Consolidated Quarterly Report as of September 30th 2004

Transcription

1 Consolidated Quarterly Report as of September 30th 2004 Approved by the Board of Directors on November 6th

2

3 Disclaimer This is a translation into English from the original in Italian, which alone is to be used for all legal purposes. The original text is at the disposal of the general public at the registered place of business of CATTOLICA and at Borsa Italiana S.p.A. The responsibility for the use of the information in the English language version is understood, within the maximum limits allowed by the law, as exclusively borne by those who decide to use it for any use, purpose or aim whatsoever. CATTOLICA shall not, however, be held responsible for any direct or indirect loss or damage, claimed by anybody and for whatever reason following the use of incomplete or inaccurate information.

4

5 Table of contents First section Statutory Governance Bodies 5 Introduction 7 Group structure 9 Second section Consolidated financial statements 13 General accounting policies and consolidation area 21 Third section Key data and ratios as at September 30 th Directors Report 33 Explanatory notes to the consolidated financial statements 47 3

6 Summary index of tables and charts Tables Table 1 Summary data 31 Table 2 Employees and sales network 31 Table 3 Reclassified consolidated income statement 32 Table 4 Investments Breakdown 50 Table 5 Technical provisions to be covered 50 Table 6 Technical provisions 50 Table 7 Consolidated premiums 52 Table 8 Premiums by channel 53 4

7 Statutory Governance Bodies BOARD OF DIRECTORS Chairman Senior Deputy Chairman Deputy Chairman Giuseppe Camadini* Ermanno Rho* Danilo Andrioli* Secretary Giuseppe Nicolò * Directors Pierluigi Angeli Luigi Baraggia* Paolo Bedoni * Carlo Casini Angelo Ferro Stefano Gnecchi Ruscone Felice Martinelli Giuseppe Martinengo Gaetano Migliarini Carlo Alberto Pelliciardi Giorgio Petroni Luigi Righetti Nicola Rotolo Giordano Veronesi BOARD OF STATUTORY AUDITORS Chairman Permanent Statutory Auditors Substitute Statutory Auditors Franco Giarolli Alessandro Lai Giovannimaria Seccamani Mazzoli Marco Bronzato Francesco Passerini Glazel GENERAL MANAGEMENT General Manager Deputy General Manager Additional Deputy General Additional Deputy General Ezio Paolo Reggia Giancarlo Battisti Maria Paola Boscaini Paolo Rubini *The directors whose names are asterisked form the Executive Committee. 5

8

9 Introduction The consolidated quarterly report of the Cattolica Group has been drawn up in accordance with Article 82 of CONSOB Resolution No dated May 14th 1999 and subsequent amendments. The statements comply with the matters specified in attachment 3D of the aforementioned resolution. The income statement data is provided in relation to the quarter under review and the period running between the start of the accounting periods and the quarter end date, it is also presented on a comparative basis with the balances relating to the same period in the previous year. The net financial position data relating to the end of the quarter is presented on a comparative basis with the closing balances of the last quarter and the last accounting period. The consolidated quarterly report is accompanied by the following schedules: - the net financial position (attachment 3D Point 2 Consob resolution No ); - the income statement (attachment 3D Point 2 Consob resolution No ); - the general accounting policies and consolidation area; - the explanatory notes to the consolidated financial statements; - the key data and ratios; - the Director s report on the performance of operations in the third quarter of the year and on the outlook for activities during the current year. 7

10

11 Group structure 9

12

13 As at September 30th, Duomo Assicurazioni Verona Assicurazioni 2 Cattolica Aziende Tua Tua Assicurazioni 100 Tua Tua Retail Duomo Previdenza 3 Risparmio&Previdenza San San Miniato Previdenza BPV BPV Vita Vita Lombarda Vita Vita Eurosav Axa Axa Cattolica Previdenza In In Azienda Cattolica Investimenti SIM SIM dica Verona Gestioni SGR Cattolica Immobiliare Nuova San San Zeno Immobiliare Cattolica IT IT Services Verona Servizi Cassa di di Risparmio di di San San Miniato Non-life insurance Life insurance Banking Other Services Property Prisma 20 EQUITY INVESTMENTS IN BANKS Società Cattolica di Assicurazione 3,16 Banca Lombarda SpA Banca Lombarda SpA 16,76 Cassa di Risparmio di Fabriano e Cassa di Risparmio di Fabriano e Cupramontana SpA Cupramontana SpA Banca Popolare S. Angelo Scrl Banca Popolare S. Angelo Scrl 0,49 6,62 Banca Regionale Europea SpA Banca Regionale Europea SpA 7,78 Banca di Cividale SpA Banca di Cividale SpA Emil Banca Scarl Emil Banca Scarl 0,27 6,38 1,05 Banca di Valle Camonica SpA Banca di Valle Camonica SpA Banca Carige SpA Banca Carige SpA Banca Popolare di Intra Scrl Banca Popolare di Intra Scrl 0,51 1 Credito Bergamasco SpA Credito Bergamasco SpA 11

14

15 Consolidated financial statements 13

16

17 CATTOLICA ASSICURAZIONI GROUP Head Offices: VERONA CONSOLIDATED QUARTERLY REPORT AS AT SEPTEMBER 30th

18 COMPANY: CATTOLICA ASSICURAZIONI GROUP Section A - CONSOLIDATED NET FINANCIAL POSITION ( millions) Consolidated Consolidated Consolidated ASSETS as at 30/09/2004 as at 30/06/2004 as at 31/12/2003 C. Investments I - Land and buildings II - Investments in affilited companies and other shareholdings 1. Shares and holdings Bonds Loans Total investments in affilited companies and shareholdings III - Other financial investments 1. Shares and holdings Quotas in mutual investment funds Bonds and other fixed-income securities 6,366 5,929 5, Loans Other Total other financial investments 6,826 6,510 5,929 IV - Deposits with transferring companies Total 7,551 7,324 6,771 D. Investments for the benefit of life assurance policyholders who bear investment risk and relating to the administration of pension funds 7,223 7,013 6,512 D.bis Technical provisions - reinsurance amount I I - Non-life technical provisions II II- Life technical provisions (excluding technical provisions in section III) III III- Life technical provisions for policies where the investment risk is borne by the policyholder and relating to the administration of pension funds Total F. Other asset items I - Attivi materiali e scorte II - Cash at banks and in hand III - Own shares or holdings Total TOTAL 15,627 15,169 14,129 17

19 COMPANY: CATTOLICA ASSICURAZIONI GROUP Section A - CONSOLIDATED NET FINANCIAL POSITION ( millions) Consolidated Consolidated Consolidated LIABILITIES AND SHAREHOLDERS' EQUITY as at 30/09/2004 as at 30/06/2004 as at 31/12/2003 B. Subordinated liabilities C. Technical provisions I - Non-life assurance business 1. Provision for unearned premiums Provision for claims outstanding 1,829 1,763 1, Sundry technical provisions Equalization provisions Total non-life technical provisions 2,299 2,293 2,204 II - Life assurance business 1. Actuarial provisions 5,298 5,132 4, Outlay provision Other Total life technical provisions 5,431 5,275 4,809 Total technical provisions 7,730 7,568 7,013 D. Technical provisions where the investment risk is borne by the policyholders and provisions relating to the administration of pension funds 7,222 7,012 6,510 F. Deposits received from reinsurers G. Financial payables I - Debenture loans Amounts owed to banks and financial institutions Total TOTAL 15,088 14,701 13,652 18

20 COMPANY: CATTOLICA ASSICURAZIONI GROUP Section B - CONSOLIDATED QUARTERLY INCOME STATEMENT ( millions) Quarterly consolidated Consolidated as at 30/09/2004 Consolidated as at 30/06/2004 Consolidated as at 30/09/2003 I. TECHNICAL ACCOUNT - NON-LIFE INSURANCE BUSINESS 1. Earned premiums net of reinsurance Other technical income, net of reinsurance Claims incurred, net of recoveries and reinsurance 4. Change in other technical provisions, net of reinsurance 5. Reversals and profit-sharing, net of reinsurance Operating expenses Change in equalisation provisions Non-life technical account result II. TECHNICAL ACCOUNT - LIFE INSURANCE BUSINESS 1. Earned premiums, net of reinsurance 641 2,300 1,659 2, Net investment income Income and unrealised gainson investment for the benefit of policyholders who bear investment risk and those relating to administration of pension funds Other technical income, net of reinsurance Claims incurred, net of reinsurance 338 1, Change in actuarial and other technical provisions, net of reinsurance net of reinsurance a) Actuarial provisions, premium provisions for complementary insurance, and other technical provisions b) Technical provisions for policies where the investment risk is borne by policyholders and relating to the administration of pension funds Total 381 1, , Reversals and profit-sharing, net of reinsurance Operating expenses

21 COMPANY: CATTOLICA ASSICURAZIONI GROUP Section B - CONSOLIDATED QUARTERLY INCOME STATEMENT Quarterly consolidated Consolidated as at 30/09/2004 ( millions) Consolidated as at 30/06/2004 Consolidated as at 30/09/ Capital and financial charges and unrealised losses on investments for the benefit of policyholders who bear investment risk and those relating to pension funds Life insurance business - technical account result III. NON TECHNICAL ACCOUNT 1. Non-life insurance -technical account result (item I. 8) Life insurance business - technical account result (item II. 10) Investment income Other income Other charges Result from ordinary operating activity Extraordinary income Extraordinary charges Result from extraordinary operating activity Pre-tax result Income taxes Consolidated net result Minority shareholders' interest in profit/(loss) for the period Profit (loss) of the Group

22 General Accounting Policies and Consolidation Area 21

23

24 General Accounting Policies and Consolidation Area GENERAL PREPARATION POLICIES The accounting reference date of this consolidated quarterly report is September 30th 2004, a date which coincides with that of the corresponding reports of the Group companies. The quarterly reports of all the consolidated companies have been approved by the respective Boards of Directors. CONSOLIDATION METHODS The consolidation methods adopted for the preparation of the quarterly report were consistent with those used for the consolidated financial statements for the period ended December 31 st ACCOUNTING POLICIES The accounting policies and standards adopted by the consolidated companies, are those utilized by the Parent Company when drawing up the consolidated quarterly report and are consistent with those used for the consolidated financial statements as of December 31 st 2003, to which reference should be made. In order to guarantee prompt communication of the quarterly information to the market, estimate processes were employed for some of the less significant items. The accounting standards adopted are those currently in force in Italy. Reporting currency used in the consolidated interim report On the basis of the provisions anticipated by Article 2 of ISVAP Instruction No dated October 5 th, 1998 and in accordance with Article 13.3 of ISVAP Instruction No dated July 6 th, 1999, all the values are expressed in millions of Euro. CONSOLIDATION AREA The scope of consolidation includes the financial statements of Società Cattolica di Assicurazione Società Cooperativa and those of the companies in which the Parent Company directly or directly holds a permanent equity investment of 50% or more. When compared with the first six months of the accounting period, the scope of consolidation did not undergo any change during the third quarter, and as of September 30th, it comprised twelve insurance companies, two property companies and a service company. Besides the companies included within the scope of consolidation, the Group comprises a banking company, an asset management company, a stockbroking company and four service companies. 23

25 1) The following companies are included in the annual consolidated financial statements on a line-by-line basis in accordance with Article 68 of Italian Legislative Decree No. 173/97: - Società Cattolica di Assicurazione Società Cooperativa with registered offices in Verona, share capital of million the Parent Company; - Il Duomo Assicurazioni e Riassicurazioni s.p.a. (hereinafter Duomo Assicurazioni ) with registered offices in Milan, share capital of million. The Parent Company owns a 99.98% direct equity investment in the company. The subsidiary is active in non-life insurance; - Verona Assicurazioni s.p.a. with registered offices in Verona, share capital of million. The Parent Company s direct equity investment amounts to 99.52%. The subsidiary is active in non-life insurance; - Cattolica Aziende s.p.a. with registered offices in Verona, share capital of million. The Parent Company s direct equity investment amounts to 83.71%, that held by Verona Assicurazioni comes to 2%. It is active in non-life insurance; - TUA Assicurazioni s.p.a. with registered offices in Milan, share capital of 9.16 million. The company is 97% owned by Duomo Assicurazioni. The subsidiary is a non-life insurer; - Duomo Previdenza s.p.a. with registered offices in Milan, share capital of million. The company is wholly owned by the Parent Company. The subsidiary is active in life insurance; - Risparmio & Previdenza s.p.a. with registered offices in Verona, share capital of million. The Parent Company s direct equity investment comes to 88%, while the investment held by Verona Assicurazioni comes to 2%. The subsidiary is a life insurer and, since 1998, has also been active in non-life insurance in the accident, injury and health classes, in accordance with the provisions of Article 16 of Italian Legislative Decree No. 174 dated March 17 th, 1995; - BPV Vita s.p.a. with registered offices in Verona, share capital of 57.6 million. The Parent Company s direct equity investment comes to 50%. The subsidiary is a life insurer and is also active in non-life business solely in the accident, injury and health classes, in accordance with the provisions of Article 16 of Italian Legislative Decree No. 174 dated March 17 th, 1995; - Lombarda Vita s.p.a. with registered offices in Brescia, share capital of 55.3 million. The Parent Company owns a direct equity investment of 50.1%. The subsidiary is a life insurer; - San Miniato Previdenza s.p.a. with registered offices in San Miniato, share capital of 5 million. The Parent Company owns a direct equity investment of 66%. The company is authorized to carry out life insurance activities in classes I, III, IV and V pursuant to attachment I, table A) of Italian Legislative Decree No. 174/95; 24

26 - Cattolica Immobiliare s.p.a. with registered offices in Verona, share capital of million. The Parent Company owns a direct equity investment of 99.9%, while the investment of Verona Assicurazioni comes to 0.1%. The company is active in the property sector; - Nuova San Zeno Immobiliare s.p.a. with registered offices in Verona, share capital of 16 million. Cattolica Immobiliare holds an equity investment of 75.25% in this company; - dica s.p.a. with registered offices in Verona, share capital of 2.58 million. The Parent Company owns a direct equity investment of 97%, while Verona Assicurazioni holds 3%. The company performs call-centre activities for claims adjustment. 2) The following companies are consolidated using the proportional method, as per Article 70 of Italian Legislative Decree No. 173/97: Associated companies - Axa-Cattolica Previdenza in Azienda s.p.a. with registered offices in Milan, share capital of 7.5 million. The company is jointly owned at 50% by the Parent Company and Axa Assicurazioni. The company has been authorized to carry out life insurance activities and non-life activities in relation to the accident, injury and health classes only, by means of the ISVAP Instruction dated March 2 nd, 2004, published in the Italian Official Gazette dated March 9 th, 2004; - Eurosav s.p.a. with registered offices in Milan, share capital of 6.45 million, jointly owned by the Parent Company and Banca Popolare di Bari. This company is active in life insurance. 3) The following companies are excluded from the scope of consolidation and carried at equity, since their business is different: Subsidiaries - Verona Gestioni SGR s.p.a. with registered offices in Verona, share capital of million. The Parent Company holds a direct equity investment of 93.91%, while Verona Assicurazioni owns 0.99%. The company provides investment services exclusively to institutional operators; - Cattolica Investimenti SIM s.p.a. with registered offices in Verona, share capital of 1 million. The Parent Company holds a direct equity investment of 70%, while Duomo Assicurazioni owns the remaining 30%. The company places its banking and financial products via group agency networks. 4) The following companies are carried at equity: 25

27 Associated companies - Cassa di Risparmio di San Miniato s.p.a. with registered offices in San Miniato, share capital of million. The Parent Company holds a direct equity investment of 24.72%. The company is a bank; - Prisma s.r.l. with registered offices in Milan, share capital of 520 thousand. The Parent Company holds a direct equity investment of 20%. The company is an insurance agency. 5) The following companies are carried in the consolidated financial statements at cost, since they are not yet operative: Subsidiaries - Cattolica IT Services s.r.l. with registered offices in Verona, share capital of 1 million, formed on September 30th. The Parent Company directly and wholly owns this company. This company supplies services and products for the planning, creation and management of IT applications, operating processes and related organizational structures, as well as services relating to telecommunications systems, to subsidiary companies or those in which Cattolica holds equity investments; - Verona Servizi s.r.l. (formerly V.P. Servizi Assicurativi s.r.l.) with registered offices in Milan, share capital of 100,000. The Parent Company holds a direct equity investment of 65%, Duomo 30%, and Duomo Previdenza 5%. The company carries out the recruitment, selection and training of new agents. 6) The following company is carried in the consolidated financial statements at cost, since it is not significant: Subsidiary company - TUA Retail s.r.l. with registered offices in Milan, share capital of 50,000. It is wholly-owned by TUA Assicurazioni. It carries out the general agency activities of TUA Assicurazioni. A schedule of the Group companies with indication of the consolidation method adopted is shown below. 26

28 Consolidated on a line-by-line basis Verona Verona Assicurazioni Assicurazioni 2 Cattolica Cattolica Aziende Aziende Duom Duom o Assicurazioni 97 Tua Tua Assicurazioni Assicurazioni 100 Duomo Duomo Previdenza Previdenza Lombarda Lombarda Vita Vita BPV BPV Vita Vita 2 Risparmio&Previdenza 88 0,1 99,9 Cattolica Cattolica Immobiliare Immobiliare Nuova Nuova San San Zeno Zeno Immobiliare Immobiliare dica dica 3 San San Miniato Miniato Previdenza Previdenza 66 Consolidated on a proportional basis 50 Axa Axa Cattolica Cattolica Previdenza Previdenza In In Azienda Azienda Eur Eur os os av av 50 Carried at equity Cattolica Cattolica Investimenti Investimenti SIM SIM Verona Verona Gestioni Gestioni SGR SGR Cassa Cassa di di Risparmio Risparmio di di San San Miniato Miniato Prism Prism a Carried at cost 100 Cattolica Cattolica IT IT Services Services s.r.l. s.r.l. TUA TUA Retail Retail VERONA VERONA SERVIZI SERVIZI 65 Non-life business Life business Banki ng Other Ser vices Property 27

29

30 Key data and ratios of the third quarter 29

31

32 Key data and ratios of the third quarter KEY RATIOS OF THE OPERATING PERFORMANCE Table 1 Summary data Summary data Change (Amounts in '000) Amount % Gross premiums written 3,331 3, ,212 Direct business - non-life 1, ,363 Direct business - life 2,308 2, ,820 Indirect business Net premiums 3,205 2, ,921 Investments 15,174 12,953 2, ,649 Non-life and life technical provisions 14,814 12,863 1, ,379 Technical provisions - non-life (premiums + claims) 2,294 2, ,200 Technical provisions - life (actuarial + Class D) 12,520 10,698 1, ,179 of which provisions benefiting policyholders 7,222 6,177 1, ,510 Net investment income Net income and gains for Class III Other administrative expenses Non-life technical account result Life technical account result Ordinary operating profit Consolidated net income for the period Group net income for the period Table 2 Employees and sales network Employees and sales network Change (number) Amount % Employees* 1,191 1, ,120 Direct network: Agencies 1,083 1, ,049 Partner networks: Bank branches 2,663 2, ,053 Financial advisors 1,065 1, ,212 Brokers * Full Time Equivalent. 31

33 Table 3 Reclassified consolidated income statement Reclassified consolidated income statement Change (amounts in '000) Quarterly figures Amount % NON-LIFE Net premiums Claims Other administrative expenses Other technical items Non-life technical account result LIFE Net premiums 641 2,300 1,659 2, Claims and change in technical provisions 719 2,460 1,741 2, Other administrative expenses Net income from Class D investments Other technical items Portion of investment income transferred from the non-technical account Life technical account result NON-TECHNICAL ACCOUNT Net income from Class C investments Portion of investment income transferred to the life technical account Other income net of other charges Result from ordinary activities Result from extraordinary activities Pre-tax result Income taxes for the period Consolidated net income Minority interests in net profit for the period GROUP PROFIT FOR THE PERIOD

34 Directors Report 33

35

36 Directors Report The Cattolica Group The Group closed the first nine months of the accounting period with consolidated net profit of 92 million, up by 27.78% when compared with the same period last year, net of taxation for 67 million. The third quarter disclosed a performance similar to that seen in the first quarter, with a result comprising the positive contribution from technical operations, still penalized however by the high costs of reinsurance, accompanied by an important and overall improvement in financial operations. In detail, the result is attributable to: the technical performances which disclosed a total value of 65 million (+ 6.56%), involving an increase of 9.3% in the life classes which totalled 47 million and a result of 18 million on the non-life classes equating to that as of September 30th 2003; the sale of certain properties of the Parent Company and Duomo Assicurazioni which permitted the realization of gross capital gains for 18.6 million and million. Cattolica Immobiliare sold certain properties, transferred in 2002 by Cattolica, generating a gross capital gain of 9.9 million in addition to 22.7 million in the consolidated statements; the improvement in financial operations, following the recovery of the stock market, when compared with the end of the third quarter last year, which led to value adjustments for 8 million compared with 16 million in 2003 (- 8 million, equating to - 50%) and losses on the disposal of investments for 3 million compared with 12 million in 2003 (- 9 million, equal to - 75%); other extraordinary income deriving mainly from the sale of Nuova Banca Mediterranea for 2.7 million and the sale of part of the equity investment in Banca Carige for 5.6 million. Consolidated net profit millions /09/03 30/09/04 Net profit for the six-month period Net profit for the third quarter During the period, Group initiatives were focused on approaches consistent with the strategic policies and the evolutionary trends which are currently affecting the Italian insurance market. In line with the continuation of the aggregation and organizational and operating rearrangement processes which characterize the Italian insurance companies, with regards to Cattolica Group, the activities necessary for starting-up the Information Technology management company are 35

37 currently being concluded. In accordance with the resolution of Cattolica Assicurazioni s Board of Directors, on September 30th the new company, Cattolica IT Services, was formed, in which all the activities of the Group s Information Technology divisions will be integrated, with the objective of maximising the existing synergies by means of the realization of a sole technology infrastructure which will oversee both the life and non-life areas. The differing expectations of the operators in relation to the methods and timescales for the recovery of the financial markets, have confirmed the validity of a prudent approach towards the investments incurred with regards to the management of the associated risks - by the now consolidated procedures and structures of ALM (asset and liability management). On a consistent basis with the market trend, further attention was focused on the technical management of the portfolio by means of careful selection and reform policies. As usual, on-going research into product innovation, with careful segmentation of the customer base, has been the distinguishing element of the Group s activities. Within this sphere, a series of new products specialized by channel and focused by customer segment are currently being studied. This is so as to respond to the growing requirements for simplicity and transparency expressed by the market which involve increasingly greater demand for advice. The development of the products is guided by the on-going search for maximum customer satisfaction, in accordance with the concept that the insurance product is, chiefly, a service. The Autotutor venture, developed for the vehicle customer base of all the Group insurance companies, proposes itself, within this sphere, as an exclusive and dedicated service for assisting the customer during the critical moment of the claim. The development of the non-life business continued with the progressive launch of endogenous growth initiatives, such as TUA Assicurazioni and, where market opportunities are recognized, by means of the start-up of exogenous growth ventures. In the latter direction, by the end of the year a company specialized in the sale of non-life products via bank branches will be formed in the bancassurance sector, under joint venture with the Banco Popolare di Verona e Novara Group. The operation anticipates the purchase by Banco Popolare of a joint equity investment in the non-life company which will be dedicated to the development of this business. The objective is to seize the pioneering opportunities offered by the initial signs from the market, maximizing the competitive advantage and combining to best effect the experience of the life bank insurance business and the technical skills in the non-life classes. The new venture will be targeted exclusively at private individuals and families, by means of an articulated insurance range: third party vehicle, fire, theft, third party liability, accident and health policies. The development of the Group s proprietary channels continued. Alongside the enhancement of the traditional ones, the networks pertaining to the new ventures launched in 2003 were consolidated during the first nine months of the year, ventures such as TUA Assicurazioni which, with a forecast of 30 agencies by December 31st, responds to the requirements for simplicity and transparency made by the customers with the growing demand for advice. The network agency as of September 30th, included 1,083 agencies: 705 attributable to Cattolica, 363 to Duomo Assicurazioni and Duomo Previdenza (of which 2 with just Duomo representation and 14 with just Duomo Previdenza representation) and 15 to TUA Assicurazioni. The branches which distribute the Group s products amount to 2,663, compared with 2,646 as 36

38 of June 30th, while the financial advisors totalled 1,065. The brokers numbered 145. Sales channels Number 3,500 3,000 2,934 3,053 2,663 2,500 2,000 1,500 1,000 1,027 1,212 1,049 1,212 1,083 1, /09/03 31/12/03 30/09/04 Agencies Brokers Bank branches Financial advisors ***** During the first nine months of the year, dialogue with the investors and analysts continued within continuity and efficacy with the aim of ensuring the market greater visibility and transparency regarding the results and the business strategies of the Group. The Group s senior management was directly involved in the annual conferences of the bank insurance sector organized by UBS Warburg in Rome and by Kepler Equities Italia in Milan, where some of the most important Italian and foreign institutional operators made speeches. Communications activities continued with the foreign financial community by means of roadshows in Spain, France, Germany and the United Kingdom. The company also organized a series of one-to-one encounters and telephone conferences with investors and analysts in Italy and abroad. Since the start of 2004, the companies who have published analysis on Cattolica stock numbered seven. An important communication instrument is the Investor Relations section of the institutional website of the company ( where all the main economic and financial information can be found in an English version as well, with a view to guaranteeing the foreign investors equal access to the information and to the main corporate events relating to the Cattolica Group. 37

39 BUSINESS PERFORMANCE Brief introductory outline Total consolidated premiums taken for direct business, mainly concentrated in the North of Italy, came to 3,309 million during the third quarter, compared with 3,054 million in the same period last year (+ 8.35%). More specifically, direct life business premiums amounted to 2,308 million ( %) and non-life premiums totalled 1,001 million (+ 1.93%). Indirect life and non-life premiums taken came to 22 million. The predominance of life business as a percentage of the total of direct turnover is confirmed (69.75%). 38

40 Direct life and non-life premiums, indirect premiums millions 2,500 2,308 2,000 2,072 1,500 1, , /09/03 30/09/04 Direct non-life business Direct life business Indirect life and non-life business Investments amounted to 15,174 million, disclosing growth of 11.17% when compared with the financial statements balance as of December 31st (in absolute value equating to 1,525 million) and 3.13% when compared with the first quarter Investments millions /12/03 30/06/04 30/09/04 The non-life technical provisions for direct and indirect business (premiums and claims) came to 2,294 million, disclosing an increase of 4.27% when compared with the end of 2003 (in absolute value equating to around 94 million) and 0.26% compared with the end of the first quarter. The life technical provisions for direct and indirect business (actuarial and class D provisions) amounted to 12,520 million, compared with 11,179 million as of December 31st (+ 12%) and 12,144 million as of June 30th (+ 3.1%). 39

41 18,000 Non-life and life technical provisions millions 16,000 14,000 12,000 11,179 13,379 12,144 14,432 12,520 14,814 10,000 8,000 6,000 4,000 2,000 2,200 2,288 2, /12/03 30/06/04 30/09/04 Gross technical provisions - non-life business Gross technical provisions - life business Total provisions Other administrative expenses represented 2.16% of the total gross premiums recorded, compared with 1.98% as at September 30th, Ordinary net financial and equity income amounted to 200 million ( %). The quarter closed with net profit for the period of 33 million, after taxation of 13 million, compared with 25 million in the same period last year. The evolution of the insurance portfolio is commented on below with reference to the main classes involved which disclosed significant changes during the quarter. Non-life business Direct non-life premiums as at September 30th, amounted to 1,001 million, up by 1.93% on the third quarter of Direct non-life premiums for the third quarter by class groups % Other classes 2.7% Fire & natural forces 5.3% Other damage to assets 5.8% TPL - General 7.7% Accident and health 9.3% TPL - land motor vehicles and land vehicle hulls 69.3% 40

42 This increase is in line with the growth forecasts of the market which indicate a slowdown due to the contained tariff increases applied as a result of the improvement in the technical results of the sector and as a consequence of the agreement in June 2003 between the Government, the majority of the consumer associations and the ANIA (Italian National Insurer Association), targeted at containing the growth in premiums, particularly for the young and families. The trend in the Group s non-life premiums was mainly sustained by motor vehicle TPL with 622 million, accident business for 62 million and general TPL for 77 million. Life business Direct life premiums as of September 30th, amounted to 2,308 million, up by 11.39% when compared with the third quarter of Direct life premiums for the third quarter by class groups % Other classes 7.0% Class III 51.1% Class I 41.9% On the life market, the third quarter disclosed growth with respect to the same period last year; during the first nine months, premiums taken returned to overall levels which were more or less comparable with those last year. The reform of the supplementary pensions system is currently entering into its operative phase, and could finally lead to the take-off of this important segment. Analysed by sales channel, consolidated life premiums disclose - when compared with the first nine months of an increase of 19.18% in the bank insurance channel, which rose from 1,788 to 2,131 million. With regards to the agency channel, premiums rose from 137 to 138 million, disclosing an increase of 0.73%. In the same period, a rise of 20% in premiums taken via financial advisors was seen, from 10 to 12 million. In Class I, the Group reported a decrease of 10.94% when compared with Class III, with premiums of 1,263 million, disclosed growth of 19.26%. Within the aforementioned market context, the index-linked products performed an important role due to their fundamental feature of recovering the capital invested on maturity of the policy, despite the presence of the negative performances of the financial markets. Class V performed a significant role as part of the sales policy, in particular within the range intended for the corporate segment, involving an increase of 87.59%. Premiums taken, for a total of 272 million compared with 145 in 2003, refer to the Parent Company for 23 41

43 million, Risparmio & Previdenza for 55 million, Duomo Previdenza for 46.8 million, BPV Vita for 123 million, Lombarda Vita for 3 million, Eurosav for 14 million and S. Miniato Previdenza for 7 million. PERFORMANCE DURING THE THIRD QUARTER In just the third quarter alone, non-life direct business amounted to 275 million, up 37.88% with respect to June 30th, compared with 726 million in the first six months of the year. In the third quarter alone, the life classes reported business of 642 million compared with 1,666 million in the first six months of the year. The figure rose by 38.54% with respect to June 30th. CAPITAL AND FINANCIAL PERFORMANCE During the first nine months of the year, the Group s financial management activities maintained the traditional prudent approach, given the persistent level of uncertainty on the financial markets. More specifically, the Group did not change its approach towards share-based investments which continue to be of marginal importance in its stocks and shares portfolio. The choice therefore fell to bond-based investments, with a clear preference for Government credit instruments. Within the bond segment, a somewhat contained financial duration was maintained as far as the non-life business portfolio was concerned. In relation to life business investments, the bonds have a longer duration on average, again with a view to ensuring a balanced structure with the technical commitments. In this sense, the systematic recourse to Asset & Liability Management (ALM) instruments for separate management activities represents the Group s clear strong point, thereby making it possible to minimize the financial risks to the charge of the insurance companies. There were no particular derivative or structured finance transactions concluded during the first nine months of the year or investments ascribable to developing countries. As in the previous periods, there were no losses to report due to the insolvency of issuers or exposures on low-rated securities or on derivative lending products. 42

44 SIGNIFICANT EVENTS DURING THE THIRD QUARTER The Group On July 15th, a transaction was finalized for the sale to Banco Popolare di Verona e Novara of part of the equity investment held by Cattolica in the share capital of Credito Bergamasco, in pursuance of the letter of intention exchanged between the parties on July 9 th last. The transaction in question involved the sale of 3,940,878 Credito Bergamasco shares, representing 6.38% of the share capital, for a total price of 72 million. The Parent Company therefore maintains an interest holding in Credito Bergamasco s share capital equating to 1%. With a value date of September 16th, Cattolica took steps to pay over an amount towards share capital increases, 700 thousand, so as to endow the subsidiary company Cattolica Investimenti SIM with adequate means for the growth of its activities. As of the same date, Duomo Assicurazioni, the other shareholder of Cattolica Investimenti SIM, paid over 300 thousand, for the same purpose. On September 30th, Cattolica, in its capacity as the sole founding shareholder, took steps to form the company Cattolica IT Services s.r.l., with registered offices in Via Carlo Ederle 45, Verona. The share capital, 1 million, was fully paid in at the time of incorporation. The start-up of the company in question falls within a wider project for the rationalization of the Group; more specifically, the project concerns the progressive integration of the Group s structures and the activities in the Information Technology area. During the quarter, the Parent Company proceeded to purchase Verona Assicurazioni shares held by several shareholders, thereby increasing it own equity investment, which rose from 97.09% to %. Other events during the period On August 2nd, Cattolica sold 4,500,000 Banca Carige shares at a total price of 11.7 million. Subsequently, it sold a further 4,597,950 shares in several tranches, again at the price of 2.6 each, for a total of million. The equity investment held by the Parent Company in Banca Carige s share capital therefore fell to 1.05%. On August 10th, the Parent Company paid over 50 thousand in favour of the Zanotto Foundation who had requested its founding shareholders for such a payment by way of a contribution to be paid in proportion to the commitment undertaken when providing said Foundation with its capital and for the purpose of sustaining the management costs. SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD As of October 5th, Cattolica subscribed the share capital increase authorized by C.I.S. Compagnia Investimenti e Sviluppo SpA, a company in which it holds 2% of the share capital, by means of the payment of 681,000.00, against the allocation of 454,000 newly issued shares, due in relation to the shareholding held. On October 12th, the Parent Company acquired an additional holding of 2% from Cassa di Risparmio di Ferrara in the share capital of Vegagest Sgr. As a result of this purchase transaction, Cattolica achieved a holding of 20%. The transactions for the disposal of the equity investment held in the share capital of Banca Carige, which amounts to 0.19%, continued. 43

45 On October 26th, Cattolica acquired 195 Verona Gestioni SGR shares from the Cassa di Risparmio di Verona Vicenza Belluno ed Ancona Foundation. The purchase transaction involved a total outlay of 218, The Cassa di Risparmio Foundation is therefore no longer within the shareholding structure of the subsidiary. As a result of this transaction, the equity investment held by the Parent Company in the share capital of Verona Gestioni SGR rose to 99.01%. OTHER INFORMATION Human resources As at September 30th, Group employees numbered 1,271, compared with 1,191 as of December 31st, including: 39 executives, 160 officers, and 1,072 white-collars. The number of employees calculated as full time equivalent came to 1,191 compared with 1,120 as at December 31st, Head count Number 1,600 1,400 1,271 1,200 1, , ,015 1, /12/03 30/09/04 White-collar workers Supervisors Managers Performance of Cattolica stock During the period January 1 st September 30 th 2004, Cattolica shares disclosed a minimum price of and a maximum price of The capitalization of the stock on the market as of September 30th came to 1,506 million. The performance of Cattolica stock during the first nine months of the year reported an increase in the listed price of 5.49% compared with a 3.95% rise of the Mibtel index and a 4.39% increase of the Italian insurance index. During the same period, the average of the volumes nearly doubled with respect to the same period in The stock disclosed a beta of 0.49 or rather it is stock with a better performance than the index in the bearish phases which tends to grow less than the index in the event of a bullish market. 44

46 OUTLOOK FOR THE BUSINESS ACTIVITIES On the basis of the figures for the first nine months of the year, growth of the Group s premiums is forecast, both in the life and non-life areas, in line with the forecasts for the market. The current market trends indicate financial operations which do not present criticalities worthy of note and it is expected that the Group will continue overall with a constant improvement. During the last few months of the year, the operations of the new company in which all the activities of the Group s Information Technology division are to be integrated, will start-up and the activities for the drawing up of the Business Plan for the period will be completed; this Plan will be presented to the market in January. 45

47

48 Explanatory notes to the consolidated financial statements 47

49

50 Explanatory notes to the consolidated financial statements NET FINANCIAL POSITION Investments At the end of the third quarter, the item investments amounted to 15,174 million, compared with 13,649 million as of December 31st ( %). The item land and buildings disclosed a decrease of 6.25% when compared with the end of last year, as a result of the disposal of certain properties by Group companies. In March, the Parent Company sold the premises in Via Calimala 2 and Via dei Lamberti 2 in Florence and the property business unit situated in Via Valverde 25, Verona, which led to the realization of a capital gain of 18.6 million. Duomo Assicurazioni sold the property unit in Via Valpetrosa, Milan and a property unit situated in Corbetta (Milan), realizing in total capital gains of million. In accordance with the objectives indicated in the business plan drawn up at the same time as its formation, Cattolica Immobiliare sold 7 entire buildings and 9 portions of apartment blocks to third parties, of which 7 for use as agencies, generating total capital gains of 9.8 million in the statutory financial statement, in addition to 22.7 million in the consolidated financial statements. The additional value at which the property transferred to Cattolica Immobiliare in December 2002 was recorded, based on an expert appraisal, totalling 281 million, has been adjusted at consolidated level, in order to take into account the disposals to third parties during the period, totalling 80 million, gross of taxation. The item Investments in Group companies- shares and holdings includes the equity investments in subsidiaries excluded from scope of consolidation and in associated companies, with which a permanent bond has been created, that are carried at equity. The item also includes non-significant subsidiaries and associated companies plus other companies which are carried at cost. The item amounts to 433 million, down in total by 131 million ( %) when compared with the end of the previous year. The item Investments in subsidiary companies amounts to 7 million and with respect to December 31st, comprises the book value of the new company Cattolica IT Services carried at cost and the effects of the valuation at equity of the subsidiary companies Cattolica Investimenti SIM and Verona Gestioni SGR. Investments in associated companies which amount to 72 million, reported a decrease of nearly 48 million chiefly attributable to the sale of the investment in Nuova Banca Mediterranea and the proportional consolidation of Axa Cattolica Previdenza in Azienda. During the first nine months of the year, Investments in other companies, which total 354 million, reported an overall decrease of 84 million. The most significant transactions involved the subscription of the share capital increase in Mapfre by the Parent Company, the purchase of an additional holding in Banca Lombarda which takes the equity investment to 3.16%, the sale of 1.58% of the equity investment in Infracom Italia for a value of nearly 7 million, the sale of 9,097,950 Banca Carige shares for a book value of million and the sale of 6.38% of Credito Bergamasco for a book value of 72 million. 49

51 Table 4 Investments - Breakdown Investments Change (Amounts in '000) Amount % Land and buildings Group companies and other investee companies Other financial investments 6,826 5, Deposits with transferor companies Cash at bank and on hand and own shares or holdings Investments benefiting policyholders 7,223 6, TOTAL 15,174 13,649 1, Technical provisions reinsurers share The reinsurers share of the technical provisions amounts to 453 million (- 5.63%). More specifically, the reinsurers share of the non-life technical provisions amounts to 362 million, while the life portion comes to 91 million. Table 5 Technical provisions to be covered Technical provisions to be covered (Amounts in '000) Change Amount % Non-life business Life business TOTAL (item D bis) Technical provisions The non-life and life technical provisions amount to 7,730 million, disclosing an increase of 10.22% when compared with December 31st. Table 6 Technical provisions Technical provisions (Amounts '000) Change Amount % Provision for unearned premiums Provision for outstanding claims 1,829 1, Equalization provision Other technical provisions Total non-life (item C.I) 2,299 2, Actuarial provisions 5,298 4, Outlay provisions Other technical provisions Total life (item C.II) 5,431 4, TOTAL (item C) 7,730 7, Non-life premiums provision In accordance with Article 32 of Italian Legislative Decree No. 173 dated May 26th, 1997, this 50

52 balance comprises both the provisions for fractions of premiums, supplemented by the premiums provision calculated on the special classes in accordance with the criteria anticipated by specific ministerial instructions, and the provision for unexpired risks. Non-life claims provision In accordance with Article 33 of Italian Legislative Decree No. 173 dated May 26th, 1997, this account includes the amount relating to the valuation of the claims which took place during the period and in previous periods which have still not been settled, at the related settlement costs, as well as the amount relating to the valuation of the claims which took place not yet reported as of the period end date, determined on the basis of the instructions issued by the ISVAP with decree issued in accordance with Article 26 of Italian Legislative Decree No. 175 dated March 17 th, Life business provisions The actuarial provisions comprise the provision for pure premiums, the premium amount carried forward relating to policies involving the annual payment of the premiums, the provision deriving from the variation of the demographic bases and the provision for life assurance risks relating to index-linked and unit-linked policies. The other technical provisions comprise reserves for future costs. Technical provisions where the investment risk is borne by the policyholders and reserves deriving from the management of pension funds The item, which exclusively comprises the provisions against index-linked and unit-linked type policies and provisions for open-end pension funds, amounts to 7,222 million and disclosed an increase of 10.94%, when compared with December 31st. 51