
sets once again at 25% the proportion of risks ceded in General Liability, excluding
professional liability which is maintained at 90%;
retains 100% of gross premium revenue in the Accident class, with reference to new premiums;
maintains pure premium rates established in 2013 for credit protection insurance;
gives preference to “bouquet” and “multi-line” reinsurance;
provides for an increase in retroceded reinsurance commissions in the Legal Expenses and
Assistance classes;
adopts excess-of-loss treaties in Property and Liability (Fire, Other Damage to Property,
General Liability) and personal (Accident) insurance due to risk and/or event to hedge against
large losses;
confirms, in view of the high degree of the segment’s specificity, minimum risk retention for the
corporate and government sectors (up to 10%), to be attained mainly via optional reinsurance
agreements.
To complete the above strategy, work on implementing the system for managing the reinsurance
process continued during the year.
As a result of the reinsurance strategy described above, the operating performance and the above
claims trends, the cost of ceded insurance has fallen from the €4.5 million of the previous year to
approximately €1.9 million in 2014. The total effects on the Company’s results are illustrated in the
notes.
Complaints
The Parent Company, Poste Vita, received 1,302 new complaints in 2014, compared with a total of
1,532 in 2013. The ratio of complaints to the total number of outstanding contracts at 31 December
2014 (5,893,892) is 0.02% (0.03% in 2013). The average time taken to respond to complaints
during the year was around 25 days (18 days in 2013).
The Parent Company received 471 complaints regarding the Personal Injury Protection (PIP)
product in 2014. The ratio of complaints to the total number of outstanding contracts at 31
December 2014 (5,893,892) is 0.008% (0.01% in 2013). The average time taken to respond to
complaints during the year was around 26 days (18 days in 2013).
During 2014, the Poste Assicura subsidiary received 1,034 new complaints, compared with 598 in
2013. The ratio of complaints to the total number of outstanding contracts at 31 December 2014
(1,049,266) is 0.09% (0.07% in 2013). The average time taken to respond to complaints during the
year was around 26 days.
Technical provisions
24
As a result of the aforementioned operating performance, in accordance with the laws and
regulations on this matter and on the basis of appropriate actuarial assumptions, technical
provisions analytically calculated for each contract total €87,219.5 million. As a result of the
positive operating performance, the provisions have grown by approximately 28.3% compared with
€68,005 million at the end of 2013. The provisions are allocated as follows:
In particular, provisions for the life branches amount to €87,129.7 million, up approximately 28%
on the comparable amount at the end of 2013 (€67,942.5 million).These provisions are made to
meet all of the Company’s obligations and include mathematical provisions (€68,639 million),
provisions for unit- and index-linked products (€8,503.5 million), outstanding claims provisions
(€474.7 million), the deferred policyholder liability (DPL) reserve (€9,427.8 million) and other
technical provisions (€84.9 million). The latter includes provisions for future expenses (article 31 of
ISVAP Regulation 21/2008), totalling €82.2 million, provisions for supplementary insurance
premiums, totalling €2.3 million, and provisions for with-profits policies, amounting to €0.4 million.
With reference to the shadow accounting method, Branch I products whose revaluation is linked to
the returns on separately managed accounts, the financial component of technical provisions was
determined on the basis of realized income and expenses, as established by the applicable
accounting standards, without considering unrealized gains and losses. This generates a timing
mismatch between liabilities and the assets designed to back them, which are recognized at fair
value, in accordance with IAS 39.
This phenomenon is monitored, as in previous years, through “shadow accounting”, a tool
introduced by IFRS 4 to report assets and liabilities they are intended to back in a consistent
manner. In particular, unrealized losses and gains on financial instruments included in separately
managed accounts are recognized as liabilities among technical provisions, though to the extent of
the amount attributable to policyholders, in proportion to the retrocession percentage contractually
provided for in the separately managed accounts. This analysis takes into account the impact on
the minimum rate of return levels currently applied in contracts. The criteria used for shadow
accounting purposes are described in the notes.
Contracts classified as “insurance contracts” and those classified as “financial instruments with a
discretionary participation feature”, for which use is made of the same recognition and
measurement criteria as in Italian GAAP, were subjected to a LAT - Liability Adequacy Test
25
established by paragraph 15 of IFRS 4. The test was conducted by taking into account the present
value of future cash flows, obtained by projecting the expected cash flows generated by the
existing portfolio as of period end, based on adequate assumptions underlying expiration causes
(death, termination, surrender, reduction) and expense trends.
Non-life technical provisions, before provisions ceded to reinsurers, amount to €89.8 million (€62.7
million in 2013) and consist of: the premium reserve of €39.6 million, outstanding claims provisions
of €45.5 million and other provisions of €4.6 million. Other technical provisions include the ageing
reserve of €0.2 million. In addition, they include additional provisions of €4.4 million, made
following an adequacy test, as described more thoroughly in the notes. Outstanding claims
provisions for claims incurred but not reported (IBNR) amount to €8.7 million.
Changes in the premium reserve and outstanding claims provisions reflect trends in premium
revenue.
Distribution
The Poste Vita Insurance Group distributes its products through the post offices of the parent,
Poste Italiane SpA, a sole shareholder company – BancoPosta RFC, duly registered under letter D
in the single register of insurance intermediaries as per ISVAP Regulation 5 of October 16, 2006
whose validity was extended until March 2019, with tacit renewal at expiration.
Poste Italiane SpA’s sales network consists of over 13,000 post offices throughout the country.
Insurance contracts are signed in the post offices by qualified and suitably trained personnel.
Training activity for personnel in charge of product sales continued according to regulatory
guidelines. Professional training programs in 2014 focused both on new products and on technical-
insurance and pension modules. The latter were created to develop the expertise of personnel
acting as intermediaries, not only in terms of specific skills in relation to the products offered, but
also of general welfare issues and of defining customer needs. Each training initiative was
designed, approved and carried out by the Poste Vita Insurance Group’s competent department,
according to Poste Italiane SpA’s training guidelines (in some instances with the support of
external training companies, specialising in the insurance sector).
Moreover, the Company also strengthened its service model for customer support based on a
multi-channel approach and through an improved website, which includes customer services, an
area reserved for the Company’s existing customers and an upgraded call centre that can be
reached through a toll free phone number. The multi-channel service model was developed also to
support the distribution network, in synergy with and integrating the central role carried out by post
office personnel.
Total distribution and collection fees paid to Poste Italiane amount to approximately €370 million
(€336 million in 2013).
26
FINANCIAL POSITION
Financial investments
Investment strategies and guidelines are defined by the Boards of Directors through "framework
resolutions", which identify both the essential characteristics, in qualitative and quantitative terms,
of investment sectors and the strategies for derivative transactions. The investment process also
includes a governance system with corporate bodies (an Investment Committee and a Risk
Committee).
Regarding derivative transactions, at 31 December 2014 the only derivative instruments held
include the warrants purchased to hedge the indexed component of certain index-linked products.
At 31 December 2014, total investments amount to €90,919.8 million, up 28.7% on the €70,657.0
million at 31 December 2013, reflecting the operating performance and financial market trends.
Investments refer to the shareholding in the associate, EGI, which is accounted for using the equity
method. EGI, which is owned by Poste Vita SpA and Poste Italiane SpA with 45% and 55% equity
interests, respectively, operates in real estate and is tasked with the management and
development of Poste Italiane’s properties no longer used in operations. This Company reports
equity of €362.8 million at 31 December 2014 and a profit for the year of approximately €45
thousand. The value of equity and, as a result, the value of the investment 31 December 2014
reflect the distribution of €75 million from retained earnings, including €33.7 million paid to the
shareholder, Poste Vita SpA. The distribution was approved by the general meeting of
shareholders held on 24 November 2014.
Loans and receivables mainly refer to the positive balance of the current account held with Poste
Italiane and to amounts receivable in connection with capital calls in relation to mutual funds for
unissued units.
27
Available-for-sale (AFS) financial assets amount to €77,012.8 million (€59,159.9 million at 31
December 2013) and mainly regard investments backing contractual obligations entered into with
policyholders in relation to traditional with-profits policies, with a minimum guaranteed return linked
to returns on pools of assets managed by Poste Vita (so-called separately managed accounts). On
these products, the Company guarantees a minimum rate of return varying between 0% and 1.5%,
payable at maturity.
In 2014, the Company continued to use an investment approach designed to balance the need to
match increasingly investments with the structure of the obligations with policyholders and, in the
meantime, to maintain a portfolio capable of ensuring returns in line with those of its main
competitors. Investment choices were informed by utmost prudence, also in light of market trends,
with a portfolio invested mostly in euro area government securities and corporate bonds of good
standing. Purchases focused mainly on Italian government bonds, including in the inflation-indexed
component. Special attention was paid to the selection and diversification of the corporate bond
portfolio. In fact, with a view to diversifying risk among different sectors, to take the profit
opportunities made available by economic growth and by the slope of corporate yield curves, the
weight of banking, financial and industrial issuers was increased. On the other hand, to achieve
geographical diversification, the weight of European (mainly French, German and Spanish) and
US issuers was increased. The fall in Italian government bond yields, which marked the early
months of 2014, allowed the Company to book gains on sales of long-dated bonds.
The increase of approximately €17.9 billion compared with 2013 is due, on the one hand, to the
positive operating performance, resulting in net inflows of €10.1 billion and, on the other, returns
generated during the period, together with a fair value increase as a consequence of positive
financial market trends. At 31 December 2014, financial assets classified as AFS had generated
net fair value gains of approximately €9,620 million, compared with approximately €2,913 million at
the end of 2013. Of these, €9,280 million (€2,688 million at 31 December 2013) is attributable to
policyholders through the shadow accounting mechanism, in accordance with IFRS 4, as they
relate to financial instruments included in separately managed accounts. The remaining €340
million (€225 million in 2013) refers to net gains on AFS securities included in the Company’s “free
capital” and therefore attributable to a specific equity reserve (equal to €224 million), net of the
related taxation.
Financial assets at fair value through profit or loss (FVTPL) amount to approximately €12,361.4
million (€10,483.8 million at 31 December 2013) and primarily regard (€8,600.2 million, compared
28
with €9,306.1 million at the end of 2013) to financial instruments backing unit and index-linked
policies. Of these, around €6,130.5 million refer to financial instruments backing index-linked type
policies for which Poste Vita provides customers with a capital guarantee as well as a minimum
rate of return.
The remaining €3.8 billion primarily refers to investments included in the Company’s separately
managed accounts, including approximately €1.4 billion in callable bonds, €0.6 billion relating to
the issue of a CMS (Constant Maturity Swap), providing for a cap and floor mechanism designed
to limit excessive movements in interest rates, and approximately €1.8 billion invested in a multi-
asset, harmonised open-ended fund of the UCITS (Undertakings for Collective Investment in
Transferable Securities) type, by which the Company has launched a process of diversifying its
investments, whilst maintaining a moderate risk appetite.
Positive trends in the financial markets have made it possible to record unrealized capital gains of
around €124.4 million, almost entirely attributable to policyholders through the shadow accounting
mechanism.
Whilst sales of this class of product during the year were marginal, the change for the period is
primarily linked to cash outflows for surrenders and policy maturities, only partially offset by
revaluations following positive movements in financial markets.
Financial assets at fair value through profit or loss at 31 December 2014 at 31 December 2013
Debt securities 7,370.4 6,560.7 809.7 12.3%
of which: government bonds 6,032.7 5,888.9 143.8 2.4%
corporate bonds 1,337.7 671.8 665.8 99.1%
Structured bonds 2,367.0 2,983.3 (616.2) (20.7%)
Other financial instruments 2,417.6 729.8 1,687.7 231.2%
Derivatives 206.4 210.0 (3.6) (1.7%)
Total 12,361.4 10,483.8 1,877.6 17.9%
(€m)
Increase/(decrease)
29
The composition of the portfolio according to issuing country is in line with the situation throughout
2013, being marked by a strong prevalence of Italian government bonds, as shown in the following
table.
The distribution of the securities portfolio at 31 December 2014 by duration class is shown below:
Country AFS FVTPL TOTALE
Austria 29,2 18,6 47,8
Australia 258,6 9,9 268,5
Belgium 212,8 22,0 234,8
Canada 7,0 - 7,0
Switzerland 194,8 536,0 730,8
Czech Republic 5,3 - 5,3
Germany 471,4 117,9 589,3
Denmark 46,0 59,2 105,2
Spain 1.599,4 69,0 1.668,4
Finland 42,3 - 42,3
France 2.472,7 327,5 2.800,2
United Kingdom 977,6 905,4 1.883,0
Ireland 211,4 246,3 457,7
Italy 66.209,8 7.078,2 73.288,0
Japan 10,4 - 10,4
Luxembourg 221,8 379,3 601,1
Malta - 235,5 235,5
Mauritius - 1.798,2 1.798,2
Mexico 30,1 15,5 45,6
Holland 1.528,8 198,8 1.727,5
Norway 50,2 - 50,2
New Zeland 41,9 - 41,9
Portugal 31,8 - 31,8
Sweden 209,2 33,0 242,2
Slovenia 10,3 - 10,3
United States of America 2.140,0 311,0 2.451,1
total 77.012,8 12.361,4 89.374,2
(€m)
30
Liquid assets of €655.9 million refer mainly to temporary cash balances, mainly available in
“Separately managed accounts”, which were invested in January 2015.
Net income from financial investments for 2014 amounts to €3,437 million, up approximately €443
million on the comparable figure for 2013. The increase is due mainly to the greater amount
invested and an increase in gains realised during the period, thanks to positive financial market
trends. A small part, consisting of net expenses of approximately €23.8 million (net expenses of
€10.6 million in 2013), refers primarily to accrued interest on subordinated bonds, interest income
on bank and post office current accounts and interest on the current account held with Poste
Italiane. Finance income and costs break down as follows:
Returns on Poste Vita’s separately managed accounts, in the specific period under review (from 1
January 2014 to 31 December 2014), were as follows:
Investment activity is continually monitored, partly through the use of advanced risk assessment
methods (using statistical models). This process is conducted with the aid of an internal financial-
actuarial model, designed to assess the compatibility of risk estimates, with reference to both
contractually guaranteed minimum returns and potential effects on the financial statements, and
their sustainability, linked to the Company’s assets and liabilities and the returns expected from
time to time. The analysis is conducted under a “central scenario” (based on current financial and
commercial assumptions) and under stress and other market scenarios. The contractually
guaranteed minimum return is between 1.0% and 1.5% and is capitalised upon maturity of the
2014 Interest
Other
income and
costs
Realized
gains
Realized
losses
Realized
gains/(losses),
net
Unrealized
gains
Unrealized
losses
Unrealized
gains/(losses),
net
Total income
(expense), net
Deriving from available-for-sale financial assets 334,3 (1,1) 33,6 (5,8) 27,8 367,7 (9,0) 358,7 719,7
Deriving from financial assets at fair value through profit or
loss 2.351,0 59,3 352,2 (21,5) 330,7 - - - 2.741,1
Income from cash and cash equivalents 5,1 5,1
Deriving from loans and receivables 2,9 2,9
Deriving from financial liabilities (31,8) (31,8)
Deriving from investments in associates 0,02 0,02 0,02
Total 2.661,5 58,2 385,8 27,3- 358,5 367,7 9,0- 358,7 3.437,0
2013 Interest
Other
income and
costs
Realized
gains
Realized
losses
Realized
gains/(losses),
net
Unrealized
gains
Unrealized
losses
Unrealized
gains/(losses),
net
Total income
(expense), net
Deriving from available-for-sale financial assets 308,2 0,1- 21,0 - 5,0 15,9 430,1 (9,5) 420,5 744,5
Deriving from financial assets at fair value through profit or
loss 2.081 30,5 178,1 (30,0) 148,2 2.259,5
Income from cash and cash equivalents 9,5 9,5
Deriving from loans and receivables 0,1 0,1
Deriving from financial liabilities (18,5) (18,5)
Deriving from investments in associates (1,6) (1,6) (1,6)
Total 2.380,3 30,3 199,1 (35,0) 164,1 430,1 (11,2) 418,9 2.993,6
Increase/(decrease) 281,2 27,9 186,7 7,7 194,4 (62,4) 2,2 (60,2) 443,4
% increase/(decrease) 12% 92% 94% -22% 118% -15% -20% -14% 15%
(€m)
separately managed accounts Gross Return Average Invested Capital
rates% (€m)
Posta Valore Più 4.15% 57,463.8
Posta Pensione 5.15% 2,435.3
31
policy. As a result, the related risk is low, based on both the returns realised to date on separately
managed accounts and those expected to be realised. In response to the downward trend in
interest rates, in early 2015 the Company intends to cut guaranteed minimum returns on its
products to 0.5%.
Equity and solvency margin
At 31 December 2014, the Group’s equity amounts to €3,084.2 million, having increased €320.7
million compared with the beginning of the year. This reflects profit for the period, the change in the
valuation reserve for available-for-sale financial assets in which the Company’s free capital is
invested (up €75.9 million) and payment of a dividend of €80 million from retained earnings to the
sole shareholder, Poste Italiane, as approved by the General Meeting of 11 December 2014.
In addition, in May 2014, the Company issued subordinated bonds with a total nominal value of
€750 million, placed in their entirety with institutional investors. The transaction, completed on 30
May, is intended to further strengthen the Company’s capital, taking into account, in particular,
growth forecasts for 2014-2015 and a targeted solvency ratio of at least 120% until 2016, when
capital requirements under the Solvency II regulations will come into force. The cost of this debt is
approximately 3% and its carrying amount is €744.1 million.
At 31 December 2014, the Company continues to report subordinated debt of €540 million (of
which €400 thousand with an undefined maturity), placed with the sole shareholder and paying a
market rate of return. The debt is governed by article 45, section IV, sub-section III of Legislative
Decree 209 of 7 September 2005, as amended. This debt qualifies in full for inclusion in the
solvency margin.
The items included in the solvency margin, calculated using the usual method and taking into
account the proposed payment of a dividend for the period, total €3,855 million, compared with a
required margin of €3,061 million. The resulting solvency ratio at the end of 2014 is 1.26.
32
ORGANISATION OF THE POSTE VITA GROUP
Corporate governance
This paragraph also represents the Report on Corporate Governance required by art. 123-bis of
Legislative Decree 58/1998 (the Consolidated Law on Finance), as for as it extends to information
required under paragraph 2, sub-paragraph b. The governance model adopted by Poste Vita is
“traditional”, i.e. characterized by the traditional dichotomy between the Board of Directors and the
Board of Statutory Auditors.
The Board of Directors, which has 7 members (2 of whom, following re-election of the Board in
August 2014, are independent), meets periodically to review and adopt resolutions on strategy,
operations, results, and proposals regarding the operational structure, strategic transactions and
any other obligations under current industry legislation. This body thus has a central role in defining
the Group’s strategic objectives and the policies needed to achieve them. The Board of Directors is
responsible for managing corporate risks and approves the strategic plans and policies to be
pursued. It promotes the culture of control and ensures its dissemination to the various levels
within the Company.
The Chairman is vested with the powers provided for by the Company’s articles of association and
those conferred by the Board of Directors at the meeting of 5 August 2014. On that date, the Board
of Directors granted the Chief Executive Officer the authority to manage the Company, save for the
powers reserved to the Board of Directors.
The Board of Directors has established a Remuneration Committee, the composition of which
changed following the re-election of Directors in August 2014 (as reported in the section, “Events
after 31 December 2014”). The Committee has an advisory role and makes recommendations to
the Board regarding remuneration policies and and the remuneration of executive Directors. The
Committee also assesses whether or not the remuneration paid to each executive Director is
proportionate to that paid to other executive Directors and the Group’s other personnel.
As reported in the section, “Events after 31 December 2014”, on 27 January 2015, the Parent
Company established an Internal Audit and Related Party Transactions Committee, with the role of
assisting the Board of Directors in determining internal control system guidelines, in assessing the
system’s adequacy and effective functionality, and in identifying and managing the principal
business risks.
The Board of Statutory Auditors is made up of 3 standing members appointed by the shareholders.
Pursuant to art. 2403 of the Italian Civil Code, the Board of Statutory Auditors monitors compliance
with the law and the articles of association and with good practices and, in particular, the adequacy
of the organizational, administrative and accounting structure adopted by the Company and its
functionality.
The audit activities required by articles 14 and 16 of Legislative Decree 39/2010 are carried out by
BDO SpA, an auditing firm entered in the register of auditors held by the Ministry of the Economy
and Finance.
The Company also has a system of procedural and technical rules that ensure consistent
corporate governance through the coordinated management of the decision-making process
regarding aspects, issues and activities of interest and/or of strategic importance, or that might give
rise to significant risks for its assets.
33
The governance system is further enhanced by a series of Company Committees chaired by the
CEO, aimed at addressing and controlling corporate policies on strategic issues. In particular, the
following committees have been established: (i) an Insurance Products Committee, which
analyses, ex ante, proposals regarding insurance product offerings, with the related technical and
financial characteristics, and verifies, ex post, the technical and profit performance and limits on
risk taking for product portfolios; (ii) a Projects Committee, which is responsible for monitoring the
Insurance Group’s strategic projects, assessing progress, analysing possible critical areas and
guiding the actions undertaken by the departments in charge in order to achieve pre-established
goals; (iii) a Crisis Management Committee, responsible for managing crisis situations arising in
connection with the Company’s information system, to ensure business continuity on the
occurrence of unexpected, exceptional events. The Committee operates in accordance with the
policies established for the areas of interest by the parent, Poste Italiane; (iv) an Investment
Committee, which plays a role in defining the investment policy, the strategic and tactical asset
allocation policy and its monitoring over time.
Lastly, to increase compliance with the more advanced governance models, the Company’s
articles of association require the appointment of a manager response for financial reporting. At its
meeting of 11 September 2014, the Board of Directors confirmed the Chief Financial Officer in this
role.
Internal control system
Within the Poste Vita Group, risk management is part of a wider internal control system that is
divided into three levels:
• Line, or first level, controls, carried out during operational processes managed by individual
operating units (this also includes hierarchical controls and controls "embedded" in
procedures); the system of proxies and of powers of attorney; the operating units therefore
represent a "first line of defence" and are responsible for effectively and efficiently managing
the risks that fall within their purview.
• Risk management controls (second level), carried out by the Risk Management function, which
is separate and independent from other operating units and identifies the various types of risk,
contributes to establishing methods for evaluation/measurement and verifies that the operating
units comply with the assigned limits; it also identifies and recommends, where necessary, risk
corrective and/or mitigation actions, checking consistency between the Company’s operations
and the risk objectives established by the competent corporate bodies.
• Controls on the risk of non-compliance with rules (second level), carried out by the
Compliance department, which is separate and independent from operating units and has
responsibility for preventing the risk of incurring legal or administrative sanctions, financial
losses or reputational damage arising from non-compliance with the relevant regulations. In
this context, the Compliance unit is responsible for assessing the adequacy of internal
processes to prevent the risk of non-compliance.
• Third Level Controls, assigned to Internal Auditing, Ethics and Internal Control Models unit,
which is separate and independent from operating units. This department, based on an
analysis of areas of risk affecting the Company’s business, plans annual audits to check the
effectiveness and efficiency of the Internal Control System with respect to operations/business
processes.
34
Regarding the organisation of control functions, controls for the subsidiary, Poste Assicura, are
conducted on a centralised basis by the Parent Company, Poste Vita, pursuant to art. 36 of ISVAP
Regulation 20, dated 26 March 2008.
The internal control system also consists of a set of rules, procedures and organisational units
designed to prevent or minimize the impact of unexpected events and to enable the achievement
of strategic and operational objectives (effectiveness and efficiency of operations and protection of
corporate assets), compliance with laws and regulations, and accurate and transparent internal
information. It is a widespread system within the Company and is constantly upgraded.
Within this context, the Internal Auditing function helps the organization to achieve its business and
governance goals, providing support to officers and management in fulfilling their duties with
regard to the internal control and risk management systems, with a view to improving constantly
the Company’s corporate governance mechanisms and control processes. In particular, the unit’s
duty is to provide assurance – also by virtue of its organisational independence and lack of any
operational role – on the adequacy and overall functionality of the internal control system, adopted
by the Company pursuant to Law 262/05.
For this reason, this unit prepares an annual Audit Plan based on a risk assessment process, in
order to ensure progressive coverage of key business processes.
A Risk Management function has also been established to develop risk measurement methods and
propose action plans to mitigate the financial, technical and process risks to which the Company is
exposed. Risk Management is also responsible for developing a risk assessment system and a
system to measure regulatory capital according to specifications under definition at EU level
(Solvency II). Risk Management also supports the Board in assessing, through stress tests, the
consistency between the risks undertaken by the firm, the risk appetite defined by the Board of
Directors and its current and prospective capital.
The Compliance unit guarantees organisational and procedural adequacy to prevent the risk of
non-compliance with regulations, as per the Compliance Policy approved by the Board of Directors
on 26 November 2008.
As to the matters governed by Legislative Decree 231/01, Poste Vita has adopted a Compliance
Programme with the objective to prevent the perpetration of the different types of offence
contemplated by the law, and has appointed a Supervisory Board.
Adoption of the 231 Compliance Programme and the rules of conduct contained therein combine
with the “Code of Ethics of the Poste Italiane Group” and the “Code of Conduct for Suppliers and
Partners of the Poste Italiane Group” adopted by Group companies, in keeping with similar codes
in place for the Parent Company, Poste Italiane.
Organizational structure and personnel
The Insurance Group’s goal during the year was to strengthen its organisational structure, to meet
the requirements associated with its growing size and the increase in business. The number of
direct employees at 31 December 2014 is equal to 336, compared with 317 at 31 December 2013.
35
Whilst not as great as in previous years, the above-mentioned increase in personnel demonstrates
the Insurance Group’s commitment and intention to not only support the growth in business and
the various strategic projects already launched, some of a long-term nature, but to also build on its
specialist expertise (actuarial, financial, corporate governance and control), whilst also improving
processes and the relevant internal control system. Recruitment not only focused on attracting
talent from within the insurance industry, but also on hiring young graduates after internships or
traineeships with the Company.
The company’s organisational structure was continuously strengthened, focusing on staff
development and skill improvements. Personnel development was again one of the Group’s
strategic priorities in 2014, resulting in significant investment in training over the year. This resulted
in the provision of over 850 days of specialist technical training to personnel in 2014.
In addition, a new training programme, based on the use of business coaches, was launched
during the year, primarily involving management personnel and designed to strengthen managerial
expertise and support management in supervising personnel.
Finally, 2014 saw continued implementation of annual staff performance appraisals, focusing on
the assessment of managerial and behavioural skills and achievement of the targets assigned.
Workforce breakdown 2014 2013 Increase/(decrease)
Executives 32 32 0
Middle managers 129 113 16
Operational staff 170 161 9
Fixed-term employees 5 11 -6
Direct employees 336 317 19
36
Other information
Research and development activities
During the period, the Group did not incur any research and development expenses, except for
costs related to new products. These outlays were expensed as incurred.
Information on own shares and/or the parent’s shares held, purchased or sold during the
period
The Parent Company, Poste Vita, and its subsidiary, Poste Assicura, do not own and did not
purchase or sell their own or the parent’s shares.
Legal disputes
Approximately 289 proceedings have been initiated against the Parent Company, Poste Vita
(including around 14 regarding non-life policies included in the portfolio transferred from Poste Vita
to Poste Assicura), mainly relating to “dormant policies" and the payment of claims. Moreover, 7
proceedings are still pending in the labour court, filed by employees of subcontractors, who have
filed claims for unpaid salaries. The likely outcome of these disputes has been taken into account
in determining the results for the period.
Approximately 115 proceedings have been filed against Poste Vita, mostly regarding alleged
offences relating in general to the falsification of insurance documents, embezzlement and the
exploitation of people who are mentally incapable. The offences concerned have been committed
by third parties or employees of Poste Italiane.
Disputes involving Poste Assicura total approximately 171 to date and mainly refer to objections
raised against the payment of claims. The likely outcome of these disputes was taken into account
in calculating outstanding claims provisions.
A further 25 proceedings have been filed against Poste Assicura with regard, primarily, to
insurance documents.
Finally, the Parent Company, Poste Vita, is party to a further 14 disputes regarding non-life policies
included in the portfolio transferred to Poste Assicura and relating to the payment of claims.
Tax disputes
With regard to the tax authorities’ notification of alleged violations regarding the failure to pay VAT
on invoices for service commissions in the tax years 2004 and 2006, the Provincial Tax Tribunal of
Rome has found in the company’s favour, ruling the tax authorities’ allegations to be unfounded.
The related sentences have, however, been appealed by the tax authorities, as notified in
December 2014. Poste Vita, via its tax consultants, filed its counterclaims on 16 February 2015. A
date for the hearing has yet to be fixed. With regard to the alleged violation relating to 2005, the
appeal is still pending before the Provincial Tax Tribunal of Rome, as a date for the hearing has yet
to be fixed. The likely outcomes of the tax disputes continue to be taken into account in
determining provisions for risks and charges.
37
Related party transactions
In addition to other companies in the Poste Italiane Group, whose relationships have already been
described in the previous paragraph, according to the provisions of IAS 24 (para. 9) related parties
are the MEF (the Ministry of the Economy and Finance), Cassa Depositi e Prestiti SpA, entities
controlled by the MEF and key management personnel. The Government and public bodies
different from the MEF and from the bodies controlled by the Ministry are not considered related
parties; furthermore, transactions involving financial assets and liabilities represented by financial
instruments are not considered related party transactions.
Given the above, the only material transaction carried out by the Company with a related party
external to the Poste Italiane Group, in 2014, relates to a lease agreement entered into, on an
arm’s length basis, with EUR SpA (90%-owned by the MEF).
Company directors and key management personnel have not conducted any related party
transactions.
IVASS - Istituto per la Vigilanza sulle Assicurazioni (the insurance regulator)
Following the inspection that took place between 1 April and 14 July 2014, for the purposes of
assessing the governance, management and control of investments and financial risk, and
compliance with anti-money laundering regulations, on 17 September 2014 IVASS notified Poste
Vita of its recommendations and the start of an administrative procedure regarding the alleged
violation of four provisions concerning anti-money laundering regulations. The Company has
submitted defence briefs and has given evidence before a hearing. The procedure will be closed
within two years.
Regulatory developments
Regulatory developments in 2014 affecting, or that might affect, the Company’s business are as
follows:
On 19 February, the Senate converted the Law Decree introducing the so-called Destinazione
Italia (“Destination Italy”) programme (Law Decree 1299) into law.
Attention is called, among other things, to article 12 of this decree, which lays down a number
of measures intended, overall, to inject liquidity into businesses and to boost access to
financing for small and medium enterprises. To encourage investment in bonds by pension
funds and insurance companies, insurance companies will be permitted to make technical
provisions for investments in bonds and similar securities issued in relation to securitization
transactions, including those without ratings, even though they are not listed in regulated
markets or in multilateral trading systems and are without a rating.
On 25 February the Senate converted Law Decree 150 of 30 December 2013, as amended,
containing an extension of deadlines set by other legislation (Law Decree 1214-B), published in
Official Gazette no. 49 of 28 February 2014 of 28 February 2014. Attention is called, in
particular, to postponement of the deadline for the mandatory adoption of debit card payment
devices (POS). This provision refers to the obligation for entities that sell products and provide
services, including insurance companies, to accept payments made by debit card.
38
The 2015 Stability Law (Law 190 of 23 December 2014, published in Official Gazette no. 300 of
29 December 2014) has introduced, from the 2015 tax year, two tax measures that will
specifically affect the insurance sector: i) raising the rate of taxation of net annual returns on
pension funds from 11% to 20%, and ii) abolition of the exemption from personal income tax
(IRPEF) on the financial component of the payment made to life insurance beneficiaries if not
taken out solely to insure against the risk of premature death.
On 1 April, a draft ruling, amending ISVAP Regulation 24 of 19 May 2008 was issued for public
consultation. This regulation concerns the procedure for filing complaints with ISVAP and the
handling of complaints by insurance companies.
On 15 April 2014 IVASS, the insurance regulator, issued Ruling 17, containing amendments
and supplements to ISVAP Regulation 20/2008 - on internal control, risk management,
compliance and the outsourcing of insurance business operations – and ISVAP Regulation
36/2011 - regarding guidelines on investments backing technical provisions – as well as ISVAP
Regulation 15/2008, concerning the Insurance Group, to implement the EIOPA guidelines in
view of Solvency II.
On 10 June, the Draft Regulation updating provisions on investments and assets backing
technical provisions under ISVAP Regulation 36 of 31 January 2011 was issued for public
consultation.
On 21 October 2014, IVASS issued Ruling 21, containing amendments and additions to ISVAP
Regulation 15/2011, concerning the Insurance Group; amendments and additions to ISVAP
Regulation 18/2008, concerning assessment of the correct solvency ratio; amendments and
additions to ISVAP Regulation 7 of 13 July 2007, concerning financial statements presentation
for insurance and reinsurance companies required to adopt IFRS; amendments and additions
to ISVAP Regulation 26/2008, concerning investments acquired in insurance and reinsurance
companies.
On 21 October 2014, IVASS issued Ruling 22, containing amendments and additions to ISVAP
Regulation 36/2011, concerning guidelines regarding investments and assets backing technical
provisions.
As part of planned improvements to Italian GAAP, the Italian Accounting Standards Setter (the
Organismo Italiano di Contabilità or OIC) published and endorsed the following accounting
standards during the period:
OIC 9, providing guidance on the accounting treatment and disclosure of impairments of
tangible and intangible assets.
OIC 10, providing guidance on the preparation and presentation of the statement of cash
flows. The statement shows changes in cash and cash equivalents.
OIC 12, providing guidance on the presentation of the statement of financial position, the
income statement and notes, with particular regard to their form and content.
OIC 13, providing guidance on the recognition, classification and measurement of inventories
and the related disclosure requirements.
OIC 14, providing guidance on the recognition, classification and measurement of cash and
cash equivalents in the financial statements and the related disclosure requirements.
OIC 15 , providing guidance on the recognition, classification and measurement of receivables
and the related disclosure requirements.
39
OIC 16, providing guidance on the recognition, classification and measurement of tangible
assets and the related disclosure requirements.
OIC 17, providing guidance on the preparation of consolidated financial statements and
application of the equity method in both separate and consolidated financial statements.
OIC 18, providing guidance on the recognition, classification and measurement of accruals
and deferrals and the related disclosure requirements.
OIC 19, providing guidance on the recognition, classification and measurement of payables
and the related disclosure requirements.
OIC 20, providing guidance on the recognition, classification and measurement of debt
securities and the related disclosure requirements.
OIC 21, providing guidance on the recognition, classification and measurement of investments
and treasury shares and the related disclosure requirements.
OIC 22, providing guidance on the recognition, classification and measurement of
memorandum accounts and the related disclosure requirements.
OIC 23, providing guidance on the recognition, classification and measurement of contract
work in progress and the related disclosure requirements.
OIC 25, providing guidance on the recognition, classification and measurement of income tax
expense and similar tax expense (IRAP) and the related disclosure requirements.
OIC 26, providing guidance on the recognition, classification and measurement of foreign
currency assets, liabilities and transactions and the related disclosure requirements.
OIC 28, providing guidance on the recognition and classification of components of equity and
the related disclosure requirements.
OIC 29, providing guidance on the accounting treatment and disclosure of events relating to
changes in accounting standards, changes in estimates, the correction of misstatements, non-
recurring events and transactions and events after the end of the reporting period.
OIC 31, providing guidance on the recognition, classification and measurement of provisions
for risks and charges and for employee benefits and the related disclosure requirements.
40
RISK GOVERNANCE AND MANAGEMENT
Risk governance
The risk management process involves, with different roles and responsibilities, the Company’s
Boards of Directors, senior management, operating units and control functions.
The Board of Directors, as described also in the “Corporate Governance” paragraph, has ample
powers of ordinary and extraordinary management and may perform all actions it deems
necessary and useful to achieve the Company’s purpose, with the exception of those expressly
reserved by law to the shareholders. This body therefore defines the Company’s strategic
objectives and the policies needed to achieve them.
The Board of Directors also has final responsibility for the internal control system and defines
strategies and policies for assuming, assessing and managing the most significant risks and in this
respect, as already explained in the section on corporate governance, its sets risk tolerance levels
and performance goals consistent with capital adequacy levels.
In this regard, the Board of Directors is regularly informed on risk exposures, also through periodic
reports by the control functions.
The role of senior management within the internal control system is to ensure an effective
management of operations and the related risks, by implementing the risk management strategies
and policies established by the Board of Directors.
Senior management implements the necessary measures to ensure the establishment and
preservation of an efficient and effective internal control system, maintaining the functionality and
overall adequacy of the risk management system. Senior management handles the information
flow to the Board of Directors to ensure full awareness and manageability of business risks. It also
ensures the timely control and constant monitoring of risk exposures, including compliance with the
level of risk tolerance and operational limits.
The Risk Management function provides specialist support to the Board of Directors and to senior
management for definition and implementation of the risk management system, by monitoring its
overall resilience over time and ensuring a complete view of the Group’s business risks; the Risk
Management function checks the consistency between risk assessment qualitative and quantitative
models and the Group’s operations.
The Risk Management function also supports the different operating units in assessing the impact
on risk profiles regarding: strategic business decisions, and particular operations, products and
prices. It also monitors risk exposure and compliance with tolerance levels. The individual
operating units are responsible for operational risk management relating to their business,
adopting, for this purpose, the necessary methods, tools and skills.
Lastly, together with other control functions, the Risk Management function contributes to
spreading and strengthening the risk and control culture across Group personnel, in order to create
an awareness of the role attributed to each individual business entity within the internal control
system.
Risk management
The Risk Management process involves the identification, assessment and ongoing management
of all risks. The process breaks down into the following stages:
41
identification: during which the risks to which the Company is exposed are identified and
classified and the quantitative or qualitative risk assessment standards and methods are
defined;
measurement/assessment: during which the risks to which the Company is exposed and the
potential impact on equity are appropriately assessed and/or measured;
control: during which the risk exposure, risk profile and compliance with the related limits are
monitored and controlled;
mitigation: during which the organisational and other measures adopted by the Company to
mitigate the various types of risk are assessed; any corrective actions are identified and
implemented with a view to keeping risk within the established limits;
reporting: during which appropriate reports on the risk profile and the related exposures are
prepared and produced for the Company’s internal departments and corporate bodies and for
regulators and external stakeholders.
The risk identification process has resulted in identification of risks deemed to be significant; these
risks are classified according to a taxonomy that is in line with the classifications used in “Pillar
One” of Solvency II, appropriately expanded to take into account risks not included in “Pillar One”.
The identified risk classes are as follows:
market risk
technical risk
liquidity risk
operational risk
other risk
Market risk
Financial instruments held by the Poste Vita Group mainly related to investments designed to back
contractual obligations to policyholders relating to traditional with-profits life insurance policies, to
pension-type policies and to index- and unit-linked products. Further investments in financial
instruments relate to the deployment of the Group’s free capital.
Traditional life policies (Branches I and V) include products where the benefits are subject to
revaluation based on the returns generated through the management of separate pools of financial
assets, which are separately identifiable in accounting terms only, within the company’s assets (the
separately managed accounts, PostavalorePiù and PostaPensione). Typically, the Company
guarantees a minimum return on such products, payable at maturity. The impact of financial risk on
investment performance can be absorbed in full or in part by the insurance provisions based on the
level and structure of the guaranteed minimum returns and the profit-sharing mechanisms of the
“separate portfolio” for the policyholder. The company determines the sustainability of minimum
returns through periodic analysis using an internal financial-actuarial (Asset-Liability Management)
model which simulates, for each separate portfolio, the change in value of the financial assets and
the expected returns under a “central scenario” (based on current financial and actuarial
assumptions) and under stress scenarios (economic and financial variables, surrenders, new
business).
Index- and unit-linked products, so-called Branch III products, refer to policies where the premiums
are invested in structured financial instruments (index-linked products issued prior to the
42
introduction of ISVAP Regulation 32 of 11 June 2009), Italian government securities and equity or
inflation-indexed warrants (index-linked products issued after the introduction of ISVAP Regulation
32), and mutual investment funds (unit-linked).
For this type of product issued prior to the introduction of ISVAP Regulation 32 and for unit-linked
policies (with the exception of the unit-linked Programma Guidattiva Radar product), the Insurance
Group does not guarantee capital or a minimum return and, therefore, the associated financial
risks are borne entirely by the customer (returns on the policies are entirely linked to the matching
assets). For policies issued after the introduction of the above-mentioned Regulation 32, on the
other hand, the Group assumes liability for solvency risk associated with the instruments in which
premiums are invested (returns on the policies are only partially linked to the matching assets).
Against this backdrop, investment strategies and guidelines are established in Board of Directors’
resolutions. The investment process also includes a governance system reinforced by a number of
committees (whose roles are described in the section on “Corporate governance”), tasked with
providing advice and making recommendations to senior management.
The monitoring of market risk takes different forms depending on the purpose of the investments
(Branch I products and the investment of “free capital”, on the one hand, Branch III, on the other).
The following sub-categories make up market risk:
- price risk
- foreign exchange risk
- interest rate risk
- credit risk
The following disclosures regard the investment of premiums from Branch I policies and of the
Company’s free capital.
Price risk
Price risk is the risk of movements in the price of equities held in portfolio or of derivative
instruments whose underlying assets are equities, equity indexes or baskets of equities, as well as
mutual investment funds. This risk is commonly divided into an idiosyncratic risk component, linked
to the specific conditions of the issuer, and a systematic risk component, which reflects changes in
the general conditions in the relevant market. The value of equities held by the Group is very
limited. The following table shows a summary of the composition of the component of the portfolio
exposed to price risk:
43
Foreign exchange risk
This is the risk that the value of a financial instrument may change as a result of fluctuations in the
value of currencies other the presentation currency. In this regard, the weight of the Company’s
holdings of instruments denominated in currencies other than the euro at 31 December 2014 is
zero.
Interest rate risk
This is the risk that a shift in the current forward rate curve may result in a change in the value of
rate-sensitive positions. As part of the management of interest rate risk, the Company performs
regular ALM analysis, based on time horizons of four to five days. The analysis uses a model that,
under determinate hypothetical scenarios (rising/falling rates), simulates the performance of assets
and liabilities in terms of deposits, returns and other components of assets and liabilities. The
analysis computes operating gains and losses, revaluations and impairments and returns, at least
under the following scenarios:
a rate increase/reduction at the 99.5th percentile and the 95th percentile;
a rate increase at the 95th percentile and a widening of credit spreads;
a rate increase at the 95th percentile, a reduction in new business and an increase in
surrender events.
In the case of rate increase scenarios, the analysis focuses on the performance of gains and
losses and revaluations and impairments in the first 12 months of the simulation. In assessing the
results of the analysis conducted, with particular reference to the impact on equity, potential
management actions designed to maintain the Company’s capital adequacy are taken into
account. Analysis of scenarios generating higher unrealised losses focuses on returns over the
five-year time horizon. As a result of this analysis and the ALM calculations carried out for the
purposes of ISVAP Regulation 21, the level of risk is deemed to be sustainable, including when
Market risk - Price
+ Vol - Vol + Vol - Vol + Vol - Vol + Vol - Vol
2014 effects
Available-for-sale financial assets 1,122 54 (54) - 54 (54) - - - - - -
Equity instruments 8 2 (2) - 2 (2) - - - - - -
Other investments 1,114 52 (52) - 52 (52) - - - - - - - - - - - - - - - - - -
Financial assets at fair value through profit or loss4,234 67 (67) - 67 (67) - 0.1 (0.1) - - -
Equity instruments - - - - - - - - - - - -
Other investments 1,798 75 (75) - 75 (75) - - - - - -
Structured bonds 1,816 53 (53) - 53 (53) - 0.1 (0.1) - - -
Other unit-linked investments 619 (62) 62 - (62) 62 - 0.0 (0.0) - - - - - - - - - - - - - - - Derivative financial instruments 206 11 (11) - 11 (11) - - - - - -
Fair value through profit or loss 206 11 (11) - 11 (11) - - - - - -
Fair value through profit or loss (liab.) - - - - - - - - - - - - - - - - - - - - - - - -
Variability at 31 December 2014 5,562 132 (132) - 132 (132) - 0.1 (0.1) - - -
2013 effects
Available-for-sale financial assets 1,542 73 (73) - 73 (73) - - - - - -
Equity instruments 5 1 (1) - 1 (1) - - - - - -
Other investments 1,537 72 (72) - 72 (72) - - - - - - - - - - - - - - - - - -
Financial assets at fair value through profit or loss3,211 123 (123) - 123 (123) - 0 (0) - - -
Equity instruments - - - - - - - - - - - -
Structured bonds 2,481 104 (104) - 104 (104) - 0 (0) - - -
Other unit-linked investments 730 18 (18) - 18 (18) - 0 (0) - - - - - - - - - - - - - - -
Derivative financial instruments 210 42 (42) - 42 (42) - - - - - -
Fair value through profit or loss 210 42 (42) - 42 (42) - - - - - -
Fair value through profit or loss (liab.) - - - - - - - - - - - - - - - - - - - - - - - -
Variability at 31 December 2013 4,963 238 (238) - 238 (238) - 0 (0) - - -
Date of reference of the analysis PositionChange in value
Effect on liability towards
policyholdersPre-tax profit
Equity reserves before
taxation
44
placed in the context of the benefits guaranteed by the Company. The following table shows a
summary of the composition of the component of the portfolio exposed to shifts in interest rates:
Credit risk
This is the risk connected with the creditworthiness of the issuer, representing the possibility that
the issuer of a security is, as a result of a deterioration in their financial position, no longer able to
meet their financial obligations. This category of risk also includes movements in sovereign
spreads. Credit risk is assessed through the afore-mentioned ALM analysis and, in particular,
under a credit spread shock scenario. The potential impacts on the Company under this scenario
are deemed to be sustainable in terms of financial position and operating performance. Credit risk
is also assessed by monitoring a series of indicators, including the average rating of the
Company’s exposures (at December 2014, equal to BBB). The distribution of the credit ratings
assigned to instruments held by the Company, by asset class, is shown below:
Interest rate risk
Nominal Fair value +100bps -100bps +100bps -100bps +100bps -100bps +100bps -100bps
2014 effects
Available-for-sale financial assets 68,689.0 75,890.3 (4,566.8) 4,566.8 (4,446.1) 4,446.1 - - (120.7) 120.7
Fixed-income instruments 68,684.6 75,511.7 (4,560.6) 4,560.6 (4,440.0) 4,440.0 - - (120.7) 120.7
Other investments 4.3 378.6 (6.2) 6.2 (6.2) 6.2 - - - -
Financial assets at fair value through profit or loss7,904.1 7,921.4 (267.5) 266.9 (265.7) 265.1 - - (1.8) 1.8
Fixed-income instruments 7,404.1 7,370.4 (247.1) 247.1 (245.3) 245.3 - - (1.8) 1.8
Structured bonds 500.0 551.0 (20.4) 19.7 (20.4) 19.7 - - - -
Variability at 31 December 2014 76,593.0 83,811.7 (4,834.3) 4,833.6 (4,711.9) 4,711.2 - - (122.4) 122.4
2013 effects
Available-for-sale financial assets 57,905.8 57,617.7 (3,480.9) 3,378.3 (3,367.3) 3,271.0 - - (113.6) 107.3
Fixed-income instruments 57,905.8 57,617.7 (3,480.9) 3,378.3 (3,367.3) 3,271.0 - - (113.6) 107.3
Financial assets at fair value through profit or loss7,106.2 6,560.7 (253.2) 254.0 (253.2) 254.0 - - - -
Fixed-income instruments 7,106.2 6,560.7 (253.2) 254.0 (253.2) 254.0 - - - -
Variability at 31 December 2013 65,011.9 64,178.4 (3,734.1) 3,632.3 (3,620.5) 3,525.0 - - (113.6) 107.3
Equity reserves before
taxationDate of reference of the analysis
Risk exposure Change in valueEffects on liabilities
towards policyholdersPre-tax profit
Credit risk
Loans and receivables - - 23 23 - - 11 11
Loans - - - - - - - -
Receivables - - 23 23 - - 11 11
Available-for-sale financial assets 1,978 73,132 402 75,512 1,656 55,693 269 57,618
Credit instruments Poste Vita Branch I 1,968 70,462 402 72,831 1,646 53,393 269 55,308
Credit instruments Poste Vita Branch III - - - - - - - -
Credit instruments Poste Vita free capital 10 2,553 - 2,563 10 2,214 - 2,224
Other securities and deposits - 117 - 117 - 86 - 86
Financial assets at FV through profit or loss 117 9,075 545 9,737 58 9,453 33 9,544
Credit instruments Poste Vita Branch I 117 1,704 75 1,896 58 1,083 33 1,174
Credit instruments Poste Vita Branch III - 7,308 470 7,778 - 8,367 - 8,367
Credit instruments Poste Vita free capital - 63 0 63 - 3 - 3
Other securities and deposits - - - - - - - -
Derivative financial instruments - 206 - 206 - - 210 - 210
Fair value through profit or loss - 206 - 206 - 210 - 210
Total 2,095 82,414 970 85,479 1,714 65,355 314 67,383
Total
Balance at 31 December 2014 Balance at 31 December 2013
Descrizionefrom Aaa
to Aa3
from A1
to Baa3
from Ba1
to Not ratedTotal
from Aaa
to Aa3
from A1
to Baa3
from Ba1
to Not
rated
45
Within this context, sensitivity analysis of credit risk is conducted. The risk factors included in the
analysis are sovereign and corporate spreads (divided into Investment Grade and High Yield).
The following table shows a summary of the composition of the component portfolio of class C
securities exposed to shifts in the credit spread:
The outcome of the sensitivity analysis of the Poste Vita Insurance Group’s portfolio securities is
shown below:
Technical risks
This type of risk arises with the stipulation of insurance contracts and the terms and conditions
contained therein (technical bases adopted, premium calculation, terms and conditions of cash
surrender, etc.). These risks include mortality, longevity and surrender risk.
Mortality risk is of limited significance for the Poste Vita Insurance Group, considering the features
of the products offered. The only area where this risk is somewhat significant is term life insurance,
for which actual death rates are compared from time to time with those projected on the basis of
the demographics adopted for pricing purposes; to date, the former have always turned out to be
much lower than the latter. Moreover, mortality risk is mitigated through reinsurance and by setting
limits on both the capital and the age of the policyholder when policies are sold.
Longevity risk is also low. In fact, for most life insurance products, policyholders have exercised the
option to annuitise their policies in a very small number of cases. Pension products, in particular,
still account for a limited share of insurance liabilities (about 4%). In addition, for these products,
the Group may, if certain conditions materialise, change the demographic base and the
composition by sex used to calculate the annuity rates.
For nearly all the products in the portfolio there are no surrender penalties. Surrender risk could
have a significant impact on the Insurance Group in the event of mass surrenders which, on the
basis of historical evidence relating specifically to Poste Vita, have a low probability of occurrence.
Pricing risk is the risk of incurring losses due to the inadequate premiums charged for the
insurance products sold. It may arise due to:
inappropriate selection of the technical basis;
incorrect assessment of the options embedded in the product;
Poste Vita Group - VAR analysis
Nominal Fair value
2014 effects
Available-for-sale financial assets 68,689.0 75,890.3 352,627.9
Government bonds 58,786.8 64,669.3 352.4
Corporate Investment Grade bonds 9,528.7 10,440.5 4.5
Corporate High Yield bonds 369.1 401.9 0.5
Other corporate High Yield investments 4.3 378.6 0.0
Financial instruments at FV through profit or loss 7,904.1 7,921.4 13,421.8
Government bonds 6,669.7 6,583.7 13.4
Corporate Investment Grade bonds 1,161.0 1,262.6 0.8
Corporate High Yield bonds 73.4 75.1 0.1
Variability at 31 December 2014 76,593.0 83,811.7 366,049.7
2013 effects
Available-for-sale financial assets 57,905.8 57,617.7 486,322.0
Government bonds 49,586.1 48,853.2 485.4
Corporate Investment Grade bonds 8,002.2 8,437.3 6.8
Corporate High Yield bonds 317.4 327.2 0.5
Financial instruments at FV through profit or loss 7,606.2 7,062.7 35,071.0
Government bonds 6,952.6 6,390.9 35.0
Corporate Investment Grade bonds 622.8 638.7 0.5
Corporate High Yield bonds 30.8 33.1 0.1
Variability at 31 December 2013 65,511.9 64,680.4 521,393.0
Date of reference of the analysis Risk exposure
VaR spread
46
incorrect evaluation of the factors used to calculate the expense loads.
As most of the mixed and whole-life policies sold by the Parent Company, Poste Vita, have cash
value build-up features, accumulating in accordance with a technical rate, the technical basis
adopted does not affect premium calculation (and/or the insured capital). For these products, there
is effectively no pricing risk associated with the choice between technical bases in Poste Vita’s
portfolio.
The options embedded in the policies held in the portfolio include:
Surrender option
Guaranteed minimum return option
Annuity conversion option
Typically, the minimum guaranteed return is 1.2% per event and upon maturity of the policy. This
risk is not significant with respect to the returns generated by the separately managed accounts.
This risk is also monitored by the Parent Company in the form of Asset Liability Management
analysis (including those for the purposes of ISVAP Regulation 21).
Cliquet Options: €6.4 billion (8.40% of total mathematical provisions)
47
The following graph shows projected mathematical provisions at 31 December 2014 for Poste
Vita’s entire portfolio, assuming that the Company is closed to new business.
In addition to policy expiration, realistic hypotheses regarding mortality and surrender have also
been taken into account.
The following graph shows the time distribution of mathematical provisions for the life business by
expiration date of the policies to which the provisions refer. The above graph shows that 68.7% of
mathematical provisions would be run off within 10 years.
The following graph shows the time distribution of the runoff of mathematical provisions for the life
business by expiration date of the policies to which the provisions refer:
21,6%
55,9%
1,9%
7,9%
5,1%
7,6%
Cedola (0%)
Cedola (1%)
Cedola (1.25%)
Win For Life
Capitale Differito
ATS
48
Liquidity risk
Liquidity risk is the risk that an entity may have difficulties in raising sufficient funds, at market
conditions, to meet its obligations linked to its liabilities. In the Company’s case, liquidity risk
derives primarily from its inability to sell financial assets quickly at an amount close to fair value or
without incurring significant losses.
In order to analyse its liquidity risk profile, the Parent Company, Poste Vita, performs Asset/liability
management (ALM) analysis to manage assets effectively in relation to its obligations to
policyholders, and also develops projections of the effects deriving from financial market shocks
(asset dynamics) and of the behaviour of policyholders (liability dynamics). Branch I and V
liabilities, at 31 December 2014, have an average term to maturity of approximately 10.99 years,
compared with an average modified duration of approximately 6.11 for the assets backing those
liabilities.
The scope of analysis includes the separately managed account, PostavalorePiù, which accounts
for 91% of the Company’s technical provisions. The projections analyse inflows (coupons,
maturities, regular premiums for the existing portfolio and deriving from new business) and
outflows (surrenders, expirations, claims, coupons), with the aim of computing net flows. The
analysis results in a significant net inflow, above all due to inflows from new business.
Default risk
Default risk is linked to the insolvency of a counterparty (reinsurers, banks, policyholders,
insurance brokers, derivatives).
Exposures to policyholders and insurance brokers (Bancoposta RFC, the ring-fenced capital
established by Poste Italiane, the Insurance Group’s sold shareholder) are insignificant. Exposure
to banks refers solely to liquidity held on deposit with major Italian banks.
The risk deriving from the Group’s exposure to reinsurers is managed and controlled through the
application of guidelines and counterparty limits.
This exposure is, therefore, concentrated on major reinsurance providers.
The exposure to derivatives is insignificant and does not result in counterparty risk, given that the
instruments in the Group’s portfolio (warrants backing certain obligations under index-linked life
policies) are hedged against default risk through collateralisation.
Operational risk
49
Even if this form of risk falls within the scope of “quantifiable risks”, operational risk requires a
specific identification and assessment process that takes into account the various types of risk
included in this risk category.
The need for a specific process reflects the type of risks involved, which are closely linked to the
heterogeneous nature of the activities carried out within the Company, and the fact that capital
requirements, determined on the basis of the standard approach, do not take into account these
specific characteristics.
Under the definition adopted by the Company, operational risk refers to the risk of losses resulting
from human error, inadequate processes and systems or from external events, such as fraud or
the conduct of service providers. This form of risk also includes compliance risk.
Assessment of the Company’s exposure to operational risk takes the form of a risk self-
assessment process, which aims to identify and assess potential risks, focusing on the following
aspects:
events that may occur in the future, being potential events of which the Company has no past
experience;
the frequency with which such events occur, an essential aspect in order to assess the
resulting potential for risks of which there is no past experience;
the likely financial impact of potential loss events when they occur;
the degree of effectiveness of the related controls.
This assessment process is conducted through the compilation of questionnaires, which gauge the
degree of risk exposure by operating segment, through a combination of opinions on the potential
financial impact and the frequency of occurrence.
The assessment of organisational arrangements (as seen in the previous paragraph) is conducted
by organisational unit and type of operational risk to which it is potentially exposed, and not by
individual event. The assessment carried out by the Process Owner is then used to obtain a risk
value mitigated by control.
The levels at which the assessment is conducted are as follows: operating unit, risk cause, the risk
itself. The self-assessment process leads to the following results:
determination of the maximum potential loss associated with the risk for each level, both gross
and after controls have been taken into account;
identification of the areas most exposed to operational risk;
definition of a corrective action plan.
The overall level of risk is low, mitigated by a satisfactory level of control.
Other risks
This category primarily includes strategic risk and reputational risk.
Strategic risk
This is the current or prospective risk of a decline in earnings or capital arising from changes in the
operating environment, from incorrect business decisions, inadequate decision implementation or a
lack of reaction to changes in the competitive and market environment.
This risk is characterised by a satisfactory control level: risk management is inherent in strategic
planning processes and, consistently with them, includes a three-year timeframe with annual
50
reviews. Within this context, assumptions adopted in drafting plans are subject to periodic
assessment and, if necessary, adapted to new market conditions.
Reputational risk
This is the current or prospective risk of a decline in earnings or capital arising from a negative
perception of the Company’s image among customers, counterparties, shareholders, employees,
investors or regulators.
The activities of the Company, which belongs to the Poste Italiane Group, are by their nature
exposed to elements of reputational risk, given the type of customer served (above all, mass
market). For this reason, in addition to mapping reputational risk, Poste Vita carries out rigorous
monitoring and controls of the risks to which all its insurance products are exposed (controls are
carried out using procedures that are identical, in terms of methods and tools, to those used to
monitor and control the risks directly assumed by the Company).
In particular, with regard to Branch III investment backing index-linked and unit-linked products
issued prior to the introduction of ISVAP Regulation 32, the Company does not guarantee capital
or a minimum return: for these products, therefore, risk controls aim to prevent the occurrence of
legal or reputational risk (the risk of a negative financial impact deriving from customers’
perception that they have been misled or poorly advised, or of damages payable as a result of
legal action brought by customers or regulators). The assessment and management of
reputational risk for Branch III products is thus conducted through identification, assessment and
management of the market and credit risks associated with each product. Any problems and/or
increases in such risks are reported to the Risk Committee and the Board of Directors.
51
RELATIONS WITH THE PARENT AND OTHER POSTE ITALIANE GROUP COMPANIES
The Parent Company, Poste Vita, is wholly owned by Poste Italiane SpA, which directs and
coordinates the Group.
Transactions with the parent, Poste Italiane SpA, which owns all the shares outstanding, are
governed by written agreements and conducted on an arm’s length basis. They regard mainly:
the sale and distribution of insurance products at post offices and related activities;
post office current accounts;
partial secondment of personnel used by the companies in the Insurance Group;
support in organising the business and in the recruitment and management of personnel;
the pick-up, packaging and shipping of ordinary mail;
call centre services;
Term Life Insurance policies;
Information Technology services.
A service contract relating to information technology is currently being finalised with the parent,
Poste Italiane SpA.
Furthermore, at 31 December 2014, subordinated loan notes, totalling €540 million and issued by
the Parent Company, Poste Vita, have been subscribed for by Poste Italiane SpA. The notes
provide a market rate of return reflecting the creditworthiness of the Company.
In addition to the relationship with the parent, Poste Vita Group companies also maintain
operational relations with other Poste Italiane Group companies, with regard to:
management of the Company’s free capital and of a part of the portfolio investments
attributable to separately managed accounts (Bancoposta Fondi SGR);
printing, enveloping and mail delivery through information systems; management of incoming
mail, the dematerialization and filing of printed documentation (Postel);
services related to network connections with Poste Italiane’s post offices (Postecom);
mobile telephone services (Poste Mobile);
advice on obligations pertaining to occupational health and safety (Poste Tutela);
Term Life Insurance policies (Postel, BdM-MCC, Poste Mobile; Bancoposta Fondi SGR; Poste
Energia; EGI; Poste Shop; Postecom; Poste Tributi).
Accident insurance (BdM-MCC – Postel), General Third Party Liability insurance (Postel) and
Fire – Credit insurance (BdM-MCC).
These arrangements are also conducted on an arm’s length basis. Details of the above are
provided in the notes to the financial statements.
52
EVENTS AFTER 31 DECEMBER 2014
As part of an general overhaul of the governance system and in line with the shareholder
resolution of 4 August 2014, which re-elected the Board of Directors, two of whom are now
independent, and with corporate governance best practices for insurance companies, on 27
January 2015, the Board of Directors established an Internal Audit and Related Party
Transactions Committee. The Committee has been assigned the role of assisting the Board of
Directors in determining internal control system guidelines, in periodically assessing the
system’s adequacy and effective functionality, and in identifying and managing the principal
business risks. At the same Board meeting, the Directors revised the composition of the
Remuneration Committee, which has an advisory role and makes recommendations to the
Board regarding remuneration policies and and the remuneration of executive Directors. The
Committee also assesses whether or not the remuneration paid to each executive Director is
proportionate to that paid to other executive Directors and the Group’s other personnel.
In line with the Poste Vita Group’s plan to expand its medical insurance business, the Parent
Company, Poste Vita, is looking at the possibility of acquiring a company that has a claims
management unit, which would enable the Group to handle claims, including and above all
those relating to medical insurance.
53
OUTLOOK
The Insurance Group will again, in 2015, continue to be geared towards implementing the strategic
and business priorities set out in its business plan, with a growing number of major initiatives,
including those relating to distribution and of a financial nature, with a view to driving further
profitable growth.
The group expects to see further growth in premium revenue in 2015, in part thanks to innovative
extension of its offering and by boosting sales activities in parallel with the distribution network.
In addition, the Insurance Group will continue work on numerous other projects, including the
demanding task of ensuring compliance with the new “Solvency II” regulations, with initial
requirements coming into force during next year.
Rome, 26 March 2015 The Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS OF THE POSTE VITA GROUP NOTES
2
The financial statements for the year ended 31 December 2014 are provided below:
at 31 December 2014 at 31 December 2013
1 INTANGIBLE ASSETS 16.372 10.513
1.1 Goodwill ‐ ‐
1.2 Other intangible assets 16.372 10.513
2 TANGIBLE ASSETS 4.438 2.954
2.1 Land and buildings ‐ ‐
2.2 Other tangible assets 4.438 2.954
3 TECHNICAL PROVISIONS CEDED TO REINSURERS 54.403 40.340
4 INVESTMENTS 90.263.862 69.852.153
4.1 Investment property ‐ ‐
4.2 Investments in subsidiaries, associates and joint ventures 163.286 197.019
4.3 Investments held to maturity ‐ ‐
4.4 Loans and receivables 726.350 11.458
4.5 Available‐for‐sale financial assets 77.012.829 59.159.855
4.6 Financial assets at fair value through profit or loss 12.361.397 10.483.821
5 SUNDRY RECEIVABLES 71.990 73.003
5.1 Receivables arising from direct insurance sales 8.451 10.225
5.2 Receivabes arising from reinsurance transactions 3.823 11.022
5.3 Other receivables 59.716 51.755
6 OTHER ASSETS 1.257.371 1.219.779
6.1 Non‐current assets or disposal groups held for sale ‐ ‐
6.2 Deferred acquisition costs 52.517 44.505
6.3 Deferred tax assets 8.442 9.754
6.4 Current tax assets 1.194.568 1.164.433
6.5 Sundry assets 1.843 1.086
7 CASH AND CASH EQUIVALENTS 655.919 804.856
TOTAL ASSETS 92.324.357 72.003.597
at 31 December 2014 at 31 December 2013
1 EQUITY 3.084.239 2.763.515
1.1 attributable to the owners of the Parent 3.084.239 2.763.515
1.1.1 Share capital 1.216.608 1.216.608
1.1.2 Other equity instruments ‐ ‐
1.1.3 Capital reserves ‐ ‐
1.1.4 Retained earnings and other reserves 1.318.772 1.142.652
1.1.5 (Treasury shares) ‐ ‐
1.1.6 Reserve for currency translation differences ‐ ‐
1.1.7 Valuation reserve for available‐for‐sale financial assets 224.113 148.130
1.1.8 Other valuation reserve 85‐ 5
1.1.9 Profit/(Loss) for the period attributable to owners of the Parent 324.832 256.120
1.2 attributable to non‐controlling interests ‐ ‐
1.2.1 Share capital and reserves attributable to non‐controll ing interests ‐ ‐
1.2.2 Valuation reserves ‐ ‐
1.2.3 Profit/(Loss) for the period attributable to non‐controll ing interests ‐ ‐
2 PROVISIONS 10.650 10.050
3 TECHNICAL PROVISIONS 87.219.518 68.005.153
4 FINANCIAL LIABILITIES 1.300.854 544.179
4.1 Financial l iabil ities at fair value through profit or loss ‐ ‐
4.2 Other financial l iabil ities 1.300.854 544.179
5 PAYABLES 131.376 144.084
5.1 Payables arising from direct insurance transactions 87.663 94.044
5.2 Payables arising from reinsurance transactions 8.567 12.856
5.3 Other payables 35.145 37.184
6 OTHER LIABILITIES 577.720 536.616
6.1 Liabil ities included in disposal groups held for sale ‐ ‐
6.2 Deferred tax l iabil ities 165.859 108.897
6.3 Current tax l iabil ities 407.229 422.849
6.4 Other l iabil ities 4.631 4.870
TOTAL EQUITY AND LIABILITIES 92.324.357 72.003.597
(€000)STATEMENT OF FINANCIAL POSITION ‐ ASSETS
(€000)STATEMENT OF FINANCIAL POSITION ‐ EQUITY AND LIABILITIES
3
2014 2013
1.1 Net premium revenue 15,473,199 13,200,235
1.1.1 Gross premium revenue 15,509,307 13,234,450
1.1.2 Outward reinsurance premiums (36,107) (34,215)
1.2 Fee and commission income ‐ ‐
1.3Net income (expenses) from financial assets at fair value through profit or
loss 719,703 744,535
1.4 Income from investments in subsidiaries, associates and joint ventures 20 ‐
1.5 Income from other financial instruments and investment property 2,770,543 2,299,056
1.5.1 Interest income 2,359,003 2,090,411
1.5.2 Other income 59,313 30,496
1.5.3 Realised gains 352,228 178,149
1.5.4 Unrealised gains ‐ ‐
1.6 Other income 272 851
1 TOTAL REVENUE 18,963,738 16,244,678
2.1 Net claims expenses (17,893,448) (15,275,329)
2.1.1 Claims paid and change in technical provisions (17,915,760) (15,295,296)
2.1.2 Share attributable to reinsurers 22,312 19,967
2.2 Commission expenses 0 0
2.3Expenses arising from investments in subsidiaries, associates and joint
ventures0 (1,648)
2.4 Expenses arising from other financial instruments and investment properties (53,225) (48,432)
2.4.1 Interest expense (31,759) (18,455)
2.4.2 Other expenses 0 0
2.4.3 Realised losses (21,466) (29,976)
2.4.4 Unrealised losses 0 0
2.5 Operating costs (440,371) (381,723)
2.5.1 Commissions and other acquisition costs (360,194) (315,060)
2.5.2 Investment management expenses (32,823) (26,509)
2.5.3 Other administrative expenses (47,354) (40,154)
2.6 Other costs (36,575) (30,943)
2 TOTAL COSTS AND EXPENSES (18,423,619) (15,738,075)
PROFIT/(LOSS) BEFORE TAX 540,118.91 506,603.28
3 Income tax expense (215,287) (250,483)
PROFIT/(LOSS) FOR THE PERIOD 324,832 256,120
4 PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS 0 0
CONSOLIDATED PROFIT/(LOSS) 324,832 256,120
of which attributable to owners of the Parent 324,832 256,120
of which attributable to non‐controlling interests ‐ ‐
STATEMENT OF COMPREHENSIVE INCOME(€000)
STATEMENT OF COMPREHENSIVE INCOME(€/000)
2014 2013CONSOLIDATED PROFIT/(LOSS) 324.832 256.120
Other components of comprehensive income that will not be reclassified to profit or loss, net of taxation
(87) 36
Change in subsidiaries' equity - - Change in revaluation reserve for intangible assets - - Change in revaluation reserve for tangible assets - - Income and expenses from non-current assets and disposal groups held for sale - - Actuarial gains and losses and adjustments related to defined-benefit plans - 87 36 Other components - - Other components of comprehensive income that may be reclassified to profit or loss, net of taxation
75.979 48.920
Change in reserve for currency translation differences - - Gains or losses on available-for-sale financial assets 75.983 48.919 Gains or losses on cash flow hedges - - Gains or losses on hedges of a net investment in foreign operations - - Change in subsidiaries' equity (4) 1 Income and expenses related to non-current assets or disposal groups held for sale - - Other components - -
TOTAL OTHER COMPONENTS OF COMPREHENSIVE INCOME 75.893 48.956
TOTAL CONSOLIDATED COMPREHENSIVE INCOME 400.724 305.076 of which attributable to owners of the Parent 400.724 305.076 of which attributable to non-controlling interests - -
4
Det
ails
of o
ther
com
pone
nts
of c
ompr
ehen
sive
inco
me
(€00
0)
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Oth
er c
ompo
nent
s of
com
preh
ensi
ve in
com
e th
at w
ill n
ot b
e re
clas
sifie
d to
pro
fit o
r los
s, n
et
(87)
36
,0
-
-
-
-
(8
7,0)
3
6,0
-
-
(76,
0)
10
Chan
ge in
sub
sidi
arie
s' eq
uity
-
-
-
-
-
-
-
-
-
-
-
-
Ch
ange
in re
valu
atio
n re
serve
for i
ntan
gibl
e as
sets
-
-
-
-
-
-
-
-
-
-
-
-
Ch
ange
in re
valu
atio
n re
serve
for t
angi
ble
asse
ts
-
-
-
-
-
-
-
-
-
-
-
-
Inco
me
and
expe
nses
from
non
-cur
rent
ass
ets
and
disp
osal
gro
ups
held
for s
ale
-
-
-
-
-
-
-
-
-
-
-
-
A
ctua
rial g
ains
and
loss
es a
nd a
djus
tmen
ts re
late
d to
def
ined
-ben
efit
plan
s (8
7)
36
-
-
-
-
(87)
36
-
-
(76)
10
O
ther
com
pone
nts
-
-
-
-
-
-
-
-
-
-
-
-
O
ther
com
pone
nts
of c
ompr
ehen
sive
inco
me
that
may
be
recl
assi
fied
to p
rofit
or l
oss
104.
940
4
8.38
6 (2
8.96
1)
5
33
-
-
75.9
79
48.9
20
(25.
392)
(5
3.87
7)
2
24.1
04
1
48.1
25
Chan
ge in
rese
rve fo
r cur
renc
y tra
nsla
tion
diffe
renc
es
-
-
-
-
-
-
-
-
-
-
-
-
G
ains
or l
osse
s on
ava
ilabl
e-fo
r-sal
e fin
anci
al a
sset
s
10
4.94
4
48.
385
(28.
961)
533
-
-
75
.983
48
.919
(2
5.39
2)
5
3.87
7
224
.113
148
.130
G
ains
or l
osse
s on
cas
h flo
w he
dges
-
-
-
-
-
-
-
-
-
-
-
-
Gai
ns o
r los
ses
on h
edge
s of
a n
et in
vest
men
t in
fore
ign
oper
atio
ns
-
-
-
-
-
-
-
-
-
-
-
-
Ch
ange
in s
ubsi
diar
ies'
equi
ty(4
)
1
-
-
-
-
(4)
1
-
-
(9)
(5)
Inco
me
and
expe
nses
rela
ted
to n
on-c
urre
nt a
sset
s or
dis
posa
l gro
ups
held
for s
ale
-
-
-
-
-
-
-
-
-
-
-
-
O
ther
com
pone
nts
-
-
-
-
-
-
-
-
-
-
-
-
TO
TAL
OTH
ER C
OM
PONE
NTS
OF
COM
PREH
ENSI
VE
INCO
ME
104.
853
4
8.42
2 (2
8.96
1)
53
3
-
-
75
.893
48
.956
(2
5.39
2)(5
3.87
7)
224
.028
148
.135
Chan
ges
Adju
stm
ents
due
to
recl
assi
ficat
ion
to p
rofit
or
loss
Oth
er c
hang
esTo
tal c
hang
esTa
xBa
lanc
e
5
STAT
EMEN
T OF C
HANG
ES IN
EQUIT
Y(€0
00)
Balan
ce at
31 De
cemb
er 201
2
Chan
ges in
clo
sing
balan
ces
Increa
ses
Adjus
tmen
ts du
e to
reclas
sifica
tion
to pro
fit or
loss
Transf
ersCh
ange
s in
equit
y inter
ests
Balan
ce at
31 De
cembe
r 201
3
Chan
ges in
clo
sing
balan
ces
Increa
ses
Adjus
tmen
ts du
e to
reclas
sifica
tion
to pro
fit or
loss
Transf
ersCh
ange
s in
equit
y inte
rests
Balan
ce at
31 De
cemb
er 201
4
866.60
8
350
.000
1.216.
608
1.216.
608
Other e
quity i
nstrum
ents
-
-
-
Capita
l reser
ves-
-
-
Re
tained
earnin
gs and
other
reserv
es 869
.280
273.37
2
1.1
42.652
176
.120
1.318.
772
(Treasu
ry sha
res)
-
-
-
Profit/(
Loss)
for the
period
273
.372
-17.25
2256
.120
68.712
324
.832
Other c
ompon
ents o
f comp
rehens
ive inc
ome
99.179
48.
422
533
148
.135
104.85
3
28.
961-
224
.028
2.108.
439
-
654.54
2
533
-
2.7
63.515
-
349
.685
28.961
-
-
3.084.
240
Share
capita
l and re
serves
Profit/(
Loss)
for the
period
Oth
er com
ponent
s of co
mpreh
ensive
incom
e
-
-
-
-
-
-
-
-
-
-
-
2.108.
439
-
654.54
2
533
-
2.7
63.515
-
349
.685
28.961
-
-
3.084.
240
TotalEq
uity a
ttribu
table
to ow
ners
of the
Paren
t
Share
capita
l
Total
attrib
utable
to ow
ners
of the
Paren
t
Equit
y attri
butab
le to
non-c
ontro
lling i
nteres
ts
Total
attrib
utable
to no
n-con
trollin
g inte
rests
6
STATEMENT OF CASH FLOWS (Indirect method)
(€000)2014 2013
Profit/(Loss) for the period before tax 540.119 449.797 Changes in non-monetary items 18.841.559 10.796.317 Change in non-life premium reserve 6.980 9.230 Change in outstanding claims provisions and other non-life technical provisions 13.421 7.266 Change in outstanding claims provisions and other life technical provisions 19.179.901 11.205.377 Change in deferred acquisition costs (8.012) (13.801) Change in provisions 600 1.441
Non-monetary income and expenses from financial instruments, investment property and investments (358.687) (418.882)
Other changes 7.357 5.685 Change in receivables and payables generated by operating activities 243.005 (222.243)
Change in receivables and payables deriving from direct insurance sales and reinsurance transactions (1.695) 22.140
Change in other receivables and payables 244.700 (244.383) Income tax paid (243.246) (311.997)
Net cash generated by (used for) monetary items related to investing and financing activities (1.877.576) (402.092)
Liabilities from investment contracts issued by insurance companies - - Due to bank and interbank customers - - Loans and receivables outstanding with bank and interbank customers - - Other financial instruments at fair value through profit or loss (1.877.576) (402.092) TOTAL NET CASH generated by OPERATING ACTIVITIES 17.503.861 10.366.588
- - Net cash generated by (used for) investment property - - Net cash generated by (used for) investments in subsidiaries, associates and joint ventures 33.734 1.647 Net cash generated by (used for) loans and receivables (714.892) 90.688 Net cash generated by (used for) investments held to maturity - - Net cash generated by (used for) available-for-sale financial assets (17.494.287) (10.816.091) Net cash generated by (used for) tangible and intangible assets (14.632) (10.553) Other net cash generated by (used for) investing activities - - TOTAL NET CASH GENERATED BY (USED FOR) INVESTING ACTIVITIES (18.190.078) (10.734.309)
- - Net cash generated by (used for) equity instruments attributable to owners of the Parent (139.395) 147.399 Net cash generated by (used for) treasury shares - - Distribution of dividends to owners of the Parent (80.000) - Net cash generated by (used for) share capital and reserves attributable to non-controlling interests - - Net cash generated by (used for) subordinated liabilities and equity instruments 756.674 (114) Net cash generated by (used for) sundry financial liabilities - - TOTAL NET CASH GENERATED BY (USED FOR) FINANCING ACTIVITIES 537.280 147.284
- - Effect of exchange rate differences on cash and cash equivalents - -
- - CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 804.856 1.025.293 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (148.937) (220.437) CASH AND CASH EQUIVALENTS AT END OF PERIOD 655.919 804.856
7
PART B – BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements of the Poste Vita Group for the year ended 31 December 2014 have been prepared in accordance with IVASS Regulation 7 of 13 July 2007, as amended.
The financial statements for the year ended 31 December 2014 have been audited by BDO SpA, the independent auditors appointed for 2014-2022.
In accordance with IFRS 10, the scope of consolidation includes the financial statements of the Parent Company, Poste Vita SpA, and those of its subsidiary, Poste Assicura SpA, an insurance company established in 2010. The Company’s principal activity is the provision, in Italy and abroad, of all permitted types of non-life insurance and reinsurance. In addition, Poste Vita SpA may undertake all activities related to, or conducive to growth in, insurance and reinsurance (as per article 4 of the Articles of Association). Poste Assicura SpA is currently authorised to carry out insurance business in all non-life classes with the exception of the motor segment and related sectors. The company is wholly owned by the Parent Company, Poste Vita. The company is consolidated on a line-by-line basis.
The Parent Company also holds a non-controlling interest in Europa Gestioni Immobiliari SpA, a real estate company engaged in property management and transactions in Italy and abroad for own account and on behalf of third parties. This investment is accounted for using the equity method.
In accordance with IFRS 10, subsidiaries are the entities over which the Parent Company exercises control. Control is obtained when the Parent Company is exposed, or has rights to, variable returns from its involvement with the investee, and has the ability to influence those returns through its power over the investee. The Parent Company controls an investee if, and only if, it simultaneously:
has power over the investee (i.e. not merely protective rights, but rights that give it the current ability to direct the relevant activities of the investee, i.e. the activities that significantly affect the investee’s returns);
is exposed, or has rights to, variable returns from its involvement with the investee; has the ability to influence those returns through its power over the investee.
Control is determined on the basis of the economic substance of the relationship between the Group and the investee, and, among other things, taking into account both current and potential voting rights.
Denominazione Stato Attività Partecipazione%
Partecipazione Metodo di Consolidamento
Poste Assicura SpA Italia Insurance Subsidiary 100 Line‐by‐line consolidation
Europa Gestioni Immobiliare SpA italia Property management Associate 45 Equity method
8
The Group periodically and systematically reviews the facts and circumstances to establish if there has been any change in one or more of the above elements.
In accordance with IAS 28, an associate is an entity over which the investor has significant influence and that is neither a subsidiary or an interest in a joint venture. The Parent Company is presumed to have significant influence if it directly or indirectly holds at least 20% of the voting power of the investee. The treatment of such an investment is described in the section, “Consolidation procedures”.
Financial statements used for consolidation
The consolidated financial statements, insofar as they relate to the consolidated company, Poste Assicura, have been prepared on the basis of the reporting package prepared by that company in accordance with IFRS.
Reporting date used for the consolidated financial statements
The reporting date is 31 December, the data on which all the consolidated companies end their financial year.
Consolidation procedures
The consolidated financial statements include the financial statements of the Parent Company and those of its wholly owned subsidiary, Poste Assicura. This company meets the above definition provided by IFRS 10 and is consolidated on a line-by-line basis.
Line-by-line consolidation entails netting the carrying amount of investments in consolidated companies against the corresponding share of equity, whilst the subsidiary’s assets and liabilities, including contingent liabilities, are accounted for on a line-by-line basis.
The criteria used for line-by-line consolidation of the subsidiary are as follows:
the assets, liabilities, costs and revenue of consolidated entities are accounted for on a line-by-line basis, separating where applicable the equity and profit/(loss) amounts attributable to non-controlling interests in consolidated equity and consolidated profit or loss;
business combinations, in which control over an entity is acquired, are accounting for using the acquisition method. The cost of acquisition is based on the fair values of the assets given, the liabilities incurred and the equity instruments issued by the acquirer, plus any directly attributable acquisition costs incurred. Any difference between the cost of acquisition and the fair values of the assets and liabilities acquired, following review of their fair value, is recognised as goodwill arising from consolidation (if positive), or recognised in profit or loss (if negative);
9
acquisitions of non-controlling interests in entities already controlled by the Group are not accounted for as acquisitions, but as equity transactions; in the absence of a relevant accounting standard, the Group recognises any difference between the cost of acquisition and the related share of net assets of the subsidiary in equity;
any significant gains and losses (and the related tax effects) on transactions between companies consolidated on a line-by-line basis, to the extent not yet realised with respect to third parties, are eliminated, as are intercompany payables and receivables, costs and revenue, and finance costs and income;
gains and losses deriving from the disposal of investments in consolidated companies are recognised in profit or loss based on the difference between the sale price and the corresponding share of consolidated equity disposed of.
Investments in entities over which the Group has significant influence (assumed when the Group holds an interest of between 20% and 50%), hereinafter “associates”, are accounted for using the equity method.
The equity method is as follows:
• the Group’s share of an entity’s post-acquisition profits or losses is recognised in profit or loss from the date on which significant influence or control is obtained until the date on which significant influence or control is no longer exerted by the Group; provisions are made to cover a company’s losses that exceed the carrying amount of the investment, to the extent that the Group has legal or constructive obligations to cover such losses; changes in the equity of companies accounted for using the equity method not related to the profit/(loss) for the year are recognised directly in equity;
• unrealised gains and losses on transactions between the Parent Company/subsidiaries and the company accounted for using the equity method are eliminated to the extent of the Group’s interest in the associate; unrealised losses, unless relating to impairment, are eliminated.
The list of subsidiaries consolidated on a line-by-line basis and of associates measured using the equity method, together with key information, is provided in the annexes to the notes (Annex 5, ISVAP Regulation 7).
Goodwill arising on consolidation
Differences between the share of the consolidated company’s equity and the carrying amount of the investment recognised in the separate financial statements is allocated directly to the “Consolidation reserve” in consolidated equity, which is included in “Revenue reserves and other equity reserves”.
ACCOUNTING POLICIES
10
The Poste Vita Group’s annual financial statements are prepared on a historical cost basis, with the exception of certain items for which fair value measurement is obligatory. The principal accounting policies adopted in the preparation of the consolidated financial statements are described below.
Intangible assets
This asset class refers to intangible assets that are identifiable non-monetary assets without physical substance, controllable and capable of generating future economic benefits for the entity, as defined by IAS 38. Intangible assets are initially recognised at cost. Assets with finite useful lives (software) are amortised on the basis of their remaining useful lives. Amortisation is applied from the date the asset is ready for use, systematically over the remaining useful life of the asset, or its estimated useful life.
Tangible assets
This asset class includes fixtures and fittings, plant, machinery and office equipment, as defined by IAS 16. These assets are recognised at cost, which includes any directly attributable costs incurred to prepare the asset for its intended use, and the cost of dismantling and removing the asset to be incurred as a result of legal obligations requiring the asset to be restored to its original condition. Tangible assets are subsequently measured at amortised cost. Depreciated is charged on a straight-line basis over the asset’s estimated useful life. Assets are accounted for after deducting depreciation and any impairments. The useful life and residual value of property, plant and equipment are reviewed annually. In the event of a discrepancy compared with earlier estimates, an impairment is recognised and depreciation recalculated. Non-routine maintenance costs generating future economic benefits are capitalised, whilst routine maintenance costs are recognised directly in profit or loss in the year in which they are incurred. The Poste Vita Group has estimated the following useful lives for the various categories of tangible asset:
Technical provisions ceded to reinsurers
Type of asset Period of amortisation/depreciation Rate
Software 3 years 33%
Start‐up and expansion costs 5 years 20%
Leasehold improvements remaining lease term
Fixtures and fittings, office
equipment and internal means of
transport
8 years
12%
Plant and machinery 5 years 20%
11
These are determined in accordance with the terms and conditions of reinsurance treaties, as this method most accurately reflects the specific revenues and costs typical of the sector.
Investments in associates
This item includes the Group’s investment in its associate. This investment is accounted for using the equity method, in proportion to the Group’s interest in the associate.
Financial instruments
Financial instruments include financial assets and liabilities that are classified on initial recognition at fair value based on the business purpose for which they were acquired. The purchase and sale of financial instruments are recognised by category. Any changes in fair value between the transaction date and the settlement date are recognised in the financial statements.
Financial assets On initial recognition, financial assets are classified in one of the following categories and valued as follows: Financial assets at fair value through profit or loss This category includes financial instruments held for trading in the short term, derivatives and securities designated by the Group at fair value through profit or loss. Designated securities include structured financial instruments where the derivative component must be measured separately unless it is embedded in the host contract, assets covering pension fund obligations, unit- and index-linked policies and any surplus instruments held for sale. On initial recognition, these assets are measured at the settlement date and at cost, determined on the basis of the fair value of the financial instrument. Transaction costs or income directly attributable to the purchase or sale of the instrument are not included on initial recognition and are recognised directly in profit or loss. The assets are subsequently measured at fair value, with any changes recognised in profit or loss. Financial assets are derecognised when there is no longer a contractual right to receive cash flows from the investment or when all the related risks and rewards and control have been substantially transferred. Loans and receivables These assets are measured at amortised cost using the effective interest rate method, less any impairments.
12
On initial recognition, these assets are measured at the settlement date and at cost, determined on the basis of the fair value of the financial instrument, plus directly attributable transaction costs. Impairment tests are conducted at the end of each annual or interim reporting period. Impairments are recognised as a reduction in the cost, with a matching entry in profit or loss. If in subsequent periods the conditions which led to the impairment no longer exist, the carrying amount of the asset is reinstated and a reversal recognised in profit or loss. The reversal must not result in a carrying amount that is higher than what the amortised cost of the asset would have been had the impairment not been recognised. These financial assets are derecognised when there is no longer a contractual right to receive cash flows from the investment or when all the related risks and rewards and control have been substantially transferred. The fair value of these assets is based on the value of recent or similar transactions or on valuation models. Available-for-sale financial assets These assets include non-derivative financial instruments that are either designated in this category or not attributable to any of the other categories described above. These financial instruments are recognised at fair value and any resulting fair value gains or losses are recognised in an equity reserve, with movements in such reserve being accounted for in “Other components of comprehensive income” (the “Fair value reserve). This reserve is only recycled to profit or loss when the financial asset is effectively disposed of (or settled) or, in the event of accumulated losses, when there is evidence that the impairment recognised in equity cannot be recovered. On initial recognition, these assets are measured at the settlement date and at cost, determined on the basis of the fair value of the financial instrument, plus directly attributable transaction costs. In the case of debt securities, the recognition of returns under the amortised cost method takes place through profit or loss, as do the effects of movements in exchange rates, whilst movements in exchange rates relating to available-for-sale equity instruments are recognised in a specific equity reserve, with movements in the reserve accounted for in “Other components of comprehensive income”. Impairment tests are conducted at the end of each annual or interim reporting period. Impairments are recognised as a reduction in the cost, with a matching entry in profit or loss by recycling accumulated gains or losses recognised in the specific equity reserve. If in subsequent periods the conditions which led to the impairment no longer exist, the carrying amount of the asset is reinstated and a reversal recognised in profit or loss, in the case of debt securities, or in equity, in the case of equity instruments. The reversal must not result in a carrying amount that is higher than what the amortised cost of the asset would have been had the impairment not been recognised. These financial assets are derecognised when there is no longer a contractual right to receive cash flows from the investment or when all the related risks and rewards and control have been substantially transferred.
13
Determining the fair value of financial assets – background Paragraph 2 of IFRS 13 – Fair Value Measurement, endorsed by EU Regulation 1255/2012 of 11 December 2012, states that “Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability)”. In accordance with the above standard, a description of the fair value measurement techniques used by the Poste Vita Group is provided below. It is important to remember that the active market concept refers to a market in which prices are readily and regularly available from an exchange, or quoted regularly on "alternative" trading platforms, as opposed to official platforms, provided that such prices are deemed to be reliable. Prices may also be those available from primary participants in different markets, provided that the prices observed represent potential or actual market transactions on an arm’s length basis. The assets and liabilities concerned are classified with reference to a hierarchy that reflects the materiality of the sources used for their valuation. The hierarchy consists of the three levels defined by IFRS 13:
Level 1 – fair value is determined with reference to prices quoted in an active market; Level 2 – fair value is based on inputs other than Level 1 quoted market prices that
are either directly or indirectly observable for the instrument being measured and based on instruments with a similar risk profile;
Level 3 – fair value is based on inputs that cannot be directly or indirectly observed and that require the entity to make estimates and assumptions.
Further details of fair value measurement techniques are provided in the section, “Fair value measurement”. Other receivables This item primarily regards amounts receivable from policyholders in the form of premiums in the process of collection, from agents and insurance and reinsurance companies. These assets are measured at amortised cost using the effective interest rate method. This method is not used for receivables falling due in the short term, as the effect of discounting to present value is negligible. These receivables are measured at cost, which coincides with their nominal value, and tested for impairment.
14
Other assets Deferred acquisition costs This item refers to deferred acquisition costs, related to the acquisition of new insurance contracts. These costs are accounted for using the local accounting standards applied in the country of residence of each consolidated company, as required by IFRS 4. Current and deferred tax assets Current and deferred tax assets are defined and governed by IAS 12. Deferred tax assets are reviewed regularly at the end of each reporting period, if there have been changes to the relevant tax regulations. Other assets “Other assets” include, among other things: • deferred commission expenses payable on investment contracts outside the
scope of IFRS 4, but of IAS 39, and as such are classified as liabilities at fair value through profit or loss;
• transitional reinsurance accounts; • other assets relating to employee benefits, as governed by IAS 19, consisting of
surpluses resulting from the difference between provisions calculated in accordance with Italian GAAP and those calculated in accordance with IAS 19.
The criteria used to determine provisions for employee benefits are described in the section, “Other payables”: • accrued income and prepaid expenses. Cash and cash equivalents This category includes cash and demand deposits. These are recognised at their nominal value and, in the case of foreign currency items, converted using closing exchange rates.
15
Impairment testing The Poste Vita Group tests its assets for impairment at the end of each reporting period. The tests are conducted by comparing the carrying amount of each asset with its estimated recoverable amount and, if the latter is lower than the former, an impairment of the asset is recognised. The recoverable amount is the greater of fair value, less costs to sell, and value in use. Impairment losses are recognised in profit or loss. Except in the case of goodwill, if the previous indicators of impairment no longer exist, the carrying amount of the asset is increased to reflect the new estimated recoverable amount. The reversal must not, however, exceed the carrying amount that would have been determined had no impairment loss been recognised. Equity attributable to owners of the Parent This category consists of equity instruments (“other equity instruments”) and capital reserves attributable to owners of the Parent. “Retained earnings and other capital reserves” include gains and losses resulting from the first-time application of IFRS and the consolidation reserves. “Gains or losses on available-for-sale financial assets” include the gains or losses resulting from measurement of available-for-sale financial assets, accounted for after both deferred taxation and the portion attributable to policyholders, which is accounted for in insurance liabilities (under the shadow accounting mechanism). Other gains and losses recognised directly in equity This item includes actuarial gains and losses and adjustments to defined benefit plans recognised directly in equity (IAS 19.93A). Provisions for risks and charges Provisions for risks and charges are recorded to cover losses that are either probable or certain to be incurred, for which, however, there is an uncertainty as to the amount or as to the date on which they will occur. This item includes the liabilities defined and governed by IAS 37. Provisions for risks and charges are made when the Group has a present (legal or constructive) obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation. Provisions are measured on the basis of management’s best estimate of the use of resources required to settle the obligation at the end of the reporting period. The value of the liability, if significant, is discounted to present value. Technical provisions A description of the accounting policy applied to “Technical provisions” is provided in
16
the next section, “Premiums and technical reserves”. Financial liabilities at fair value through profit or loss This category includes financial liabilities held for trading in the short term, derivative financial instruments and liabilities designated at fair value through profit or loss. This category also includes financial policies for life insurance. On initial recognition, these liabilities are measured at the settlement date and at cost, determined on the basis of the fair value of the liability. Transaction costs or income directly attributable to the transaction are not included on initial recognition and are recognised directly in profit or loss. The liabilities are subsequently accounted for at fair value and any difference between fair value and the carrying amount e is recognised in profit or loss. Financial liabilities are derecognised when settled or when all the related risks and rewards have been substantially transferred. Other financial liabilities This category includes financial liabilities not held for trading. They regard subordinated loans to the Parent Company, Poste Vita, from the parent, Poste Italiane. On initial recognition, these liabilities are measured at fair value at the settlement date, plus directly attributable transaction costs. The liability is subsequently measured at amortised cost using the effective interest rate method. Payables Payables arising from direct insurance transactions This item includes trade payables deriving from direct insurance transactions. These payables are recognised at their nominal value. Discounting is not used as, given the short-term nature of the payables, the impact would not be significant. Payables arising from reinsurance transactions This item includes trade payables deriving from reinsurance transactions. These payables are recognised at their nominal value. Discounting is not used as, given the short-term nature of the payables, the impact would not be significant. Other payables Other payables refer to items not relating to the insurance business. This item includes provisions for the component of employee benefits calculated under Italian GAAP. Discounting is not used, as these are short-term payables or payables involving the payment of interest in accordance with pre-established contracts. Employee benefits consist of the following categories:
17
Short-term benefits Short-term employee benefits are those that will be fully paid within twelve months of the end of the year in which the employee provided his or her services. Such benefits include wages, salaries, social security contributions, holiday pay and sick pay. The undiscounted value of short-term employee benefits to be paid to employees in consideration of employment services provided over the relevant period, is accrued as personnel expenses. Post-employment benefits Post-employment benefits are of two types: defined benefit plans and defined contribution plans. Since, for defined benefit plans, the amount of benefits payable can only be determined subsequent to the cessation of employment, the related cost and obligations can only be estimated by actuarial techniques in accordance with IAS 19. Under defined contribution plans, contributions payable are recognised in profit or loss when incurred, based on the nominal value.
Defined benefit plans Defined benefit plans include the post-employment benefits payable to employees in accordance with article 2120 of the Italian Civil Code:
- For all companies with at least 50 employees, covered by the reform of supplementary pension provision, from 1 January 2007 vesting employee benefits must be paid into a supplementary pension fund or into a Treasury Fund set up by INPS. Accordingly the company’s defined benefit liability is applicable only to the provisions made up to 31 December 2006.
- In the case of companies with less than 50 employees, to which the reform of supplementary pension provision does not apply, vested employee benefits continue to represent a defined benefit liability for the company.
The post-employment benefit (“TFR”) liability to be paid on cessation of employment is calculated using the projected unit credit method and then discounted to recognise the time value of money prior to the liability being settled. The liability recognised in the financial statements is based on calculations performed by independent actuaries.
The calculation takes account of benefits accrued for the period of service to date and is based on actuarial assumptions. These primarily regard: demographic assumptions (such as employee turnover and mortality) and financial assumptions (such as rate of inflation and a discount rate consistent with that of the liability). In the case of companies with at least 50 employees, as the company is not liable for employee benefits accruing after 31 December 2006, the actuarial calculation of employee benefits no longer takes account of future salary increases. Actuarial gains and losses are recognised directly in other comprehensive income at the end of each reporting period, based on the difference between the carrying amount of the liability and the
18
present value of the Group’s obligations at the end of the period, due to changes in the actuarial assumptions.
Defined benefit plans also include supplementary pension plans guaranteeing members and their surviving spouses pensions in addition to those managed by INPS to the extent of and in accordance with the conditions provided for in specific regulations covered by the collective labour contract and legislation. The initial recognition and subsequent measurement of such plans are consistent with valuation of the TFR described above. Measurement of the liability recognised in the financial statements is based on calculations performed by independent actuaries.
Defined contribution plans Post-employment benefits payable pursuant to art. 2120 of the Italian Civil Code fall within the scope of defined contribution plans provided they vested subsequent to 1 January 2007 and were paid into a Supplementary Pension Fund or a Treasury Fund at INPS. Contributions to defined contribution plans are recognised in profit or loss when incurred, based on their nominal value. Termination benefits Termination benefits payable to employees are recognised as a liability when the entity decides to terminate the employment of an employee, or group of employees, prior to the normal retirement date or, alternatively, an employee or group of employees accepts an offer of benefits in consideration of a termination of employment. Termination benefits payable to employees are immediately recognised as personnel expenses. Other long-term employee benefits Other long-term employee benefits consist of benefits not payable within twelve months of the end of the reporting period during which the employees provided their services. Generally, there is not the same degree of uncertainty regarding the measurement of other long-term employee benefits as there is in relation to post-employment benefits. As a result, IAS 19 permits use of a simplified method of accounting: the net change in the value of the liability during the reporting period is recognised in full in profit or loss. Measurement of the other long-term employee benefits liability is recognised in the financial statements based on calculations performed by independent actuaries.
Other liabilities Liabilities in disposal groups held for sale This item refers to liabilities included in a disposal group held for sale, as defined by IFRS 5.
19
Current and deferred tax liabilities Current and deferred tax liabilities are governed by IAS 12. Current tax liabilities are calculated in accordance with the regulations in force governing direct taxation. Deferred tax liabilities are calculated on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts, with the exception of cases expressly provided for in paragraph 15 of IAS 12. Deferred tax liabilities calculated on items recognised in equity are also recognised directly in equity.
Other liabilities This item includes: • deferred commission income on contracts not governed by IFRS 4; • liabilities resulting from defined benefit obligations and other long-term
employee benefits; • accrued expenses and deferred income. Premiums and technical reserves
Contracts classified as “insurance” based on the requirements of IFRS 4 are accounted for and measured in accordance with the accounting standards used in preparation of the statutory financial statements and, as a result, comply with the provisions of Legislative Decrees 173/2997 and 209/2005 and ISVAP regulations 16, 21 and 22.
In compliance with IFRS 4, contracts qualify as insurance contracts when one party accepts significant insurance risk from another party.
Under IFRS 4, insurance risk, other than financial risk, occurs when a risk is transferred from the holder of a contract to the issuer. Financial risk is, in turn, defined as “the risk of a possible future change in one or more of a specific interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, in the case of a non-financial variable, that the variable is not specific to a party to the contract”.
Insurance risk is significant if, and only if, an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction). Given that IFRS 4 does not provide any specific indication regarding the level of significance of the insurance risk, it is the responsibility of the insurer to define the threshold above which the payment of additional benefits in the event of occurrence of the insured event generates the transfer of significant insurance risk. This threshold has been identified by the Company’s Board of Directors. The assessment of significance was conducted by grouping individual contracts into uniform categories based on the nature of the risk transferred to the Company.
20
Contracts that do not transfer significant insurance risk and that qualify for classification as financial instruments are accounted for and measured in accordance with the accounting standards used in preparation of the statutory financial statements when they have discretionary participation features.
IFRS 4.10 establishes that the unbundling of a contract, classified as insurance, into its deposit and insurance components is required in certain circumstances and is optional in others. In the event of unbundling, the deposit component falls within the scope of application of IAS 32 and IAS 39, whilst the risk component falls within the scope of application of IFRS 4.
Unbundling is required if the insurer can measure the deposit component separately (i.e. without considering the insurance component), and if the insurer’s accounting policies do not otherwise require it to recognise all obligations and rights arising from the deposit component. Based on the above, the Company has opted not to unbundle its contracts.
Contracts (or components of contracts) that do not transfer significant insurance risk and that do not have discretionary participation features are accounted for and measured in accordance with IAS 39 or IAS 18, depending on whether they qualify for classification as financial instruments or service contracts.
The bases on which non-life and life contracts are classified, and the criteria used in accounting for and measuring such contracts, are described below.
Non-life insurance Non-life contracts are all classified as insurance contracts, taking into account the substance of such contracts, which expose the Company to significant insurance risk.
Technical provisions for non-life contracts are as follows:
The premium reserve consists of “Provisions for the unearned portion of premiums” and “Provisions for unexpired risks”. Provisions for the unearned portion of premiums are calculated on an accruals basis, taking into account gross premium revenue less acquisition costs.
Outstanding claims provisions are measured analytically and, based on a prudent assessment of the available elements, on the basis of the final cost, in order to arrive at an adequate valuation of the provisions needed to cover claims expenses and the related direct and indirect settlement costs. The above calculation process also includes an estimate of claims incurred but not reported (IBNR).
In relation to Liability Adequacy Testing (LAT), the requirements of Italian GAAP governing the calculation of technical provisions for non-life contracts are deemed to
21
comply with the minimum requirements of paragraph 16 of IFRS 4. As a result, the Company is exempted from the need to conduct further adequacy tests.
Specifically, the component of the premium reserve relating to provisions for unexpired risks, calculated and set aside when the technical report for a particular branch of the business indicates that the expected cost of claims is higher than revenue attributable to future reporting periods, represents a reasonable approximation of the liability adequacy test.
The calculation of outstanding claims provisions, based on the final cost, includes an estimate of the principal undiscounted future cash flows and, as a result, the provisions are higher than the amount that would result from a LAT in accordance with IFRS 4.
Catastrophe and equalisation provisions have been reversed, given that IFRS 4 does not permit recognition of any prudential provision for potential future claims expenses.
The ageing reserve is calculated in accordance with article 46 of ISVAP Regulation 16. This is based on a flat rate of 10% of gross premium revenue for the year from contracts of the type indicated in the Regulation.
Life insurance In view of the above, Branch I products whose benefits are revaluated, based on the return generated through the management of separately identifiable pools of financial assets, are classified as financial instruments with discretionary participation features (“DPF”, as defined in Appendix A of IFRS 4), for which IFRS 4.35 makes reference to local accounting standards. During the year, the Company also sold asset-based Branch I products. These policies mature in 2015. Given that, at maturity, amounts that have accumulated within the separately managed Posta Valore Più account will be automatically transferred, these contracts have been classified as financial instruments but, in keeping with the above approach, are accounted for as insurance contracts.
“Pure risk” policies are classified as insurance contracts.
Branch III products exposed to significant “insurance risk” are classified as insurance contracts. These products are classified on the basis of the results of internal assessments that, through yield curve analysis, aim to assess the likelihood that the Company will have to pay out significant additional benefits in the event of occurrence of the insured event.
In addition, in order to assess the adequacy of provisions, in accordance with IFRS 4, the Company has conducted Liability Adequacy Tests. The tests were conducted on the basis of the present value of future cash flows, obtained by projecting expected future cash flows from the existing portfolio to the end of the reporting period, based on appropriate assumptions regarding the cause of expiration (death, surrender,
22
redemption, reduction) and the performance of claims expenses. The results of the tests revealed that the technical provisions were adequate and did not need to be topped up.
Shadow accounting
In order to mitigate mismatches between the financial assets included in separately managed accounts, measured in accordance with IAS 39, and the mathematical provisions measured in accordance with local accounting standards, the Company has applied “shadow accounting” to the contracts included in the separately managed accounts associated with life policies, as permitted by paragraph 30 of IFRS 4.
Shadow accounting allows an insurer to change the accounting policies applied to insurance liabilities (i.e. its statutory technical provisions) so that a recognised but unrealised gain or loss on an asset affects the measurement of insurance liabilities in the same way that a realised gain or loss does.
Shadow accounting is applied using a “going concern approach”, based on the following assumptions:
• the realisation, for each separately managed account, of unrealised, prospective gains and losses at the measurement date over a period of years that, based on an ALM approach, is consistent with the characteristics of the assets and liabilities held in portfolio and more representative of the overall nature of the business. The assumption based on immediate realisation is thus discarded;
• determination of the insurance liability based on the prospective yield on each separately managed account, taking into account the contractual obligations, the level of guaranteed minimum returns and any financial guarantees provided.
Commission income and expenses
These items regard commissions on investment contracts outside the scope of IFRS 4. Commission income consists of explicit and implicit fees and commissions accruing during the reporting period and management fees, whilst commission expenses regard acquisition costs. Income and expenses arising from investments Net income (expenses) from financial assets at fair value through profit or loss
This item includes realised gains and losses and unrealised gains and losses on assets and liabilities classified as “fair value through profit or loss”. Changes in value are measured on the basis of the difference between the fair value and carrying amount of the financial instruments accounted for in this category.
23
Income and expenses arising from investments in subsidiaries, associates and joint ventures
This item includes income and expenses arising from investments in the Group’s associates. It primarily refers to the Group’s share of the investees’ results for the period.
Income and expenses arising from other financial instruments and investment property
This item includes: income and expenses and realised gains and losses on investments classified
as “available-for-sale”; income and expenses from loans and receivables and other financial liabilities; income and expenses from investment property.
Other income This item includes: income from the sale of goods and services, other than financial services, and from
the use, by third parties, of tangible and intangible assets and other assets; other net technical income, related to insurance contracts; exchange rate differences recorded in profit or loss in accordance with IAS 21; realised gains and reversals of impairments of tangible and intangible assets. Net claims expenses The category includes amounts paid less recoveries, the change in outstanding claims provisions and in other technical provisions for the non-life business, the change in mathematical provisions and in other technical provisions for the life business, the change in technical provisions for contracts where investment risk is transferred to policyholders, relating to insurance contracts and financial instruments falling within the scope of application of IFRS 4. Recognised amounts are shown before settlement costs and after the share attributable to reinsurers. Expenses arising from investments in subsidiaries, associates and joint ventures This category refers to expenses arising from the investments in subsidiaries, associates and joint ventures accounted for in the corresponding asset category.
24
Expenses arising from other financial instruments and investment property This category refers to expenses arising from investment property and financial instruments not measured at fair value through profit or loss. These expenses primarily regard other expenses from investments, including the costs incurred on investment property, including management fees and uncapitalised maintenance and repair costs; losses following derecognition of a financial asset or liability or of investment property; losses resulting from measurement, including amortisation, depreciation and impairments. Operating costs This item includes fees and other acquisition costs, including insurance contract acquisition costs, less those ceded to reinsurers; investment management expenses, including the overheads and personnel expenses incurred in the management of financial instruments and investment property; other administrative expenses, which include the overheads and personnel expenses not allocated to claims expenses, insurance contract acquisition costs and investment management expenses. Other costs This item includes: the costs incurred on the sale of goods and services, other than financial services; other net technical expenses, related to insurance contracts; provisions made during the reporting period; exchange rate differences recorded in profit or loss in accordance with IAS 21; realised losses, impairments and depreciation and amortisation of tangible assets –
when not allocated to specific items – and intangible assets. Use of estimates As required by paragraph 116 of IAS 1, we declare that the consolidated financial statements have been prepared with clarity and give a true and fair view of the financial position, cash flows and operating results for the year. The notes provide explanations of the judgements made and the estimation methods and accounting policies adopted in applying IFRS. Use of such estimates and assumptions affects the amounts reported in the financial statements and related disclosures. The actual amounts of items for which the above estimates and assumptions have been applied may differ from those reported in previous financial statements, due to uncertainties regarding the assumptions themselves and the conditions on which estimates are based. Estimates and assumptions are periodically reviewed and the impact of any changes is reflected in the financial statements for the period in which the estimate is revised if the revision only
25
influences the current period, or also in future periods if the revision influences both current and future periods. Estimates were used in the following cases during the period under review: in determining the fair value of financial assets and liabilities when this was not
observable on an active market; in estimating the recoverability of deferred tax assets; in quantifying provisions for risks and charges and provisions for employee
benefits, in view of the indeterminate nature or amount of the related liabilities and uncertainty regarding the date on which they will occur and the actuarial assumptions applied;
in estimating technical provisions for the life business; in determining the amounts used in application of the shadow accounting method,
as described above; in estimating technical provisions for the non-life business. Determination of fair value In compliance with IFRS 13 – Fair Value Measurement, endorsed by EU Regulation 1255/2012 of 11 December 2012, the following section provides information regarding the techniques used to measure the fair value of financial instruments within the Poste Vita Group. The assets and liabilities concerned (specifically assets and liabilities carried at fair value and carried at cost or amortised cost, for which fair value is required to be disclosed in the notes) are classified with reference to a hierarchy that reflects the materiality of the sources used for their valuation. The hierarchy consists of three levels. Level 1: this level is comprised of fair values determined with reference to prices quoted in active markets for identical assets or liabilities to which the entity has access on the measurement date. For the Poste Vita Group, these include the following types of financial instrument: Bonds quoted on active markets:
• Bonds issued by the Italian government: measurement is based on prices on the MTS (the wholesale electronic market for government securities).
• Bonds issued by EU government bodies or Italian or foreign corporate bonds: measurement is based on prices on regulated markets, according to a hierarchy of sources:
a. the bid price at 4.00pm London time (GMT), quoted by a globally recognised information provider;
b. the last bid price on regulated markets recognised by the CONSOB in accordance with Resolution 16370 of 4 March 2008.
26
c. equity instruments quoted on active markets: measurement is based on the price resulting from the last trade of the day on the stock exchange of reference.
d. quoted investment funds: this category includes funds invested in financial instruments quoted on active markets. Measurement is based on the NAV (Net Asset Value) determined by the fund manager.
Financial liabilities quoted on active markets: this category includes plain vanilla
bonds, whose measurement is based on the ask prices quoted by a globally recognised information provider.
Level 1 bond price quotations incorporate a credit risk component. Level 2: this level is comprised of fair values based on inputs other than Level 1 quoted market prices that are either directly or indirectly observable for the asset or liability. For the Poste Vita Group, these include the following types of financial instrument: Bonds either quoted on inactive markets or not at all:
• Plain vanilla Italian and international government and non-government bonds: valued using discounted cash flow techniques involving the computation of the present value of future cash flows, inputting rates from yield curves incorporating spreads reflecting credit risk that are based on asset swap spreads determined with reference to quoted and liquid benchmark securities issued by the issuer. Yield curves may be slightly adjusted to reflect liquidity risk relating to the absence of an active market.
Structured bonds: measurement is based on a building blocks approach, where the structured bond is broken down into its basic components: the bond component and the option component. The bond component is measured by discounting cash flows to present value in line with the approach applicable to straight bonds, as defined above. The option component – which, considering the features of the bonds included in the portfolio of the Poste Vita Group, relates to interest rate risk - is measured in accordance with a standard closed form expression as with classical option valuation models with underlyings exposed to such risks.
Unquoted equities: this category may be included here provided it is possible to use
the price of quoted equities of the same issuer as a benchmark. The price inferred in this manner would be adjusted through the application of the discount implicit in the process to align the value of class B and C shares to quoted class A shares.
Derivative financial instruments:
• Warrants: considering the features of the securities held, measurement is based on a closed form expression.
27
Financial liabilities either quoted on inactive markets or not at all: • Plain vanilla bonds: valued using discounted cash flow techniques
involving the computation of the present value of future cash flows, inputting rates from yield curves incorporating spreads reflecting the issuer’s credit risk;
• Structured bonds: measurement is based on a building blocks approach, where the structured bond is broken down into its basic components: the bond component and the option component. The bond component is measured by discounting cash flows to present value in line with the approach applicable to straight bonds, as defined above. The option component – which, considering the features of the bonds issued by Group companies, relates to interest rate risk - is measured in accordance with a standard closed form expression as with classical option valuation models with underlyings exposed to such risks.
Level 3: this category includes the fair value measurement of assets and liabilities using inputs which cannot be observed. For the Poste Italiane Group the following categories of financial instrument apply: Property funds subject to capital calls and closed-end private equity funds subject
to capital calls: these include funds that invest in unlisted instruments. Their fair value is determined by considering the NAV (Net Asset Value) reported by the fund manager. This NAV is adjusted according to the capital calls and reimbursements announced by managers.
The investment in the associate, Europa Gestioni Immobiliare (EGI), measured using the equity method.
Financial liabilities measured at amortised cost.
IFRS 12 – Disclosure of interests in other entities
Adopted with (EU) Regulation 1254/2012, IFRS 12 is a consolidated disclosure standard requiring a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, associates and non-consolidated structured entities. This standard summarises all the disclosures that an entity is required to make to allow financial statement users to assess the nature and risks deriving from its investments in other entities, and the effects of such investments on the statement of financial position, operating performance and cash flows. A structured entity is an entity designed in such a way as not to make voting rights the key factor in determining control over it, as in the case where voting rights refer solely to administrative activities and the relevant operations are managed on the basis of contractual arrangements.
At 31 December 2014, the above definition encompasses investments held by Poste Vita in the following funds:
• BlackRock MultiAssets diversified distribution fund (Open-end fund)
• Advance Capital Energy Fund (Closed-end fund)
28
• Piano 400 Fund Deutsche Bank (Open-end fund)
• Tages Capital Platinum (Open-end fund)
• Tages Platinum Growth (Open-end fund)
As provided for in paragraphs 24-31 of IFRS 12, supported by paragraphs B25 – B26, Poste Vita is required to provide disclosures in its consolidated financial statements that will allow financial statement users to assess the following, with regard to each non-consolidated structured entity:
• the nature and extent of its interest in the entity;
• the nature of the risks associated with its interest in the entity.
The required disclosures are provided below.
Nature of the interest in the non-consolidated structured entity (IFRS 12.26)
With regard to the first point, we hereby provide qualitative and quantitative disclosures regarding the nature, purpose, size and activities of the non-consolidated structured entity, and how the entity is financed.
The Company holds interests in excess of 50% in each of the above funds, with 100% interests in the Tages, Piano 400 and Blackrock funds. The Company’s investments in the funds do not qualify as controlling interests as defined by IFRS10 and have not been consolidated, but, in any event, fall within the scope of application of IFRS12 in that they are non-consolidated structured entities. The purpose of Poste Vita’s investment in the funds is to diversify its portfolio of financial instruments intended to cover Branch I products (Separately Managed Accounts), with the objective of mitigating the concentration of investments in Italian government bonds and euro-denominated corporate bonds. The following table provides the disclosures required by IFRS 12.26:
ISIN Name Nature of entity Activity of fund % investment NAV of fund (€000)
IE00BP9DPZ45
BLACKROCK DIVERSIFIED DISTRIBUTION
FUND
Harmonised open‐end
UCITS
Investment in a mix of asset classes
(corporate bonds, government
bonds and equities). 100,00% 1.798.229
IT0004597396 ADVANCE CAPITAL ENERGY FUND
Non‐harmonised closed‐
end fund of funds
Investment in energy companies to
increase their value and, via the
subsequent sale, generate capital
gains. 86,21% 19.876
IE00B1VWGP80 PIANO 400 FUND DEUTSCHE BANK Harmonised open‐end
Investment in amix of asset classes,
above all debt instruments from
various sectors and countries. 100,00% 512.560
IT0004801996 TAGES CAPITAL PLATINUM
Non‐harmonised fund of
hedge funds
Pursuit of absolute returns, with a
low degree of volatility and long‐
term correlation with the principal
financial markets. 100,00% 211.097
IT0004937691 TAGES PLATINUM GROWTH
Non‐harmonised fund of
hedge funds
Pursuit of absolute returns, with a
low degree of volatility and long‐
term correlation with the principal
financial markets. 100,00% 123.732
29
Nature of the risk (IFRS 12. 29 – 31)
The following disclosures are provided with regard to the second point:
• the carrying amounts of the assets and liabilities recognised in the financial
statements in relation to the non-consolidated structured entity;
• the line items in the statement of financial position in which those assets and liabilities are recognised;
• the maximum exposure to loss from the Company’s interests in non-consolidated structured entities, including how the maximum exposure to loss is determined.
• a comparison of the carrying amounts of the assets and liabilities of the entity that relate to its interests in non-consolidated structured entities and the maximum exposure to loss from those entities.
The following table provides the disclosures required for each non-consolidated structured entity:
Changes in the fair value of the above funds during the period are passed on to the policyholder under the shadow accounting mechanism, as they regard financial instruments included in separately managed accounts.
(€000)
ISIN NameCategory in financial
statementsCarrying amount of investment
Maximum loss
exposure
Comparison of carrying amount
and maximum exposure
Method for determining
maximum loss exposure
IE00BP9DPZ45
BLACKROCK DIVERSIFIED DISTRIBUTION
FUND
Financial assets at fair
value through profit or loss 1.798.229 239.501 1.558.728
Analytical annualised VaR
99.5%
IT0004597396 ADVANCE CAPITAL ENERGY FUND
Available‐for‐sale financial
assets 17.135 9.681 7.454
VAR at 99.5% over a 1‐year
time horizon
IE00B1VWGP80 PIANO 400 FUND DEUTSCHE BANK
Available‐for‐sale financial
assets 512.560 13.239 499.321
Difference between market
value at the measurement
date and par value (equal to
100)
IT0004801996 TAGES CAPITAL PLATINUM
Available‐for‐sale financial
assets 211.097 33.142 177.955
VAR at 99.5% over a 1‐year
time horizon
IT0004937691 TAGES PLATINUM GROWTH
Available‐for‐sale financial
assets 123.732 15.219 108.513
VAR at 99.5% over a 1‐year
time horizon
2.662.753 310.782 2.351.971
30
New accounting standards and interpretations and those soon to be effective
Accounting standards and interpretations applied from 1 January 2014
The following amendments, interpretations and revisions are applicable from 1 January 2014:
IAS 27 - Separate Financial Statements, amended with (EU) Regulation 1254/2012. The amendments introduced involve the extrapolation and transfer to a new dedicated standard (IFRS 10 – Consolidated financial statements) of the rules on the preparation of consolidated financial statements. In this way, the new IAS 27 defines and governs the standards to be applied in preparation of the separate financial statements only and, in this respect, it is substantially unchanged from the previous version.
IAS 28 - Investments in Associates and Joint Ventures, amended with (EU) Regulation 1254/2012. This standard was amended with the introduction of the application of the equity method to account for investments in joint ventures.
IFRS 10 - Consolidated Financial Statements, adopted with (EU) Regulation 1254/2012. The new standard lays down the rules for the preparation and presentation of consolidated financial statements, supplementing the provisions contained formerly in IAS 27 – Consolidated and Separate Financial Statements and in SIC 12 – Special Purpose Entities (Investment Vehicles). The new standard redefines control as the only basis of consolidation of all types of entities, eliminates certain inconsistencies or interpretative doubts between IAS 27 and SIC 12 and, lastly, defines clear and specific rules to identify “de facto control”.
IFRS 11 - Joint Arrangements, adopted with (EU) Regulation 1254/2012. The new standard establishes rules for accounting for jointly controlled entities, replacing IAS 31 – Investments in Joint Ventures and SIC 13 – Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 also lays out the criteria for identifying joint arrangements on the basis of rights and obligations deriving from the arrangements, more than the legal form of such arrangements, and does not permit, unlike IAS 31, proportionate consolidation as a method to account for investments in joint ventures.
IFRS 12 - Disclosure of Interests in Other Entities, adopted with (EU) Regulation 1254/2012. IFRS 12 is a consolidated disclosure standard requiring a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, associates and non-consolidated structured entities. This standard summarises all the disclosures that an entity is required to make to allow financial statement users to assess the nature and risks deriving from its investments in other entities, and the effects of such investments on the statement of financial position, operating performance and cash flows.
IAS 32 - Financial Instruments: Presentation – Offsetting Financial Assets and Liabilities amended with (EU) Regulation 1256/2012. Following the amendment to IFRS 7, IAS 32 (revised) provides additional guidance to reduce inconsistencies in the application of this standard.
Amendments to IFRS 10, IFRS 12 and IAS 27 adopted with (EU) Regulation
31
1174/2013. To set out rules on Investment Entities, the following standards were amended:
IFRS 10, amended to require investment entities to measure their subsidiaries at their fair value through profit or loss instead of consolidating them, to better reflect their business model;
IFRS 12, amended to require specific disclosures about the subsidiaries of investment entities;
IAS 27, amended to eliminate the possibility for investment entities to opt for the valuation at cost of certain subsidiaries, requiring their recognition at fair value in their separate financial statements.
IAS 36 - Impairment of Assets, amended with (EU) Regulation 1374/2013. The amendments intend to clarify that the disclosures on the recoverable amount of assets, when such amount is based on fair value less costs to sell, concern only impaired assets.
IAS 39 – Financial Instruments: Recognition and Measurement, amended with (EU) Regulation 1375/2013. The amendments provide for situations where derivatives designated as hedges are novated from one counterparty to another central counterparty, as a result of laws or regulation. In particular, in these cases hedge accounting can continue regardless of novation.
Accounting standards and interpretations soon to be effective
The following standards, interpretations and amendments are applicable from 1 January 2015:
IFRIC 21 – Levies, adopted with (EU) Regulation 634/2014, will apply as of 1 January 2015. The interpretation provides guidance on how to account for a liability for a levy imposed by a government, when the liability is to be accounted for in accordance with IAS 37.
Annual Improvement Cycle to IFRSs 2011 - 2013 adopted with Regulation (EU) no. 1361/2014 in connection with the annual projects to improve and revise international accounting standards.
The following accounting standards, interpretations and amendments apply as of 1 January 2016:
IFRS – Annual improvement cycle in relation to 2010-2012 adopted with Regulation (EU) no. 28/2015 in connection with the annual projects to improve and revise international accounting standards.
IAS 19 – Employee benefits – Defined Benefit Plans: Employee Contributions adopted with Regulation (EU) no. 29/2015. The amendment clarifies the application of IAS 19 to defined benefit plans requiring contributions from employees or third parties that are not voluntary contributions. Such contributions reduce the entity’s service cost. The amendment permits contributions linked to service, but not the years in service, to be deducted from service costs for the year in which they are paid, instead of allocating them over the employee’s years of service.
32
Lastly, as of the date of approval of these financial statement, the IASB has issued standards, interpretations, amendments and a number of Exposure Drafts that have not yet been endorsed by the EU and/or that are still in the consultation phase, including:
IFRS 9 – Financial Instruments; IFRS 14 - Regulatory Deferral Accounts; IFRS 15 - Revenue from Contracts with Customers; Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities – Applying the
Exception to Consolidation; Amendments to IAS 1 - Disclosures; Annual improvements to IFRS - 2012 – 2014 Cycle; Amendments to IFRS 10 and IAS 8 - Sale or Contribution of Assets between an
Investor and its Associate/Joint Venture; Amendments to IAS 27 - Equity Method in Separate Financial Statements; Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of
Depreciation and Amortisation; Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint
Operations; Exposure Draft “IFRS 2 – Share-Based Payments” on the Classification and
Measurement of Share-Based Payment transactions; Exposure Draft “IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36” on the Fair Value
Measurement of Quoted Investments in Subsidiaries, Joint Ventures and Associates;
Exposure Draft “IAS 12 – Income Tax” on the Recognition of Deferred Tax Assets for Unrealised Losses;
Discussion Paper “Conceptual Framework for Financial Reporting” as part of the conceptual revision of the current Framework;
Exposure Draft “Insurance Contracts” as part of the conceptual revision of the current standard;
Exposure Draft “Leases” as part of the conceptual revision of the current standard; Exposure Draft “IAS 1 – Classification of Liabilities”, which clarifies how entities
classify debt, particularly when it is coming up for renewal.
33
PART C – NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
1. INTANGIBLE ASSETS
At the end of 2014, intangible assets amount to €16,372 thousand, compared with €10,513 thousand at 31 December 2013.
The following table provides a breakdown:
Intangible assets mainly comprise unamortized software programme licenses, totalling €16,160 thousand, and the capitalized costs incurred in software development still to be completed at the end of 2014 (which did not, therefore, generate economic benefits in the period), totalling €200 thousand.
Software licenses have finite useful lives and are amortised at a rate of 33%. No impairment losses were recognised in 2014.
The table below shows changes in this item during the period under review:
Increases with respect to the previous year reflect the capitalisation of costs for the acquisition of software licenses and upgrades of other software applications, totalling €9,257 thousand.
Other intangible assets
at 31 December 2013 Increases Decreases at 31 December 2014
Software 16,341.3 15,445.3 31,786.6
‐ Accumulated amortisation (9,438.6) (6,188.4) (15,627.0)
Intangibles in progress 3,590.1 (3,390.4) 199.7
‐ Accumulated amortisation 0.0 0.0
Start‐up and expansion costs 518.9 518.9
‐ Accumulated amortisation (498.7) (7.1) (505.8)
Total 10,513.0 5,859.4 ‐ 16,372.4
(€000)
34
2. TANGIBLE ASSETS
Tangible assets total €4,438 thousand, an increase of €1,485 thousand on 31 December 2013.
The following table shows a breakdown of tangible assets:
Other tangible assets primarily relate to assets used in operations: fixtures and fittings amounting to €921 thousand, net of accumulated depreciation, electronic equipment amounting to €3,256 thousand, net of accumulated depreciation, the telephone system amounting to €259 thousand, net of accumulated depreciation, and leasehold improvements amounting to €2 thousand, net of accumulated depreciation.
The following table shows a breakdown of movements during the period:
The increase mainly relates to the purchase of new computers and electronic equipment during the period, totalling €1,770 thousand.
Other tangible assets at 31 December 2014 at 31 December 2013
Fixtures and fittings 921.3 446.6 474.7 106.3%
Computer equipment 3,255.5 2,336.8 918.7 39.3%
Telephone system 259.4 162.6 96.8 59.5%
Leasehold improvements 2.1 7.6 (5.5) (72.4%)
Carrying amount 4,438.3 2,953.6 1,484.7 50.3%
(€000)
Increase/(decrease)
35
3. TECHNICAL PROVISIONS CEDED TO REINSURERS
At 31 December 2014, these provisions total €54,403.3 thousand, an increase of €14,063 thousand compared to 31 December 2013 (€40,339.6 thousand). A breakdown of the balance is provided below:
The year-on-year increase in the amount of technical provisions ceded to reinsurers is due to growth of the business.
4. INVESTMENTS
Investments total €90,263,862 thousand at 31 December 2014, a 29.2% increase compared with the €69,852,153 thousand of 31 December 2013. They consist of the following:
Investments in subsidiaries, associates and joint ventures The Poste Vita Group accounts for its associate, Europa Gestioni Immobiliare SpA (EGI) - a real estate company, 45% owned by the Group, tasked with the management and development of the Poste Italiane SpA Group’s properties no longer used in operations – using the equity method. The figures for 2014 show that the company’s equity amounts to €362,857 thousand and that it reported a profit for the year of
Investments at 31 December 2014 at 31 December 2013
Investments in subsidiaries, associates and joint ventures 163,285.6 197,019.2 (33,733.6) (17.1%)
Loans and receivables 726,350.2 11,457.8 714,892.4 6239.4%
Available‐for‐sale financial assets 77,012,829.1 59,159,854.6 17,852,974.5 30.2%
Financial assets at fair value through profit or loss 12,361,397.3 10,483,821.3 1,877,576.0 17.9%
Total Investiments 90,263,862.1 69,852,152.9 20,411,709.2 29.2%
(€000)
Increase/(decrease)
36
approximately €45 thousand. The value of equity, and thus the value of the investment at 31 December 2014, reflect the distribution of retained earnings amounting to €75,000 thousand, including €33,750 thousand to the shareholder, Poste Vita SpA, as approved by the general meeting of shareholders held on 24 November 2014. For more details regarding the level of the fair value hierarchy assigned to the investments in this category, please see Annex 5 D.3, D.4, D.5 to these financial statements. Loans and receivables Loans and receivables amount to €726,350 thousand at 31 December 2014, compared with €11,458 thousand at 31 December 2013. They comprise the following: Loans Loans, amounting to €702,879 thousand at 31 December 2014 (€142 thousand at 31 December 2013), consisted entirely of the amount held by the Parent Company as part of the Group’s cash management system, inclusive of the proceeds from the subordinated bonds issued in May 2014.
The Company, taking account of lower interest rates at 31 December 2014, decided to wait and evaluate appropriate types of investment for those proceeds, keeping the sum with Poste Italiane SpA in the meantime, given that the cash deposit obtains a return in line with comparable market alternatives.
Receivables Receivables of €23,471 thousand at 31 December 2014 (€11,316 thousand as at 31 December 2013) regard subscriptions and the related capital calls on mutual funds for which the corresponding units have not yet been issued. Available-for-sale financial assets This item breaks down as follows:
The increase of approximately €17,852,975 thousand, compared with 2013, reflects the positive operating performance and gains during the period, accompanied by an increase in the fair value of these assets as a result of financial market trends. In fact, at 31 December 2014, unrealised net gains on securities classified as AFS amount to approximately €9,620,214 thousand, compared with approximately €2,913,018 thousand at the end of 2013. Of this amount, €9,280,238 thousand (€2,687,955
Available‐for‐sale financial assets at 31 December 2014 at 31 December 2013
Equity instruments 8,032.2 5,284.5 2,747.7 52.0%
Debt securities 75,511,704.7 57,617,659.2 17,894,045.5 31.1%
UCI units/shares 1,493,092.2 1,536,910.9 (43,818.7) (2.9%)
Total 77,012,829.1 59,159,854.6 17,852,974.5 30.2%
(€000)
Increase/(decrease)
37
thousand at 31 December 2013) is attributable to policyholders through the shadow accounting mechanism, in accordance with IFRS 4, as they relate to financial instruments included in separately managed accounts. The remaining €339,975 thousand (€225,063 thousand in 2013) refers to net gains on AFS securities included in the Company’s “free capital” and therefore attributable to a specific equity reserve (equal to €224,113 thousand), net of the related taxation.
Equity instruments, classified in the AFS category, totalling €8,032 thousand (€5,284 thousand at 31 December 2013), relate to Branch I products linked to separately managed accounts.
Fixed income instruments, totalling €75,511,705 thousand (€57,617,659 thousand at 31 December 2013), include €72,393,025 thousand in instruments traded on liquid and active markets, as defined on the basis of the Fair Value Policy approved for the Group, in application of IFRS 13. The remaining €3,118,680 thousand regards financial instruments not traded on liquid and active markets, as defined by the above IFRS, and include specific CDP SpA issuances (private placements) with a fair value of €541,101 thousand, used to back specific Branch I insurance policies linked to specific pools of assets and maturing in 2015.
UCITS units, totalling €1,493,092 thousand (€1,536,911 at 31 December 2013) consist of €1,114,449 thousand in mutual funds primarily invested in equities and €378,643 thousand in mutual funds that are mainly invested in bonds. For more details regarding the level of the fair value hierarchy assigned to the investments in this category, please see Annex 5 D.3, D.4, D.5 to these financial statements. Financial assets at fair value through profit or loss At 31 December 2014, these assets amount to €12,361,397 thousand, compared to €10,483,821 thousand at 31 December 2013, and consist of the following:
Fixed income instruments, totalling €7,370,424 thousand (€6,560,746 thousand at 31 December 2013), include €6,032,746 thousand in stripped “BTP” Treasury Bonds purchased to back Branch III insurance policies, with the remaining €1,337,678 thousand invested in corporate bonds issued by leading issuers and included in separately managed accounts.
Structured bonds, totalling €2,367,036 thousand (€2,983,252 thousand at 31 December 2013), relate to investments whose returns are linked to particular market indices, primarily designed to back insurance obligations to the holders of Branch III index-linked policies, amounting to €1,814,834 thousand. The remaining amount regards investments not tied to contractual obligations and thus classified in the
38
Company’s free capital. The sum of €550,967 thousand regards Constant Maturity Swaps issued by CDP and included in separately managed accounts. The reduction compared with the beginning of the year reflects disposals of approximately €803,403 thousand to cover corresponding Branch III claims, partially offset by fair value gains of €187,187 thousand.
Other financial instruments, totalling €2,417,564 thousand (€729,835 thousand at 31 December 2013), regard UCITS units. Of this amount, approximately €616,408 thousand are used to back unit-linked products. During the year, following the expiration of a product, the financial instruments linked to it were redeemed, resulting in a reduction compared with the beginning of the year, partially offset by fair value gains of approximately €20,969 thousand at the end of the year, reflecting positive financial market trends. UCITS units also include €1,798,231 thousand invested in the Blackrock Diversified Distribution Fund during the year in relation to Branch I products, with the aim of diversifying the exposure to government bonds and, in the meantime, to secure consistent returns for policyholders.
Derivatives amount to €206,373 thousand (€209,988 thousand at 31 December 2013) and consist of warrants backing index-linked products.
Warrants have a total nominal value of €5,657,997 thousand, down on the previous year (when the figure was €6,057,718 thousand) as a result of sales in the fourth quarter of 2014. The Company did not enter into new derivatives during the year.
Details of the Group’s warrants are as follows:
For more details regarding the level of the fair value hierarchy assigned to the investments in this category, please see Annex 5 D.3, D.4, D.5 to these financial statements.
39
5. SUNDRY RECEIVABLES
Sundry receivables at 31 December 2014 amount to €71,706 thousand, reflecting a decrease of €1,297 thousand compared with 31 December 2013, when the figure was €73,003 thousand. This item consists of the following:
The carrying amount of trade receivables and other receivables is in line with their fair value. Trade receivables do not earn interest and are short-term.
With regard to receivables from policyholders, the Group does not present any particular credit risk concentration since credit exposure is divided among a large number of counterparties.
Receivables arising from direct insurance transactions
At 31 December 2014, this item amounts to €8,451 thousand, compared with €10,225 thousand at 31 December 2013, and consists of:
Amounts due from policyholders, totalling €3,576 thousand, reflecting uncollected premiums due and payable on the basis of a prudent assessment.
Receivables due from policyholders include €961 thousand in uncollected non-life premiums for the year. The remaining €830 thousand regards life insurance premiums for the year that have yet to be collected at the end of the period.
Amounts due from agents, totalling €6,281 thousand at 31 December 2014 (€7,458 thousand at 31 December 2013), refer to premiums already collected during the last days of the year which, despite already having been collected by the agent at 31 December 2014, were paid to the Company early in January 2015.
Of the €6,281 thousand receivable, €6,073 thousand is due from the agent, Poste Italiane, and regards premiums written during the last days of the year, which are settled subsequently. These receivables were paid in January 2015.
Receivables from co-insurance agreements amount to €378 thousand at 31 December 2014 (€831 thousand at 31 December 2013) and relate to the co-insurance agreement with Eurizon Vita SpA. These are amounts owed by this company to Poste Vita in its capacity as lead agent for products placed before 30 September 2004.
Receivables arising from direct insurance transactions at 31 December 2014 at 31 December 2013
Due from policyholders 1,791.1 1,936.4 (145.3) (7.5%)
Premiums receivable from agents 6,281.4 7,457.9 (1,176.5) (15.8%)
Receivables arising from co‐insurance agreements 378.1 831.1 (453.0) (54.5%)
Total 8,450.6 10,225.4 (1,774.8) (17.4%)
(€000)
Increase/(decrease)
40
Receivables arising from reinsurance transactions
These receivables amount to €3,823 thousand at the end of the period, compared with €11,022 thousand at 31 December 2013.
This receivable consists of amounts to be recovered from reinsurers for claims and commissions. The reduction compared with the previous year is due to the fact that receivables due at 31 December 2014 are shown less amounts payable to the same counterparty.
Other receivables
Other receivables total €59,716 thousand at 31 December 2014 (€51,756 thousand at 31 December 2013) and consist of the following:
Due from policyholders for stamp duty, in the amount of €56,486 thousand, refers to stamp duty1 on Branch III and V financial policies.
The item “Due from Poste Italiane Group companies”, amounting to €2,127 thousand at 31 December 2014, primarily relates to a sum due from Bancoposta Fondi SGR for VAT paid in 2013 on invoices issued for management fees on the investment of insurance assets. This sum will be yet settled in 2015 and amounts to €2,006 thousand.
The amount due from third parties primarily reflects advances to suppliers and receivables outstanding with suppliers not belonging to the Poste Italiane Group.
6. OTHER ASSETS
Other assets total €1,257,371 thousand at 31 December 2014, an increase of €37,592 thousand compared with 31 December 2013, and include the following:
1 As per the implementing decree of 24 May 2012, enacted pursuant to paragraph 5 of article 19 of Law Decree 201 of
6 December 2011, converted by Law 214 of 2 December 2011.
41
Deferred acquisition costs amount to €52,517 thousand at the end of the period (€44,505 at 31 December 2013). They include €49,037 thousand in unamortised deferred management fees attributable to individual pension plans (FIP - Forme Individuali di Previdenza) and €3,480 thousand in unamortised fees paid to Poste Italiane on sales of non-life policies. The increase compared with 2013 is due to the growth in premiums relating to Individual Pension Plan products during the period.
Deferred tax assets, amounting to €8,442 thousand (€9,754 thousand at 31 December 2013), are calculated as the total of the temporary differences arising between the carrying amounts of assets and liabilities and their tax bases, in accordance with IAS 12 and to the extent deemed to be recoverable.
Temporary differences originate mainly from provisions and impairments of equity instruments included in current assets, as well as other expenses, such as the non-deductible excess of the change in outstanding claims provisions and provisions for bad debts, which are deductible in equal instalments in future years.
Current tax assets, amounting to €1,194,568 thousand (€1,164,433 at 31 December 2013), mainly relate to tax credits on mathematical provisions under Law 191/2004, totalling approximately €1,168,918 thousand (€926,929 thousand at 31 December 2013), prepayments of corporate income tax (IRES) for 2014 to the parent under the tax consolidation arrangement, totalling €1,487 thousand (€160,634 thousand at 31 December 2013) and the prepayment of IRAP of €20,917 thousand (€74,145 thousand at 31 December 2013).
Sundry assets amount to €1,843 thousand at the end of the period (€1,086 thousand at 31 December 2013). They primarily regard prepaid expenses.
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents amounts to €655,919 thousand at 31 December 2014, compared with €804,856 thousand at the end of 2013.
This item breaks down as follows:
42
This item includes short-term bank and post office deposits, as well as cash and revenue stamps.
43
LIABILITIES AND EQUITY
1. EQUITY
At 31 December 2014, equity attributable to owners of the Parent amounts to €3,084,410 thousand (€2,763,515 at 31 December 2013). Changes in individual reserves are shown in the statement of changes in equity. The various components of equity are as follows:
The increase compared with the previous year reflects: i) profit for the period of €324,831.5 thousand, ii) the change in the valuation reserve for available-for-sale financial assets, and iii) payment of a dividend of €80 million from retained earnings to the sole shareholder, Poste Italiane, as approved by the General Meeting of 11 December 2014. The reconciliation of equity with profit for the period is shown below:
2. PROVISIONS
Provisions total €10,650 thousand at the end of 2014, compared with €10,050 thousand at the end of 2013. This item reflects amounts set aside to cover contingent liabilities in relation to:
Equity at 31 December 2014 at 31 December 2013
Share capital 1.216.607,9 1.216.607,9 0,0 0,0%
Reserves 1.318.772,0 1.142.652,1 176.119,9 15,4%
Legal reserve 72.322,9 60.412,5 11.910,4 19,7%
Extraordinary reserve 648,0 648,0 (0,0) 0,0%
Organisation fund 2.582,3 2.582,3 (0,0) 0,0%
Negative goodwill 426,0 428,0 (2,0) ‐0,5%
Retained earnings 1.242.792,8 1.078.581,3 164.211,5 15,2%
Valuation reserve for AFS financial a 224.113,2 148.130,1 75.983,1 51,3%
Other gains or losses recognised thro (85,1) 5,3 (90,4) n.s.
Profit for the period 324.831,5 256.119,9 68.711,6 26,8%
Total 3.084.239,5 2.763.515,3 320.724,2 11,6%
(€000)
Increase/(decrease)
Profit/(Loss) Changes in equity Equity Profit/(Loss) Changes in equity Equity
2013 at 31 December 2013 at 31 December 2013 2014 at 31 December 2014 at 31 December 2014
Italian GAAP financial statements 238,207 350,000 2,547,317 293,533 (80,000) 2,760,850
Measurement of financial assets 17,276 71,540 33,289 104,830
Measurement of AFS financial assets less 0 47,735 144,837 0 70,592 215,429
Measurement of investments (cost method) (3,822) (51,887) 25,043 (26,844)
Actuarial gains/(losses) on employee benefits 0 32 16 0 (82) (66)
Adjustment to deferred acquisition costs 0 0 0 0
Other minor adjustments 1,049 1,056 (524) 532
Parent Company's IAS/IFRS financial statements 252,710 397,768 2,712,880 351,341 (9,489) 3,054,731
Retained earnings of consolidated subsidiary 5,128 4 9,869 7,537 (5) 17,402
Valuation reserve for subsidiary's AFS financial 0 1,183 3,293 0 5,391 8,684
Measurement of investment using the equity meth (1,718) 1 37,473 (33,730) (4) 3,740
Elimination of effects of intercompany transactions (317) (317)
IAS/IFRS consolidated financial statements 256,120 398,956 2,763,515 324,832 (4,107) 3,084,240
Reconciliation between the Parent Company's financial statements and the IAS/IFRS consolidated financial statements
44
application of Law 166/08 (so-called "dormant policies"), totalling approximately €1 million;
outstanding legal disputes, totalling approximately €3.9 million;
tax liabilities which could arise from ongoing disputes (claims of approximately €5.7 million), as described in greater detail in the Directors’ report on operations.
The increase of €0.6 million compared with 31 December 2013 primarily reflects provisions made during the period to cover potential liabilities resulting from legal disputes pending at the end of the period. The increase is only partially due to the upward revision of previous estimates of the exposure relating to expired policies.
3. TECHNICAL PROVISIONS
Technical provisions total €87,219,518.2 thousand at 31 December 2014, up €19,214,365.7 thousand on the €68,005,153 thousand of 31 December 2013. Technical provisions break down as follows:
Non-life technical provisions Non-life technical provisions, before provisions ceded to reinsurers, consist of: the premium reserve of €39.605 thousand, outstanding claims provisions of €45,531 thousand and other provisions of €4,639 thousand. Following an adequacy test of the premium reserve, it was decided to make additional provisions of €4,400 thousand to the premium reserve to cover future insurance liabilities, in accordance with the empirical method suggested by the Supervisory Authorities, deemed suitable to meet IFRS 4 requirements for the adequacy test of the premium reserve. This item also includes the ageing reserve of €239 thousand. The provisions have been made in accordance with article 37, paragraph 8 of Legislative Decree 209 of 7 September 2005 and article 46 of ISVAP Regulation 16, based on a flat rate of 10% of gross premium revenue for the year from contracts of the type indicated in the Regulation. Outstanding claims provisions include provisions for claims incurred but not reported (IBNR), amounting to €8,722 thousand. Changes in the premium reserve and outstanding claims provisions reflect trends in premium revenue.
45
Life technical provisions Contracts classified as "insurance contracts" and as "financial instruments with discretionary participation features" continue to be accounted for and measured on the basis of Italian GAAP, as established in paragraph 15 of IFRS 4. These provisions were subjected to a Liability Adequacy Test (LAT) in order to test the adequacy of net technical provisions with respect to “realistic” provisions, which reflect the present value of future cash flows, obtained by projecting expected future cash flows from the existing portfolio to the end of the reporting period, based on appropriate assumptions regarding the cause of expiration (death, surrender, redemption, reduction) and the performance of claims expenses. The results of the tests revealed that the technical provisions were adequate and did not need to be topped up. The outcome of the test, as described in the section on “Risk management”, revealed that the provisions accounted for in the financial statements are adequate. “Other technical provisions” include provisions for future expenses (article 31 of ISVAP Regulation 21/2008), totalling €82,202 thousand, provisions for supplementary insurance premiums, totalling €2,345 thousand, and provisions for with-profits policies, amounting to €360 thousand, and provisions for deferred liabilities to policyholders, accrued according to the shadow accounting method, pursuant to paragraph 30 of IFRS 4, totalling €9,427,809 thousand.
4. FINANCIAL LIABILITIES
Financial liabilities break down as follows:
Other financial liabilities, totalling €1,300,854 thousand at 31 December 2014, include €756,849 thousand relating to subordinated bonds issued by the Company in May 2014, including accrued interest on the bonds and the issue discount. The remaining €544,005 thousand regards subordinated debt (of which €400 thousand with an undefined maturity), issued by Poste Vita and placed in its entirety with the sole shareholder, Poste Italiane. The debt pays a market rate of return and is governed by article 45, section IV, sub-section III of Legislative Decree 209 of 7 September 2005, as amended Poste Italiane. The above amount includes accrued interest.
46
5. PAYABLES
Payables amount to €131,091 thousand at 31 December 2014, down €12,993 thousand on the €144,084 thousand at 31 December 2013. The following table shows a breakdown and changes with respect to the previous year:
Payables arising from direct insurance transactions:
This item, totalling €87,663 thousand (€94,044 thousand at the end of 2013), refers to invoices to be received from the parent, Poste Italiane SpA, for commissions earned on the sale of insurance products in November and December. These will be settled in early 2015. Amounts due to policyholders, totalling €248 thousand (€2,480 at 31 December 2014), mainly relate to payables to policyholders arising in the period for amounts collected that are subject to refund. Payables arising from co-insurance agreements, amounting to €348 thousand (€500 thousand at 31 December 2013), relate to the co-insurance agreement with Eurizon Vita SpA. These are amounts owed to it by the Company in its capacity as lead agent for products placed before 30 September 2004. Payables arising from reinsurance transactions Amounts due to reinsurers at 31 December 2014 amount to €8,567 thousand, down €4,289 thousand on the figure for the end of the previous year, when the total was €12,856 thousand. The reduction compared with the previous year is due to the fact that payables due at 31 December 2014 are shown less amounts receivable from the same counterparty.
47
Other payables This item, totalling €35,145 thousand at the end of 2014 (€37,184 thousand at 31 December 2013), breaks down as follows:
Trade payables of €20,730 thousand refer to services rendered by companies that do not belong to the Poste Italiane Group, part of which have not yet been invoiced at the end of the period under review.
The amount due to Poste Italiane Group suppliers (€8,203 thousand) relates to services provided by Poste Italiane’s subsidiaries.
The amount due to the MEF (the Ministry of the Economy and Finance), amounting to €1,919 thousand at 31 December 2014, relate to amounts payable to the Fund set up by the MEF for policies expiring after 28 October 2008, when Law 166/2008 came into force, introducing rules on "dormant policies". This amount will be paid in May 2015.
The amount of payables for fund purchases, amounting to €1,261 thousand, refers to funds purchased and not yet paid for at the end of 2014. These transactions will be settled in early 2015.
In accordance with IVASS requirements contained in Regulation 7, the liability for post-employment benefits (“TFR”) has been accounted for in “Other payables”. Under international financial reporting standards, and in accordance with indications provided by the International Accounting Standards Board (IASB) and by the International Financial Reporting Interpretations Committee (IFRIC), post-employment benefits are considered as a defined-benefit plan. Actuarial assessment of post-employment benefits was carried out according to the "accrued benefits" method using the projected unit credit (PUC) method, as defined in paragraphs 64-66 of IAS 19. The assessment took into account the period of service of each employee at 30 November 2014. In the case of unpaid terminated employees or those on fixed-term contracts, i.e. employees who have already terminated or who will terminate their employment in the coming months and whose vested post-employment benefits have yet to be paid, no projection was made on an individual basis. The resulting IAS 19 liability was thus assumed to equal the statutory provisions made.
48
The actuarial assessment of post-employment benefits is based on a number of assumptions of a demographic and financial nature. Certain of the assumptions used are explicitly based on the Company’s direct historical experience, others are based on the related best practices. The actuarial assumptions used are shown below:
Movements in this liability for the past two years are summarised as follows:
6. OTHER LIABILITIES
These items amount to €577,720 thousand at the end of 2014, compared with €536,616 thousand at the end of the previous year, and break down as follows:
Post‐employment benefits at 31 December 2014 at 31 December 2013 Increase/(decrease)
Opening balance 823,3 804,7 18,5 2%
Service cost 36,6 36,2 0,4 1%
Interest cost 23,3 23,1 0,2 1%
Benefits paid ‐ (6,9) 6,9 ‐100%
Transfers in/(out) (23,7) 21,2 (44,9) ‐212%
Actuarial (Gains)/Losses 132,0 ‐ 55,0 187,1 ‐340%
Closing balance 991,5 823,3 168,2 20,4%
(€000)
49
Current tax liabilities, amounting to €407,229 thousand, consist of the following:
The tax on reserves for 2014 (€334,096 thousand) refers to the payment on account due on mathematical provisions for 2014. This will be paid in May 2015. The increase with respect to the previous year reflects the increase in mathematical provisions during the period. At the end of the year under review, stamp duty payable on financial policies included in Life Branches III and V (as provided for in the implementing decree of 24 May 2012, issued pursuant to article 19, paragraph 5 of Law Decree 201 of 6 December 2011, as converted by Law 214 of 2 December 2011)2, amounts to €54,373 thousand. Substitute taxes payable on individual pension plans (FIP - Forme Individuali di Previdenza) amount to €10,531 thousand. The increase compared with the previous year is due to the growth in premiums relating to Individual Pension Plan products during the period. Payables for withholding and substitute taxes on amounts paid for life policies are €5,514 thousand at the end of 2014. Current tax liabilities at 31 December 2013 primarily regard the one-off additional amount of IRES payable at a rate of 8.5% for 2013. This levy is payable by banks, insurance companies and other financial companies in accordance with article 2, paragraph 2 of Law Decree 133/2013. Deferred tax liabilities of €165,859 thousand at 31 December 2014 include the tax effect of all temporary tax differences, to be reversed in future years, mainly attributable to financial asset adjustments. Other liabilities Other liabilities at 31 December 2014 amount to €4,631 thousand (€4,870 thousand at 31 December 2013) and primarily regard unpaid salaries due to personnel.
2 Paragraph 7 of the implementing decree provides that for communications relating to Life Branch III and V policies, stamp duty is payable at the time of redemption or surrender. However, for each year of contract duration, companies must record the value of stamp duty for each policy in force at period end and enter this sum in the statement of financial position as an amount payable to the tax authorities. This debt will be cancelled in later periods as a contra entry to the amounts due to policyholders, through the tax payment determined cumulatively upon redemption or surrender of each individual policy.
50
PART D – NOTES TO THE CONSOLIDATED INCOME STATEMENT 1.1 NET PREMIUM REVENUE Consolidated net premium revenue for 2014 amounts to €15,473,199 thousand, up €2,272,964 thousand on the €13,200,235 thousand of 2013. Gross premium revenue amounts to €15,517,135 thousand, up 17% on the figure for 2013 (€13,244,002 thousand). Total outward reinsurance premiums amount to €36,831 thousand, compared with €34,655 thousand in 2013.
All gross premium revenue attributable to the Insurance Group’s portfolio falls within the scope of IFRS 4. With regard to life premiums, €15,376,897 thousand regards with-profits policies, whilst €51,801 thousand relates to without-profits policies.
1.3 NET INCOME FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Net income from financial assets at fair value through profit or loss amounts to €719,703 thousand for 2014, compared with €744,535 thousand in 2013. The reduction with respect to 2013 reflects a decrease in fair value gains as a result of less positive market conditions compared with the previous year, partially offset by an increase in realised gains and ordinary income recognised during the period. The following table shows a breakdown of income and expenses from financial instruments at fair value through profit or loss:
51
1.4- 1.5 NET INCOME FROM INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES, FROM OTHER FINANCIAL INSTRUMENTS AND INVESTMENT PROPERTY This item totals €2,717,338.2 thousand for 2014, up €468,220 thousand on the figure for 2013. The item breaks down as follows:
Net income from financial assets classified as available-for-sale amounts to €2,741,114 thousand for 2014, compared with €2,259,536 thousand for 2013, with the increase attributable to growth in assets under management and an increase in realised gains during the period. A small part of net expenses of approximately €23,776 thousand for the period under review (€10,418 thousand in 2013) relates to interest expense on subordinated debt, totalling €31,759 thousand, €5,084 thousand in interest income on bank and post office current accounts, €2,879 thousand in interest earned on the current account held with Poste Italiane, and €20 thousand reflecting the Group’s share of EGI’s profit for the period.
1.6 OTHER INCOME This item amounts to €272 thousand for 2014, compared with €851 thousand for 2013. It relates primarily to the following: i) the reversal of premiums ceded in previous years, totalling €97 thousand; ii) accrued interest at the end of the year on refundable IRES as a result of the applications for refunds filed for the years from 2004 to 2007, in accordance with Law Decree 185/2008, in relation to the 10% lump-sum deduction from IRAP, and for the years from 2007 to 2011, in accordance with Law Decree 201/2011, relating to the deductibility of IRAP paid on personnel expenses, totalling €26 thousand, iii) the recovery of claims paid in previous years, totalling €44 thousand, and iv) the recovery of personnel expenses, totalling €81 thousand.
Interest Other income
(expenses), net Realised gains Realised losses
Net realised
gains/(losses)Unrealised gains
Unrealised
losses
Net
unrealised
gains/(losses)
Total income (expenses), net for
2014
Income and expenses from available‐for‐sale financial
assets 2.351.039,5 59.312,6 352.227,8 (21.466,2) 330.761,6 ‐ ‐ ‐ 2.741.113,7
Income from cash and cash equivalents5.084,5 5.084,5
Income and expenses from loans and receivables2.878,7 2.878,7
Income and expenses from other financial liabilities (31.758,7) (31.758,7)
Income and expenses from investments in associates 20,0 20,0 20,0
Total 2.327.244,0 59.312,6 352.227,8 21.466,2‐ 330.761,6 20,0 ‐ 20,0 2.717.338,2
Interest Other income
(expenses), net Realised gains Realised losses
Net realised
gains/(losses)Unrealised gains
Unrealised
losses
Net
unrealised
gains/(losses)
Total income (expenses), net for
2013
Income and expenses from available‐for‐sale financial
assets 2.080.867 30.496 178.149,0 (29.976,1) 148.172,9 2.259.536,0
Income from cash and cash equivalents 9.543,9 9.543,9
Income and expenses from loans and receivables 141,9 141,9 Income and expenses from other financial liabilities (18.455,4) (18.455,4)Income and expenses from investments in associates (1.647,9) (1.647,9)
Total 2.072.097,1 30.496,4 178.149,0 (29.976,1) 148.172,9 0,0 (1.647,9) (1.647,9) 2.249.118,5
Increase/(decrease) 255.146,9 28.816,2 174.078,8 8.509,9 182.588,7 20,0 1.647,9 1.667,9 468.219,8
% increase/(decrease) 12,3% 94,5% 97,7% ‐28,4% 123,2% n.s. ‐100,0% ‐101,2% 20,8%
(€000)
52
2.1 NET CLAIMS EXPENSES Total claims expenses, after the share attributable to reinsurers, total €17,893,448 thousand, compared with €15,275.329 thousand for the previous year. Total amounts paid, including allocated settlement costs and the change in technical provisions, amount to €17,915,760 thousand for 2014, compared with €15,295,296 thousand for the previous year. These expenses break down as follows:
The share attributable to reinsurers amounts to €22,312 thousand, compared with €19,967 thousand for the previous year, and breaks down as follows:
53
2.5 OPERATING COSTS The following table shows a breakdown of operating costs by business (life or non-life):
Acquisition commissions, net of the change in unamortised deferred acquisition costs, amounting to €344,637 at the end of 2014 (€307,853 thousand in 2013), reflect commissions related to the sale of insurance products paid to Poste Italiane SpA’s distribution network. Commissions relating to long-term contracts are amortised in accordance with ISVAP Regulation 22 of 4 April 2008.
The increase on the comparable amount for the previous year is due mainly to the growth in premium revenue. Commissions are set on the basis of a written arm’s length agreement entered into with Poste Italiane SpA.
Other acquisition costs, amounting to €27,877 thousand (€19,708 thousand in 2013), include expenses arising from the sale of insurance policies, other than acquisition commissions. Specifically, this sub-item includes advertising expenses incurred to market insurance products, administrative costs incurred in handling applications and drawing up policies, as well as employee expenses allocated, in whole or in part, to operational units or operations. Commissions and the share of profit received from reinsurers, totalling €12,320 thousand for 2014 (€12,500 thousand for 2013), include commissions paid to the Company by reinsurers, calculated on the share of premiums ceded under the relevant treaties. Costs not directly or indirectly attributable to the acquisition of premiums and contracts, to the settlement of claims or to investment management represent other administrative costs and total €47,353.5 thousand for 2014, compared with €40,154 thousand for 2013. Investment management expenses of €32,823 thousand for 2014, compared with €26,509 thousand for 2013, include portfolio management fees of €21,011 thousand, fees for the custody of securities, totalling €2,718 thousand, and overheads of €9,094 thousand allocated to this item. These increases were due to growth in the portfolio.
54
2.6 OTHER COSTS
This item amounts to €36,575 thousand for 2014, compared with €30,943 thousand for 2013. These costs relate mainly to: i) maintenance commissions paid to the agent, totalling €18,368 thousand; ii) substitute tax of €10,483 thousand payable on gains on the separately managed account, Posta Pensione; iii) accrued charges incurred by the Company in 2014 in relation to dormant policies, totalling €1,839 thousand, and payable to the MEF in May 2015; iv) provisions of €600 thousand made during the period to cover potential liabilities resulting from legal disputes pending at the end of the period, and only partially due to the upward revision of previous estimates of the exposure relating to expired policies; v) €1,967 thousand relating to the derecognition of amounts due from policyholders for technical reasons and the reversal of premiums collected in previous years; vi) overheads of €1,399 thousand allocated to this item; and vii) the share of the profit passed on to policyholders, totalling €442 thousand.
3. INCOME TAX EXPENSE Income tax expense for 2014, amounting to €215,287 thousand, includes €195,899 thousand in current IRES and IRAP expense and €19,389 thousand in net deferred tax expense, as shown below.
Deferred tax income and expense is calculated according to the tax rates expected to be applied during the year in which the assets are recovered, based on information available at the end of the period. The net amount recognised in the income statement in relation to changes in deferred tax liabilities amounts to €20,257 thousand. This amount is primarily influenced by provisions for deferred tax liabilities for IRES and IRAP on the increased amount of finance income for the purposes of IAS/IFRS, compared with the income recognised on the basis of tax regulations. Changes in deferred tax assets have resulted in deferred tax income of €868 thousand, which mainly reflects provisions for risks and other adjustments for changes in the value of equity instruments held as current assets by Poste Vita, as well as other charges, such as impairments and losses on receivables and the non-deductible
55
excess amount of the change in outstanding claims provisions, which will be deductible in equal instalments over future years. The table below reconciles the effective tax charge and the tax charge resulting from application of the statutory IRES tax rate of 27.5%. No account was taken of IRAP, considering that the tax base for this tax is different from that on which IRES is calculated.
56
Strategic direction and coordination
The Parent Company, Poste Vita, is wholly owned by Poste Italiane SpA, which performs direction and coordination activities for the Group. The table below shows key indicators extracted from the financial statements for the year ended 31 December 2013. Reference should be made to Poste Italiane SpA‘s financial statements which, together with the independent auditors’ report, are available in the form and manner established by law.
STATEMENT OF FINANCIAL POSITION
(€000)
Assetsat 31 December
2013
at 31 December
2012
Non-current assets 44.218.826 40.407.471
Current assets 18.671.539 20.851.931
Non-current assets held for sale - 129
TOTAL ASSETS 62.890.365 61.259.531
EQUITY AND LIABILITIESat 31 December
2013
at 31 December
2012
Equity
Share capital 1.306.110 1.306.110
Reserves 1.801.921 1.163.588
Retained earnings 2.322.175 1.843.172
Total 5.430.206 4.312.870
Non-current liabilit ies 8.151.766 8.111.694
Current liabilit ies 49.308.393 48.834.967
TOTAL EQUITY AND LIABILITIES 62.890.365 61.259.531
INCOME STATEMENT (€000)
2013 2012
Revenue from sales and services 8.978.220 9.206.306
Other income from financial activities 307.504 155.686
Other operating income 147.059 123.280
Total revenue 9.432.783 9.485.272
Cost of goods and services 2.024.373 2.121.094
Other expenses from financial activities 7.293 1.472
Personnel expenses 5.755.065 5.658.396
Amortisation, depreciaton and impairments 501.134 525.546
Capitalised costs and expenses (4.908) (7.629)
Other operating costs 232.487 235.725
OPERATING PROFIT/(LOSS) 917.339 950.668
Finance costs 92.643 115.027
Finance income 139.125 90.695
Profit before tax 963.821 926.336
Income tax expense 473.491 474.390
Income tax for previous years following change in legislation (217.758) (270.299)
PROFIT FOR THE YEAR 708.088 722.245
POSTE ITALIANE SPA
57
PART E – OTHER INFORMATION Personnel
The Group employs a total of 336 people at 31 December 2014 , marking an increase of 19 with respect to one year earlier. Whilst not as great as in previous years, the increase in personnel demonstrates the Insurance Group’s commitment and intention to not only support the growth in business and the various strategic projects already launched, some of a long-term nature, but to also build on its specialist expertise (actuarial, financial, corporate governance and control), whilst also improving processes and the relevant internal control system.
Disclosure of fees paid to the independent auditors and for services other than audit In compliance with the provisions of art. 49-duodecies of the CONSOB’s Regulations for Issuers, the fees paid to BDO SpA for auditing the separate and consolidated financial statements in 2014 amount to €173 thousand. Fees paid for services relating to the audit of reports for the separately managed accounts, the conduct of compliance reviews for the annual reports prepared for internal insurance funds and the audit of the accounts of the investee, Poste Assicura SpA, amount to €408 thousand, after expenses and VAT. These services are carried out by the audit firm, PricewaterhouseCoopers SpA.
Solvency margin The items included in the solvency margin, calculated on a consolidated basis, amount to €3,855 million, compared with a required margin of €3,061 million. The resulting solvency ratio at the end of 2014 is 1.26. Further details can be found in the spreadsheet prepared in accordance with Annex 1 of ISVAP Regulation 18.
58
Events after 31 December 2014
As part of an general overhaul of the governance system and in line with the shareholder resolution of 4 August 2014, which re-elected the Board of Directors, two of whom are now independent, and with corporate governance best practices for insurance companies, on 27 January 2015, the Board of Directors established an Internal Audit and Related Party Transactions Committee. The Committee has been assigned the role of assisting the Board of Directors in determining internal control system guidelines, in periodically assessing the system’s adequacy and effective functionality, and in identifying and managing the principal business risks. At the same Board meeting, the Directors revised the composition of the Remuneration Committee, which has an advisory role and makes recommendations to the Board regarding remuneration policies and and the remuneration of executive Directors. The Committee also assesses whether or not the remuneration paid to each executive Director is proportionate to that paid to other executive Directors and the Group’s other personnel.
In line with the Poste Vita Group’s plan to expand its medical insurance business, the Parent Company, Poste Vita, is looking at the possibility of acquiring a company that has a claims management unit, which would enable the Group to handle claims, including and above all those relating to medical insurance.
59
PART F: INFORMATION ON RELATED PARTY TRANSACTIONS
Transactions between the Parent Company, Poste Vita SpA, and its subsidiary, Poste Assicura SpA, have been eliminated, as consolidated financial statements require the elimination of intercompany transactions and, as such, they are not shown in this section. They relate mainly to staff secondment, office rental and the organization of space, administration, support, IT assistance, communication and marketing. Assets, liabilities, costs and income arising from transactions between Group companies, including the Parent Company, and their related parties are shown in the following tables:
The Parent Company, Poste Vita, is wholly owned by Poste Italiane SpA, which directs and coordinates the Group.
Transactions with Poste Italiane SpA, which owns all the shares outstanding, are governed by written agreements and conducted on an arm’s length basis. They regard mainly:
the sale and distribution of insurance products at post offices and related activities;
post office current accounts;
partial secondment of personnel used by the companies in the Insurance Group;
support in organising the business and in the recruitment and management of personnel;
the pick-up, packaging and shipping of ordinary mail;
call centre services;
Term Life Insurance policies;
Information Technology services.
Furthermore, at 31 December 2014, subordinated loan notes, totalling €540 million and issued by the Parent Company, Poste Vita, have been subscribed for by Poste Italiane
60
SpA. The notes provide a market rate of return reflecting the creditworthiness of the Company.
At 31 December 2014, assets include the value of the investment in the associate, Europa Gestioni Immobiliare SpA (EGI), totalling €163,286 thousand, whilst revenue includes the Group’s share of the associate’s profit for the year, amounting to €20 thousand.
In addition to the relationship with the parent, Poste Vita Group companies also maintain operational relations with other Poste Italiane Group companies, with regard to:
management of the Company’s free capital and of a part of the portfolio investments attributable to separately managed accounts (Bancoposta Fondi SGR);
printing, enveloping and mail delivery through information systems; management of incoming mail, the dematerialization and filing of printed documentation (Postel);
services related to network connections with Poste Italiane’s post offices (Postecom);
mobile telephone services (Poste Mobile);
advice on obligations pertaining to occupational health and safety (Poste Tutela);
Term Life Insurance policies (Postel, BdM-MCC, Poste Mobile; Bancoposta Fondi SGR; Poste Energia; EGI; Poste Shop; Postecom; Poste Tributi).
Accident insurance (BdM-MCC – Postel), General Third Party Liability insurance (Postel) and Fire – Credit insurance (BdM-MCC).
These arrangements are also conducted on an arm’s length basis.
Rome, 26 March 2015
The Board of Directors
at 31 December 2014 at 31 December 20131 INTANGIBLE ASSETS 16.372 10.513 1.1 Goodwill - - 1.2 Other intangible assets 16.372 10.513 2 TANGIBLE ASSETS 4.438 2.954 2.1 Land and buildings - - 2.2 Other tangible assets 4.438 2.954 3 TECHNICAL PROVISIONS CEDED TO REINSURERS 54.403 40.340 4 INVESTMENTS 90.263.862 69.852.153 4.1 Investment property - - 4.2 Investments in subsidiaries, associates and joint ventures 163.286 197.019 4.3 Investments held to maturity - - 4.4 Loans and receivables 726.350 11.458 4.5 Available-for-sale financial assets 77.012.829 59.159.855 4.6 Financial assets at fair value through profit or loss 12.361.397 10.483.821 5 SUNDRY RECEIVABLES 71.990 73.003 5.1 Receivables arising from direct insurance sales 8.451 10.225 5.2 Receivabes arising from reinsurance transactions 3.823 11.022 5.3 Other receivables 59.716 51.755 6 OTHER ASSETS 1.257.371 1.219.779 6.1 Non-current assets or disposal groups held for sale - - 6.2 Deferred acquisition costs 52.517 44.505 6.3 Deferred tax assets 8.442 9.754 6.4 Current tax assets 1.194.568 1.164.433 6.5 Sundry assets 1.843 1.086 7 CASH AND CASH EQUIVALENTS 655.919 804.856
TOTAL ASSETS 92.324.357 72.003.597
at 31 December 2014 at 31 December 20131 EQUITY 3.084.239 2.763.515 1.1 attributable to the owners of the Parent 3.084.239 2.763.515 1.1.1 Share capital 1.216.608 1.216.608 1.1.2 Other equity instruments - - 1.1.3 Capital reserves - - 1.1.4 Retained earnings and other reserves 1.318.772 1.142.652 1.1.5 (Treasury shares) - - 1.1.6 Reserve for currency translation differences - - 1.1.7 Valuation reserve for available-for-sale financial assets 224.113 148.130 1.1.8 Other valuation reserve 85- 5 1.1.9 Profit/(Loss) for the period attributable to owners of the Parent 324.832 256.120 1.2 attributable to non-controlling interests - - 1.2.1 Share capital and reserves attributable to non-controlling interests - - 1.2.2 Valuation reserves - - 1.2.3 Profit/(Loss) for the period attributable to non-controlling interests - - 2 PROVISIONS 10.650 10.050 3 TECHNICAL PROVISIONS 87.219.518 68.005.153 4 FINANCIAL LIABILITIES 1.300.854 544.179 4.1 Financial liabilities at fair value through profit or loss - - 4.2 Other financial liabilities 1.300.854 544.179 5 PAYABLES 131.376 144.084 5.1 Payables arising from direct insurance transactions 87.663 94.044 5.2 Payables arising from reinsurance transactions 8.567 12.856 5.3 Other payables 35.145 37.184 6 OTHER LIABILITIES 577.720 536.616 6.1 Liabilities included in disposal groups held for sale - - 6.2 Deferred tax liabilities 165.859 108.897 6.3 Current tax liabilities 407.229 422.849 6.4 Other liabilities 4.631 4.870
TOTAL EQUITY AND LIABILITIES 92.324.357 72.003.597
(€000)STATEMENT OF FINANCIAL POSITION - ASSETS
(€000)STATEMENT OF FINANCIAL POSITION - EQUITY AND LIABILITIES
2014 20131.1 Net premium revenue 15.473.199 13.200.235 1.1.1 Gross premium revenue 15.509.307 13.234.450 1.1.2 Outward reinsurance premiums (36.107) (34.215)1.2 Fee and commission income - -
1.3 Net income (expenses) from financial assets at fair value through profit or loss 719.703 744.535
1.4 Income from investments in subsidiaries, associates and joint ventures 20 - 1.5 Income from other financial instruments and investment property 2.770.543 2.299.056 1.5.1 Interest income 2.359.003 2.090.411 1.5.2 Other income 59.313 30.496 1.5.3 Realised gains 352.228 178.149 1.5.4 Unrealised gains - - 1.6 Other income 272 851 1 TOTAL REVENUE 18.963.738 16.244.678 2.1 Net claims expenses (17.893.448) (15.275.329)2.1.1 Claims paid and change in technical provisions (17.915.760) (15.295.296)2.1.2 Share attributable to reinsurers 22.312 19.967 2.2 Commission expenses 0 0
2.3 Expenses arising from investments in subsidiaries, associates and joint ventures 0 (1.648)
2.4 Expenses arising from other financial instruments and investment properties (53.225) (48.432)
2.4.1 Interest expense (31.759) (18.455)2.4.2 Other expenses 0 0 2.4.3 Realised losses (21.466) (29.976)2.4.4 Unrealised losses 0 0 2.5 Operating costs (440.371) (381.723)2.5.1 Commissions and other acquisition costs (360.194) (315.060)2.5.2 Investment management expenses (32.823) (26.509)2.5.3 Other administrative expenses (47.354) (40.154)2.6 Other costs (36.575) (30.943)2 TOTAL COSTS AND EXPENSES (18.423.619) (15.738.075)
PROFIT/(LOSS) BEFORE TAX 540.118,91 506.603,28 3 Income tax expense (215.287) (250.483)
PROFIT/(LOSS) FOR THE PERIOD 324.832 256.120 4 PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS 0 0
CONSOLIDATED PROFIT/(LOSS) 324.832 256.120 of which attributable to owners of the Parent 324.832 256.120 of which attributable to non-controlling interests - -
(€000)STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF COMPREHENSIVE INCOME(€000)
for the six months ended 30 June 2014 2013
CONSOLIDATED PROFIT/(LOSS) 324.832 256.120
Other components of comprehensive income that will not be reclassified to profit or loss, net of
taxation(87) 36
Change in subsidiaries' equity - -
Change in revaluation reserve for intangible assets - -
Change in revaluation reserve for tangible assets - -
Income and expenses from non-current assets and disposal groups held for sale - -
Actuarial gains and losses and adjustments related to defined-benefit plans - 87 36
Other components - -
Other components of comprehensive income that may be reclassified to profit or loss, net of
taxation 75.979 48.920
Change in reserve for currency translation differences - -
Gains or losses on available-for-sale financial assets 75.983 48.919
Gains or losses on cash flow hedges - -
Gains or losses on hedges of a net investment in foreign operations - -
Change in subsidiaries' equity (4) 1
Income and expenses related to non-current assets or disposal groups held for sale - -
Other components - -
TOTAL OTHER COMPONENTS OF COMPREHENSIVE INCOME 75.893 48.956
TOTAL CONSOLIDATED COMPREHENSIVE INCOME 400.724 305.076
of which attributable to owners of the Parent 400.724 305.076
of which attributable to non-controlling interests - -
Details of other components of comprehensive income
(€000)
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Other components of comprehensive income that will not be reclassified to profit or loss, net of (87) 36,0 - - - - (87,0) 36,0 - - (76,0) 10
Change in subsidiaries' equity - - - - - - - - - - - -
Change in revaluation reserve for intangible assets - - - - - - - - - - - -
Change in revaluation reserve for tangible assets - - - - - - - - - - - -
Income and expenses from non-current assets and disposal groups held for sale - - - - - - - - - - - -
Actuarial gains and losses and adjustments related to defined-benefit plans (87) 36 - - - - (87) 36 - - (76) 10
Other components - - - - - - - - - - - -
Other components of comprehensive income that may be reclassified to profit or loss 104.940 48.386 (28.961) 533 - - 75.979 48.920 (25.392) (53.877) 224.104 148.125
Change in reserve for currency translation differences - - - - - - - - - - - -
Gains or losses on available-for-sale financial assets 104.944 48.385 (28.961) 533 - - 75.983 48.919 (25.392) 53.877 224.113 148.130
Gains or losses on cash flow hedges - - - - - - - - - - - -
Gains or losses on hedges of a net investment in foreign operations - - - - - - - - - - - -
Change in subsidiaries' equity (4) 1 - - - - (4) 1 - - (9) (5)
Income and expenses related to non-current assets or disposal groups held for sale - - - - - - - - - - - -
Other components - - - - - - - - - - - -
TOTAL OTHER COMPONENTS OF COMPREHENSIVE INCOME 104.853 48.422 (28.961) 533 - - 75.893 48.956 (25.392) (53.877) 224.028 148.135
Changes
Adjustments due to
reclassification to profit or
loss
Other changes Total changes Tax Balance
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CHANGES IN EQUITY (€000)
Balance at
31 December
2012
Changes in
closing balancesIncreases
Adjustments due
to
reclassification
to profit or loss
TransfersChanges in
equity interests
Balance at
31 December
2013
Changes in
closing balancesIncreases
Adjustments due
to
reclassification
to profit or loss
TransfersChanges in
equity interests
Balance at
31 December
2014
866.608 350.000 1.216.608 1.216.608
Other equity instruments - - -
Capital reserves - - -
Retained earnings and other reserves 869.280 273.372 1.142.652 176.120 1.318.772
(Treasury shares) - - -
Profit/(Loss) for the period 273.372 -17.252 256.120 68.712 324.832
Other components of comprehensive income 99.179 48.422 533 148.135 104.853 28.961- 224.028
2.108.439 - 654.542 533 - 2.763.515 - 349.685 28.961- - 3.084.240
Share capital and reserves
Profit/(Loss) for the period
Other components of comprehensive income
- - - - - - - - - - -
2.108.439 - 654.542 533 - 2.763.515 - 349.685 28.961- - 3.084.240 Total
Equity attributable to
owners of the Parent
Share capital
Total attributable to owners of the Parent
Equity attributable to non-
controlling interests
Total attributable to non-controlling interests
03 Allegati bilancio consolidato in inglese x sito web.xls
STATEMENT OF CASH FLOWS (Indirect method)
(€000)
for the six months ended 30 June 2014 2013
Profit/(Loss) for the period before tax 540.119 449.797
Changes in non-monetary items 18.841.559 10.796.317
Change in non-life premium reserve 6.980 9.230
Change in outstanding claims provisions and other non-life technical provisions 13.421 7.266
Change in outstanding claims provisions and other life technical provisions 19.179.901 11.205.377
Change in deferred acquisition costs (8.012) (13.801)
Change in provisions 600 1.441
Non-monetary income and expenses from financial instruments, investment property and investments (358.687) (418.882)
Other changes 7.357 5.685
Change in receivables and payables generated by operating activities 243.005 (222.243)
Change in receivables and payables deriving from direct insurance sales and reinsurance transactions (1.695) 22.140
Change in other receivables and payables 244.700 (244.383)
Income tax paid (243.246) (311.997)
Net cash generated by (used for) monetary items related to investing and financing activities (1.877.576) (402.092)
Liabilities from investment contracts issued by insurance companies - -
Due to bank and interbank customers - -
Loans and receivables outstanding with bank and interbank customers - -
Other financial instruments at fair value through profit or loss (1.877.576) (402.092)
TOTAL NET CASH generated by OPERATING ACTIVITIES 17.503.861 10.366.588
- -
Net cash generated by (used for) investment property - -
Net cash generated by (used for) investments in subsidiaries, associates and joint ventures 33.734 1.647
Net cash generated by (used for) loans and receivables (714.892) 90.688
Net cash generated by (used for) investments held to maturity - -
Net cash generated by (used for) available-for-sale financial assets (17.494.287) (10.816.091)
Net cash generated by (used for) tangible and intangible assets (14.632) (10.553)
Other net cash generated by (used for) investing activities - -
TOTAL NET CASH GENERATED BY (USED FOR) INVESTING ACTIVITIES (18.190.078) (10.734.309)
- -
Net cash generated by (used for) equity instruments attributable to owners of the Parent (139.395) 147.399
Net cash generated by (used for) treasury shares - -
Distribution of dividends to owners of the Parent (80.000) -
Net cash generated by (used for) share capital and reserves attributable to non-controlling interests - -
Net cash generated by (used for) subordinated liabilities and equity instruments 756.674 (114)
Net cash generated by (used for) sundry financial liabilities - -
TOTAL NET CASH GENERATED BY (USED FOR) FINANCING ACTIVITIES 537.280 147.284
- -
Effect of exchange rate differences on cash and cash equivalents - -
- -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 804.856 1.025.293
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (148.937) (220.437)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 655.919 804.856
Statement of financial position by operating segment
(€000)
at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013
at 31
December
2014
at 31
December
2013
at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013
1 INTANGIBLE ASSETS 8.086.138 3.131.853 8.286.299 7.381.118 - - 16.372.437 10.512.972
2 TANGIBLE ASSETS 259.272 - 4.179.049 2.953.566 - - 4.438.321 2.953.566
3 TECHNICAL PROVISIONS CEDED TO REINSURERS 23.053.115 16.367.552 31.350.158 23.971.979 - - 54.403.273 40.339.531
4 INVESTMENTS 120.151.234 88.869.807 90.171.886.349 69.791.458.587 - - (28.175.489) (28.175.489) 90.263.862.094 69.852.152.906
4.1 Investment property - - - - - - - -
4.2 Investments in subsidiaries, associates ad joint ventures - - 191.461.070 225.194.729 - - (28.175.489) (28.175.489) 163.285.582 197.019.240
4.3 Investments held to maturity - - - - - - - -
4.4 Loans and receivables - - 726.350.193 11.457.801 - - 726.350.193 11.457.801
4.5 Available-for-sale financial assets 120.151.234 88.869.807 76.892.677.829 59.070.984.765 - - 77.012.829.063 59.159.854.572
4.6 Financial assets at fair value through profit or loss - - 12.361.397.257 10.483.821.292 - - 12.361.397.257 10.483.821.292
5 SUNDRY RECEIVABLES 3.386.289 10.741.309 70.180.881 63.659.911 - - (1.576.816) (1.398.140) 71.990.354 73.003.080
6 OTHER ASSETS 9.920.283 9.657.564 1.247.450.778 1.210.121.168 - - 1.257.371.061 1.219.778.732
6.1 Deferred acquisition costs 3.480.291 2.705.783 49.037.078 41.799.544 - - 52.517.369 44.505.327
6.2 Other assets 6.439.992 6.951.781 1.198.413.699 1.168.321.624 - - 1.204.853.692 1.175.273.405
7 CASH AND CASH EQUIVALENTS 11.756.579 13.529.662 644.162.787 791.326.544 - - 655.919.366 804.856.206
TOTAL ASSETS 176.612.910 142.297.748 92.177.496.302 71.890.872.873 - - (29.752.305) (29.573.629) 92.324.356.907 72.003.596.992
1 EQUITY 39.313.677 25.481.648 3.071.941.835 2.765.047.669 - - 27.016.026- 27.014.052- 3.084.239.486,20 2.763.515.266
2 PROVISIONS - - 10.650.000 10.050.000 - - 10.650.000 10.050.000
3 TECHNICAL PROVISIONS 89.775.241 62.688.956 87.129.742.996 67.942.463.567 - - 87.219.518.237 68.005.152.523
4 FINANCIAL LIABILITIES - - 1.300.853.582 544.179.121 - - 1.300.853.582 544.179.121
4.1 Financial liabilities at fair value through profit or loss - - - - - - - -
4.2 Other financial liabilities - - 1.300.853.582 544.179.121 - - 1.300.853.582 544.179.121
5 PAYABLES 17.324.491 19.012.354 115.628.268 126.469.702 - - (1.576.816) (1.398.140) 131.375.943 144.083.916
6 OTHER LIABILITIES 3.790.078 7.688.480 573.929.586 528.927.687 - - 577.719.663 536.616.167
TOTAL EQUITY AND LIABILITIES 150.203.487 114.871.438 92.202.746.267 71.917.137.746 - - 28.592.842,35- 28.412.191,65- 92.324.356.912 72.003.596.992
Non Life Life … (*) Elisioni intersettoriali Total
Income statement by operating segment
(€000)
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
1.1 Net premium revenue 56.608 38.706 15.416.591 13.161.529 - - - - 15.473.199 13.200.235
1.1.1 Gross premium revenue 80.608 61.823 15.428.698 13.172.627 - - - - 15.509.307 13.234.450
1.1.2 Outward reinsurance premiums 24.000- 23.116- 12.107- 11.098- - - - - 36.107- 34.215-
1.2 Fee and commission income - - - - - - - - - -
1.3Net income (expenses) from financial assets at fair value through
profit or loss - - 719.703 744.535 - - - - 719.703 744.535
1.4Income from investments in subsidiaries, associates and joint
ventures - - 20 - - - - - 20 -
1.5 Income from other financial instruments and investment property 4.215 3.300 2.766.328 2.295.756 - - - - 2.770.543 2.299.056
1.6 Other income 521 905 1.976 1.736 - - 2.225- 1.789- 272 851
1 TOTAL REVENUE 61.344 42.911 18.904.619 16.203.556 - - 2.225- 1.789- 18.963.738 16.244.678
2.1 Net claims expenses 24.120- 14.736- 17.869.328- 15.260.593- - - - - 17.893.448- 15.275.329-
2.1.1 Claims paid and change in technical provisions 35.593- 22.387- 17.880.167- 15.272.909- - - - - 17.915.760- 15.295.296-
2.1.2 Share attributable to reinsurers 11.473 7.651 10.839 12.316 - - - - 22.312 19.967
2.2 Commission expenses - - - - - - - - - -
2.3Expenses arising from investments in subsidiaries, associates and
joint ventures - - - 1.648- - - - - - 1.648-
2.4Expenses arising from other financial instruments and investment
properties 3- 0- 53.222- 48.431- - - - - 53.225- 48.432-
2.5 Operating costs 22.207- 12.680- 418.164- 369.042- - - - - 440.371- 381.723-
2.6 Other costs 4.232- 3.802- 34.568- 28.930- - - 2.225 1.789 36.575- 30.943-
2 TOTAL COSTS AND EXPENSES 50.562- 31.219- 18.375.282- 15.708.645- - - 2.225 1.789 18.423.619- 15.738.075-
PROFIT/(LOSS) BEFORE TAX 10.782 11.692 529.337 494.911 - - - - 540.119 506.603
TotalElisioni intersettoriali… (*)Life BusinessNon Life Business
Scope of consolidation
(€000)
NameCountry of
registration
Country of
operation
Method
(1)
Business
(2)
%
direct
interest
Total %
interest
(3)
%
voting
rights
(4)
% consoli-
dation
Poste Assicura SPA 086 086 G 1 100 100 100 100
(1) Consolidation method: Line-by-line =G, Proportionate=P, Line-by-line consolidation due to coordinated management=U(2) 1=Italian ins.; 2= EU ins.; 3=non-EU ins.; 4=insurance holding; 4.1= mixed holding company; 5= UE reinsurance; 6=non-EU
reins.; 7=bank; 8=asset man. co.; 9=other holding; 10=real estate; 11=other
(3) This is the sum of the equity interests related to all the companies along the ownership chain standing between the
consolidating company and the company in question. If the latter is directly held by several subsidiaries it is necessary to add up
all the interests.
(4) Total percentage of the available voting rights, if different from the direct or indirect equity interest.
Details of non-consolidated investments
(€000)
NameCountry of
registration
Country of
operation
Business
(1)
Type
(2)
%
direct
interest
Total % interest
(3)
%
voting rights
(4)
Carrying amount
EGI SPA 086 086 10 b 45 45 45 163.286
(1) 1=Italian ins.; 2= EU ins.; 3=non-EU ins.; 4=insurance holding; 4.1= mixed holding company; 5= UE reinsurance; 6=non-EU reins.; 7=bank; 8=asset man. co.; 9=other holding;
10=real estate; 11=other
(2) a=subsidiaries (IFRS 10) ; b=associates (IAS 28); c=joint ventures (IFRS 11); indicate companies classified as held for sale, in compliance with IFRS 5, with an asterisk (*) and
include the key under the table.
(3) This is the sum of the equity interests related to all the companies along the ownership chain standing between the consolidating company and the company in question. If the
latter is directly held by several subsidiaries it is necessary to add up all the interests.
(4) Total percentage of the available voting rights, if different from the direct or indirect equity interest.
Financial and investment income and expenses
(€000)
Unrealised gains Write-backsUnrealised
lossesImpairments
2.688.200 59.313 - 1.113 385.837 - 27.230 3.105.008 367.680 - - 8.972 - 358.707 3.463.715 3.002.423 a From investment property - - - - - - - - - - - - - b From investments in subsidiaries, associates and joint ventures - - - - - - 20 - - - 20 20 - 1.648 c From investments held to maturity - - - - - - - - - - - - - d From loans and receivables 2.879 - - - - 2.879 - - - - - 2.879 - e From available-for-sale financial assets 2.351.039 59.313 - 352.228 - 21.466 2.741.114 - - - - - 2.741.114 2.259.536 f From held-for-trading financial assets - - - - - - - - - - - - - g From financial assets at fair value through profit or loss 334.282 - - 1.113 33.610 - 5.763 361.016 367.660 - (8.972) - 358.687 719.703 744.535
- - - - - - - - - - - - -
5.085 - - - - 5.085 - - - - - 5.085 9.544
(31.759) - - - - (31.759) - - - - - (31.759) - 18.455 a From held-for-trading financial liabilities - - - - - - - - - - - - -
b From financial liabilities at fair value through profit or loss - - - - - - - - - - - - -
c From other financial liabilities (31.759) - - - - (31.759) - - - - - (31.759) - 18.455
- - - - - - - - - - - - -
Total 2.661.526 59.313 1.113- 385.837 27.230- 3.078.334 367.680 - 8.972- - 358.707 3.437.041 2.993.512
2014
Unrealised gains
Income from cash and cash equivalentsIncome and expenses from financial liabilities
Income and expenses from payables
Unrealised lossesNet unrealised
income/(expenses)Interest 2013
Investment income and expenses
Income and expenses from sundry receivables
Other income Other expenses Realised gains Realised lossesNet realised
income/(expenses)
03 Allegati bilancio consolidato in inglese x sito web.xls
Interests in unconsolidated structured entities
(€000)
Name of structured entityRevenue earned by structured entity
during reporting period
Carrying amount (at transfer date) of assets transferred
to structured entity during reporting period
Carrying amount of assets recognised
in financial statements and attributable
to structured entity
Asset class in financial statements
Carrying amount of
liabilities recognised in
financial statements and
attributable to structured
entity
Liability class in financial
statements
Maximum loss
exposure
BLACKROCK DIVERSIFIED DISTRIBUTION FUND 1.798.229 Financial assets at fair value through profit or loss 239.501
ADVANCE CAPITAL ENERGY FUND 17.135 Available-for-sale financial assets 9.681
PIANO 400 FUND DEUTSCHE BANK 512.560 Available-for-sale financial assets 13.239
TAGES CAPITAL PLATINUM 211.097 Available-for-sale financial assets33.142
TAGES PLATINUM GROWTH 123.732 Available-for-sale financial assets15.219
Details of underwriting business (€000)
GROSSCEDED TO
REINSURERSNET GROSS
CEDED TO
REINSURERSNET
80.608 24.000- 72.265 61.823 23.116- 57.812
a Premium revenue 88.437 24.724- 63.713 71.375 23.556- 47.819
b Change in premium reserve 7.829 724 8.552 9.553 440 9.993
35.593- 11.473 24.120- 22.387- 7.651 14.736-
a Claims paid 16.335- 5.636 10.700- 12.523- 5.052 7.471-
b Change in outstanding claims provisions 19.426- 5.876 13.549- 9.737- 2.575 7.162-
c Change in recoveries - - - - - -
d Change in other technical provisions 168 39- 129 127- 23 104-
NET PREMIUM REVENUE 15.428.698 12.107- 15.416.591 13.172.627 11.098- 13.161.529
17.880.167- 10.839 17.869.328- 15.272.909- 12.316 15.260.593-
a Claims paid 5.284.745- 3.461 5.281.284- 5.166.004- 2.846 5.163.159-
b Change in outstanding claims provisions 245.383- 2.211 243.172- 24.948- 72 24.876-
c Change in mathematical provisions 12.915.809- 5.167 12.910.642- 10.545.828- 9.398 10.536.429-
d Change in technical provisions where the investment risk is borne by policyholders and deriving from pension fund management 686.699 - 686.699 449.881 - 449.881
e Change in other technical provisions 120.929- - 120.929- 13.991 - 13.991
NET PREMIUM REVENUE
NET CLAIMS EXPENSES
NET CLAIMS EXPENSES
Life Business
20132014
Non-Life Business
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of tangible and intangible assets (€000)
Cost Fair value Carrying amount
Investment property - - -
Other properties - - -
Other tangible assets 4.438 - 4.438
Other intangible assets 16.372 - 16.372
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of technical provisions attributable to reinsurers(€000)
at 31 December
2014
at 31 December
2013
at 31
December
2014
at 31
December
2013
at 31 December
2014
at 31 December
2013
Non-life provisions 23.053 16.368 - - 23.053 16.368
Premium reserve 6.364 5.515 - - 6.364 5.515
Outstanding claims provisions 15.967 10.091 - - 15.967 10.091
Other provisions 722 762 - - 722 762
Riserve vita 31.350 23.972 - - 31.350 23.972
Riserva per somme da pagare 5.802 3.591 - - 5.802 3.591
Mathematical provisions 25.548 20.381 - - 25.548 20.381
Technical provisions where the investment risk is borne by policyholders and
provisions deriving from the management of pension funds - - - - - -
other provision - - - - - -
Total provisions attributable to reinsurers 54.403 40.340 - - 54.403 40.340
Direct Business Indirect BusinessTotal
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of financial assets(€000)
at 31 December 2014at 31 December
2013
at 31 December
2014
at 31 December
2013at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013
at 31 December
2014
at 31 December
2013
Equity instruments and derivatives recognised at cost - - - - - - - -
Equity instruments at fair value - - 8.032 5.284 - - 8.032 5.284
of which listed - - 5.284 5.284 - - 5.284 5.284
Debt securities - - 75.511.705 57.617.659 9.737.460 9.543.998 85.249.165 67.161.657
of which listed - - 74.885.778 56.483.696 9.735.082 9.541.546 84.620.860 66.025.242
UCI units - - 1.493.092 1.536.911 2.417.564 729.835 3.910.656 2.266.746
Loans and receivables due from banks - - - - - - - -
Interbank loans and receivables 702.879 142 - - - - 702.879 142
Deposits with ceding entities - - - - - - - -
Assets of investment components of insurance contracts - - - - - - - -
Other loans and receivables 23.471 11.316 - - - - 23.471 11.316
Non-hedging derivatives - - - - 206.373 209.988 206.373 209.988
Hedging derivatives - - - - - - - -
Other financial investments - - - - - - - -
Total 0 0 726.350 11.458 77.012.829 59.159.855 12.361.397 10.483.821 90.100.577 69.655.134
Total Loans and receivablesInvestments held to maturityFinancial assets at fair value through profit or
lossAvailable-for-sale financial assets
03 Allegati bilancio consolidato in inglese x sito web.xls
(€000)
at 31 December 2014 at 31 December 2013at 31 December
2014
at 31 December
2013at 31 December 2014 at 31 December 2013
On-balance-sheet assets 8.601.099 9.306.141 - - 8.601.099 9.306.141
Intercompany assets * - - - - - -
Total assets 8.601.099 9.306.141 - - 8.601.099 9.306.141
On-balance-sheet financial liabilities - - - - - -
On-balance-sheet technical provisions 8.503.478 9.190.177 - - 8.503.478 9.190.177
Intercompany liabilities * - - - - - -
Total liabilities 8.503.478 9.190.177 - - 8.503.478 9.190.177
* Assets and liabilities eliminated during the consolidation process
Details of assets and liabilities related to contracts issued by insurance companies where the investment risk is borne by policyholders and deriving from
the management of pension funds
TotalBenefits linked to investment funds and
market key
Benefits linked to the
management of pension funds
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of technical provisions(€000)
at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013
Non-life provisions 89.775 62.689 - - - - 89.775 62.689
Premium reserve 39.605 31.777 - - - - 39.605 31.777
Outstanding claims provisions 45.531 26.106 - - - - 45.531 26.106
Other provisions 4.639 4.807 - - - - 4.639 4.807
of which provisions made after a test of adequacy of liabilities 4.400 4.400 - - - - 4.400 4.400
Life provisions 87.129.743 67.942.464 - - - - 87.129.743 67.942.464
Outstanding claims provisions 474.727 229.344 - - - - 474.727 229.344
Mathematical provisions 68.638.821 55.723.799 - - - - 68.638.821 55.723.799
Technical provisions where the risk is borne by policyholders and provisions deriving
from the management of pension funds 8.503.478 9.190.177 - - - - 8.503.478 9.190.177
Other provisions 9.512.717 2.799.144 - - - - 9.512.717 2.799.144
of which provisions made after a test of adequacy of liabilities - - - - - - - -
of which deferred policyholder liabilities 9.427.809 2.723.630 - - - - 9.427.809 2.723.630
Total technical provisions 87.219.518 68.005.153 - - - - 87.219.518 68.005.153
Total Direct Business Indirect Business
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of underwriting expenses (€000)
2014 2013 2014 2013
20.661- 15.305- 351.852- 312.256-
a Acquisition costs 17.869- 13.079- 334.595- 308.384-
b Other acquisition costs 3.567- 2.056- 24.310- 17.652-
c Increase/decrease of deferred acquisition costs 775 169- 7.238 13.970
d Provvigioni di incasso - - 185- 190-
10.487 10.557 1.832 1.944
489- 292- 32.334- 26.216-
11.544- 7.640- 35.810- 32.514-
Total 22.207- 12.680- 418.164- 369.042-
Gross commissions and other acquisition costs
Other investment management expenses
Other administrative expenses
commissions and share of profits received from reinsurers
Non Life Business Life Business
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of financial liabilities
(€000)
at 31 December
2014
at 31 December
2013
at 31 December
2014
at 31 December
2013
at 31 December
2014
at 31 December
2013
at 31 December
2014
at 31 December
2013
Equity-like instruments - - - - - - - - Subordinated liabilities - - - - 1.300.854 544.179 1.300.854 544.179 Liabilities from investment contracts issued by insurance companies deriving - - - - - - -
from contracts where the investment risk is borne by policyholders - - - - - - - -
from pension fund management - - - - - - - -
from other contracts - - - - - - - -
Deposits received from reinsurers - - - - - - - -
Liabilities of investment components of insurance contracts - - - - - - - -
Debt securities issued - - - - - - - - Due to banks - - - - - - - - Interbank payables - - - - - - - -
Other borrowings - - - - - - - -
Non-hedging derivatives - - - - - - - -
Hedging derivatives - - - - - - - - Sundry financial liabilities - - - - - - - -
Total - - - - 1.300.854 544.179 1.300.854 544.179
TotalFinancial liabilities at fair value
through profit or lossFinancial liabilities held for trading
Other financial liabilities
03 Allegati bilancio consolidato in inglese x sito web.xls
Assets and liabilities recognised at fair value on a recurring and non-recurring basis: breakdown by fair value level
(€000)
at 31 December
2014at 31 December 2013
at 31 December
2014
at 31 December
2013
at 31 December
2014
at 31 December
2013at 31 December 2014 at 31 December 2013
73.651.399 57.814.489 3.118.680 1.133.964 242.751 211.402 77.012.829 59.159.855
Held-for-trading financial assets - - - - - - - -
Financial assets designated at fair value through profit or loss 7.893.630 9.769.431 4.467.767 714.390 - - 12.361.397 10.483.821
- - - - - - - -
- - - - - - - -
- - - - - - - -
81.545.029 67.583.921 7.586.447 1.848.353 242.751 211.402 89.374.226 69.643.676
Held-for-trading financial liabilities
Financial liabilities designated at fair value through profit or loss
Financial liabilities at fair value through
profit or loss
Total
Available-for-sale financial assets
Financial assets at fair value through
profit or loss
Property Investmenta
Tangible Assets
Total
Intangible Assets
Level1 Level2 Level3 Total
Assets and liabilities recognised at fair value on a recurring basis
03 Allegati bilancio consolidato in inglese x sito web.xls
Details of changes in level 3 assets and liabilities recognised at fair value on a recurring basis (€000)
Held-for-trading
financial assets
Financial assets
designated at fair
value through profit
or loss
Held-for-trading
financial liabilities
Financial liabilities
designated at fair
value through profit
or loss
Opening balance 211.402 -
Purchases/Issues 47.861
Sales/Repurchases (30.051)
Redemptions
Gains or losses through profit or loss (1.439)
- of which unrealised gains/losses
Gains or losses through other components of comprehensive income 14.978
Transfers to level 3
Transfers to other levels
Other changes
Closing balance 242.751 -
-
Financial liabilities at fair value through profit or
loss
rilevato a conto economico
Intangible assetsAvailable-for-sale
financial assetsInvestment property Tangible assets
Financial assets at fair value through
profit or loss
03 Allegati bilancio consolidato in inglese x sito web.xls
Assets and liabilities not recognised at fair value: breakdown by fair value level
(€000)
at 31 December 2014 at 31 December 2013at 31 December
2014
at 31 December
2013 at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013 at 31 December 2014 at 31 December 2013
Assets
Investments held to maturity - -
Loans and receivables 726.350 11.458 - - - - - - - 726.350 11.458 - 726.350 11.458
Investments in subsidiaries, associates and joint ventures 163.286 197.019 - - - - - - - 163.286 197.019 - 163.286 197.019
Investment property - - - - - - - - - - - - - -
Tangible assets 4.438 2.954 - - - - - - - 4.438 2.954 - 4.438 2.954
Total assets 894.074 211.431 - - - - - - - 894.074 211.431 - 894.074 211.431
Liabilities - - - - - - - - - - - - - -
Other financial liabilities 1.300.854 544.179 - - - - - - - 1.300.854 544.179 - 1.300.854 544.179
Level 3 TotalCarrying amount
Level 1Fair value
Level 2