UNIPOL GRUPPO FINANZIARIO INTERIM FINANCIAL REPORT 30 SEPTEMBER 2010

Transcription

1 UNIPOL GRUPPO FINANZIARIO INTERIM FINANCIAL REPORT 30 SEPTEMBER 2010

2 Translation from the Italian original which remains the definitive version

3 UNIPOL GRUPPO FINANZIARIO S.P.A. Registered and Head Offices at Via Stalingrado 45, Bologna Share capital 2,698,895, fully paid-up Tax code and Bologna Company Registration No R.E.A. No Interim Financial Report 30 September 2010 (in accordance with Article 154-ter of Legislative Decree 58/1998) Bologna, 11 November 2010

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5 Contents Company bodies...4 Interim management report Consolidation scope at 30 September Macroeconomic background and market trends...7 Group highlights...11 Alternative performance indicators...12 Management report...13 Insurance business...16 Banking business...22 Holding and services business...22 New products...23 Property and financial management...24 Business outlook for the current financial year...28 Consolidated financial statements Statement of financial position...30 Income statement and statement of comprehensive income...32 Income statement by class of business...33 Declaration of the Manager in charge of financial reporting pursuant to Article 154-bis of Legislative Decree 58/

6 Company bodies Honorary Chairman Board of Directors Chairman Vice Chairman Chief Executive Officer and General Manager Board Members Secretary to the Board of Directors Enea Mazzoli Pierluigi Stefanini Piero Collina Carlo Cimbri Francesco Berardini Sergio Betti Rocco Carannante Pier Luigi Celli Gilberto Coffari Sergio Costalli Ernesto Dalle Rive Jacques Forest Vanes Galanti Roger Iseli Claudio Levorato Roberto Giay Ivan Malavasi Massimo Masotti Enrico Migliavacca Pier Luigi Morara Milo Pacchioni Marco Pedroni Giuseppe Politi Francesco Vella Marco Giuseppe Venturi Luca Zaccherini Mario Zucchelli Board of Statutory Auditors Chairman Standing Auditors Alternate Auditors Roberto Chiusoli Giorgio Picone Domenico Livio Trombone Carlo Cassamagnaghi Cristiano Cerchiai Manager in charge of financial reporting Maurizio Castellina 4

7 Interim management report

8 CONSOLIDATION SCOPE AT 30 SEPTEMBER 2010 LINE-BY-LINE 60% 67.74% 100% 100% UGF 32.26% UGF ASSICURAZIONI ARCA VITA BANCA BOLOGNA VERONA BOLOGNA UNIPOL SGR BOLOGNA 98.48% UNISALUTE BOLOGNA 100% SMALLPART BOLOGNA 95.64% ARCA ASSICURAZIONI VERONA 86.18% UGF MERCHANT BOLOGNA 100% LINEAR ASSICURAZIONI BOLOGNA 100% UNIFIMM BOLOGNA 50% ISI INSURANCE VERONA 100% UNIPOL FONDI IRELAND 51% BNL VITA MILAN 100% MIDI BOLOGNA 100% ARCA VITA INTERNATIONAL IRELAND 100% UGF LEASING BOLOGNA 99.83% NAVALE ASSICURAZIONI S. DONATO M. (MI) 100% NAVALE VITA ROME 100% 60.22% 82.03% ARCA DIRECT ASSICURAZIONI VERONA ARCA INLINEA VERONA 1% ARCA SISTEMI VERONA 39.78% 16.97% 100% 100% UGF PRIVATE EQUITY SGR BOLOGNA NETTUNO FIDUCIARIA BOLOGNA 100% AMBRA PROPERTY BOLOGNA 51% UNICARD MILAN HOLDING INSURANCE COMPANIES PROPERTY AND OTHERS FINANCIAL SERVICES AND BANKS

9 Macroeconomic background and market trends Macroeconomic background Currently engaging the attention of observers of the economy are the fluctuations in the money markets as a result of the attempts by various countries to use the increase in demand from abroad to make up for the difficulties experienced at home. The issue of the sustainability of public debt seems to be having less effect on currency prices: at the end of the summer the Euro once again stood at approximately 1.40 to the Dollar. Contrary to the expectations generated by the results of the second quarter the picture that is emerging is of a gradual slowdown in the United States and Europe (with the exception of Germany) alongside concerns about the rise in the exchange rate against the currencies of the emerging countries, which are taking various measures in an attempt to stem the tide of worldwide liquidity, which risks inundating their fragile financial systems. The Italian economy grew by 0.9% in the first half of In the October edition of its World Economic Outlook the International Monetary Fund credited Italy with an increase of 1% for the whole of 2010, well below the performance of the German economy, which showed annual growth of 3.4%. Even though there were a few signs of recovery in manufacturing (an average of +6.2% in the first eight months of the year), jobs continued to be lost (-0.8% in August) and payments from the cassa integrazione wages guarantee fund soared (+50.5% by 30/9/2010). Consumption was flat, with no change in retail sales in the first seven months of 2010 compared with the same period of Exports (+20.4% in the first eight months of 2010) represented a possible way out of stagnant domestic demand for Italian businesses, though the recent rise of the Euro against the main currencies is a constraint from which Italian industry will have trouble breaking free. Government action is strictly limited by the need to reassure the markets about the health of the public accounts. According to Istat, "Total net indebtedness was 6.1% of GDP in the first half of 2010, down compared with the figure of 6.3% recorded in the first half of In the first six months of 2010 the primary balance on GDP was negative and at 1.5%, the same as during the same period last year". Financial markets The third quarter of 2010 was characterised by an overall increase in investors' propensity for risk, which led to a rise in prices in the main share markets. The MSCI index, which represents stock markets worldwide, in fact recorded a quarterly performance of 9.19%, largely the same as at the beginning of the year (+0.70%). The main geographical areas contributed to this result in a rather uneven way: the Eurostoxx50 index, representing the share markets in the Eurozone as a whole, performed less well over the quarter than the worldwide index (+6.78%), and this contributed to keeping the balance since the beginning of the year in deficit (-7.32%). On the other hand the US share market (S&P 500) rose by 10.72% during the quarter, reversing the trend since the beginning of the year (+2.34%), and the emerging markets (MSCI index) was up 11.92% during the quarter and 5.90% since the beginning of the year. The variations in performance between the European block and the other main share markets were due to differences in the state of the economies involved and the economic policies adopted. Economic growth continued to be modest in the Eurozone as a whole and distributed unevenly among the countries belonging to the EMU: in the face of a German economy that was expanding at the fastest rate experienced in the last decade, growth in the GDP of the peripheral countries, including Italy, continued to be limited, partly because of the sovereign debt crisis that had struck several of these nations. 7

10 The US economy, helped by the expansionary economic policies adopted by the Obama administration and by the Fed, performed better than that of the Eurozone, whilst the emerging economies continued to outgrow their potential, which induced the central banks of several of those countries, such as China, to adopt restrictive monetary policies. Still on the subject of economic policies, in the United States quantitative easing, that is the central banks acquiring financial assets in order to keep long-term interest rates down, was used more and more and was the reason for the general rise in share and bond prices. On the other hand the European Central Bank used this tool much more conservatively: with the exception of the plan to repurchase the government bonds of the peripheral countries in difficulty, the ECB did not purchase any financial assets for fear of the inflationary implications in the medium term. This position helped to damp down the share markets in the Eurozone. As for the government bond markets in the peripheral countries of the Eurozone, the third quarter saw a divergence between, on the one hand, Italy and Spain, where yield differentials fell compared with Germany, and, on the other hand, Greece, Ireland and Portugal, where yields continued to rise both in absolute terms and compared with Germany. Investors in those countries were sceptical about the reliability of their banking systems and the credibility of the economic policies adopted. In the corporate bond market the rise in share prices had a positive effect: the itraxx index, representing the average spread at which financial sector companies with a high credit rating issue bonds, rose from points at the end of June to by the end of September. Insurance business The figures available for 2010 show that there continued to be a real dichotomy in the insurance market. Whilst Non-Life business was largely stagnant (+1.1% in the first half of the year 1 ), new Life business (individual policies in the first eight months) grew even faster (+27.9% including crossborder activity), even though it has slowed down in the last few months. Income in MV Non-Life classes grew 2.2% in the first six months of 2010 thanks to the MV TPL class, where premium income was up 2.5% on the same period last year, largely due to the changes in tariffs introduced by insurers with the aim of balancing the technical account in this class. Motor vehicles own damage or loss recorded modest growth (+0.5%), in all probability a result of new registrations in the first three months, when government incentives were still being offered. A further fall in growth in this class is expected in the light of the drop of approximately 20% in new registrations of cars in the last few months. Non-MV Non-Life business was slightly down overall (-0.4%). Typical Italian under-insurance was made worse by the prevailing economic stagnation. Lower manufacturing output led to a reduction in sums assured (and therefore in premiums) in corporate business, whilst individuals' reluctance to commit to new expenditure meant they were less willing to take out insurance policies. Growth in Life income (+27.9% in the first eight months of 2010) has been followed by a significant slowdown during the last few months. The result for August was lower than for the same month of 2009 (-18.9%). Both supply and demand factors played a role in this. It should be borne in mind that low interest rates did not make it easy for insurers to obtain yields from segregated accounts that could cover the guaranteed minima to policyholders. This was also the reason for the increase in Class III products offered by the companies (+200% in the first eight months of 2010). Bank branches and post offices accounted for almost 66% of the market and financial advisers brought in just under 15% of total income. Although these two sales channels seemed to be down in August, 1 All the figures showing variations in Non-Life premiums were recalculated, based on ISVAP tables, in order to make a like-for-like comparison between 2009 and 2010 to take account of the transition between businesses belonging to the European Economic Area of a leading company operating in Italy previously classified as operating outside the EU. 8

11 agents managed to achieve a good rate of growth both during the month (+15.1%) and during the period (+21.5% in the first eight months of 2010). Our companies are launching new products that respond to customers' requirements for lower-risk investments without compromising the already low level of profitability that Life policies provide for insurers. The sector is also making preparations for incorporating the changes introduced under the new Solvency II legislation. Pension funds market The whole supplementary pension market has stalled and there is no reason to expect it to take off again in the near future. There was a modest increase in total membership in September At the level of individual funds there was a drop in the number of members of occupational funds (more than 37,000 people have left schemes covering specific categories of worker after losing their jobs), a modest increase in the number of members of open-ended funds and a significant increase in the number of subscribers to individual pension plans. The total assets of supplementary pension schemes (including the preexisting funds) exceeded 70bn, more than 20bn of them in occupational funds, approximately 7bn in open-ended funds, more than 4bn in individual pension plans and the remaining 39bn in preexisting funds. During the last five years the average yield of Assofondipensione occupational pension funds has been 2.33%, less than the figure guaranteed by the revaluation of the employees' leaving entitlement (2.52%). The new thinking among social partners is that membership should be compulsory, with only employers making contributions, albeit at a reduced level. Banking and assets under management Bank loans to individuals began to grow significantly once again (+16.9% year on year by August 2010). This figure was a reflection of the relative upturn in the Italian property market and of low interest rates, which made loans attractive. However, lending to non-financial companies was rather different (+1%), with their modest level of activity being insufficient to lead to greater increases. Customer deposits rose more than lending to customers (+8.6%). The most dynamic element was repo contracts, a wise investment for savers concerned by the volatility in the financial markets. Gross bad and doubtful debts exceeded 71bn in August, whilst net doubtful debts ( 41bn) accounted for more than 2.2% of lending to customers. The decision by the European Central Bank to end the state of emergency by starting to reduce the amount of cash available to the banking system led to a gradual rise in Euribor rates (with the three-month rate exceeding the 1% threshold at the beginning of October). In this context, after gradually falling the bank rate spread stabilised at not much above 2%. Half-yearly reports submitted by the main Italian lending groups indicated that brokerage and agency revenues were less than in the same period of 2009 (-4%). The most critical factor was net interest income, which was affected by both low levels of lending and the narrow bank rate spread. Loans tended to form a higher proportion of individuals' financial liabilities, although consumer credit was affected by low levels of consumption in Italy. In the case of financial assets there is no doubt that volatility in the markets had the effect of directing savers towards short-term cash instruments. Public securities were not so prominent in investors' portfolios because of the sovereign debt crisis in Europe in the spring. There was a deficit of 1.7bn in net income from investment funds in September. The worst performance was recorded in cash funds: - 1,748m in September and bn since the 9

12 beginning of the year. Total net income from unit trusts for the first nine months of 2010 was positive to the tune of more than 4.5bn. Total assets managed by investment funds had risen to 449bn by September ( 429bn at the end of 2009). According to the Banca d Italia equity in managed funds had amounted to 472bn at the end of March The UGF Group's Interim Financial Report for the period ended 30 September 2010 was drawn up in accordance with Article 154-ter of Legislative Decree 58/1998 (Consolidated Finance Act). There were no changes in the scope of consolidation between 30 June and 30 September

13 GROUP HIGHLIGHTS Amounts in m 30/9/ /9/ /12/2009 Non-Life direct insurance premiums 2,967 3,012 4,260 % variation (1) Life direct insurance premiums 3,425 4,031 5,240 % variation (1) of which Life investment products % variation (1) Total direct insurance premiums 6,392 7,043 9,501 % variation (1) Bank business - direct customer deposits 9,117 8,554 9,540 % variation (2) Annual Premium Equivalent (APE) Life business - Group share % variation (1) Loss ratio - Non-Life - direct business 81.4% 82.6% 86.0% Combined ratio - Non-Life - direct business 103.3% 104.7% 108.0% Net gains on investments and financial income (excl. assets/liabilities at fair value) % variation (1) Consolidated profit (loss) % variation (1) Comprehensive income (expense) Investments and cash and cash equivalents 47,046 39,758 40,531 % variation (2) Technical provisions 32,635 27,712 28,286 % variation (2) Financial liabilities 13,786 11,288 12,198 % variation (2) Equity attributable to owners of the Parent 3,824 3,808 3,585 % variation (2) Number of employees 7,520 7,117 7,157 (1) % variation compared with the corresponding period of the previous year (2) % variation compared with 31/12 of the previous year 11

14 Alternative performance indicators These indicators (APE, loss ratio, expense ratio and combined ratio) are not laid down in the accounting standards but are calculated in accordance with economic and financial practices. Annual Premium Equivalent The new Life production expressed in APE is a measurement of the volume of business relating to new policies and is expressed by the sum of periodic premiums of new production and one tenth of single premiums. This indicator is used to assess business jointly with the Life in-force value and new business value of the Group. Amounts in m Sep-10 Jun-10 Dec-09 Sep-09 Recurring annual premiums (pro quota) Single premiums (pro quota) 2,241 1,545 3,457 2,681 Total new production - Life (pro quota) 2,267 1,563 3,486 2,701 Pro quota APE Loss ratio Non-Life (direct business and gross of reinsurance) This is the principal indicator of the profitability of an insurance company's operations in the Non- Life sector. It is the ratio between the cost of direct claims for the period and direct income for the period. Amounts in m Sep-10 Jun-10 Dec-09 Sep-09 Direct premiums (gross of reinsurance) 3,150 2,071 4,294 3,205 Direct claims (gross of reinsurance) 2,563 1,687 3,703 2,649 Loss ratio 81.4% 81.5% 86.0% 82.6% Expense ratio Non-Life (direct business and gross of reinsurance) Percentage indicator for the ratio between operating expenses (excluding commissions from indirect insurance business) and total direct premiums. Amounts in m Sep-10 Jun-10 Dec-09 Sep-09 Direct premiums (gross of reinsurance) 2,967 2,068 4,260 3,012 Direct operating expenses (gross of reinsurance) Expense ratio 21.9% 22.0% 22.0% 22.1% Combined ratio Non-Life (direct business and gross of reinsurance) This indicator measures the balance of Non-Life technical account and is made up of the sum of the loss ratio and the expense ratio. Sep-10 Jun-10 Dec-09 Sep-09 Loss ratio 81.4% 81.5% 86.0% 82.6% Expense ratio 21.9% 22.0% 22.0% 22.1% Combined ratio 103.3% 103.5% 108.0% 104.7% 12

15 Management report The first nine months of 2010 were characterised by numerous events of great importance for the UGF Group. The main events are summarised below, but details have already been notified to the markets and mentioned in the previous interim financial reports for the current year. The first part of the year saw the drawing up of the Business Plan, which was approved by the Board of Directors of UGF S.p.A. on 13 May 2010 and is now the driving force behind the Group's operations. Formulated with the contribution of more than 500 employees during the course of more than 160 workshops, the plan was the first stage in the process of general involvement in projects to improve and constantly monitor results. On the corporate front the integration of Navale Assicurazioni into UGF Assicurazioni was launched and the acquisition of the Arca Vita Group (Arca Group) was completed. The integration of Navale Assicurazioni into UGF Assicurazioni is in line with the objectives of strengthening and improving the efficiency of insurance business and the networks of Aurora and Unipol agencies, which will be joined by Navale agencies. Under this operation Navale Assicurazioni's insurance business will be hived off to UGF Assicurazioni and subsequently Navale Assicurazioni will be merged into the holding company, UGF. The operation is subject to the required permits being obtained from the relevant Authorities. As regards the Arca Group, on 22 June, having obtained the permits from the Supervisory Authority, the Parent UGF acquired control of Arca Vita and entered into a ten-year agreement with the vendors to develop a strategic partnership covering Life and Non-Life bancassurance business, as provided for in the agreement signed in December The operation establishes the new platform for the UGF Group's bancassurance business in view of the expected departure from the Group of BNL Vita when the current partnership with BNP Paribas expires in In July the Group increased its capital by a total of 500m ( 400m in shares and 100m in warrants) in order to maintain a firm equity structure and a high degree of financial flexibility. The success of the operation, under which despite going through a bad patch the market subscribed all the ordinary and preference shares without the underwriting syndicate needing to intervene, showed that shareholders continue to have confidence in the Group's prospects for growth. When looking at business performance in the first nine months of 2010 it must be remembered that the acquisition of the Arca Group was not formalised until the end of June and therefore the income statement includes the figures relating to Arca for only the third quarter of the year. Non-Life insurance business continued to record the positive effects of the measures implemented under the Business Plan to tackle the deterioration in the loss ratio in the last few years when the climate in the sector has been very negative. The improvement was mainly due to the full effect of the changes in the MV TPL tariff introduced during 2009 after the constant fall in the average premium in the previous few years and to the reforms/cancellation of badly performing contracts. As expected, the portfolio of policies in force since the beginning of the year continued to shrink in the third quarter of 2010 as a result of the very selective underwriting policy, which had repercussions on direct premiums for the first nine months of 2010, on the same scope of consolidation, i.e. excluding the Arca Group, of 2,914m, -3.3% compared with same period of 13

16 2009. However, including the contribution of the Arca Group Non-Life premiums amounted to 2,967m, down only 1.5%. These measures led to a complete reversal of the trend in claims reported, which were considerably down compared with the same period last year. To be specific, in MV TPL, on the same scope of consolidation, i.e. excluding the Arca Group, there was a drop of 12% in claims reported in the first nine months of 2010, even greater than the -10% recorded at the half-year point. The decrease in claims frequency in this class is proof of the effectiveness of the new initiatives and the improved quality of the portfolio of policies. The loss ratio for this year has therefore improved even though average costs are still a problem, partly as a result of decisions made by the courts which, in the absence of relevant legislation, mean that more prudence must be exercised when decisions on how much to allocate to provisions for claims are being made. Underwriting terms in non-mv classes were also substantially revised through the divestment of badly performing contracts and tightening of the underwriting policy in particularly risky areas of business. There was an increase in losses for weather damage during the summer, as has been happening for many years as a result of climate change, though to a lesser extent than during the same period last year. Against this background the Group recorded a loss ratio for direct business of 81.4% at 30 September 2010 compared with 86% at the end of The expense ratio for direct business was 21.9%, in line with last year despite the drop in premiums. Therefore at 30 September the Group had a combined ratio (direct business) of 103.3%, lower than the 104.7% for the third quarter of 2009 and 108% at the end of 2009, proof of the efficacy of the measures undertaken to return to profit and combat the erosion of the margin for this type of business. The Arca Group achieved Non-Life premiums of 171m in the first nine months of 2010 (+38.2%) and a combined ratio for direct business of 98.2%. Premiums attributable to the UGF Group amounted to 53m for the third quarter alone. Life business saw a drop in income of 15% (-18.9% excluding the contribution of the Arca Group). The expected drop in BNL Vita business (-19.1%) contrasted with a substantial increase of +128% in the third quarter of UGF Assicurazioni's Life premiums were down 18.6%, largely owing to the fact that a one-off contract for a very significant amount was recorded in the third quarter of 2009, net of which the decrease would have been only 6.8%. Our latest sales campaigns are aimed at increasing business in the final quarter of The Arca Group achieved Life premiums of 694m in the first nine months of 2010 (+99.3%), 156m of which was from the third quarter and was therefore consolidated by the UGF Group. As a result of the above, new business in terms of APE also fell in the third quarter of 2010, to 249m, i.e. by 13.6% compared with the same period of 2009 (though without the Arca Group's contribution of 16m in the third quarter the fall would have been 17%). UGF Assicurazioni's contribution of 136m was down 14%, but this was less than the fall in premiums owing to the increased incidence on total business of annual premiums. The Arca Group's contribution for the entire nine months would have brought the proforma figure for APE up to 283m. Asset management recorded a partial rise on the stock markets and in the credit spread on bonds during the third quarter of the year in contrast to the generally downward trend since 2009, which reached its lowest point in June, largely linked to the problems of the indebtedness of countries on the periphery of the Eurozone, Greece in particular. Faced with continuing uncertainties in the macroeconomic situation, especially relating to inflation, the Group's investment policies continued to be prudent, the aim being to maintain an appropriate balance between risk and yield and between assets and liabilities to policyholders. Therefore in the first nine months of 2010 the Group brought liquidity into line with ALM requirements for Groups, reduced exposure to the share risk 14

17 and hedged the risk of a rise in interest rates. Asset management was affected by 71m of impairment of share securities during the period but still achieved a gross return of more than 4%. In banking business work continued on consolidating and rationalising the network of existing branches. Banking business performed well in the first nine months of 2010 with an increase in the number of current accounts held by customers, mainly in the areas of business with the highest margins such as small and medium enterprises. Although the economy was still in crisis and net interest income was penalised by extremely low rates, this type of business made a profit after two years, 2008 and 2009, in which there had been an increase in deteriorated loans. The UGF Group ended the first nine months of 2010 with a consolidated gross result of 116m and a consolidated net profit of 45m ( 31m at 30/9/2009, +46.8%), on which a high amount of approximately 5m of tax was payable, largely because of IRAP, the effects of dividend washing on several sales of share securities and the new rate of IRES that insurance companies operating in Life business have to pay, which was introduced this year. The comprehensive result was a loss of 28m ( 438m profit at 30/9/2009) as a result of decreases in the provisions for profits and losses on available-for-sale assets and on cash-flow hedges (- 73m). At the half-year point the Group's excess solvency had been affected by the capital absorption linked to the acquisition of the Arca Group but in the third quarter it benefited from the recovery in the financial markets and the capital increase and therefore on 30 September 2010 was still at the same prudent levels as at the end of 2009, i.e. approximately 1.4 times the requirements. It will be recalled that the acquisition of the Arca Group took place at the end of the first half of this year and therefore this Interim Financial Report includes the figures for the Arca Group for the third quarter of 2010 alone. The changes in the figures for the most significant items compared with 30 September 2009 are also set out on the same scope of consolidation, i.e. excluding the figures for the Arca Group on 30 September Variations in equity since 31 December 2009 are also shown on the same scope of consolidation. 15

18 Insurance business Premiums and investment products Total premiums (premiums and investment products) at 30 September 2010 amounted to 6,415m, a decrease of 9.2% compared with 30 September Life business recorded a decrease of 15%, whilst Non-Life business fell by 1.5%. On the same scope of consolidation the overall change was -12.2% (-18.9% in Life income and -3.2% Non-Life income). Premiums at 30 September 2010 may be broken down as follows: Non-Life premiums 46.6% (42.9% at 30/9/2009) Life premiums 52.9% (56.9% at 30/9/2009) Life investment products 0.5% (0.2% at 30/9/2009). Almost all the policies issued were underwritten in Italy. Consolidated premiums Amounts in m 30/9/2010 comp. % 30/9/2009 comp. % Non-Life direct premiums 2,967 3, Non-Life inwards reinsurance Total Non-Life premiums 2, , Life direct premiums 3,390 4, Life inwards reinsurance Total Life premiums 3, , Total Life investment products Total Life business premiums 3, , Comprehensive income 6, , var. % Premiums for the third quarter of 2010 alone were worth 1,987m (-6%, of which -0.6% was Non- Life and -26.2% was Life). On the same scope of consolidation income amounted to 1,778m (-15.8%, of which -6.8% was Non-Life and -38.5% was Life). In compliance with the requirements of IFRS 4 (presence of a significant insurance risk) all the Non-Life income of the companies in the Group was classified as insurance premiums. As regards Life business, investment products at 30 September 2010 related to Class III - unit- and index-linked policies and Class VI - pension funds. The breakdown of premiums by class of business, with the breakdown indices and the variation compared with the previous year, is set out in the following table: 16

19 Breakdown of premiums by class of business Amounts in m 30/9/2010 comp. % 30/9/2009 comp. % DIRECT ITALIAN BUSINESS Non-Life business premiums Accident and Health (classes 1 and 2) Motor vehicles - TPL (class 10) 1, , Motor vehicles - Property damage (class 3) Marine, Aviation and Transport insurance (classes 4, 5, 6, 7, 11 and 12) Fire and Miscellaneous damages (classes 8 and 9) General third-party liability (class 13) Credit and Bond (classes 14 and 15) Pecuniary losses (class 16) Legal protection (class 17) Support and assistance (class 18) Total Non-Life business 2, , Life business premiums I - Whole and term life insurance 2, , III - Unit-linked/index-linked policies IV - Health V - Capitalisation VI - Pension funds Total Life business 3, , Total Life and Non-Life direct premiums 6, , Life investment products III - Unit-linked/index-linked policies ##### V - Capitalisation VI - Pension funds Total Life investment products Life direct premiums I - Whole and term life insurance 2, , III - Unit-linked/index-linked policies V - Capitalisation VI - Pension funds Total Life direct premiums 3, , Total direct premiums 6, , INDIRECT BUSINESS Non-Life premiums Life premiums Total indirect business TOTAL REVENUE 6,415 7, The classification of premiums by class set out above complies with the provisions of Article 2 of Legislative Decree 209 of 7 September Insurance Code (paragraph 1 in the case of Life business and paragraph 3 in the case of Non- Life business). var. % 17

20 Direct income amounted to 6,392m at 30 September 2010 (-9.2% compared with 30/9/2009), 6,357m of which was premiums ( 7,031m at 30/9/2009) and 35m investment products ( 12m at 30/9/2009), whilst inwards reinsurance amounted to 23m ( 24m at 30/9/2009). On the same scope of consolidation direct income amounted to 6,184m (-12.2%), 6,173m of which was premiums and 11m investment products. Premiums ceded Amounts in m 30/9/2010 comp. % 30/9/2009 comp. % Non-Life premiums Retention index - Non-Life business (%) 97.3% 97.4% Life premiums Retention index - LIfe business (%) 99.6% 99.7% Total premiums ceded Overall retention index (%) 98.5% 98.7% The retention index is the ratio between premiums retained (total direct and indirect premiums, net of premiums ceded) and total direct and indirect premiums. Investment products are excluded from the calculation. Life business Life business premiums totalled 3,427m at 30 September 2010, down 15% compared with 30 September 2009 (-18.9% on the same scope of consolidation). Direct premiums amounted to 3,425m (-15% compared with 30/9/2009, or -18.9% on the same scope of consolidation). There was a drop in Class I traditional policies (-18.8%, or -22.8% on the same scope of consolidation) and Class V capitalisation policies (-29.6%, or -31.5% on the same scope of consolidation) whilst there was an increase in Class III index- and unit-linked policies (+28.1%, or +19.2% on the same scope of consolidation) and in Class VI pension funds (+3.8%). Life direct premiums amounted to 3,390m at 30 September 2010 whilst investment products amounted to 35m, 24m of which related to the Arca Group. At 30 September 2009 Life premiums had been 4,019m and investment products 12m. New business in terms of APE, net of non-controlling interests, amounted to 249m in the third quarter of 2010, a decrease of 13.6% compared with the third quarter of 2009 ( 240m on the same scope of consolidation, or -17%). As for changes to Group occupational pension funds since the end of 2009, the mandates to manage the guaranteed subfund of the Cometa pension fund and the balanced subfund of the Arco Pension Fund were renewed and a bond mandate for the GommaPlastica pension fund (rubber/plastic) was awarded. Tendering for a guaranteed mandate and two balanced mandates is currently in progress. At 30 September 2010 the Group had 26 occupational pension fund mandates (15 with minimum guaranteed yield and/or capital). Assets under management totalled 2,250m ( 1,960m at 31/12/2009). In open-ended pension funds, 'Unipol Futuro', 'Unipol Previdenza', 'Unipol Insieme', 'Aurora Previdenza' and 'BNL Pensione Sicura' had total funds of 242m and 21,891 members at the end of the third quarter of 2010 ( 210m and 21,300 members at 31/12/2009). var. % 18

21 The traditional composite company UGF Assicurazioni had Life direct income of 1,311m, 18.6% down on 30 September Life premiums amounted to 1,300m ( 1,600m at 30/9/2009) whilst investment products amounted to 11m ( 12m at 30/9/2009). With the sole exception of Class VI pension funds, which was up 3.7%, all the other classes were down: Class I traditional policies -19.9%, Class III unit and index-linked policies -10.4%, Class V capitalisation policies -34%. Income from Life policies obtained via UGF Banca branches was 125m at 30 September 2010 ( 157m at 30/9/2009). The Arca Group life companies (Arca Vita and Arca Vita International) had achieved direct income of 694m by 30 September 2010, well up compared with 30 September 2009 (+99.3%), 156m of it in the third quarter attributable to the UGF Group. The bancassurance company BNL Vita achieved total premiums of 1,957m compared with 2,418m at 30 September 2009 (-19.1%). There was a rise in the number of Class III index- and unit-linked policies (+19.4%) and Class V capitalisation policies (+6.6%), whilst Class I traditional policies were down (-24.2%). Non-Life business Total premiums in the Non-Life portfolio amounted to 2,987m at 30 September 2010 (-1.5% compared with 30/9/2009, or -3.2% on the same scope of consolidation). Direct premiums amounted to 2,967m (-1.5% compared with 30/9/2009, or -3.3% on the same scope of consolidation), whilst premiums from inwards reinsurance amounted to 21m (substantially unchanged compared with 30/9/2009). MV TPL was almost the same (+0.2%), whilst Land vehicles own damage or loss fell 3.3%. Almost all the other non-mv classes were also down: Fire/Miscellaneous damages -1.5%, General TPL -11.8% and Accident and Health -1.1%. % breakdown of Non-Life direct business premiums Accident and Health Motor Vehicles TPL Motor Vehicles/Property damage Fire/Miscellaneous damages 9.7% 7.4% 4. 9% 16.4% General third-party liability Other classes 8.1% 53.3% UGF Assicurazioni had direct premiums of 2,475m (-4.4%). Despite an improvement since the first half of the year premiums continued to fall in MV TPL (-3.3%) and Land vehicles own damage or loss (-6%) owing to the reduction in the client portfolio of both individual policies and policies for fleets of company vehicles. In the case of the latter in particular the fall in premiums was due to the reform or divestment of poorly performing contracts, work on which was already in its 19

22 final stages, whilst in the case of individual policies the fall was expected as a result of changes in tariffs introduced with the aim of a return to profit. The effects of the review of company vehicle business and the new tariff were shown in the significant fall in MV TPL claims frequency. Apart from improved selectivity in underwriting new risks, the changes in the tariff structure also helped to rebalance the average MV TPL premium which, after a long period during which it fell, bucked the trend and is expected to be up at the end of the financial year. The other classes, although doing well compared with the first half of the year, were also still down compared with 30 September 2009: General TPL -2.8%, Accident and Health -6.4%, Fire/Miscellaneous damage -2.8%, which was expected as a result of the policy of recovering profit margins. The Non-Life companies in the Arca Group (Arca Assicurazioni and ISI Insurance) had achieved direct premiums of 171m by 30 September 2010 (+38.2%), 53m of it in the third quarter and therefore attributable to the UGF Group. MV TPL was up 34.9%, Land vehicles own damage or loss 46.3% and the other classes 42.5%. The specialist companies (Navale Assicurazioni, Linear and Unisalute) recorded direct premiums of 439m (+3.6%). Navale Assicurazioni achieved direct premiums of 184m at 30 September 2010 (-0.4%). There was a substantial increase in the MV TPL class (+10.8%), Land vehicles own damage or loss was largely stable, whilst the other classes fell by a total of 13.6%. Linear achieved direct premiums of 125m (+4.3%). UniSalute achieved direct premiums of 130m, an increase of 9.1%. It should be mentioned that the Health class was up 1.5% at the end of the first half of 2010 (latest available figure). The expense ratio for Non-Life direct business, that is the incidence of operating expenses gross of commissions received from reinsurers and investment management expenses on direct premiums, was slightly down at 21.9% compared with 22.1% at 30 September 2009 and 22% at 31 December The loss ratio for Non-Life direct business (i.e. the incidence of charges relating to claims for direct business on the relevant direct premiums) was 81.4% compared with 82.6% at 30 September 2009 and 86% at 31 December Results for core business in all classes continued to be positive thanks to the combined effects of the measures taken to rebalance the portfolio and the improvement in the loss ratio resulting from the drop in claims for weather damage and major claims. As for the direct indemnity scheme for the MV TPL class, in the first nine months of 2010 (excluding the figures for the Arca Group, which joined the UGF Group only in the third quarter of this year) the companies in the Group recorded 334,830 claims reported (total non-card and debtor CARD claims), i.e. 12.1% fewer than in ,683 of the claims came under the Knock-for-Knock Agreement (debtor CARD claims) and accounted for 82% of the total (debtor CARD + non-card). 274,869 CARD claims were reported. 72.3% of Card claims were fully settled by Group companies (excluding claims where there was contributory negligence, which were partially dealt with by the counterpart companies), with the average cost of claims paid increasing by 3.6%. 20

23 There was a total of 1,563,652 direct claims in the other classes, net of the Arca Group, an increase of 14.4% mainly in the Health class (+26.8%), which was affected by both Unisalute's portfolio and the extension of benefits to several health funds covering specific categories of worker characterised by many claims with low average cost. If Health is excluded the number of claims reported fell 4.9%. The combined ratio, based on direct business, was 103.3% at 30 September 2010 (104.7% at 30/9/2009 and 108% at 31/12/2009). The indicator is derived from the sum of the loss ratio (81.4%) and expense ratio (21.9%). The pre-tax profit for insurance business (Life and Non-Life) was 142m at 30 September 2010 ( 104m at 30/9/2009, +37.1%), - 12m of which related to Non-Life business and 154m to Life business (- 28m and + 132m respectively at 30/9/2009). The Arca Group contributed 10.7m (Non-Life business 0.4m and Life business 10.3m). 21

24 Banking business Customer deposits totalled 9.1bn ( 9.5bn at 31/12/ %). The drop was mainly due to the decrease in deposits from companies in the UGF Group (- 0.4bn) and was only partially offset by the increase from customers outside the Group. Indirect customer deposits amounted to 24.3bn at 30 September 2010 ( 21.7bn at 31/12/2009), 22.5bn of which were assets under management ( 19.9bn at 31/12/2009) and 1.8bn funds under administration (substantially in line with 31/12/2009). Lending to customers was up by more than 329m (+3.3%) to 10.1bn, whilst receivables from banks amounted to 245m compared with 452m at the end of 2009 (-45.7%). The growth in lending to customers was due both to the work carried out by the Parent UGF Banca in its Business Centres and with the small business segment and to UGF Merchant's lending activity. The period closed with a net pre-tax profit of 16m ( 17m at 30/9/2009), with gross operating income being 247m (-4.1%), adjustments for impairment of financial assets of 35m ( 47m at 30/9/2009) and operating costs of 195m (+0.9%). Net interest income was down 8.7% because of the fall in interbank rates that had led to a reduction in the rate spread, whilst net commission income was up 23.2%. Holding and services business The pre-tax profit of holding and services business was 98m at 30 September 2010 (- 29m at 30/9/2009), benefiting from the receipt of 140m of dividends from subsidiaries. Investments and available cash in holding and services business amounted to 5,991 at 30 September 2010 ( 5,613m at 31/12/2009), 4,702m of which was accounted for by holdings in subsidiaries, which had risen by 325m compared to 31 December 2009 for the acquisition of the Arca Group ( 270m) and for payments to subsidiaries for capital increases. Financial liabilities included 949m for bonds issued in 2009 ( 922m at 31/12/2009) and 292m of financing from UGF Assicurazioni ( 306m at 31/12/2009). Intersector eliminations Intersector eliminations related to the derecognition of income and costs between Group companies belonging to different sectors. To be specific the negative balance of 140m related to the derecognition of dividends within the Group. 22

25 New products Synergies between banking and insurance, together with the continuous attention paid to the market and customers' requirements, led to the introduction of a new product: the insurance current account known as Formula RENDIPIU, first marketed at the end of the third quarter of Formula RENDIPIU is a combined UGF Banca and UGF Assicurazioni product consisting of a bank current account and a Life policy, the aim being to offer Group customers the advantages of both types of product and a better return than traditional current accounts. This new cash product offers customers all the flexibility and services of a current account that can be used on a daily basis and the security and guaranteed yield of an insurance policy. The Life policy, known as UGF AssiConto, is offered exclusively in conjunction with this current account, has no charges for receipts and payments and guarantees a minimum gross annual return of 1.75% until 31 December 2012 on the sums invested, which are automatically transferred from the current account by means of the Servizio RENDIPIU system. Servizio RENDIPIU is an automatic system for making payments into and withdrawals from the current account and the policy based on predetermined maximum and minimum balances. If the balance available in the current account exceeds the maximum or falls below the minimum, a payment is made from the current account into the policy or from the policy into the current account respectively. The main advantages of the new product are: the ease of use a current account combined with the yields of a Life policy a minimum return of 1.75% gross fixed until the end of 2012 (which may be extended) it may be cashed in at any time the capital gains on the policy are subject to tax at 12.5% rather than the 27% charged on normal current accounts the sums transferred to the policy are invested in UGF Assicurazioni's Vitattiva segregated account and thus benefit from all the security and safeguards provided in law for insurance accounts the Life policy also enjoys all the advantages typical of insurance, including allowing clients to designate the beneficiary of their choosing separately from the rest of their estate and to specify that the benefits may be neither forfeited nor distrained. 23

26 Property and financial management Investments and cash and cash equivalents In the first nine months of 2010 markets were affected by the growing tensions over the indebtedness of the countries on the edge of the Eurozone, which had already made themselves felt at the end of last year, particularly in the case of Greece, followed in the summer by Portugal and Ireland. The resultant uncertainties and fears accentuated the divergence between cost of the indebtedness of the core countries compared with the most vulnerable countries on the edge (Greece, Ireland and Portugal), with Italy and Spain maintaining their position in the middle. The urgent need to launch plans to reduce public debt led to expectations of a prolonged period of stagnation in the developed countries, whilst the economies of the emerging countries continued to be robust. The fragility of the upturn, together with the continuing rise in unemployment (+10.1% in the Eurozone as a whole), kept expectations of inflation firmly in place. Consequently the following was the situation in the Eurozone: short-term rates at rock-bottom levels. The three-month Euribor rate was slightly up (to 0.89%, from 0.70% at the end of 2009), medium- to long-term interest rates were further down (the 10- year swap rate falling from 3.58% to 2.58% during the same period); the spread between core and peripheral countries widened, as, in general, did credit spreads compared with the Euribor; the share markets remained weak despite performing well in September. The Standard & Poor s 500 index, representing the US Stock Exchange, ended the first nine months 2.34% up, the Eurostoxx50 index, which represents stock markets in the Eurozone, fell by 7.32%, whilst the Japanese Nikkei 225 was down 11.16%. During the nine months in question the Group's investment policies tried to maintain an appropriate balance between risk and yield in the bond sector. Work continued on ensuring that investments remained in line with liabilities to policyholders. Activity in government securities concentrated on Italian government bonds and, to a lesser extent, on sovereign securities of other EU countries. Mention should be made that, in view of the traditionally very low level of interest rates, the portfolio's sensitivity to the risk of a rise in rates was reduced during the first quarter through the purchase of 'cap' options. Hedging was carried out in the Life portfolios, which had the highest duration profiles. In the Group consolidated insurance portfolio the duration in Non-Life business was 3.05 and in Life business The total duration was therefore No significant changes have been noted in bond portfolio structure, either quantitative or qualitative. Fixed rate and floating rate components of the bond portfolio remained stable at 70% and 30% respectively. Treasury bonds constituted approximately 57% of the bond portfolio, supplemented by 43% corporate bonds, split across financial credit at 40% and industrial credit at 3%. The quality of the issuers (Standard & Poor s rating) confirmed the high creditworthiness of the portfolio, 70% of which was made up of securities rated A+ or above, 18% between A and A- and 12% BBB+ or below. In order to manage assets prudently a good level of liquidity of approximately 1.3bn was maintained in the Group insurance portfolio at the end of September, most of it deposited with UGF Banca. 24

27 Defensive policies prevailed in the case of the share portfolios, leading to a gradual run-down of this asset class, particularly in Non-Life business, and a gradual reduction in the beta coefficient (the portfolio's sensitivity to the index). Most of the cash resulting from this reduction in share securities was reinvested in debt instruments. The share portfolio was mainly made up of securities belonging to the Eurostoxx50 or to the main European indices, which were characterised by a high level of liquidity and a good profile in terms of profitability represented by the dividends expected. Exposure on the various markets other than those in the Eurozone, where investment is predominantly hedged from currency risk, appeared marginal. Trading activity in the bond and equity markets has been in line with profitability objectives. In summary, the investment portfolio, net of investments where the risk is borne by policyholders, was split as follows: debt instruments: 24.7bn, or 89.4%; equity instruments: 1.7bn, or 6.1%; cash and cash equivalents: 1.3bn, or 4.5%. At 30 September 2010 the level of the Group's investments and liquid assets reached a total of 47,046m, an increase of 6,515m compared with 31 December 2009 (+16.1%). On the same scope of consolidation the increase was 2,478m (+6.1%). Investments and cash and cash equivalents in the insurance sector amounted to 37,135m ( 31,614m at 31/12/2009) and accounted for 78.9% of total investments (78% at 31/12/2009), whilst those in the banking sector amounted to 11,040m ( 10,512m at 31/12/2009). Investments in the holding and services sector amounted to 5,991m ( 5,613 at 31/12/2009). The aforementioned figures are gross of intragroup eliminations totalling 7,120m ( 7,208m at 31/12/2009). The Group's investments subdivided according to type and comparisons with the position at 31 December 2009 are set out in the following table: 25

28 Investments and cash and cash equivalents Amounts in m 30/9/2010 comp. % 31/12/2009 comp. % Property (*) Investments in subsidiaries and associates and interests in joint ventures Held-to-maturity investments 1, , Loans and receivables 15, , Debt instruments 4, , Loans and receivables from bank customers 10, , Interbank loans and receivables Deposits held at ceding companies Other loans and receivables Available-for-sale financial assets 20, , Financial assets at fair value through profit or loss 8, , held for trading at fair value through profit or loss 7, , Cash and cash equivalents Total investments and cash and cash equivalents 47, , (*) includes property for the use of the Group and available for sale (IFRS 5) The Group's property assets, including owner-occupied property and property available for sale, amounted to 781m ( 741m at 31/12/2009), of which 13m related to Arca Group property. Investments in subsidiaries and associates and interests in joint ventures amounted to 48m ( 44m at 31/12/2009). The increase related in particular to investments acquired during the third quarter of the year by banking group companies. Loans and receivables amounted to 15,142m compared with 14,786m at 31 December The main contributor to this item was bank business, with 10,119m of customer loans and receivables ( 9,786m at 31/12/2009) and 182m of interbank loans ( 371m at 31/12/2009). Debt instruments amounted to 4,576m ( 4,443m at 31/12/2009). Arca Group figures were not significant. Available-for-sale financial assets amounted to 20,466m ( 15,314m at 31/12/2009), 2,892m of which related to the Arca Group. The compulsory provision for profits or losses on available-forsale assets (Group amount) was negative to the tune of 436m (- 393m at 31/12/2009). Financial assets at fair value through profit or loss amounted to 8,553m ( 7,645 at 31/12/2009), of which 1,049m related to the Arca Group. They were made up of 676 of assets held for trading ( 465m at 31/12/2009) and 7,877m of assets at fair value, where the investment risk is borne by the policyholder ( 7,180m at 31/12/2009). var. % 26

29 Net gains on investments and net financial income Net gains on investments (excluding those arising out of assets and liabilities on financial instruments at fair value) amounted to 856m ( 791m at 30/9/09, +8.2%). On the same scope of consolidation the increase was 5.1%. Net gains on financial instruments at fair value amounted to 89m ( 280m at 30/9/2009). 71m of impairment losses on share securities classified as Available-for-sale assets were recorded through profit or loss at 30 September 2010 (unchanged on the same scope of consolidation). Impairment losses had amounted to 15m at 30 September 2009 and had related to the holding in Hopa. The fair value hedging operations on government bonds classified as Available-for-sale assets had a positive net financial repercussion of 14m owing to a 107m fall in the fair value of the derivatives (IRS) compared with a 121m rise in the fair value of the bonds hedged. At 30 September 2010 hedging was producing the desired results since the ratios between the variations in fair value of the hedged derivatives and the variation in fair value linked to the risk of the underlying assets hedged were still within the range 80%-125%. Interest payable on financial liabilities amounted to 157m ( 150m at 30/9/2009). 27

30 Business outlook for the current financial year Since the end of the third quarter of 2010 performance in insurance business has continued as in previous months and therefore so have the positive effects on the Non-Life loss ratio for the current year resulting from the numerous measures being taken. Mention should be made of the serious weather damage that affected several parts of the country at the end of October and the beginning of November, which could lead to an increase in the cost of that type of claim despite the fact that until the third quarter it had been below last year's figure. The UGF Group did a lot of advertising in various media during the period following 30 September 2010 with its campaigns for UGF Assicurazioni's new MV product 'Km Sicuri' (Safe Miles) and 'RendiPiù', the new combined product resulting from collaboration between UGF Assicurazioni and UGF Banca. In addition, 'Pension Month' was launched on 3 November in the agencies that had signed up to it, aimed at encouraging people to take out insurance in the face of the real and growing need to make provision for a supplementary pension. These agencies will be able to advise on individual customers' existing pension provision and offer the most suitable personalised solution to cover any shortfalls. The climate in the economy as a whole and in the sectors in which the Group operates is still critical even though there are glimpses of a few green shoots of recovery. It is therefore thought that, in the light of these considerations, it is not unreasonable to confirm a return to a consolidated profit this year. Bologna, 11 November 2010 The Board of Directors 28

31 Consolidated Financial Statements Statement of financial position Income statement and statement of comprehensive income Income statement by class of business

32 Statement of financial position - Assets Amounts in m 30/9/ /12/ INTANGIBLE ASSETS 2,097 1, Goodwill 2,003 1, Other intangible assets PROPERTY, PLANT AND EQUIPMENT Property Other property, plant and equipment TECHNICAL PROVISIONS - REINSURERS' SHARE INVESTMENTS 46,161 39, Investment property Investments in subsidiaries and associates and interests in joint ventures Held-to-maturity investments 1,754 1, Loans and receivables 15,142 14, Available-for-sale financial assets 20,466 15, Financial assets at fair value through profit or loss 8,553 7,645 5 SUNDRY RECEIVABLES 1,420 1, Receivables relating to direct insurance business 632 1, Receivables relating to reinsurance business Other receivables OTHER ASSETS 1, Non-current assets or assets of a disposal group held for sale Deferred acquisition costs Deferred tax assets Current tax assets Other assets CASH AND CASH EQUIVALENTS TOTAL ASSETS 52,219 45,661 30

33 Statement of financial position - Equity and liabilities Amounts in m 30/9/ /12/ EQUITY 4,194 3, attributable to owners of the Parent 3,824 3, Share capital 2,699 2, Other equity instruments Equity-related reserves 1,506 1, Income-related and other reserves (Treasury shares) Translation reserve Gains or losses on available-for-sale financial assets Other gains or losses recognised directly in equity Profit (loss) for the year attributable to owners of the Parent attributable to non-controlling interests Share capital and reserves attributable to non-controlling interests Gains or losses recognised directly in equity Profit for the year attributable to non-controlling interests PROVISIONS TECHNICAL PROVISIONS 32,635 28,286 4 FINANCIAL LIABILITIES 13,786 12, Financial liabilities at fair value through profit or loss 2,835 2, Other financial liabilities 10,951 10,094 5 PAYABLES Payables from direct insurance business Payables from reinsurance business Other payables OTHER LIABILITIES 1, Liabilities associated with disposal groups Deferred tax liabilities Current tax liabilities Other liabilities TOTAL EQUITY AND LIABILITIES 52,219 45,661 31

34 Income statement Amounts in m 30/9/ /9/ Net premiums 6,464 7, Gross premiums 6,562 7, Ceded premiums Commission income Gains and losses on remeasurement of financial instruments at fair value through profit or loss Gains on investments in subsidiaries and associates and interests in joint ventures Gains on other financial instruments and investment property 1,369 1, Interest income Other income Realised gains Fair value gains Other income TOTAL REVENUE 7,941 8, Net charges relating to claims 6,344 7, Amounts paid and changes in technical provisions 6,383 7, Reinsurers' share Commission expense Losses on investments in subsidiaries and associates and interests in joint ventures Losses on other financial instruments and investment property Interest expense Other expense Losses realised Fair value losses Operating expenses Commissions and other acquisition costs Investment management expenses Other administrative expenses Other costs TOTAL COSTS AND EXPENSES 7,825 8,600 PRE-TAX PROFIT (LOSS) FOR THE PERIOD Income taxes PROFIT(LOSS) FOR THE PERIOD attributable to owners of the Parent attributable to non-controlling interests Statement of comprehensive income - net amounts Amounts in m 30/9/ /9/2009 CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD Gains or losses on available-for-sale financial assets Gains or losses on cash flow hedges TOTAL OTHER COMPREHENSIVE INCOME TOTAL CONSOLIDATED COMPREHENSIVE INCOME attributable to owners of the Parent attributable to non-controlling interests

35 Income statement by class of business Amounts in m NON-LIFE BUSINESS Sep-10 Sep-09 LIFE BUSINESS TOTAL INSURANCE HOLDING AND SERVICES CONSOLIDATED TOTAL var. % Sep-10 Sep-09 var. % Sep-10 Sep-09 var. % Sep-10 Sep-09 var. % Sep-10 Sep-09 var. % Sep-10 Sep-09 Sep-10 Sep-09 var % Net premiums 3,084 3, ,380 4, ,464 7, ,464 7, Net commissions Financial income/expense (excl. assets/liabilities at fair value) Net interest Other income and expense Realised gains and losses Fair value gains (excl. impairment on AFS shares) ##### Impairment on AFS equities ##### Net charges relating to claims -2,547-2, ,708-4, ,256-6, ,256-6, Operating expenses Commissions and other acquisition costs Other expenses Other income/expense ##### Pre-tax profit (loss) Taxation Consolidated profit (loss) attributable to owners of the Parent attributable to non-controlling interests Other comprehensive income Total consolidated comprehensive income attributable to owners of the Parent attributable to non-controlling interests BANKS Intersector eliminations 33

36

37 Declaration of the Manager in charge of financial reporting pursuant to Article 154-bis of Legislative Decree 58/1998

38

39 DECLARATION OF THE MANAGER IN CHARGE OF FINANCIAL REPORTING RE: Interim Financial Report of Unipol Gruppo Finanziario S.p.A. at and for the nine months ended 30 September 2010 The undersigned Maurizio Castellina, the Manager in charge of Unipol Gruppo Finanziario S.p.A. s financial reporting DECLARES in accordance with Article 154-bis, para. 2, of the Consolidated law on financial intermediation that the Interim Financial Report at and for the nine months ended 30 September 2010 is consistent with the accounting records, ledgers and documents. Bologna, 11 November 2010 The Manager in charge of financial reporting Maurizio Castellina (signed on the original) 37

40

41 UNIPOL GRUPPO FINANZIARIO S.P.A. REGISTERED AND HEAD OFFICES via Stalingrado, Bologna Share capital 2,698,895, fully paid-up Tax Code and Bologna Company Registration No R.E.A. No Entry in special section in accordance with Article 113 T.U.B

42