Interim Management Report as of March 31st, 2017

Transcription

1 Interim Management Report as of March 31st, 2017 Approved by the Board of Directors May 9th, 2017

2 Please note that the original Report is in Italian. In case of doubt the Italian version prevails.

3 Contents INTERIM MANAGEMENT REPORT Corporate Bodies 5 Group Structure 9 Foreword and consolidation area 13 Consolidated financial statements 19 Management report 27 Certification of the Appointed Executive 49 TABLES Table 1 - Key economic indicators 31 Table 2 - Key equity indicators 31 Table 3 - Sales network and headcount 32 Table 4 - Reclassified consolidated statement of financial position 33 Table 5 - Reclassified consolidated income statement 34 Table 6 - Reclassified consolidated income statement by segment of activities 35 Table 7 - Key indicators 36 Table 8 - Total premiums written 37 Table 9 - Life premiums written 38 Table 10 - Investments 39 3

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5 Corporate Bodies

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7 Corporate Bodies BOARD OF DIRECTORS Chairman Paolo Bedoni (*) Vice Deputy Chairman Aldo Poli (*) Deputy Chairman Manfredo Turchetti (*) Secretary Alessandro Lai (*) Managing Director Giovan Battista Mazzucchelli (*) Directors Barbara Blasevich (*) Bettina Campedelli Nerino Chemello Lisa Ferrarini Paola Ferroli Paola Grossi Giovanni Maccagnani Luigi Mion Carlo Napoleoni Angelo Nardi Pilade Riello (*) Chiara de Stefani Eugenio Vanda BOARD OF STATUTORY AUDITORS Chairman Giovanni Glisenti Statutory Auditors Luigi de Anna Federica Bonato Cesare Brena Andrea Rossi Substitute Auditors Massimo Babbi Carlo Alberto Murari GENERAL MANAGEMENT General Managers Marco Cardinaletti Flavio Piva Deputy General Managers Carlo Barbera Carlo Ferraresi (*) The Directors whose names are marked with an asterisk are members of the Executive Committee 7

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9 Group Structure

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13 Foreword and consolidation area

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15 Foreword Italian Legislative Decree No. 25 dated February 15th, 2016, which assimilated the European Transparency II directive within Italian legislation, eliminated the obligation to publish the interim management report, envisaged by Article 154 ter, section 5 of the Consolidated Financial Law (T.U.F.) and granted CONSOB the faculty to envisage - by means of regulation - possible additional disclosure obligations. By means of resolution No dated October 26th, 2016 CONSOB approved the amendments to the Issuers Regulations regarding interim management reports providing listed companies with the faculty to choose whether to publish the additional periodic information or otherwise. The new provisions will apply as from January 2nd, The interim management report as of March 31st, 2017 has been drawn up on a voluntary basis, for the purpose of ensuring continuity with the previous periodic quarterly disclosure. In the report: the income statement figures for the first quarter of 2017 are presented on a comparative basis with those for the first quarter of 2016; the statement of financial position figures at the close of the first quarter of 2017 are compared with the corresponding figures as of December 31st, The report is accompanied by the following statements: statement of financial position income statement and statement of comprehensive income management report. The interim management report closed as of March 31st, a date which coincides with that of the corresponding reports of the companies included within the consolidation area. For the purpose of ensuring prompt quarterly disclosure to the market, recourse was also made to estimation processes for certain items of minor importance. 15

16 Consolidation area The consolidation area includes the financial statements of the Parent Company and those of the subsidiary companies, in accordance with IFRS 10. During the first three months of 2017, the consolidation area did not change. As of March 31st, the consolidation area comprised eight insurance companies, two companies which carry out agricultural-real estate activities, four service companies and three real estate property mutual funds. In addition to the companies in the consolidation area, the Group includes a banking company, two service companies and 51% of Fondo Immobiliare Mercury, structured in three segments, which is valued using the equity method since it is subject to joint control. 16

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19 Consolidated financial statements

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21 INTERIM MANAGEMENT REPORT AS OF MARCH 31st, 2017 Company: CATTOLICA ASSICURAZIONI GROUP STATEMENT OF FINANCIAL POSITION - ASSETS ( millions) March 31st, 2017 December 31st, INTANGIBLE ASSETS Goodwill Other intangible assets TANGIBLE ASSETS Property Other tangible assets TECHNICAL PROVISIONS - REINSURANCE AMOUNT INVESTMENTS 21,634 21, Investment property Investments in subsidiary companies, associated companies and joint ventures Held to maturity investments Loans and receivables Available for sale financial assets 16,596 16, Financial assets at fair value through profit or loss 3,381 3,129 5 SUNDRY RECEIVABLES Receivables deriving from direct insurance transactions Receivables deriving from reinsurance transactions Other receivables OTHER ASSET ITEMS 1,120 1, Non-current assets or disposal group held for sale Deferred acquisition costs Deferred tax assets Current tax assets Other assets CASH AND CASH EQUIVALENTS TOTAL ASSETS 24,535 24,233 21

22 Company: CATTOLICA ASSICURAZIONI GROUP STATEMENT OF FINANCIAL POSITION - SHAREHOLDERS EQUITY AND LIABILITIES ( millions) March 31st, 2017 December 31st, SHAREHOLDERS EQUITY 2,129 2, pertaining to the Group 1,867 1, Share capital Other equity instruments Capital reserves Revenue reserves and other equity reserves (Own shares) Reserve for net exchange differences Gains or losses on available for sale financial assets Other gains or losses recognised directly in equity Profit (loss) for the period pertaining to the Group pertaining to minority interests Capital and reserves pertaining to minority interests Gains or losses recognised directly in equity Profit (loss) for the period pertaining to minority interests PROVISIONS AND ALLOWANCES TECHNICAL PROVISIONS 19,706 19,486 4 FINANCIAL LIABILITIES 1,650 1, Financial liabilities at fair value through profit or loss 1,395 1, Other financial liabilities PAYABLES Payables deriving from direct insurance transactions Payables deriving from reinsurance transactions Other payables OTHER LIABILITY ITEMS Liabilities of disposal group held for sale Deferred tax liabilities Current tax liabilities Other liabilities TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 24,535 24,233 22

23 INTERIM MANAGEMENT REPORT AS OF MARCH 31st, 2017 Company: CATTOLICA ASSICURAZIONI GROUP INCOME STATEMENT ( millions) March 31st, 2017 March 31st, Net premiums 1,193 1, Gross premiums written 1,247 1, Ceded premiums Commission income Income and charges from financial instruments at fair value through profit or loss Income from investments in subsidiary companies, associated companies and joint ventures Income from other financial instruments and investment property Interest income Other income Realised gains Valuation gains Other revenues TOTAL REVENUES AND INCOME 1,411 1, Net charges relating to claims -1,134-1, Amounts paid and change in technical provisions -1,165-1, Reinsurance amount Commission expense Charges from investments in subsidiary companies, associated companies and joint ventures Charges from other financial instruments and investment property Interest expense Other charges Realised losses Valuation losses Operating expenses Commission and other acquisition costs Operating expenses relating to investments Other administrative expenses Other costs TOTAL COSTS AND CHARGES -1,364-1,281 PROFIT (LOSS) FOR THE PERIOD BEFORE TAXATION Taxation PROFIT (LOSS) FOR THE PERIOD NET OF TAXATION PROFIT (LOSS) FROM DISCONTINUED OPERATIONS 0 0 CONSOLIDATED PROFIT (LOSS) pertaining to the Group pertaining to minority interests

24 INTERIM MANAGEMENT REPORT AS OF MARCH 31st, 2017 Company: CATTOLICA ASSICURAZIONI GROUP STATEMENT OF COMPREHENSIVE INCOME - Net amounts ( millions) March 31st, 2017 March 31st, 2016 CONSOLIDATED PROFIT (LOSS) Other income components net of income taxes without reclassification in the income statement 0 0 Change in the equity of investee companies 0 0 Change in intangible assets revaluation reserve 0 0 Change in tangible assets revaluation reserve 0 0 Income and charges relating to non-current assets or disposal group held for sale 0 0 Actuarial gains and losses and adjustments related to defined-benefit plans 0 0 Other items 0 0 Other income components net of income taxes with reclassification in the income statement Change in reserve for net exchange differences 0 0 Gains or losses on available for sale financial assets Profits or losses on cash flow hedging instruments 0 0 Profits or losses on instruments hedging a net investment in foreign operations 0 0 Change in the equity of investee companies 2 2 Income and charges relating to non-current assets or disposal group held for sale 0 0 Other items 0 0 TOTAL OF THE OTHER COMPONENTS OF THE STATEMENT OF COMPREHENSIVE INCOME TOTAL OF THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 11 9 pertaining to the Group 13 8 pertaining to minority interests

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29 Management report The Cattolica Group The Cattolica Group closed the first quarter of 2017 with consolidated profit of 30 million, compared to 25 million in the first quarter of 2016 (+20%). The Group s net result came to 29 million, compared with 24 million as of March 31st, 2016 (+20.8%). The combined ratio of retained business rose from 92% as of March 31st, 2016 to 93.4%. The increase, already present during 2016, is the result of the drop in profitability of the motor class in the presence of a prolonging of the decrease in the average premium which is affecting the entire market. The quality of the Motor TPL portfolio and the expertise within the sphere of claims settlement permit the Group to maintain the technical balance also in a market context of heavy competition with signs of a pick-up in the frequency of claims. Total premiums written for direct and indirect business - life and non-life - came to 1,317.3 million, up 3.2% compared with 1,276.9 million as of March 31st, Premiums written for direct non-life business dropped from 469 million to 465 million as of March 31st, 2017 (-0.9%). The motor segment posted premiums of million, down 1.8% compared with March 31st, Premiums written for non-motor classes, increasingly focused on products intended for retail customers, amounted to million compared with million as of March 31st, 2016 (+0.5%). In the life sector, direct business premiums came to million, up 5.4% with respect to March 31st, Financial operations 1 closed with a result, gross of tax effects, amounting to 126 million as against 108 million as of March 31st, 2016 (+16.7%). It is characterised by net income deriving from investments in subsidiary companies, associated companies and joint ventures which passed from a loss of 1 million to a profit of 1 million; the net income from other financial instruments and investment property, which amounted to 128 million compared with 114 million as of March 31st, 2016, is made up of net income from interest and the net proceeds which rose from 108 to 123 million, net profits realised which dropped from 17 million to 10 million and net losses from valuation on financial assets for 5 million compared with 11 million as of March 31st, As of March 31st, investments - including properties classified in the item tangible assets and cash and cash equivalents - amounted to 21,992 million ( 21,591 million as of December 31st, 2016). Gross technical provisions for non-life business amounted to 3,532 million ( 3,567 million as of December 31st, 2016). Provisions for life business, inclusive of financial liabilities, amounted to 17,294 million ( 16,991 million as of December 31st, 2016). Consolidated shareholders equity amounted to 2,129 million ( 2,114 million as of December 31st, 2016). The Group s Solvency II margin came to 1.81 times the regulatory minimum and is calculated according to the Standard Formula with the use of the USPs 1 With the exclusion of investments whose risk is borne by the policyholders and the change in other financial liabilities. 29

30 (Undertaking Specific Parameters). 2 As of March 31st, there were a total of 1,514 agencies, distributed as follows: 50.9% in Northern Italy, 27% in Central Italy and 22.1% in Southern Italy and the islands. The number of branches distributing Pension Planning products increased from 5,649 at the end of last year to 5,722. The bank branches of the UBI Group numbered 605, compared with 580 as of December 31st, The alliance with ICCREA HOLDING launched in the second half of 2009 makes it possible to distribute products via 3,986 branches (3,940 as of December 31st, 2016) of the cooperative lending banks, while that with Banca Popolare di Vicenza, underway since 2007, permits the Cattolica Group to access a network of 502 branches (unchanged with respect to December 31st, 2016). The leading banks operating as Cattolica s partner, in addition to those already indicated, include Banca Carim, Banca Popolare Pugliese, Banca di Credito Popolare, Nuova Cassa di Risparmio di Ferrara and Cassa di Risparmio di San Miniato. The Group s financial advisors numbered 899, compared to 906 at the end of the previous year. Welfare and pension product advisors came to 281: C.P. Servizi Consulenziali sub-agents numbered 261 and Agenzia Generale Agrifides sub-agents, whose activities started in the latter part of 2016, came to 20. 7,000 6,000 5,649 5,722 Sales channels number 5,000 4,000 3,000 2,000 1,514 1,514 1, Agencies Bank branches Financial advisors Pension advisors Ratio after distribution of the Parent Company dividend, calculated according to the Standard Formula with the use of the Undertaking Specific Parameters (USPs). On April 4th, 2017 the Supervisory Authority was sent the application for authorisation to use the USPs as from December 31st, 2016; net of the use of the USPs the solvency margin would be

31 KEY INDICATORS OF CATTOLICA GROUP BUSINESS PERFORMANCE The tables which follow show the most significant performance indicators, the figures concerning the sales network and the headcount, the reclassified consolidated statement of financial position and income statement, the consolidated income statement reclassified by segment of activities and the key indicators as compared to those for the same periods in the previous year, respectively, in accordance with the international accounting standards. In this report, the term premiums written means the sum total of the insurance premiums (as defined by IFRS 4) and the amounts of the investment contracts (as defined by IFRS 4 which refers the related discipline to IAS 39). Table 1 - Key economic indicators Change ( millions) March 31st, 2017 March 31st, 2016 Amount % Total premiums written 1, , of which Gross premiums written 1, , Direct business - non-life Direct business - life Indirect business - non-life Indirect business - life n.a. of which Investment contracts Consolidated net profit for the period Group net profit for the period n.a. = not applicable Table 2 - Key equity indicators Change ( millions) March 31st, 2017 December 31st, 2016 Amount % Investments 21,992 21, Technical provisions net of reinsurance amount 19,025 18, Financial liabilities relating to investment contracts 1,395 1, Consolidated shareholders equity 2,129 2,

32 Table 3 - Sales network and headcount Change (number) March 31st, 2017 December 31st, 2016 Amount % Total headcount 1,576 1, FTE headcount 1,516 1, Direct network: Agencies 1,514 1, Partner networks: Bank branches 5,722 5, Financial advisors Welfare and pension product advisors

33 Table 4 - Reclassified consolidated statement of financial position Change ( millions) March 31st, 2017 December 31st, 2016 Amount % Items from obligatory statements (*) Assets Investment property Property Investments in subsidiary companies, associated companies and joint ventures Loans and receivables Held to maturity investments Available for sale financial assets 16,596 16, Financial assets at fair value through profit or loss 3,381 3, Cash and cash equivalents Total investments 21,992 21, Intangible assets Technical provisions - reinsurance amount Sundry receivables, other tangible assets and other asset items 1,538 1, (**) TOTAL ASSETS 24,535 24, Shareholders equity and liabilities Group capital and reserves 1,838 1, Group profit (loss) for the period Shareholders equity pertaining to the Group 1,867 1, Capital and reserves pertaining to minority interests Profit (loss) for the period pertaining to minority interests Shareholders equity pertaining to minority interests Total capital and reserves 2,129 2, Premium provision Provision for outstanding claims 2,788 2, Gross technical provisions - non-life 3,532 3, Gross technical provisions - life 15,899 15, Other gross non-life technical provisions Other gross life technical provisions Financial liabilities 1,650 1, of which deposits from policyholders 1,395 1, Allowances, payables and other liability items 1, (***) TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 24,535 24, (*) Indicates the items of the statements in the consolidated financial statements as per ISVAP Regulation No. 7 dated July 13th, (**) Sundry receivables, other asset items, and other tangible assets (statement of financial position items under assets = ). (***) Allowances, payables and other liability items (statement of financial position items under liabilities = ). 33

34 Table 5 - Reclassified consolidated income statement Change ( millions) March 31st, 2017 March 31st, 2016 Amount % Items from obligatory statements (*) Net premiums 1,193 1, Net charges relating to claims -1,134-1, Operating expenses of which commission and other acquisition costs of which other administrative expenses Other revenues net of other costs (other technical income and charges) Net income from financial instruments at fair value through profit or loss n.s. 1.3 Of which result from class D financial operations (**) n.s. Net income from investments in subsidiary companies, associated companies and joint ventures n.s Net income from other financial instruments and investment property of which net interest of which other income net of other charges of which net profits realised of which net valuation profits on financial assets of which changes in other financial liabilities n.a Commission income net of commission expense Operating expenses relating to investments (***) RESULT OF INSURANCE BUSINESS AND FINANCIAL OPERATIONS Other revenues net of other costs (excluding other technical income and charges included under insurance operations) n.s PRE-TAX PROFIT (LOSS) FOR THE PERIOD Taxation NET PROFIT (LOSS) FOR THE PERIOD PROFIT (LOSS) FROM DISCONTINUED OPERATIONS n.a. 4 CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD Profit (loss) for the period pertaining to minority interests PROFIT (LOSS) FOR THE PERIOD PERTAINING TO THE GROUP (*) Indicates the items of the statements in the consolidated financial statements as per ISVAP Regulation No. 7 dated July 13th, (**) Includes the Class D profits recognised in the operating expenses relating to investments amounting to less than 1 million and other revenues amounting to 1 million. (***) Includes operating expenses relating to class D investments amounting to less than 1 million. n.s. = not significant n.a. = not applicable 34

35 Table 6 - Reclassified consolidated income statement by segment of activities NON-LIFE LIFE OTHER TOTAL ( millions) March 31st, 2017 March 31st, 2016 March 31st, 2017 March 31st, 2016 March 31st, 2017 March 31st, 2016 March 31st, 2017 March 31st, 2016 Net premiums ,193 1,152 Net charges relating to claims ,134-1,047 Operating expenses of which commission and other acquisition costs of which other administrative expenses Other revenues net of other costs (other technical income and charges) Net income from financial instruments at fair value through profit or loss Result from class D financial operations (*) Net income from investments in subsidiary companies, associated companies and joint ventures Net income from other financial instruments and investment property Commission income net of commission expense Operating expenses relating to investments (**) RESULT OF INSURANCE BUSINESS AND FINANCIAL OPERATIONS Other revenues net of other costs (excluding other technical income and charges included under insurance operations) PRE-TAX PROFIT (LOSS) FOR THE PERIOD Taxation NET PROFIT (LOSS) FOR THE PERIOD PROFIT (LOSS) FROM DISCONTINUED OPERATIONS CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD (*) Includes the Class D profits recognised in the operating expenses relating to investments amounting to less than 1 million and other revenues amounting to 1 million. (**) Includes operating expenses relating to class D investments amounting to less than 1 million. 35

36 Table 7 - Key indicators March 31st, 2017 March 31st, 2016 December 31st, 2016 Non-life ratios for retained business Claims ratio (Net charges relating to claims / Net premiums) 67.3% 65.4% 65.9% G&A ratio (Other administrative expenses / Net premiums) 6.4% 6.7% 6.6% Commission ratio (Acquisition costs / Net premiums) 19.0% 19.0% 19.2% Total Expense ratio (Operating expenses / Net premiums) 25.4% 25.7% 25.8% Combined ratio (1 - (Technical balance / Net premiums)) 93.4% 92.0% 93.2% Non-life ratios for direct business Claims ratio (Net charges relating to claims / Premiums for the period) 65.8% 65.3% 64.3% G&A ratio (Other administrative expenses / Premiums for the period) 5.8% 6.0% 5.7% Commission ratio (Acquisition costs / Premiums for the period) 19.9% 19.8% 19.8% Total Expense ratio (Operating expenses / Premiums for the period) 25.7% 25.8% 25.5% Combined ratio (1 - (Technical balance / Premiums for the period)) 92.5% 91.9% 91.4% Life ratios G&A ratio (Other administrative expenses / Premiums written) 1.0% 1.2% 1.1% Commission ratio (Acquisition costs / Premiums written) 2.6% 2.3% 2.8% Total Expense ratio (Operating expenses/ Premiums written) 3.6% 3.5% 3.9% Total ratios G&A ratio (Other administrative expenses / Premiums written) 2.7% 2.9% 3.0% Note: premiums written in the life business refer to the amount of gross insurance premiums and of the investment contracts. 36

37 Table 8 - Total premiums written A BRIEF OUTLINE OF THE BUSINESS PERFORMANCE Insurance premiums are shown in the table below, with indication of the percentage in relation to total direct business and percentage changes as compared with the same period last year, together with investment contracts. Classes Change ( millions) March 31st, 2017 % of total March 31st, 2016 % of total Amount % Accident and injury Health Land vehicle hulls Goods in transit Fire & natural forces Other damage to assets TPL - Land motor vehicles TPL - General Credit n.s Suretyship Sundry financial losses Legal protection Assistance Other classes (1) 0.4 n.s. 0.9 n.s Total non-life classes Insurance on the duration of human life - class I Insurance on the duration of human life linked to investment funds - class III Health insurance - class IV 0.2 n.s. 0.2 n.s. 0 0 Capitalisation transactions - class V Pension funds - class VI Total life classes Total direct business 1, , Indirect business Total insurance premiums 1, , Insurance on the duration of human life linked to investment funds - class III Pension funds - class VI Total investment contracts TOTAL PREMIUMS WRITTEN 1, , (1) includes railway rolling stock, aircraft, sea and inland water vessels/hulls and TPL aircraft and sea and inland water vessels. n.s. = not significant 37

38 Table 9 - Life premiums written Life business Change ( millions) March 31st, 2017 % of total March 31st, 2016 % of total Amount % Insurance on the duration of human life - class I Insurance on the duration of human life linked to investment funds - class III Health insurance - class IV 0.2 n.s. 0.2 n.s. 0 0 Capitalisation transactions - class V Pension funds - class VI Total life premiums - direct business n.s. = not significant Direct non-life premiums written decreased from 469 million to 465 million, or 0.9%. As already indicated, in the motor segment there were premiums for million (-1.8%) and in the non-motor segment the premiums amounted to million (+0.5%): in particular, with reference to the main non-life classes, premiums relating to accident and injury rose to 51.4 million (+2.8%), along with land vehicle hulls which amounted to 34.7 million (+3.3%) and those relating to other damage to assets which amounted to 36.9 million (+4.2%). Classes which saw a decrease in premiums included the fire and natural forces class which amounted to 25.2 million (-1.9%) and TPL motor equal to million (-2.5%). Direct non-life premiums written were generated as follows: the agency channel with million (-0.2%), the banking channel with 18.4 million (+4.5%), brokers with 12.1 million (-9%) and other channels with 4.1 million (-39.7%). Direct business non-life premiums are attributable to the Parent Company for 384 million, ABC Assicura for 7.9 million, BCC Assicurazioni for 9.7 million and TUA Assicurazioni for 63.4 million. Insurance premiums in the life business totalled million (+5.5%). Premiums written relating to investment contracts amounted to 70.8 million (+4%). Total life premiums written, amounting to million, were up by 5.4% when compared with million as of March 31st, Direct life premiums written were generated as follows: the agency channel with million (+17.2%), the banking channel with million (+3.3%), brokers with 13.7 million (-13.8%), financial advisors with 3.7 million (-45.6%) and other channels with 77.1 million (+13.7%). Life premiums attributable to the Parent Company totalled million, BCC Vita 70.5 million, Berica Vita 37.7 million, Cattolica Life 9.6 million and Lombarda Vita 488 million. 38

39 STATEMENT OF FINANCIAL POSITION Goodwill Investments The item, which comprises the goodwill acquired in the business combinations as established by IFRS 3, amounts to 203 million, unchanged with respect to December 31st, Investments (which include investment property, investments in subsidiary companies, associated companies and joint ventures, loans and receivables, held to maturity investments, available for sale financial assets, financial assets at fair value, cash & cash equivalents and property used for operating purposes) at the end of the period amounted to 21,992 million, compared with 21,591 million as of December 31st, 2016 (+1.9%). Table 10 - Investments The result of financial operations, with the exclusion of investments whose risk is borne by the policyholders and gross of the tax effects and the change in other financial liabilities, came to 126 million, compared with 108 million as of March 31st, 2016 (+16.7%). Change ( millions) March 31st, 2017 % of total December 31st, 2016 % of total Amount % Investment property Property Investments in subsidiary companies, associated companies and joint ventures Loans and receivables Held to maturity investments Available for sale financial assets 16, , Financial assets at fair value through profit or loss 3, , Cash and cash equivalents TOTAL 21, , Investment property and properties Corporate investment property ended 2016 with a record in terms of volume equal to around 9.1 billion ( 8 billion in 2015) and for the first quarter of 2017 an estimated volume of 1.6 billion is envisaged. Also the percentage of Italian investment property to investments in Europe rose, from 2.9% in 2015 to 3.6% in The boost of the investments towards these levels was determined by the contribution of both the interest in our country shown by foreign operators and also the rediscovered vitality of the Italian operators whose contribution to the total invested in Italy reached around 40%. With regard to the property units for the business, 2016 was a year which saw an inversion in the trend, with a significant increase in contracts (+17%) and transactions in the office sector (+12.5%), the commercial sector (+16.6%) and the industrial sector (+22.1%). The hotel market also remained lively with many ventures being planned both by 39

40 international chains and Italian operators once again active on the market with development strategies. All this contributes towards rendering the Italian market more attractive with respect to the average European one thanks to the interest of both the chains in the luxury and the economy sector, the wealth of properties to be developed and more generally the considerable growth potential. It should be emphasised that the growth of the market does not only concern Rome and Milan, but extends to other important areas such as Venice, Florence, Turin and the South (source: Scenari immobiliari). It is recalled that, in November 2016, a letter of intent was signed by the Parent Company, Cattolica Beni Immobili, Cattolica Agricola, H-Farm and Cassa Depositi e Prestiti, so as to outline the content and the structuring of the property transaction known as H-Campus comprising an organic complex of buildings and infrastructures intended to be used for school and university digital education. Implementing the agreements reached by means of the afore-mentioned letter of intent, in February an Investment Agreement was signed between the afore-mentioned parties so as to launch the realisation of the project entitled H-Campus. The signing of the final Investment Agreement with the Veneto Regional Authority, whose proposal, entered into by the proponent Cattolica Beni Immobili, was presented at the Conference of Services held in January, is envisaged for the second half of the year. The item amounted to 658 million, unchanged with respect to December 31st, Securities investments The investment activities took place in a market context characterised by a period of moderate volatility and returns on the up, essentially influenced by still expansive monetary policies adopted by the main central banks, apart from the Federal Reserve, and by a series of crucial events of a political nature. Operations were characterised by the maintenance of adequate liquidity levels; there were no significant movements between the various investment sectors, while rotations within the same sector took place on a consistent basis with the financial duration objectives of the portfolios expressed by asset & liability management. During the quarter, geographic diversification activities were carried out on the governmental component within the sphere of the countries of the Euro Zone, for the purpose of reducing the concentration on domestic government securities and mitigating the risk of extension of the spreads in contexts of high volatility. These transactions were carried out in coincidence with a period of rate rises. With regard to bonds, the company took advantage of interesting opportunities offered by the subscription, both on the primary and secondary market, of bank securities and securities of industrial issuers. Particular value was recognised in subordinate issues of primary standing issuing banks, with fixed coupon plans for the first year and, subsequently, index-linked to the monetary rates. Capital gains were also generated, exploiting the volatility of the related financial markets, animating both the floating rate component and the fixed rate one. 40

41 The exposure to the share component was kept stable during the quarter for the purpose of containing the average portfolio volatility and rationalising the capital absorption. The positions maintained in the portfolio were mostly attributable to issues capable of paying the shareholders stable and sustainable dividends over the mid-term, as well as characterised by solid performance from an economic-equity standpoint. The portfolio is denominated principally in Euro, with marginal exposures in US dollars and GBP. Issuers place products primarily in Europe, and to a lesser extent in the United States. However, many issuers presented spheres of operations highly diversified in geographic terms, for the purpose of reducing recession risks as far as possible. Investments in subsidiary companies, associated companies and joint ventures The item includes investments in subsidiary companies excluded from the consolidation area, in associated companies over which the Group exercises significant influence, and in jointly-controlled companies, which are accounted for using the equity method. The item amounted to 72 million, compared with 71 million as of December 31st, Loans and receivables Assets with a pre-established maturity and payments which are fixed or can be determined, not listed on active markets, which are not recorded in any of the other categories, are included in this item. Specifically, all the loans and receivables, the deposits from re-insurers with transferring companies and bonds not listed on active markets are recognised herein. At the end of the period, loans and receivables amounted to 851 million (+0.5% with respect to the end of 2016) and represent 3.9% of investments. Held to maturity investments All financial assets, excluding derivatives, with a pre-established maturity and payments which are fixed or can be determined, which the Group intends to or has the ability to hold until maturity, are classified in this category. As of March 31st, held to maturity investments amounted to 240 million, compared with 242 million as of December 31st, 2016 (-0.8%) and represent 1.1% of investments. Available for sale financial assets This category includes all the financial assets, valued at fair value, other than derivative instruments, both debt instruments and equities, which are not classified in the other categories and are disciplined by IAS 39. Specifically, the equity investments deemed to be strategic in companies which are not subsidiary or associated companies, whose fair value derives from prices taken from active markets, or, in the case of securities not listed on active markets, from commonly applied valuation methods, which have been chosen taking into account the sector they belong to, have been recognised in this category. At the end of the first quarter, available for sale financial assets amounted to 16,596 41

42 million (+0.8%) and represented 75.5% of investments. Financial assets at fair value through profit or loss This item comprises financial assets, including derivatives, held for trading and those designated by the Group as valued at fair value through profit or loss. Specifically, besides assets held for trading purposes, the item also includes the financial assets designated at fair value through profit or loss related to: insurance or investment contracts issued by the Group whose investment risk is borne by the policyholders; the management of pension funds. At the end of the first quarter, financial assets at fair value through profit or loss amounted to 3,381 million (+8.1%) and represented 15.4% of total investments. Technical provisions Gross non-life technical provisions (premiums and claims) amounted to 3,532 million, compared with 3,567 million as of December 31st, 2016 (-1%). Gross life technical provisions (mathematical provisions inclusive of shadow accounting) totalled 15,899 million, compared with 15,638 million at the end of the previous year (+1.7%). Also taking into account financial liabilities relating to investment contracts, the technical provisions and deposits relating to life business amounted to 17,294 million ( 16,991 million as of December 31st, 2016, +1.8%). Shareholders Equity Consolidated shareholders equity at the end of the first quarter came to 2,129 million, compared with 2,114 million at the end of the previous year, of which 1,867 million for the Group and 262 million pertaining to minority interests. The Group s shareholders equity includes gains on available for sale financial assets amounting to 46 million, compared with 64 million at the end of the previous year. The shareholders equity pertaining to minority interests includes gains on available for sale financial assets amounting to 7 million, compared with 10 million as of December 31st,

43 SIGNIFICANT TRANSACTIONS CARRIED OUT DURING THE FIRST QUARTER The significant events that occurred during the period as part of managing the investments in Group companies are set out below, in addition to other significant events during the period. You are hereby reminded that the Parent Company s Board of Directors resolved to comply, with effect as from December 13th, 2012, with the opt-out regime as per Articles 70.8 and 71.1 bis of the Issuers Regulations, therefore availing itself of the faculty to depart from the obligations to publish the disclosure documents laid down at the time of significant merger, spin-off, share capital increase via conferral of assets in kind transactions, acquisitions and transfers. Cattolica and the Group On January 31st, 2017, the Parent Company made a payment towards share capital in favour of Cattolica Beni Immobili for 4.9 million, within the sphere of the plan for dealing with the commitments envisaged for the restructuring and safety measures for the premises used for events care of the Cattolica Center. On February 10th, 2017, further to the matters communicated on August 4th, 2016, since six months had elapsed as from receipt by Banca Popolare di Vicenza (BPVi) of the communication relating to the unilateral withdrawal of Cattolica from the partnership agreements with the bank, the lock-up restriction on 4,120,976 Cattolica shares owned by BPVi ceased, without prejudice to anything else envisaged in the agreements. As from the same date, the period for the exercise of the right to sell to BPVi the investments held in the share capital of Berica Vita, Cattolica Life and ABC Assicura started, in accordance with the matters envisaged by the Partnership Agreements originally entered into with said bank and already communicated to the market. Furthermore, you are hereby informed that further to the acquisition of elements of information during 2016, with regard to the various transactions entered into by BPVi between 2014 and 2016, the Parent Company decided to check any requirements and conditions for the eventual protection of its claims as investor in BPVi, with particular reference to the share capital increase transactions of the same bank in Spring 2014 and the content of the related prospectus. A specific opinion was requested on the matter from qualified legal advisors, who concluded, on the one hand, for the theoretical existence of said compensatory claims of Cattolica and, on the other hand, for the appropriateness of awaiting, due to the launch of the related action, the outcome of the assessments and the sanction procedures vis-à-vis the former exponents of BPVi launched by CONSOB with regard to the same subject. On February 15th, 2017 the shareholders of BCC Vita paid over in proportion to the respective holding held, additional payments towards share capital for a total of 10 million already envisaged among the measures at the end of Supervisory Authority (IVASS) On December 15th, 2016 several of the leading insurance companies operative in Italy in 43

44 the Motor TPL class, and among these the Parent Company, FATA and TUA Assicurazioni were notified of the opening of a procedure of the Anti-trust Authority for a possible restrictive understanding of the competition in violation of the pertinent legislation. This procedure, according to the matters declared by the Authority, originates from a number of public declarations of representatives of the Generali Group and the Unipol Group referring to the market as a whole; these declarations could, according to the theories of the Authority, cancel out the uncertainty on the future price strategy in the Motor TPL class and fuel the expectation that any increases, being generalised among the main players, will not be followed by the risk of losing customers, or in other words there may have been the manifestation of a restrictive agreement of the competition among the main players. At the time of notification, inspections took place care of a number of insurance companies, not forming part of the Cattolica Group. At present, the procedure is still in the preliminary stages; therefore, Cattolica and TUA have decided to propose to the Authority the closure of the Procedure with the undertaking of commitments, in accordance with the matters envisaged by current legislation, in relation to which a reply is awaited. With reference to the inspection activities launched by IVASS in 2016, during the first quarter Lombarda took steps to inform the Authority of the progress of the activities underway and BCC Vita and BCC Assicurazioni responded to the report delivered in January. OTHER INFORMATION Human resources As of March 31st, the Group headcount included 1,576 staff, compared with 1,568 as of December 31st, The headcount comprised 43 executives, 298 officials and 1,235 office workers. The number of full time equivalent employees came to 1,516, compared with 1,508 as of December 31st, Performance of Cattolica stock During the first quarter, Cattolica shares recorded a minimum price of 5.69 and a maximum price of The capitalization of the stock on the market as of March 31st, came to 1,309 million. The stock performance showed an increase of 31.99%, with respect to an increase of 4.73% in the FTSE Mib index and an increase of 4.06% in the FTSE Italia All-Share Insurance Index. Average volumes traded in the first quarter of 2017 were 707,633 transactions. 44

45 SIGNIFICANT EVENTS AFTER THE END OF THE FIRST QUARTER On April 4th, 2017 Cattolica resolved to exercise, by the deadlines envisaged contractually, the option right for the sale to BPVi of the investments held in the share capital of Berica Vita, Cattolica Life and ABC Assicura started, in accordance with the matters envisaged by the Partnership Agreements originally entered into and mentioned previously. As of that date, the equivalent value came to million. Furthermore, on the basis of the accounting and actuarial results, the envisaged penalties for the failure to achieve the production and profitability objectives of the investee companies, as of February 10th, 2017, came to 8.6 million. On April 5th, 2017 BPVi issued a press release informing of the sale of 10,500,000 ordinary Cattolica shares, equal to around 6.02% of the share capital. This press release also specified that, on conclusion of the transaction BPVi came to hold 15,767,793 shares, equal to around 9.05% of Cattolica s share capital, an investment on which BPVi undertook a lock-up commitment of 90 days. By means of communication dated April 19th, 2017 BPVi challenged the put option exercised by Cattolica also confirming the controversy on the validity and efficacy of the August 2016 withdrawal. The Parent Company has stated the groundlessness of BPVi s complaints with full confirmation of the validity and efficacy of both the right to withdraw and the put option right, in any event duly noting the willingness to enter into discussions so as to examine each question in the reciprocal interests of both parties, without any prejudice. Cattolica Assicurazioni s ordinary and extraordinary shareholders meeting was held on April 22nd. The shareholders meeting approved the 2016 annual financial statements and the Board of Directors proposal for a single dividend for a total of 0.35 per share. The shareholders meeting appointed the following members of the Board of Directors for the two-year period : Chiara de Stefani and Nerino Chemello. The shareholders meeting approved the remuneration policies relating to the directors and officers, the personnel and other parties contemplated as beneficiaries of general principles by legislation. Upon the proposal of the Board of Directors, the shareholders meeting approved the plan for the purchase and sale of own shares in accordance with the law. In extraordinary session, the shareholders meeting approved the amendment of Articles 2, 24, 32, 33, 35, 39, 41, 44, 54 and the cancellation of Article 55 of the Articles of Association. During the board meeting held on April 28th, it was disclosed that Mr. Giovan Battista Mazzucchelli will, as from May 30th, leave the office of Director and Managing Director of Cattolica Assicurazioni and the other Group companies. The Board of Directors has duly noted and expressed to Mr. Mazzucchelli the greatest appreciation for the expertise, professionalism and passion with which he had guided the Group over a period of ten years distinguished by continual and gradual growth and by operating results which have turned Cattolica into an entrepreneurial concern of primary importance in the Italian insurance sector. 45

46 As of the same date, the Board of Directors appointed Mr. Alberto Minali as the new Managing Director as from June 1st, OUTLOOK FOR BUSINESS ACTIVITIES In an insurance market still characterised by sharp competition and low interest rates, the envisaged trends are confirmed, for the moment and barring extraordinary events, for the entire year. THE BOARD OF DIRECTORS Verona, Italy, May 9th

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49 The undersigned Giuseppe Milone, in his capacity as Executive appointed to draw up the corporate accounting documents of Società Cattolica di Assicurazione Soc. Coop., with registered offices in Lungadige Cangrande, 16, Verona, Italy, with reference to the Interim Management Report as of March 31st, 2017, approved by the Board of Directors during the meeting held on May 9th, 2017, hereby DECLARES in pursuance of Article 154 bis, paragraph 2 of the Consolidated Finance Law, that the accounting disclosure contained in the Interim Management Report as of March 31st, 2017 and in the press release, complies with the documental results, the books and ledgers and the accounting entries. Giuseppe Milone Verona, May 9th, 2017

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