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  • CONSOLIDATED ANNUAL REPORT 2016

  • Consolidated report on operations 2016

    2

    CONTENTS

    Corporate officers

    Group structure

    DIRECTORS REPORT ON OPERATIONS

    Executive Summary

    Economic and market environment

    Operating review

    Financial position

    Organisation of the Poste Vita Group

    Relations with the parent and other Poste Italiane Group companies

    Other information

    Events after 31 December 2016

    Outlook

    CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated financial statements

    Notes

    Annexes

    REPORT OF THE INDEPENDENT AUDITORS

    ATTESTATION OF THE MANAGER RESPONSIBLE FOR FINANCIAL REPORTING

  • Consolidated report on operations 2016

    3

    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 DellAtti Auditor Marco De Iapinis Auditor Simona Arduini Alternate Franco Pichiorri Alternate Teresa Naddeo INDEPENDENT AUDITORS (2) BDO Italia 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.

  • Consolidated report on operations 2016

    4

    Group structure

    The Insurance Groups current structure and its scope of consolidation are briefly described below.

    The Poste Vita Insurance Group operates primarily in the life insurance sector and, to a less

    significant extent, in the non-life sector, although this side of the business is expanding.

    The scope of consolidation includes Poste Assicura SpA, an insurance company founded in 2010 to

    provide non-life insurance, excluding motor insurance, and a wholly owned subsidiary of the Parent

    Company, Poste Vita, and, from 4 November 2015, Poste Welfare Servizi Srl, a 100% interest in

    which was acquired by the Group at a cost of 20.9 million. The transaction falls within the wider

    strategic objective of broadening the Groups offering of health insurance for individuals and groups

    of people. These investments are 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 Italianes properties no

    longer used in operations. EGI has also begun to operate in the electricity market as a specifically

    authorised wholesale purchaser, having taken on the role of electricity supplier to the Poste Italiane

    Group previously carried out by Poste Energia SpA, which was merged with and into EGI with effect

    from 31 December 2015.

    This investment is not accounted for on a line-by-line basis, but using the equity method.

    100%

    55%

    45% 100% 100%

    Posteitaliane

    _ _ _ Postevita _ _ _

    EGI Spa Poste Assicura Poste Welfare Servizi

  • Consolidated report on operations 2016

    5

    EXECUTIVE SUMMARY

    In 2016, the Poste Vita Insurance Group proceeded to pursue the following strategic and

    business priorities, in continuity with the approach followed in 2015:

    to strengthen our leadership in the life market and consolidate our position with regard to

    other players;

    to boost our position in the protection and welfare segment, investing in the health

    insurance sector, partly through the activities of the subsidiary, Poste Welfare Servizi Srl.

    The reclassified income statement, broken down by category of insurance, is shown below:

    In the life business, in a market environment marked by low interest rates and high volatility, and in

    keeping with the strategic guidelines in the business plan, the Groups operations focused on

    achieving a progressive rebalancing of the offering towards products with a significant investment

    component without guarantees (multi-line and unit-linked products), but providing a moderate

    risk-return profile. This is in line with the type of customer served by the Group, whilst potentially

    providing more attractive returns on investment. At the same time, the Group is committed to

    developing new tools and support strategies and to training network staff (to cover the three phases

    of pre-sales, sales and post-sales) with the aim of improving and consolidating long-term customer

    relationships.

    Total premium revenue amounted to 19.8 billion (18.1 billion in 2015), including approximately

    19.1 billion from sales of Class I and V investment and savings products (traditional separately

    managed accounts), compared with 17.8 billion in 2015. Premium revenue from Class III policies

    RECLASSIFIED INCOME STATEMENT m

    for the year ended 31 December

    Non-life business Life business Total Non-life businessLife business Total

    Net premium revenue 80.5 19,803.4 19,883.9 67.1 18,130.6 18,197.8

    Gross premium revenue 108.5 19,820.2 19,928.7 93.3 18,145.4 18,238.7

    Outward reinsurance premiums (28.0) (16.8) (44.7) (26.2) (14.8) (41.0)

    Fee and commission income 5.9 5.9 3.3 3.3

    Net financial income from assets related

    to traditional products3.5 3,271.6 3,275.1 3.6 2,348.0 2,351.6

    Income 3.2 2,545.9 2,549.1 3.2 2,472.8 2,476.0

    Realised gains and losses 0.3 251.2 251.5 0.4 310.2 310.6

    Unrealised gains and losses 474.4 474.4 (435.0) (435.0)

    Net financial income from assets related

    to index- and unit-linked products28.9 28.9 189.7 189.7

    Net change in technical provisions (33.0) (21,938.0) (21,971.0) (29.3) (19,665.6) (19,694.9)

    Claims paid (21.8) (7,462.3) (7,484.1) (19.1) (8,030.6) (8,049.7)

    Change in technical provisions (20.7) (14,485.7) (14,506.4) (22.8) (11,637.4) (11,660.2)

    Share attributable to reinsurers 9.5 10.1 19.6 12.6 2.4 15.0

    Investment management expenses (0.4) (44.0) (44.4) (0.6) (37.1) (37.7)

    Acquisition and administration costs (33.6) (524.3) (558.0) (24.5) (477.6) (502.1)

    Net commissions and other

    acquisition costs(7.3) (440.7) (448.1) (6.0) (404.2) (410.2)

    Operating costs (26.3) (83.6) (109.9) (18.6) (73.4) (91.9)

    Other revenues/(costs), net 7.9 (18.8) (10.9) 0.2 (17.2) (17.0)

    EBITDA 24.8 584.8 609.6 16.5 474.2 490.7

    Net financial income attributable to free

    capital 75.0 75.0112.2 112.2

    Interest expense on subordinated loans (36.4) (36.4) (38.9) (38.9)

    PROFIT BEFORE TAX 24.8 623.3 648.2 16.5 547.5 564.0

    Income tax expense (7.4) (244.5) (252.0) (5.4) (210.7) (216.0)

    PROFIT FOR THE PERIOD 17.4 378.8 396.2 11.1 336.8 347.9

    2016 2015

  • Consolidated report on operations 2016

    6

    (multi-line products and unit-linked products launched in April) amounts to approximately 722

    million, compared with 342 million in the previous year.

    Sales of regular premium products also performed well (Multiutile Ricorrente, Long Term Care, Posta

    Futuro Da Grande), with over 117 thousand policies sold in 2016, as did sales of the

    PostaPrevidenzaValore product which, with over 96 thousand policies sold during the year and a

    total number of members amounting to 874 thousand, has enabled Poste Vita to consolidate its role

    in the pensions market. Sales of pure risk policies (term life insurance) also performed well. These

    are sold in stand-alone versions (not bundled together with products of a financial nature), with over

    23 thousand new policies sold during 2016, whilst almost 90 thousand were new policies, again of a

    pure risk nature, sold bundled together with financial obligations deriving from mortgages and loans

    sold through Poste Italianes network.

    While the contribution of the non-life business to the Groups results is still limited, sales in this area

    have also performed well, with total gross premium revenue for the period (earned on the sale of

    approximately 375 thousand new policies) of 108.5 million, up 16% on 2015. Management of the

    non-life business was also along the lines set out in the business plan and in continuity with the

    approach followed in 2015, seeking to meet the new needs of customers in the areas of welfare and

    health insurance, expanding the offering and fine-tuning the model for network support. Above all,

    during the year the Group identified specific marketing and commercial initiatives aimed at

    developing a health and protection product offering (e.g., PosteProtezione Innova Salute and

    PosteProtezione Innova Infortuni), capable of meeting the different needs of a very large customer

    base.

    In terms of investments during the period, the investment policy continues to be marked by the

    utmost prudence, based on the guidelines in the above-mentioned business plan. The portfolio is

    primarily invested in Italian government securities and highly-rated corporate bonds, with an overall

    exposure that represents over 85% of the entire class C portfolio. Against a backdrop of fa

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