Consolidated Financial Statements. Financial Year 2015

Transcription

1 Consolidated Financial Statements Financial Year 2015 Approved by the Board of Directors March 9th, 2016

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

3 Contents REPORTS AND FINANCIAL STATEMENTS Group Structure and bank shareholdings 9 Reference Scenario 13 Management Report 21 The Group in Key indicators of Cattolica Group business performance Business Plan 32 Ways in which the Group image and information are disclosed 36 Business performance for the period 39 A brief outline of the business performance 41 Insurance business and other sectors of activities 45 Financial and asset management 58 Risk management 63 Risk management procedures 65 Insurance risk - non-life business 67 Insurance risk - life business 69 Market risk 71 Operating and reputational risk 74 Headcount and sales network 77 Human resources 79 Academy 81 Sales network 83 Significant events and other information 87 Significant transactions carried out during the year 89 Internal Control system 93 Internal control units 94 Other control units and bodies 96 Anti-fraud management 97 Group complaints management 97 Stage of completion of Solvency II 98 Information systems 99 Own shares held by the Parent Company and by its subsidiaries 101 Report on corporate governance and the ownership structures 102 3

4 Transactions with related parties 102 Atypical or unusual transactions and non-recurrent significant events and operations 102 Performance of Cattolica stock 102 Significant events during the first few months of Outlook for business activities 104 Consolidated Financial Statements 107 Statement of financial position 109 Income statement 111 Statement of comprehensive income 112 Cash flow statement 114 Statement of changes in shareholders equity 115 Reconciliation statement of the result of the period and shareholders equity of the Group and the Parent Company 119 Notes to the accounts 125 Part A - Basis of presentation and consolidation area 127 Part B - Accounting principles 139 Part C - Information on the consolidated statement of financial position and income statement 161 Part D - Other information 213 Certification of the Executive appointed to draw up the corporate accounting 219 Independent Auditors Report 221 4

5 Summary index of tables TABLES Table 1 - Key economic indicators 27 Table 2 - Key equity indicators 27 Table 3 - Headcount and sales network 28 Table 4 - Reclassified consolidated statement of financial position 29 Table 5 - Reclassified consolidated income statement 30 Table 6 - Reclassified consolidated income statement by segment of activities 31 Table 7 - Key indicators 32 Table 8 - Total premiums written 49 Table 9 - Life premiums written 50 Table 10 - Group exposure to re-insurers by rating category 68 Table 11 - Stratification of the portfolio on the basis of the maturity date 72 Table 12 - Stratification of the bond portfolio by rating 73 Table 13 - Group headcount 80 Table 14 - Ratios per share 103 Table 15 - Consolidation area (ISVAP Regulation No. 7 dated July 13th, 2007) 132 Table 16 - Consolidation area: equity investments in companies with significant minority interests (ISVAP Regulation No. 7 dated July 13th, 2007) 134 Table 17 - Interest holdings in non-consolidated structured entities (ISVAP Regulation No. 7 dated July 13th, 2007) 134 Table 18 - Statement of financial position by sector of activities (ISVAP Regulation No. 7 dated July 13th, 2007) 163 Table 19 - Intangible assets 164 Table 20 - Goodwill - changes during the year 164 Table 21 - Changes in the cost of own capital and the long-term growth rate necessary for rendering the recoverable amount equal to the book value. 167 Table 22 - Other intangible assets - changes during the year 167 Table 23 - Tangible assets 169 Table 24 - Property and other tangible assets - changes during the year 169 Table 25 - Analysis of technical provisions - reinsurance amount (ISVAP Regulation No. 7 dated July 13th, 2007) 170 Table 26 - Investments 171 Table 27 - Investment property - changes during the year 171 5

6 Table 28 - Analysis of tangible and intangible assets (ISVAP Regulation No. 7 dated July 13th, 2007) 173 Table 29 - Investments in subsidiaries, associated companies and joint ventures 173 Table 30 - Analysis of non-consolidated equity investments (ISVAP Regulation No. 7 dated July 13th, 2007) 174 Table 31 - Summary data of non-consolidated subsidiary and associated companies and joint ventures 174 Table 32 - Financial Investments 175 Table 33 - Analysis of financial assets (ISVAP Regulation No. 7 dated July 13th, 2007) 176 Table 34 - Exposure in government debt securities issued or guaranteed by EU zone countries - Available for sale financial assets 178 Table 35 - Exposure in government debt securities issued or guaranteed by EU zone countries - Financial assets at fair value through profit or loss 178 Table 36 - Exposure in government debt securities issued or guaranteed by EU zone countries - Held to maturity investments 178 Table 37 - Assets and liabilities valued at fair value on a recurrent and non-recurrent basis: breakdown by fair value hierarchy (ISVAP Regulation No. 7 dated July 13th, 2007) 179 Table 38 - Analysis of changes in level 3 financial assets and liabilities valued at fair value on a recurrent basis (ISVAP Regulation No. 7 dated July 13th, 2007) 181 Table 39 - Assets and liabilities not valued at fair value: breakdown by fair value hierarchy (ISVAP Regulation No. 7 dated July 13th, 2007) 183 Table 40 - Analysis of assets and liabilities relating to contracts issued by insurance companies where the investment risk is borne by the policyholder and deriving from pension fund management (ISVAP Regulation No. 7 dated July 13th, 2007) 184 Table 41 - Sundry receivables 185 Table 42 - Other asset items 185 Table 43 - Other assets 187 Table 44 - Shareholders equity 188 Table 45 - Provisions and allowances - changes during the year 189 Table 46 - Analysis of technical provisions (ISVAP Regulation No. 7 dated July 13th, 2007) 191 Table 47 - Analysis of financial liabilities (ISVAP Regulation No. 7 dated July 13th 2007) 194 Table 48 - Payables 195 Table 49 - Sensitivity test hypotheses 197 Table 50 - Sensitivity test results 198 6

7 Table 51 - Employee severance indemnity, length-of-service bonus and premiums on health contracts 198 Table 52 - Other liability items 199 Table 53 - Other liabilities 200 Table 54 - Breakdown of direct and indirect gross premiums written 201 Table 55 - Insurance business 202 Table 56 - Analysis of insurance operating expenses 202 Table 57 - Financial operations 203 Table 58 - Financial and investment income and charges (ISVAP Regulation No. 7 dated July 13th, 2007) 204 Table 59 - Income taxes for the year 206 Table 60 - Reconciliation of the tax rate - analysis 207 Table 61 - Analysis of the statement of other comprehensive income - net amounts (ISVAP Regulation No. 7 dated July 13th, 2007) 208 Table 62 - Income statement by sector of activities (ISVAP Regulation No. 7 dated July 13th, 2007) 209 Table 63 - Analysis of technical insurance items (ISVAP Regulation No. 7 dated July 13th, 2007) 210 Table 64 - Analysis of insurance operating expenses (ISVAP Regulation No. 7 dated July 13th, 2007) 210 Table 65 - Transactions with related parties 217 7

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9 Group Structure and bank shareholdings

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13 Reference Scenario

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15 Reference Scenario Macro-economic scenario 2015 confirmed the global economic growth trend that was seen in 2014, again at a lower level than had been expected at the beginning of the year, and with marked differences between geographic areas. In the US, GDP growth was higher than 2%, mainly guided by the pick-up in domestic demand, thanks to an employment market with an unemployment rate down 5%. Internal consumption and the real estate sector have benefitted as a result, although the low growth in salaries partially offset the benefits, highlighted by contained inflation. The manufacturing sector and the energy sector by contrast suffered from the low prices of the raw materials, ending up being a brake on economic growth. The Federal Reserve therefore decided on a 25 basis point rise in the interest rates in December, however maintaining a prudent approach with regard to the timescales for monetary policy getting back to normal. In Europe, economic growth data confirmed the recovery phase, although at modest levels, a situation which led the anti-euro parties to make a comeback in the various national elections. In order to boost the economy and inflation, having remained at all time lows, the European Central Bank (ECB) launched a securities repurchasing programme (Quantitative Easing) during the year and a rate cut on deposits, further reducing the returns on bonds and feeding the liquidity in the system. In Italy, economic recovery remained fragile but on the up, essentially driven by internal consumption and in part by exports. The healthiest sector was the motor industry, while the scant investments kept the growth rate modest. The reforms implemented by the government, both with regard to the employment market and the institutional one, together with the improvement in the overall global situation, led to the expectation of growth in economic activities with regard to the confidence indices. In Japan, economic activities continued at gradual, though volatile, levels, with continued support from the Bank of Japan s exceptionally expansive monetary policy. The emerging markets by contrast mainly suffered due to the Chinese slowdown and the rise in the rates in the United States. The ongoing reduction in domestic inflation in any event allowed a majority of the central banks to maintain more accommodating monetary policies, partly supporting the economic scenario. In China, the manufacturing surplus together with marked growth in private debt led the GDP for the current year to grow 6.9%, the lowest level since the 1990s. Brazil and Russia, on the other hand, continue to show the need for profound structural reforms, blocked at present by political inactivity and the collapse in the price of raw materials. Bond markets 2015 showed itself to be particularly volatile. The first half saw further strengthening in risk appetite, largely due to the high levels of liquidity available at a low cost for operators. The Greek crisis and the collapse of the emerging markets in the Summer however led to marked rises of the rates curves and the risk premium, only partly adjusted by the expectations of action adopted by the European Central Bank. The recovery in performance was most evident in peripheral government securities and those with high ratings. Low rating securities ended up in negative terrain as from the second half, in coincidence with the tensions on emerging 15

16 markets. On an annual basis, 10-year US government securities closed with a return of 2.3% (+10 basis points from the start of the year), while 2-year securities closed at 1.1%. Corresponding German securities by contrast disclosed returns of 0.6% and -0.4%, with an increase of 9 and a decrease of 25 basis points respectively. Stock markets The layout of the stock markets was positive in Europe, even if extremely volatile. During the first half, the markets were driven upwards by the implementation of extraordinary measures by the European Central Bank and by the publication by the listed companies of results higher than expectations. The second part of the year was by contrast characterised by a trend, in which periods of growth alternated with consistent profit taking, mainly due to the tensions on the emerging markets and on the price of oil. The performance in the United States was less positive: after the strong growth in the first half and the achievement of all-time highs, in fact, the listings reported a trend of consolidation. The figures published by the US companies were only marginally better than expectations, with a modest positive impact on the listed prices of the securities. The Japanese listings disclosed a positive trend during the year, partly thanks to the launch of a new plan of reforms in the attempt to provide further support for the economy. On an annual basis, the U.S. S&P 500 index closed at -0.7%, while in Europe the Dax closed at +9.6%, the Eurostoxx50 at +3.8% and the FTSEMIB at +12.6%. In Asia, the Hang Seng index fell 7.2%, while the Nikkei closed with a rise of 9.1%. Foreign exchange markets The foreign exchange markets were marked by high volatility following the monetary policy manoeuvres undertaken by the various global central banks. The Euro ended the year at against the dollar, with a devaluation of 10.2% with respect to the values at the beginning of the year. With respect to the Yen, there was a depreciation of 9.8% to By contrast, the dollar experienced an increase in value of 0.4% vis-à-vis the Japanese currency, to

17 Insurance industry The graphs below show certain summary figures published by ANIA 1 for the insurance industry for the period , , ,000 Key economic indicators of the insurance sector euro/millions 31, ,000 80,000 33,054 34,052 32,723 31,608 60, ,963 40,000 90,592 74,368 70,376 85,756 20, Direct and indirect Life premiums Direct and indirect non Life premiums Key indicators Insurance sector % 12.0% 10.0% 9.4% 8.0% 6.0% 4.0% 5.6% 5.9% 4.5% 4.7% 4.2% 2.0% 0.0% -2.0% -0.5% -0.6% -4.0% -3.0% -3.4% -6.0% Technical result/direct and indirect premiums Net income/direct and indirect premiums According to ANIA, 1 during 2015 total premiums written (life and non-life) for direct Italian business should reach 156 billion, up 8.8% with respect to the year just ended; this involved a further increase after that reported in 2014 (+20.6%) and in 2013 (+13.1%). This will 1 Source ANIA - L assicurazione italiana nel , publication dated June 24th,

18 specifically be the result of the growth achieved in life premiums in relation to which a rise of 12% is envisaged in 2015, while non-life premiums will again disclose a decrease of 1.9%. Overall premiums as a percentage of GDP will rise further from 8.9% in 2014 to 9.6% in Premiums written for direct Italian business in the non-life sector during 2015 should reach 32.2 billion and would once again be down by 1.9% (for the fourth year running). This would exclusively depend on the drop in TPL motor and sea and inland water vehicles premiums since all the other non-life classes would be up. In the TPL motor class, the insurance companies are thought to still be operating in a highly competitive market and, partly due to the effect of the overall positive technical results reported in the three-year period , it is estimated that the companies will reflect significant reductions on the tariffs applied to the policyholders at the time of renewal; the premiums volume, therefore, after a sharp drop already observed in 2013 (-7%) and in 2014 (- 6.5%) will see a further drop in 2015 equal to that reported in the previous year (-6.5%). Partly due to the signs of a pick up in the economic cycle, the premiums of the remaining nonlife classes (excluding just TPL motor) should continue to rise 2.1%, after the slight pick up in 2014 (+0.9%). In detail, emphasis is placed in the growth which the land vehicle hull class should report (+3%) interrupting a trend of ongoing decline which started in 2008 (and continued in fact until 2014) and which saw premiums written drop in seven years cumulatively by more than 27%. Also the premiums of the other non-life classes should report positive changes: TPL - general +3%, accident and injury, and other damage to assets +1.5%, fire and health +1%. In 2015, non-life premiums as a percentage of GDP should remain more or less at the 2014 levels (2%). In the life sector, sustained growth should also continue in 2015 in the premiums written which would amount to around 124 billion with an increase of 12%, after the sharp growth already reported in 2013 (+22%) and in 2014 (+30%). This would be the result of a change in the mix of products sold: if, one the one hand, a slowdown in sales of class I products is reported (-17.5% for an estimated volume of premiums equal to just over 68 billion), on the other hand a sharp increase is seen in the marketing of class III policies, essentially unit products which rise 125%, for a total of premiums written each to almost 50 billion. The prolonged period of low interest rates, despite the presence of overall positive results revealed by the financial markets, is boosting (not just in Italy) the search for additional or alternative investment solutions to those traditional forms of guaranteed savings. Attention is increasing with regard to instruments with a higher risk-return profile based on a more diversified and more dynamic asset allocation for the purpose of pursuing positive financial results. In Italy, so-called multi-class products are increasing, in other words unit life insurance policies resulting from the combination of a traditional separate management (class I) and the unit-linked type investment fund (class III). On the basis of the market figures for gross premiums written as of September 30th, 2015, of Italian companies and non-eu representative agencies, (Ania Trends, No. 1, January 2016) 18

19 total life and non-life premiums were up 3.1%, the non-life classes were down 2.3% and the life classes up 4.5%. The non-life classes fell 5.4% in the motor classes and rose 1.9% in the non-motor classes (Ania Trends, quarterly non-life premiums, No. 3, November 2015). On the basis of the ANIA annual forecasts 2, the Group s market share in the non-life sector would rise from 5% to 6.3% and in the life sector would pass from 3.3% to 2.9%. Total Group market share % Non life Life Total 2 Source ANIA - L assicurazione italiana nel , publication dated June 24th,

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21 Management Report

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23 Management Report The Group in 2015 Business performance for the period Risk management Headcount and sales network Significant events and other information

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25 Management Report The Group in 2015 The Cattolica Group closed the year with a consolidated result of 81.6 million, compared to million in the previous year (-23.8%). The Group s net result came to 60.9 million, compared to 90.7 million as of December 31st, 2014 (-32.9%). In the presence of an improvement in the business result, the consolidated profit was influenced by 114 million 3 in writedowns on portfolio investments mainly pertaining to the bank equity investments in Cassa di Risparmio di San Miniato, Banca Popolare di Vicenza and Veneto Banca and 53 million in capital gains realised by means of the disposal of equity investments (Mapfre RE, Banca di Valle Camonica and Europ Assistance), seizing the opportunities which presented themselves on the financial market. The recognition of the adjustment of the prepaid and deferred tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from 2017 was also negative for more than 18 million. Having taken this into account, the consolidated profit, normalised by the non-recurrent effects, came to 161 million (+41.2% with respect to the normalised result as of December 31st, 2014); the Group profit came to 140 million (+42.9% with respect to the normalised result as of December 31st, 2014). The Group continued its process of consolidating the management of non-life classes, reporting a combined ratio of net retained business of 91.5%, in line with December 31st, 2014 and an improvement on September 30th, 2015 (92.5%). Despite the highly competitive context, the technical result of the motor TPL class remained positive thanks to the quality of the portfolio and the expertise in the sphere of settlement of Group claims. In the non-motor classes, thanks to the review initiatives on the portfolio carried out over the last few years, the Group improved the technical result. Total premiums written amounted to 5,611.5 million, more or less in line with the previous year (-1.2%). In the non-life classes, direct premiums written amounted to 2,028.6 million (+9.5%). The motor segment disclosed premiums written of 1,123.2 million, up 8.7% compared with Non-motor classes reported premiums written for million, up 10.4% on 2014, and were increasingly focused on products intended for retail customers. The contribution from FATA Assicurazioni Danni (hereinafter FATA ), on premiums written for the non-life classes as of December 31st, 2015, came to 366 million (of which 201 million motor and 165 million non-motor). Non-life premiums written, without including FATA; came to 1,662 million (-2%), of which motor 922 million (-1.8%) and non-motor 740 million (-2.2%). The Group also felt the effect of the generalised drop in the average premium on the market and even though it maintained prudent undertaking policies, it increased the number of customers (over 160 thousand new motor polices sold from the beginning of 2015; +5.4% 4 ). Life premiums written for direct business fell by 5.4%, passing from 3,769.1 million to 3,567 million, with premiums in the traditional, capitalisation and health segment for 2, Balances net of shadow accounting (for securities under segregated management schemes) and the tax effects. 4 Figure relating to the period between January 1st, 2015 and December 31st,

26 million (-16.9%), unit-linked premiums for million (+90.5%) and pension funds for million (+6.5%). Financial operations 5 closed with a result, gross of the tax effects, amounting to million as against million in the previous year. With reference to net income from other financial instruments and investment property, this aggregate was characterised by greater net income from interest and other net proceeds, which grew from to million, by the increase in net profits realised which rose from 43.9 million to million and the increase net losses from valuation on financial assets from 22.4 million to 81 million, plus net charges deriving from equity investments in associated companies for 50 million. With reference to net income deriving from financial assets held for trading, the result from financial operations was characterised by income from net interest and other net proceeds for 2.7 million compared with 3.6 million in 2014, by net profits on disposal for 2.5 million with respect to losses for 540 thousand in 2014 and net profits from valuation for 477 thousand, in line with December 31st, As at December 31st, investments - including properties classified in the item tangible assets and cash and cash equivalents - amounted to 21,390.9 million ( 19,957.7 million as of December 31st, 2014). Gross technical provisions for non-life business amounted to 3,589 million ( 3,582.8 million as of December 31st, 2014). The considerable increase in premiums written made the life business provisions, inclusive of financial liabilities, increase to 16,606.4 million ( 15,218.1 million as of December 31st, 2014). Consolidated shareholders equity amounted to 2,158.7 million ( 2,188.1 million as of December 31st, 2014) and the Group s solvency margin came to 1.89 times the regulatory minimum 6 (1.90 times as of December 31st, 2014). ***** At the end of June, the deed was entered into for the total spin-off of Cattolica Previdenza within the Parent Company with regard to the insurance business, and within C.P. Servizi Consulenziali with regard to the relationships outstanding with the staff and co-workers of the commercial and commercial support services. It became effective as from p.m. on June 30th, 2015, while the accounting and tax effects commenced as from January 1st, ***** 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 of the previous year, respectively, in accordance with the international accounting standards. For a proper analysis of changes during the year, note that the income statement balances as of December 31st, 2014 also include those relating to FATA as from the date of acquisition which took place in June With the exclusion of investments whose risk is borne by the policyholders and the change in other financial liabilities. 6 Taking into account the dividend proposal of the Parent Company. 26

27 Management Report In these consolidated financial statements, the term premiums written means the sum total of the insurance premiums (as defined by IFRS 4) and the amounts relating to investment contracts (as defined by IFRS 4 which refers the related discipline to IAS 39). Table 1 - Key economic indicators Change ( thousands) Amount % Total premiums written 5,611,475 5,676,943-65, of which Gross premiums written 5,172,092 5,357, , Direct business - non-life 2,028,648 1,853, , Direct business - life 3,127,592 3,449, , Indirect business - non-life 15,791 54,685-38, Indirect business - life of which Investment contracts 439, , , Consolidated net profit for the period 81, ,122-25, Group net profit for the period 60,914 90,715-29, Table 2 - Key equity indicators Change ( thousands) Amount % Investments 21,390,937 19,957,695 1,433, Technical provisions net of reinsurance amount 18,169,701 17,084,161 1,085, Financial liabilities relating to investment contracts 1,622,526 1,290, , Consolidated shareholders equity 2,158,699 2,188,085-29,

28 Table 3 - Headcount and sales network Change (number) Amount % Total headcount 1,580 (1) 1, % FTE headcount 1,522 (2) 1, % Direct network: Agencies 1,516 1,535 (3) % including non-exclusive agencies (3) 3 0.5% Partner networks: Bank branches 5,744 5, % Financial advisors 1, % Welfare and pension product advisors % (1) Having taken into account the exit as of December 31st, 2015 of 46 co-workers of which 35 members of the Intersectorial Solidarity Fund. (2) Having taken into account the exit as of December 31st, 2015 of 45 co-workers of which 34 members of the Intersectorial Solidarity Fund. (3) Number represented with unification of double mandates 28

29 Management Report Table 4 - Reclassified consolidated statement of financial position Change ( thousands) Amount % Items from obligatory statements (*) Assets Investment property 367, ,412 20, Property 137, , Investments in subsidiaries, associated companies and joint ventures 35,112 87,934-52, Loans and receivables 876, ,409-92, Held to maturity investments 246, ,415-6, Available for sale financial assets 15,841,390 14,542,762 1,298, Financial assets at fair value through profit or loss 3,365,426 3,199, , Cash and cash equivalents 521, , , Total investments 21,390,937 19,957,695 1,433, Intangible assets 321, ,416 5, Technical provisions - reinsurance amount 729, ,380 2, Sundry receivables, other tangible assets and other asset items 1,601,628 1,768, , (**) TOTAL ASSETS 24,043,496 22,768,951 1,274, Shareholders equity and liabilities Group capital and reserves 1,850,909 1,871,983-21, Group profit (loss) for the period 60,914 90,715-29, Shareholders equity pertaining to the Group 1,911,823 1,962,698-50, Capital and reserves pertaining to minority interests 226, ,980 17, Profit (loss) for the period pertaining to minority interests 20,722 16,407 4, Shareholders equity pertaining to minority interests 246, ,387 21, Total capital and reserves 2,158,699 2,188,085-29, Premium provision 769, ,912-3, Provision for outstanding claims 2,819,969 2,809,926 10, Gross technical provisions - non-life 3,589,001 3,582,838 6, Gross technical provisions - life 14,983,922 13,927,746 1,056, Other gross non-life technical provisions 2,128 2, Other gross life technical provisions 324, ,835 25, Financial liabilities 1,904,895 1,605, , of which deposits from policyholders 1,622,526 1,290, , Allowances, payables and other liability items 1,080,281 1,164,006-83, (***) TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 24,043,496 22,768,951 1,274, (*) Indicates the items of the statements in the consolidated financial statements as per ISVAP Regulation No. 7 dated July 13th, 2007 (**) 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 = ) 29

30 Table 5 - Reclassified consolidated income statement Change ( thousands) Amount % Items from obligatory statements (*) Net premiums 4,850,632 5,050, , Net charges relating to claims -4,520,699-4,807, , Operating expenses -561, ,552-53, of which commissions and other acquisition costs -409, ,073-46, of which other administrative expenses -151, ,479-7, Other revenues net of other costs (other technical income and charges) -54,089-35,904-18, Net income from financial instruments at fair value through profit or loss 48,024 88,466-40, Of which result from class D financial operations (**) 41,885 84,246-42, Net income from investments in subsidiaries, associated companies and joint ventures -50,110-2,242-47,868 n.s Net income from other financial instruments and investment property 601, ,776 76, of which net interest 462, ,445 6, of which other income net of other charges 70,613 46,846 23, of which net profits realised 149,339 43, ,390 n.s of which net valuation profits on financial assets -80,970-22,436-58,534 n.s of which changes in other financial liabilities n.s Commissions income net of commissions expense 5,223 2,642 2, Operating expenses relating to investments -27,227-24,453-2, RESULT OF INSURANCE BUSINESS AND FINANCIAL OPERATIONS Other revenues net of other costs (excluding other technical income and charges included under insurance operations) 292, ,105 3, ,060-76,228 8, PRE-TAX PROFIT (LOSS) FOR THE PERIOD 224, ,877 11, Taxation -142, ,755-36, NET PROFIT (LOSS) FOR THE PERIOD 81, ,122-25, PROFIT (LOSS) FROM DISCONTINUED OPERATIONS n.a. 4 CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD 81, ,122-25, Profit (loss) for the period pertaining to minority interests 20,722 16,407 4, PROFIT (LOSS) FOR THE PERIOD PERTAINING TO THE GROUP 60,914 90,715-29, (*) Indicates the items of the statements in the consolidated financial statements as per ISVAP Regulation No. 7 dated July 13th, 2007 (**) Includes the Class D profits recognised in the operating expenses relating to investments amounting to less than million, revenues for commissions amounting to 1.97 million and interest in liquidity for 129 thousand. n.s. = not significant n.a. = not applicable 30

31 Management Report Table 6 - Reclassified consolidated income statement by segment of activities NON-LIFE LIFE OTHER TOTAL ( thousands) Net premiums 1,766,865 1,647,811 3,083,767 3,402, ,850,632 5,050,593 Net charges relating to claims -1,138,244-1,097,675-3,382,455-3,709, ,520,699-4,807,221 Operating expenses -450, , , , , ,552 of which commissions and other acquisition costs -331, ,035-78,093-74, , ,073 of which other administrative expenses -119, ,843-32,086-38, , ,479 Other revenues net of other costs (other technical income and charges) -28,309-14,907-25,780-20, ,089-35,904 Net income from financial instruments at fair value through profit or loss ,105 87, ,024 88,466 Result from class D financial operations (*) ,885 84, ,885 84,246 Net income from investments in subsidiaries, associated companies and joint ventures Net income from other financial instruments and investment property ,114-2, ,110-2, ,855 84, , , , , ,776 Commissions income net of commissions expense ,338 2, ,223 2,642 Operating expenses relating to investments -7,065-6,656-18,715-16,385-1,447-1,412-27,227-24,453 RESULT OF INSURANCE BUSINESS AND FINANCIAL OPERATIONS 269, ,104 25,273 72,965-1,932-2, , ,105 Other revenues net of other costs (excluding other technical income and charges included under insurance operations) -57,633-57,719-9,372-18,277-1, ,060-76,228 PRE-TAX PROFIT (LOSS) FOR THE PERIOD 211, ,385 15,901 54,688-2,987-3, , ,877 Taxation -113,600-75,725-29,361-30, , ,755 NET PROFIT (LOSS) FOR THE PERIOD 97,792 85,660-13,460 24,439-2,696-2,977 81, ,122 PROFIT (LOSS) FROM DISCONTINUED OPERATIONS CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD 97,792 85,660-13,460 24,439-2,696-2,977 81, ,122 (*) Includes the Class D profits recognised in the operating expenses relating to investments amounting to less than million, revenues for commissions amounting to 1.97 million and interest on liquidity for 129 thousand. 31

32 Table 7 - Key indicators Non-life ratios for retained business Claims ratio (Net charges relating to claims / Net premiums) 64.4% 66.6% G&A ratio (Other administrative expenses / Net premiums) 6.8% 6.4% Commission ratio (Acquisition costs / Net premiums) 18.7% 17.6% Total Expense ratio (Operating expenses / Net premiums) 25.5% 24.0% Combined ratio (1 - (Technical balance / Net premiums)) 91.5% 91.5% Non-life ratios for direct business Claims ratio (Net charges relating to claims / Premiums for the period) 64.3% 67.3% G&A ratio (Other administrative expenses / Premiums for the period) 5.9% 5.6% Commission ratio (Acquisition costs / Premiums for the period) 19.8% 18.5% Total Expense ratio (Operating expenses / Premiums for the period) 25.7% 24.1% Combined ratio (1 - (Technical balance / Premiums for the period)) 91.6% 92.0% Life ratios G&A ratio (Other administrative expenses / Premiums written) 0.9% 1.0% Commission ratio (Acquisition costs / Premiums written) 2.2% 2.0% Total Expense ratio (Operating expenses/ Premiums written) 3.1% 3.0% Total ratios G&A ratio (Other administrative expenses / Premiums written) % Note: premiums written in the life business refer to the amount of gross insurance premiums and of the investment contracts BUSINESS PLAN The Business Plan, presented to the financial and institutional community and the press on September 19th, 2014, includes amongst its main goals the speeding up of the profitable growth of the Group, in an increasingly difficult and volatile market context, to be pursued both by means of the increase in premiums written in the reference period (in 2017 estimated premium growth is over one billion on 2013) and thanks to the increase in the profitability, especially in the non-motor and life classes (expected result of over 200 million in net profit in 2017, with a ROE of 9%). Support for the Plan development, profitability and solidity initiatives comes from both the share capital increase which the Parent Company finalised successfully in November 2014 for 500 million, with the correlated forecast of 100 million in investments to be activated over the Plan period to essentially support the internal projects in innovation and technology. The latter, in particular, by now become irremissible in the current market context characterised by emphasised developmental trends both with regard to customers (increasingly better informed and sophisticated, and seeking digital and multi-channel access) and with regard to technologies and process automation (with the development of on-line activities and 32

33 Management Report the introduction of Big Data technologies, which permit advanced analysis on customers and insurance risks via the use of evolved, outside databases). But the challenge also concerns the on-going improvement of internal efficiency, the rationalisation of the production and management processes supporting the business as well as the pursuit of a further streamlining of the Group s corporate structure. A great boost was given during 2015 to the bringing onto stream of a new organisational and governance structure, completely overhauled and enhanced with regard to its managerial expertise, so as to more fully meet the challenges and goals to be achieved as well as complete important corporate and strategic consolidation initiatives (e.g. spin-off of Cattolica Previdenza in the Parent Company) for the development of the business and the rationalisation of the range and the distribution channels. The main projects and activities launched during the year for each of the six strategic lines identified to support the attainment of the goals of the long-term Business Plan described above, are illustrated below: 1. Profitable growth of the Non-life Business: great efforts have been made during the year to defend the technical excellence of the Motor Business. The action carried out was targeted at the containment of the costs of the claims (e.g. push towards the use of contracted body repair shops, as well as experimentation throughout Italy of genuine Immediate Medical Claim Settlement Centres, often organised within the same Settlement Centres) and the development of a more targeted and selected range, by means of the use of new databases during the tariff rating and risk selection phase. These databases are at present at an advanced experimental stage in certain Italian provinces and their use on a national scale should take place within the first few months of Activities have been launched on the corporate segment aimed on the one hand at rebalancing the portfolio mix towards target products and the containment of the exposures on highly volatile risks, by means of the definition of a structured three-year reform plan, and on the other hand innovation in the underwriting and pricing stages (e.g. new products for SMEs and catastrophic risk geo-referencing project). The efforts carried out to further strengthen the settlement model, by means of the search for excellence and efficiency in the processes, concerned the entire non-life portfolio in In fact, important control activities were achieved on the operations of all the trustees and a project is underway for the strengthening of the anti-fraud activities which should hone in around mid 2016, with the launch of a new anti-fraud information system. 2. Leadership in the agricultural and foodstuffs sector: development of the insurance potential of agricultural and foodstuffs sector, playing on the leadership position obtained further to the acquisition of FATA, represents one of the fundamental strategic lines on which the Business Plan is based. Within this sphere, the signing of the 10-year agreement in 2014 with Coldiretti is highlighted, envisaging the opening of 180 new sales outlets, mainly located care of the territorial headquarters of the service companies invested in by Coldiretti, for the distribution of non-life insurance products under the FATA brand, and life and pension products under the Cattolica brand. In the policy for the development of the synergies with FATA, furthermore, mention should be made of the launch of an extremely new project for the development of non-life 33

34 products for the coverage of the risks both in the agricultural and foodstuffs sector and the insurance of the crops, with evolved contents supporting the settlement activities and service contents addressing the customer (e.g. use of drones and satellite images during the settlement stage to improve the detection of the damages by the appraisers, processing of satellite images serving the farms to be used also for foreseeing damaging events, biotic risks or for on-going monitoring of the state of the crops). 3. Life, Pension and Welfare development: as from the end of 2014, the Group launched important activities for the review of the life product catalogue of all the distribution networks, with a view to ensuring the full sustainability and profitability, minor absorption of the capital (according to Solvency II logics) and adaptation to the competitive dynamics. The initiatives for up-dating the range were completed in 2015 and also concerned the review of the return guarantees on the policies already in the portfolio, where envisaged by contractual regulations. A further rationalisation of the product catalogue is envisaged at the beginning of 2016, in concurrence with the introduction of the new rules laid down by IVASS relating to the contents of the information files of the policies linked to segregated funds. The effects of these initiatives are already visible today in the overall profitability of the portfolios and in the heavy containment of the guarantees offered on traditional new production premiums, in line with the trends by now underway throughout the Italian market. During 2015, the merger of Cattolica Previdenza in Cattolica and C.P. Servizi Consulenziali also took place: this transaction is of great strategic importance for the Group since thanks to the consequent organisational streamlining and the in-sourcing of the skills on the pension business developed in the past by the absorbed company, it was possible to start up operational areas of focus which will lead to the modernisation and relaunch of the entire life, pension and welfare sector on all the Group s distribution channels, in a transversal and co-ordinated manner. Important benefits are also expected with regard to improving internal efficiency and the automation of the processes, which will have repercussions on the quality of the service as well as on the containment of the operating costs. 4. Distribution excellence and Digital Transformation: further to the analysis of Cattolica s competitive positioning within the insurance market, a developmental process was defined whose first stage required the development of diagnostics relating to the current business processes and the current IT architecture. On the basis of the results of said diagnostics, the Cattolica Group therefore outlined a socalled developmental road map, divided up into 16 project-based areas of focus, classified by priority, for the creation of a target digital operating model to be achieved over the reference period of the Strategic Plan. During the first quarter of 2015, steps were taken to achieve the measures deemed to be of greatest priority, attributable within the afore-mentioned initiatives and aimed at providing the Group, over the short-term, with indispensable instruments for maintaining its competitive position in the new market context (e.g. advanced electronic signature, mobile payments, monthly scheduling of payments). In a market context which reshapes the distribution channels, the Group has chosen to make the agents leading players, offering them the opportunity of being involved directly in the ambitious digital transformation programme. The new agency, efficient from an 34

35 Management Report operational standpoint, commercially effective and sustainable over time with regard to the income statement, is that in which the agent-entrepreneur manages to seize and exploit the instruments and the potential of the digital world. The Group s decision to make certain agents, selected in terms of personal and entrepreneurial characteristics, active players of the change in the capacity of Digital Ambassadors, stems from here. They will have the task of furthering the Group in the implementation of the new digital initiatives and will become promoters of the new work method care of their colleagues. In order to achieve a complex Plan, which transversally impacts all company levels, streamlined and fast decision-making processes are now favoured, heedful of the control and optimisation of the required investments. In this connection, the Project and Demand Management unit and the Cost Management unit have been established. The former handles all the processes and instruments aimed at assessing the alignment with the objectives defined in the development road map, gauging the value generated and assigning the correct priority. The latter by contrast governs, at every company level, the expenditure authorisation and control processes. The above digital transformation programme and the initiatives undertaken aimed at the achievement of the same, are functional for the attainment of the Group s distributive excellence, characterised by a multi-access service model, capable of providing advice on intrinsically complex products so as to customise them in line with the real needs of the customer. This excellence will be obtained by means of: the digitalisation of the agencies, to enable operating efficiency and mobile sales ability; the development of strong skills, both technical and managerial, with particular focus on agency management, marketing and CRM (Customer relationship management) aspects, where the latter have particular importance since they are useful for encouraging the cultural change which must lead from a product logic to a service logic, focused on the customer; an increasingly greater synergy between the various distribution channels of the Group. 5. Operating efficiency and productivity: this area of focus includes a series of activities aimed at simplifying the processes and the internal organisation, as well as developing new methods for managing the staff with regard more to merit, with the aim of increasing efficiency and productivity. In this connection, mention is made of the introduction of a Performance Management system for the employees, as well as the definition of new processes for the identification of the high potential resources, for the creation of customised career paths and for the handling of the job rotation, with implementation as from Furthermore, activities aimed at rationalising the expenditure vis-à-vis third parties continued throughout the year, by means of the renegotiation of contracts with strategic suppliers, with significant impacts on the Group s general expenses (and with tangible effects already in the 2015 financial statements). In this connection, mention is also made of the creation of internal work Groups which have been entrusted with responsibility to analyse specific existing processes and propose improvements/changes which may permit both greater efficiency and, if possible, additional cost savings. 35

36 6. New approaches to the management of capital and finance: 2015 saw the consolidation and bringing onto stream of advanced approaches for the allocation of the capital and for the management of the investments, which made it possible to optimise the profitability and the equity soundness of the Group. The activation of the new ALM (Asset allocation management) and finance management model has been completed at Group level, consistent with the new Solvency II legislative requirements, fully implemented as from the cycle for the definition of the 2016 Asset allocation, approved at year end. In conclusion, the new Strategic Planning and Capital Management process has been launched, with the approval for all the group companies of the Capital Management Plan for the three-year period The target allocation of the capital and the business areas on which to calculate the expected returns adjusted for the risk has been defined within this framework. Said implementation was carried out completely in line with the internal assessment of the risk and solvency profile ( ORSA ), with a view to Solvency II. Further developments of the model are being implemented, so as to use this application also in the development and monitoring of the individual product classes. WAYS IN WHICH THE GROUP IMAGE AND INFORMATION ARE DISCLOSED The Investor Relations Division The Investor Relations Division maintained on-going dialogue with the financial community, involving relations marked by clarity and transparency, in order to ensure the market visibility on the results and on the strategies of the Group. During the year, the banks which publish analysis and comments on Cattolica stock were five, with Banca Akros which joined this group in December. Individual meetings are periodically organised with the analysts so as to look in-depth at the business trend and meetings were intensified with Italian and international institutional investors. A public conference call was organised in March to comment on the results as of December 31st, 2014, while in May a public conference call was organised to comment on the results as of March 31st, In conclusion, in August and November two public conference calls were organised, to comment on the results as of June 30th and September 30th, 2015, respectively. Rating In July, following the rating of December 2014 by means of which the Standard & Poor s agency reviewed the Cattolica rating from BBB to BBB-, Cattolica s rating was confirmed as BBB- and the outlook stable. The rating remains limited by that of the Italian Republic, in accordance with the matters envisaged by the standards of the agency. Standard & Poor s by contrast raised the Stand-Alone Credit Profile (SACP) of Cattolica from BBB to BBB+. The agency duly notes both the improvement in the Group s financial risk profile, which now stands at a more than adequate level, and the reconfirmed stability of the risk profile of the business, which remains satisfactory also thanks to a strong competitive positioning on the Italian market. 36

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39 Management Report The Group in 2015 Business performance for the period Risk management Headcount and sales network Significant events and other information

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41 Management Report Business performance for the period A BRIEF OUTLINE OF THE BUSINESS PERFORMANCE The Group by main financial statement aggregates Sectors of business The Group s activities are divided up into three business segments: life, non-life and other. The core business of the Group, headed up by Cattolica Assicurazioni, a company which is involved in both life and non-life business, is divided between the non-life business (ABC Assicura, BCC Assicurazioni, FATA Assicurazioni Danni, TUA Assicurazioni, Cattolica Services Sinistri, C.P. Servizi Consulenziali for the Cattolica danni mandate and TUA Assicurazioni and the closed-end property funds allocated to the non-life portfolio), and the life business (BCC Vita, Berica Vita, Cattolica Life, Lombarda Vita, C.P. Servizi Consulenziali for the Cattolica Vita mandate and the closed-end property funds allocated to the life portfolio). The other activities include the agricultural-real estate sector of Cattolica Agricola and Cattolica Beni Immobili and the operating services of Cattolica Services, Cattolica Immobiliare and Prisma in liquidazione, instrumental in the performance of the Group s activities. For an analysis of the result by segment of business, reference should be made to Table 6, where each segment is represented net of the eliminations between sectors. The notes to the accounts contain tables relating to the operating segments envisaged by ISVAP Regulation No. 7 dated July 13th, 2007 (gross of eliminations between sectors). Profit for the year The year closed with a consolidated net result of 81.6 million, of which 97.8 million related to the non-life business ( 85.7 million as of December 31st, 2014), million related to the life business ( 24.4 million as of December 31st, 2014), while the other segment reported a loss of million (loss of - 3 million as of December 31st, 2014). The Group s net profit came to 60.9 million ( 90.7 million as of December 31st, 2014). Premiums Gross consolidated premiums (which therefore comply with the definition of insurance policy as per IFRS 4) at the end of the accounting period amounted to 5,172.1 million. Also taking into account investment contracts, total premiums written came to 5,611.5 million, disclosing a decrease of 65.5 million (- 1.2%) compared with the previous year. 4,400 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1, ,853 3,769 2,028 3, Direct life and non life premiums, indirect premiums euro/millions Direct non life premiums Direct life premiums Indirect premiums (life and non life) Gross direct non-life premiums totalled 2,028.6 million, up 9.5% and account for 39.3% of 41

42 total direct premium business (34.9% as of December 31st, 2014). Gross direct life premiums totalled 3,127.6 million ( 3,449.7 million as of December 31st, 2014); total life premiums written amounted to 3,567 million (-5.4%). Life premiums represented the majority share of total direct business (60.7% as of December 31st, 2015 compared with 65.1% as of December 31st, 2014). Direct premiums written are divided up as follows by sales channel: agencies 41.1%, banks 48.4%, brokers 4.9%, advisors 0.2% and other channels 5.4% Direct premiums by channel euro/million 2,301 2,708 Agencies Banks Brokers Financial Advisors Other channels Other administrative expenses Other administrative expenses amount to 152 million (of which 18 million deriving from FATA), disclosing an increase of 5.2% when compared with million as of December 31st, With reference to direct business, the ratio of other non-life administration expenses to premiums written for the period passed from 5.6% to 5.9% mainly due to the increase in premiums from 1,647.8 to 1,766.9 million, while the ratio of other life administration expenses to life premiums fell from 1% to 0.9%. The Group by segments Non-life business The non-life business ended the year with a profit of 97.8 million, compared with 85.7 million as of December 31st, 2014 (+14.2%). The result is influenced by 43 million in writedowns on portfolio investments mainly pertaining to Banca Popolare di Vicenza and Veneto Banca and 34 million in capital gains realised by means of the disposal of Europ Assistance, seizing the opportunities which presented themselves on the financial market. The recognition of the adjustment of the prepaid and deferred tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from 2017 was also negative for more than 17 million. Net premiums of the non-life business amounted to 1,766.9 million compared with 1,647.8 million in 2014 (+7.2%). The combined ratio of retained business net of reinsurance came to 91.5%, in line with December 31st, 2014 and was characterised by the decrease in the claims ratio (claims to premiums ratio) which fell from 66.6% to 64.4%, while the incidence of other administrative expenses rose from 6.4% to 6.8%. Financial operations, which ended the year with a result of million ( 78.8 million as of December 31st, 2014), were mainly characterised by net income deriving from other financial instruments and investment property for million, compared with

43 Management Report million as of December 31st, 2014, with net interest and other net income, which increased from 79.2 million to 88.2 million, net realised gains, which rose from 9.1 million to 85.7 million, and net losses from valuation, which rose from 3.3 million to 48 million. This result, normalised by the non-current effects, came to 129 million. Life business The life business ended the year with a loss of 13.5 million, compared with profit of 24.4 million as of December 31st, The result is influenced by 71 million in writedowns on portfolio investments mainly pertaining to Cassa di Risparmio di San Miniato and Banca Popolare di Vicenza and 19 million in capital gains realised by means of the disposal of Mapfre Re and Banca di Valle Camonica. The recognition of the adjustment of the prepaid and deferred tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from 2017 was also negative for 1 million. Net life premiums fell from 3,402.8 million to 3,083.8 million (-9.4%), and financial operations closed with a result of 420 million, with net income from other financial instruments and investment property for million, compared to million as of December 31st, 2014, with interest and other net income growing from million to million, realised net gains rising from 34.9 million to 63.6 million, and net losses from valuation increasing from 18.9 million to 32.7 million. 7 This result, normalised by the non-current effects, came to 472 million. Other business Sectors by geographic area Investments The result relating to the other segment at the end of the year was a loss of 2.7 million, compared with a loss of 3 million in Premiums written, which are taken in Italy, are mainly concentrated in Central-Northern Italy, an area similar in terms of risk and return and therefore not significant for the purposes of the secondary segmentation envisaged by IFRS 8. Investments (which include investment property, investments in subsidiaries, associated companies and joint ventures, loans and receivables, held to maturity investments, available for sale financial assets, financial assets at fair value, cash and cash equivalents and property used for operating purposes) at the end of the year amounted to 21,390.9 million, compared with 19,957.7 million as of December 31st, 2014 (+7.2%). Specifically, investment property and property used for operating purposes amounted to million compared with million as of December 31st, 2014 (+4.1%), the investments in Group companies fell from 87.9 million to 35.1 million (-60.1%), mainly as a result of the writedowns mentioned previously, loans and receivables fell from million to million (-9.5%), held to maturity investments amounted to million compared with million as of December 31st, 2014 (-2.7%), available for sale financial assets rose from 14,542.8 million to 15,841.4 million (+8.9%) and financial assets at fair value through profit or loss rose from 3,199.6 million to 3,365.4 million (+5.2%). 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 - as already mentioned - to million, compared with million as of December 7 With the exclusion of investments whose risk is borne by the policyholders and the change in other financial liabilities. 43

44 31st, This result, normalised by the non-current effects, came to 599 million. Technical provisions Non-life technical provisions (premiums and claims) amounted to 3,589 million, compared with 3,582.8 million in the previous year (+0.2%). 5,000 4,500 4,000 3,500 3,583 3,589 Non life technical provisions euro/millions 3,000 2,500 2,000 1,500 1, Life technical provisions (actuarial provisions inclusive of shadow accounting) amounted to 14,983.9 million, compared with 13,927.7 million at the end of the previous period (+7.6%). Also taking into account Financial liabilities relating to investment contracts, the technical provisions and deposits relating to life business amounted to 16,606.4 million, an increase of 9.1% compared with December 31st, ,000 18,000 16,606 Life technical provisions and financial liabilities euro/millions 16,000 14,000 12,000 10,000 15,218 1,290 1,622 8,000 6,000 4,000 2,000 13,928 14, Life technical provisions Financial liabilities Life technical provisions include the shadow accounting provision which takes into account the share of unrealised gains and losses on assets in segregated funds ascribable to policyholders. 44

45 Management Report Shareholders equity Consolidated shareholders equity at the end of the accounting period came to 2,158.7 million as against 2,188.1 million in 2014 (-1.3%), mainly due to the dividends paid and the change in the gains reserve on available for sale financial assets. Summary of the activities carried out by the Group companies The Group s shareholders equity amounts to 1,911.8 million compared with 1,962.7 million as of December 31st, 2014 (-2.6%) and includes gains on available for sale financial assets amounting to million, compared with million at the end of the previous year. Portions of shareholders equity pertaining to minority interests amounted to million ( million as of December 31st, 2014, +9.5%) and include gains on available for sale financial assets amounting to 11.1 million, compared with 15.2 million at the end of the previous year. INSURANCE BUSINESS AND OTHER SECTORS OF ACTIVITIES At December 31st, the consolidation area comprised the insurance Parent Company, eight insurance companies, five service companies (of which one in liquidation), two companies in the agricultural-real estate sector and three real estate property investment funds. Società Cattolica di Assicurazione - Società Cooperativa, which operates throughout Italy in the life and non-life businesses, ideally targeting the medium/high range of the personal segment. It is the Parent Company of the following companies: Non-life companies ABC Assicura, with headquarters in Verona, share capital of 8.9 million, is authorized to carry out non-life business and distributes its products using the network of branches of the Banca Popolare di Vicenza Group. The Parent Company holds 60% of the share capital; BCC Assicurazioni, with headquarters in Milan, share capital of 14.4 million, is authorised to carry out non-life business and distributes its products using the network of branches of the ICCREA Group. The Parent Company holds 51% of the share capital; FATA Assicurazioni Danni, with headquarters in Rome, share capital of 5.2 million, is the non-life company specialising in the agricultural sector, wholly-owned by the Parent Company; TUA Assicurazioni, with headquarters in Milan, share capital 23.2 million, carries out insurance activities in the non-life business, offering the market a specialist range of insurance and financial products/services able to meet the needs of personal line customers. The Parent Company holds 99.99% of the share capital; Cattolica Services Sinistri, with headquarters in Verona, share capital of 150 thousand, is the Group company dedicated to activities supporting the settlement of claims. It is wholly-owned by Cattolica Services; 45

46 C.P. Servizi Consulenziali, with headquarters in Verona, share capital of 120 thousand following the share capital increase in April. It carries out non-life premium business activities (with TUA and Cattolica products) as well as in the life classes (Cattolica) using sub-agents. As from June 30th, 2015, due to the spin-off of Cattolica Previdenza it acquired the relationships outstanding with the staff and co-workers of the commercial and commercial support services. It is wholly-owned by Cattolica; Fondo Euripide, is a closed-end real estate property mutual investment fund managed by Finanziaria Internazionale Investments SGR. The interests held in the fund are as follows: Cattolica 45.95%, Lombarda Vita 43.63%, Berica Vita 9.77% and TUA Assicurazioni 0.65%. Part of said interests are allocated to the non-life portfolios of Cattolica and TUA Assicurazioni; Fondo Macquarie Office Italy, is a closed-end real estate property mutual investment fund, managed by CB Richard Ellis, which was wholly acquired by the Group companies. It owns the City Central property complex in Via Lepetit, Milan. The interests held in the fund are as follows: Cattolica 72.02%, Lombarda Vita 17.66% and BCC Vita 10.32%. Part of said interests are allocated to Cattolica s non-life portfolio; Fondo Perseide, is a real estate property mutual fund dedicated to investment in renewable energies, managed by Finanziaria Internazionale Investments SGR. The interests held in the fund are as follows: Cattolica 52.87%, Lombarda Vita 20.46%, Berica Vita 13.38%, BCC Vita 6.41%, FATA 3.59% and TUA Assicurazioni 3.29%. Part of said interests is allocated to Cattolica and TUA Assicurazioni s non-life portfolio. Life companies BCC Vita, with headquarters in Milan, share capital of 62 million, is authorized to carry out life insurance activities and distributes its products via the branches of the ICCREA Group. It is a subsidiary of Cattolica which holds an investment of 51% in the same; Berica Vita, with headquarters in Vicenza, share capital of 31 million, is authorised to carry out life insurance activities and distributes its products using the network of branches of the Banca Popolare di Vicenza Group. The Parent Company holds 60% of the share capital; Cattolica Life Limited, is a life insurance company with headquarters in Dublin, Ireland, share capital of 635 thousand, specialising in the structuring of index and unit linked contracts for customer segments. The Parent Company holds 60% of the share capital; Lombarda Vita, with headquarters in Brescia, share capital of million; it is authorised to carry out life insurance activities, distributing them via the network of branches of the UBI Banca Group. The Parent Company holds 60% of the share capital; C.P. Servizi Consulenziali, with headquarters in Verona, share capital of 120 thousand following the share capital increase in April. It carries out non-life premium business activities (with TUA and Cattolica products) as well as in the life classes (Cattolica) using sub-agents. As from June 30th, 2015, due to the spin-off of Cattolica Previdenza it acquired 46

47 Management Report the relationships outstanding with the staff and co-workers of the commercial and commercial support services. It is wholly-owned by Cattolica; Fondo Euripide, is a closed-end real estate property mutual investment fund managed by Finanziaria Internazionale Investments SGR. The interests held in the fund are as follows: Cattolica 45.95%, Lombarda Vita 43.63%, Berica Vita 9.77% and TUA Assicurazioni 0.65%. Part of said interests are allocated to the life portfolios of Lombarda Vita, Cattolica and Berica Vita; Fondo Macquarie Office Italy, is a closed-end real estate property mutual investment fund, managed by CB Richard Ellis, which was wholly acquired by the Group companies. It owns the City Central property complex in Via Lepetit, Milan. The interests held in the fund are as follows: Cattolica 72.02%, Lombarda Vita 17.66% and BCC Vita 10.32%. Part of said interests are allocated to the life portfolio of Cattolica, Lombarda Vita and BCC Vita; Fondo Perseide, is a real estate property mutual fund dedicated to investment in renewable energies, managed by Finanziaria Internazionale Investments SGR. The interests held in the fund are as follows: Cattolica 52.87%, Lombarda Vita 20.46%, Berica Vita 13.38%, BCC Vita 6.41%, FATA 3.59% and TUA Assicurazioni 3.29%. Part of said interests is allocated to the life portfolios of Cattolica, Berica Vita, Lombarda Vita and BCC Vita. Other companies Agricultural-real estate property sector Cattolica Agricola was established on September 28th, 2012 by Cattolica, the singlemember company within the sphere of the purchase of the property complex known as Tenuta Ca Tron. It has headquarters in Verona and share capital of 35.5 million. It is an agricultural limited liability company with single member which has the exclusive purpose of carrying out agricultural activities pursuant to Article 2135 of the Italian Civil Code; Cattolica Beni Immobili was established on September 28th, 2012 by Cattolica, single member, within the sphere of the purchase of the property complex known as Tenuta Ca Tron. It is a limited liability company with single member. It has headquarters in Verona and share capital of 7 million. It manages the properties not instrumental to the agricultural activities related to said estate, as well as the former Autogerma property complex, located in Via Germania, Verona. Service companies Cattolica Immobiliare, with headquarters in Verona, share capital of 400 thousand, carries out activities for developing and leveraging the real estate assets and those typical of property services. It is wholly-owned by the Parent Company; Cattolica Services, a consortium company which carries out service activities for the Group, with headquarters in Verona and share capital of 21 million. The services and activities provided are: planning, implementation and management of IT applications and operating processes, along with the services relating to telecommunications systems; supervision of the digital innovation of the Group with regard to IT and organisational aspects; handling of the settlement of Group claims with the exception of the security, hail and transport areas; teaching and training services for the Group resources; the life and 47

48 welfare technical area; non-life and accounting operations and financial statements of the Group companies. Cattolica Services is % owned by the Parent Company Cattolica, while the remaining investment is held by other Group companies (ABC Assicura, BCC Assicurazioni, BCC Vita, Berica Vita, C.P. Servizi Consulenziali, FATA Assicurazioni and Lombarda Vita to an equal extent of 0.005%) and by TUA Assicurazioni, which owns 0.01%. Prisma in liquidazione carried out agency activities, with headquarters in Milan and share capital of 60 thousand. In December, the final liquidation statements and the related allocation plan were filed care of the Milan Companies Register. 48

49 Management Report Insurance business Insurance premiums are shown in the table below, with indication of the percentage in relation to total direct business and changes as compared with the previous year, together with investment contracts. Table 8 - Total premiums written Classes Change ( thousands) 2015 % of total 2014 % of total Amount % Accident and injury 202, , , Health 68, , , Land vehicle hulls 131, , , Goods in transit 9, , , Fire & natural forces 122, , , Other damage to assets 219, , , TPL - Land motor vehicles 991, , , TPL - General 178, , , Credit 867 n.s. 1,040 n.s Suretyship 19, , Sundry financial losses 29, , , Legal protection 15, , , Assistance 35, , , Other classes (1) 4,303 n.s. 4, Total non-life classes 2,028, ,853, , Insurance on the duration of human life - class I 2,473, ,836, , Insurance on the duration of human life linked to investment funds - class III 410, , ,449 n.s. Health insurance - class IV 931 n.s. 649 n.s Capitalisation transactions - class V 229, , , Pension funds - class VI 13, , Total life classes 3,127, ,449, , Total direct business 5,156, ,302, , Indirect business 15,852 54,762-38, Total insurance premiums 5,172,092 5,357, , Insurance on the duration of human life linked to investment funds - class III 305, , , Pension funds - class VI 133, , , Total investment contacts 439, , , TOTAL PREMIUMS WRITTEN 5,611,475 5,676,943-65, (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 49

50 In particular, life premiums written are divided by insurance class (taking account of both insurance premiums and investment contracts) as follows: Table 9 - Life premiums written Life business Change ( thousands) 2015 % of total 2014 % of total Amount % Insurance on the duration of human life - class I 2,473, ,836, , Insurance on the duration of human life linked to investment funds - class III 716, , , Health insurance - class IV 931 n.s. 649 n.s Capitalisation transactions - class V 229, , , Pension funds - class VI 147, , , Total direct business 3,566, ,769, , Indirect business Total life premiums written 3,567,036 3,769, , n.s. = not significant Non-life business - Premiums written Direct non-life premiums written rose from 1,853.1 million to 2,028.6 million, disclosing an increase of 9.5%. Indirect premiums fell from 54.7 million (amount which included a hail agreement with FATA, acquired in June 2014, for the first half of 2014 for around 28 million) to 15.8 million. The motor segment disclosed premiums written of 1,123.2 million, up 8.7% compared with Non-motor classes reported premiums written for million, up 10.4% on 2014, and were increasingly focused on products intended for retail customers. The contribution from FATA on premiums written for the non-life classes as of December 31st, 2015, came to 366 million (of which 201 million motor and 165 million non-motor). Non-life premiums written, without including FATA, came to 1,662 million (-2%), of which motor 922 million (-1.8%) and non-motor 740 million (-2.2%). The premiums relating to the motor TPL class amounted to million (+7.7%), million (-3.1%) net of FATA s contribution; premiums for land vehicle hulls came to 132 million (+16.9%), million (+8.6%) net of FATA. With reference to the non-motor classes, premiums relating to accident and injury rose to million (+10.3%), million (+4.7%) net of the FATA contribution; premiums relating to fire and natural forces amounted to million (+3.7%), million (-3.7%) net of the FATA contribution; those relating to other damages to assets amounted to million (+21%), million (-11.9%) net of the FATA contribution; those relating to general TPL amounted to million (+11.3%), million (+1.2%) net of the FATA contribution; premiums relating to the sundry financial losses class amounted to 29.3 million (+8.2%), 25.7 million (+1.2%) net of the FATA contribution; premiums relating to the assistance class amounted to 35.8 million (+12.5%), 32.3 million (+7%) net of the FATA contribution. 50

51 Management Report 1, Main non life classes, direct premiums euro/millions TPL - Land motor vehicles Land vehicle hulls TPL General Other damage to assets Direct non-life premiums written were generated as follows: the agency channel with 1,866.2 million (+10.9%), the banking channel with 63.4 million (+25.4%), brokers with 53.8 million (-34.5%) and other channels with 45.2 million (19.7%). Direct business non-life premiums are attributable to the Parent Company for 1,353.7 million, ABC Assicura for 26.7 million, BCC Assicurazioni for 32 million, FATA for million and TUA Assicurazioni for million. Non-life business - Research and development activities: new products The Parent Company The year was characterised by a number of innovations in the TPL motor class and goods in transit sector. As from April, Cattolica&AUTO was added to with three new forms of coverage: restriction of assignment of the credit, compensation in specific form, waiver of recourse for transportation not compliant with legislation on safety belts. The tariff also envisages a new and innovative parameter which turns to account the safety level and the technical features of the insured vehicle. With regard to the goods in transit class, in June the Cattolica&Trasporti - MOSTRE D ARTE policy was up-dated, aimed at covering exhibitions and other events and shows. It addresses a specialised customer target, such as museums and other bodies which organise artistic or cultural events, and offers complete coverage for all unforeseeable circumstances which might occur during the organisation of an event from the time of transportation to display to the general public of works of art and the subsequent return of the same to the original premises. ABC Assicura The insurance company did not make any significant changes to the existing product catalogue during the year. 51

52 BCC Assicurazioni In January, the Crediper Protezione Dental (health class) agreement was finalised with BCC CreditoConsumo S.p.A, for the reimbursement of medical costs for dental care due to accident and illness. During the year, the FormulaFamily policy was marketed offering protection for the family and for the home, modulating the level of coverage in relation to the specific needs of the customer with two innovative solutions available to the sales network and the customers: the possibility of achieving targeted sales campaigns on specific targets with an automated and targeted quotation process and the possibility of establishing the insurance plan with a small monthly cost to be paid, at the discretion of the customer, at any point of the duration of the contract. In March, the Group won the Digital Model Insurer prize for the CLICK2GO multi-channel platform ( which distributes the company s products as from the first few months of The prize was awarded by Celent, a research and strategy company of the Oliver Wyman Group which operates at international level in the sector of financial institutions, banks and insurance companies. FATA As from March, an initiative was launched dedicated to the customers of the Multiveicolo di FATA product, who are offered accident coverage for the driver with a capital of 100 thousand in the event of death and 100 thousand for permanent disability. In June, the FATAHello! Globale Agricoltura came onto the market, within the FATAHello! line, offered as a package together with products already in the range. The Proprietà package is dedicated to owners of agricultural land which provide the same to third parties under concession, while the Proprietà e conduzione package addresses small agricultural businesses. In October, the FATAHello! Integra product was placed on the market, belonging to the FATAHello! line, in order to provide coverage in the event of serious personal injuries due to accident. The new package makes it possible to choose between an absolute excess of 7% and one of 10%, thereby completing the commercial proposal of the FATA Infortuni Integra product. TUA Assicurazioni The insurance company did not make any significant changes to the existing product catalogue during the year. 52

53 Management Report Life business - Premiums written Insurance premiums in the life business totalled 3,127.6 million(-9.3%). Premiums written relating to investment contracts amounted to million (+37.6%). Total direct life premiums written, amounting to 3,567 million, were down by 5.4% when compared with 3,769.1 million as of December 31st, The prolonged period of low interest rates created the conditions for the development of investment solutions, which work alongside the traditional forms of guaranteed saving, and which make it possible for the customer to seize the opportunities deriving from the dynamic nature of the financial markets. Particularly in the bank-assurance channel, a significant increase has been seen in the premiums of the unit linked segment in the direction of solutions with a higher risk-return profile, such as to pursue decidedly more interesting financial performances over the mid-tolong term. This trend did not compromise the validity of the range of traditional products, whose volumes remained in line with Group s expectations. Class I (insurance on the duration of human life) recorded a decrease of 12.8% in insurance premiums, from 2,836.6 million to 2,473.1 million. This result expresses, without prejudice to the specific distribution contexts, the desire of the Group to stabilise the premiums which flow to the segregated schemes, also with a view to ensuring the sustainability over time of the returns offered, which could be partly compromised by the diluting effect deriving from the significant decrease in the interest rates on the investments linked to the new incoming assets. Total class III premiums written (insurance on the duration of human life linked to investments funds) amounted to million, compared with million as of December 31st, 2014, and consisted of unit linked contracts. Investment contracts amounted to million, compared with million as of December 31st, 2014 (+57.6%). 53

54 Total class V premiums written (capitalisation) amounted to million, compared with million as of December 31st, 2014, which included non-repeatable corporate contracts. No investment contracts were issued during the year. Class VI premiums written (pension funds) rose from million to million (+6.5%), due primarily to investment contracts from million to million (+6.6%). Direct life premiums written were generated as follows: the agency channel with million (-1.4%), the banking channel with 2,645 million (-4.4%), brokers with million (+4.1%), financial advisors with 10.5 million (-25.5%) and other channels with million (-22.8%). The contribution made to the consolidated amount on life premiums attributable to the Parent Company totalled 1,009 million, BCC Vita million, Berica Vita million, Cattolica Life million and Lombarda Vita 1,466.3 million. Life business - Research and development activities: new products During the year new Class I and V products were marketed, for the Parent Company, for Lombarda Vita, for Cattolica Life, for Berica Vita and for BCC Vita, in addition to the activities for updating the existing product catalogues. Multi-class products were created (in which a maximum portion of investment in segregated schemes is fixed) for BCC Vita, Lombarda Vita and Cattolica. These products take on the form of single premium and single additional premium tariff products in which the class III component is represented by internal funds. Furthermore, given the current situation of the markets, and in line with the matters envisaged by the Business Plan, steps were taken to review some products in the catalogue so as to adapt the level of financial guarantees provided and improve the overall profitability of the range. The Parent Company and Lombarda Vita During the year, product-related activities were focused on consolidating the achievements in 2014, revising financial guarantees and the cost structure; product innovation specifically concerned the segment of protection, savings and investment products, by re-styling current products and developing a new model for approaching the segment business linked to both investment and protection coverage, as well as working on new insurance solutions. With regard to the banking network of the Parent Company and Lombarda Vita in addition to the network of welfare and pension product advisors and insurance brokers, the insurance range saw the development of new products of various types: twenty-four mixed insurance products with single premium and annual revaluation of capital and additional benefits in the event of demise; two mixed insurance products with single recurrent premium and annual revaluation of capital and additional benefits in the event of demise; a mixed insurance product with single premium and additional single premiums with annual revaluation of capital, additional benefit in the event of death and the option of an 54

55 Management Report annual coupon; a mixed insurance product with single premium and annual revaluation of capital, annual coupon plan and additional benefits in the event of demise; full life insurance linked to a Segregated Management Scheme and Internal Funds, with additional coverage in the event of demise; a full life insurance product with single premium and additional single premiums with annual revaluation of capital and additional benefit in the event of death; a full life insurance product with single premium and additional single premiums with annual revaluation of capital, additional benefit in the event of death and annual coupon. The insurance range placed by the proprietary networks (agents and welfare and pension product advisors) was extended with the development of three products, achieved for the purpose of offering a competitive mix of catalogue products. In fact, a mixed product has been realised with a single premium and additional single premiums, with benefit which can be revalued and additional benefit in the event of death; a full life multi-class product, with additional benefit in the event of the death of the insured party; a temporary product in the event of death which can be personalised on the basis of the status of the smoker in the insurance form with annual premium and constant capital, single premium and constant capital, single premium and decreasing capital. Various capitalisation products have been developed dedicated to institutional contracting parties, which make it possible to establish capital which can be revalued annually in relation to the return obtained by the internal segregated fund; in this case as well, the company guarantees, at a minimum, the consolidation of the revalued capital. Some of these insurance solutions have been specifically created to manage the resources of welfare funds. Furthermore, several insurance products have been created for the sales networks of the companies, linked to the disbursement of mortgage loans and other loan agreements with the related insurance coverage in the event of demise and other events. BCC Vita The line dedicated to investment will be enhanced by adding the following to the company s sale networks: a full life insurance product with single premium and annual revaluation of capital settled under the form of a one-off coupon and additional benefit in the event of death; a mixed insurance product with recurrent single premium and additional single premiums with annual revaluation of capital and additional benefit in the event of death; a mixed insurance product with single premium and additional single premiums with annual revaluation of capital and additional benefit in the event of death; Furthermore, the investment product range was expanded by developing a new multi-class product (with class I and III components), aimed at retail customers. Berica Vita The line dedicated to protection was enhanced by creating two forms of insurance with a constant annual premium for the company s sale networks, dedicated to the coverage of the 55

56 risk of demise. Cattolica Life The company is focusing its research and development activities mainly on the Open Architecture product line, placed on the Banca Popolare di Vicenza Group s sales networks and soon to be introduced also on the Cassa di Risparmio di San Miniato network. This product family includes Cattolica Life s unit linked policy with single premium, known as Free Selection. The open architecture structure makes it possible for customers to build their own investment portfolio selecting a maximum of 20 UCITs from a list of around 60 funds managed by leading investment firms. The company is currently working on the development of new functions such as stop-loss and take-profit mechanisms with the purpose of improving the commercial appeal of the product. Reinsurance Non-life business The Parent Company s reinsurance programme maintained a standardised structure in line with that last year. Reference continued to be made to a programme of proportional transfers with the complementary nature of optional transfer. The residual retained portion of each class was further protected by claim excess coverage against the occurrence of both individual insured events of a significant amount as well as catastrophic events. With regard to proportional transfers, for the theft, accident and injury classes, steps were taken to lower the transfer percentage from 16% to 15%, while for the transport class the transfer percentage was raised from 65% to 67.5%. With regard to the other classes the transfers maturing were confirmed. With regard to the catastrophe coverage with claim excess for the fire and land vehicle hulls classes, also the FATA portfolio is covered for 2015 by the Group agreement. This inclusion led to an increase in the exposures with respect to last year, but at the same time the modelling of the catastrophe risk disclosed a modest diversification benefit with consequent reduction of the PML (probable maximum loss) for a return period of 250 years. Despite this, on a prudent basis, the decision was made to acquire a capacity of 280 million as falling due. For the Parent Company and the companies ABC Assicura and BCC Assicurazioni, a specific agreement is in place to cover earthquake guarantees for residential risks, with a transfer percentage of 80%. The 20% retention is protected by the catastrophic agreement in the aforementioned Group claim excess. With regard to the main specificities of the transfer programmes for the subsidiary insurance companies, it is hereby revealed that, in consideration of the sizes of the respective portfolios, TUA Assicurazioni, ABC Assicura, BCC Assicurazioni and Cattolica Previdenza (for the latter up until the merger with the Parent Company on June 30th, 2015) transfer a multi-class basket to the Parent Company, which in turn carries out retrocession to the reinsurance market, via its reinsurance programmes. In greater detail, with regard to 2015, for the purpose of further diversifying the risk and guaranteeing the market conditions, the proportional and non-proportional agreements of BCC Assicurazioni, ABC Assicura and TUA Assicurazioni were transferred for the most part to the 56

57 Management Report Parent Company (70% of the transferred agreements) and the remainder (30%) was transferred directly to the reinsurance market. As for the other Group insurance companies, the placement of the proportional and nonproportional coverage of FATA was carried out mainly with the Parent Company (70% of that transferred) and the remaining portion (30%) with the reinsurance market, with the exception of the suretyship proportional agreement which was placed in full outside the Group. With regard to the hail class, the 2015 reinsurance structure envisages a proportional coverage with transfer percentage equal to 50% for Cattolica and 60% for FATA. The retention (respectively 50% for Cattolica and 40% for FATA) is protected by a stop loss agreement with priority per individual company equal to 110% (the coverage is activated when the claims/premiums ratio exceeds this threshold) and combined extent for the two companies equal to 70%. For all infragroup agreements, the corporate resolutions related to ISVAP Regulation No. 25 dated May 27th, 2008 were followed, with observance of transaction limits for each reinsurance transaction indicated therein. Life business With regard to the period under review, steps were taken to simplify the structure of the reinsurance agreements of the individual and collective policies. Accordingly, the excess agreement for the individual policies and the quota share agreement for the collective policies have been cancelled. Both the portfolios are covered in 2015 by a non-proportional agreement per risk with priority equal to 250 thousand and an agreement per Group event with priority equal to 1 million. The renewal, under the same conditions, of the proportional agreements relating to the coverage of the following completes the life reinsurance programme: risk of non-self sufficiency (long-term care) with a transfer percentage of 60%; salary-backed loans for employees and pensioners with a transfer percentage of 70%; risk of demise associated with disbursement of loans and mortgages. ***** Dealings with reinsurance companies which present the best prospects of continuity over the long-term have been preferred for all the Group companies. When selecting the partners, particular attention was paid to the solidity and reliability of the same, directing the choice towards those with the best rating or those less exposed, in the composition of the portfolio, to risk categories liable to technical-economic imbalances. When defining the reinsurance programme, all Group companies followed the provisions of the Outline Resolution concerning outgoing reinsurance in pursuance of Article 3 of the ISVAP circular No. 574/D dated December 23rd, In February, the boards of directors of all the companies approved the structure and the transfer plan for

58 FINANCIAL AND ASSET MANAGEMENT 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 14,543 15,841 3,200 3,365 Investments euro/millions 2, Investment property and property Investments in subsidiaries, associates and joint ventures Loans and receivable, cash and cash equivalents Held to maturity investments Available for sale financial assets Financial assets at fair value through profit or loss Cash and cash equivalents Investment property and properties The markets continued to disclose satisfactory performances which confirm how the property sector has definitively set itself along a route of moderate growth. Given the abundance of risk capital, the availability of debt and the permanent context of low interest rates, the property investment volumes should continue to rise. Acquisitions and property transactions During the year, Cattolica Beni Immobili finalised the purchase of a property complex used for catering purposes, adjacent to the Tenuta Ca Tron business complex, for a value of around 1 million. Furthermore, it finalised the purchase of an additional portion adjacent to the former Autogerma complex for a fee totalling 1.2 million. Cattolica Agricola finalised the purchase of a property with appurtenant land in the Municipality of Roncade (TV) for a total of 350 thousand and entered into a preliminary agreement for the purchase of land covering 1.3 hectares; the drawing up of the related notarial deed is envisaged in Mutual investment funds During the year, Fondo Perseide finalised the purchase of a photovoltaic plant with an output of 2.29 MW in the province of Teramo, for a price of 6.5 million and two photovoltaic plants with a total output of 4.65 MW in the provinces of Viterbo and Aquila, for a price of 14.1 million. As of December 31st, the Fund had invested 59.2 million in plants for the generation of electricity from photovoltaic sources, with an installed power of 24 MWp. Within the sphere of the collaboration and partnership dealings underway with Coldiretti, in the agricultural sector, the Parent Company and FATA Assicurazioni have defined the terms 58

59 Management Report for an investment of around 14 million in the closed-end real estate mutual investment fund AGRIS. In December, Fondo Euripide entered into a preliminary purchase/sale agreement with Fondo Delphine, managed by BNP Paribas, for the purchase of the NHOW hotel in Via Tortona 35, Milan, run by the NH Group. A down payment for 1 million was paid over at the time of signing the preliminary agreement. Securities investments The investment activities took place in a market context characterised by a period of high volatility for the majority of the year and a marked reduction in the liquidity mainly influenced by the tensions linked to the sorting out of the Greek situation, by the deterioration of the growth forecasts for emerging markets and by the start of the cycle for the raising of the rates in the United States. The macro-economic scenario saw a modest pick up in activities in Europe and a moderate expansion in the United States, balanced by a further slowdown in emerging markets, which led to a maintenance of the rates of inflation at all-time minimum levels, mainly fuelled by a further heavy drop in raw material prices. This permitted the central banks to maintain the accommodating monetary policy for the purpose of supporting the economy, with the real returns close to all time lows, even if in a context of strong aversion to risk and high volatility. 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 year, exposure to Italian government issues with maturities within 12 months was more or less kept unchanged, while the component with a duration of more than 12 months was mainly increased on the fixed rate portion, the prices of which were supported for the majority of the period by the heavy demand from the domestic market, partly by the foreign market, and the European Central Bank. Furthermore, tactical positions were taken on US government securities. As regards bonds, the company took advantage of interesting opportunities offered by the subscription, especially on the primary market, of both bank securities and securities linked to industrial issuers. Capital gains were also generated, exploiting the volatility of the related financial markets. The exposure to the share component was gradually reduced, cashing in part of the positive performances reported further to the growth of the markets. 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 an elevated geographic diversification within the sphere of operations, for the purpose of reducing recession risks as far as possible. 59

60 Performance in the 4th quarter Unrealised capital gains and losses The Group result as of December 31st, felt the effect of the negative contribution from the fourth quarter for 23 million, while the negative consolidated result came to 18 million. The consolidated result normalised with regard to the non-recurrent effects was positive for 41 million; the Group result was positive for 36 million. At year end, unrealised capital gains net of tax effects were recorded on held to maturity investments for 36.7 million, along with unrealised capital gains net of tax effects on loans and receivables for million, relating to bonds and other fixed-income securities. The overall fair value of the held to maturity investments and loans and receivables as of December 31st, amounted to 1,335.9 million. Net of the tax effects on properties and on investment property, latent capital gains - on the basis of estimates made by appointed outside experts - totalled 42.8 million. The overall fair value of property and investment property came to million. 60

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63 Management Report The Group in 2015 Business performance for the period Risk management Headcount and sales network Significant events and other information

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65 Management Report Risk Management RISK MANAGEMENT PROCEDURES Enterprise Risk Management process The Group has established a risk management process with a view to Enterprise Risk Management (ERM) having taken into account the objectives of the Business Plan and the annual budget on the basis of the following macro-phases: risk management policies and strategy; risk mapping (identification and recognition of the risks); stress test; propensity to risk and tolerance levels; operating limits (monitoring and mitigation of the risks). Risk management and undertaking policies and strategies The strategies and policies for undertaking and managing the Group s risks are based on the values and the priorities which inspire the Group mission, first and foremost the central nature of the insured party and their needs and the generation of stable and long-lasting value of the partners and the shareholders. The risk management strategy is based on three fundamental principles: responsibility vis-à-vis the customers and understanding of their needs; clear understanding of the various risks which affect the Group and awareness of the related undertaking limits; consistency with the aspiring principles of Cattolica and with its co-operative model. The Group therefore intends to fulfil the commitments vis-à-vis the customers and, on a more general note, the various stakeholders of the companies, maintaining a suitable and conservative risk profile, preserving its equity soundness and a satisfactory level of profitability. Specifically, the Group undertakes the life technical risks, the non-life technical risks and the accident, injury and health technical risks on a consistent basis with the objectives of also growing the insurance business envisaged within the Business Plan. The Group has established an average preference for the markets and counterparty risks, which are undertaken to the extent that these risks are instrumental to the insurance business and make it possible to meet the customers needs, maintaining a suitable level of profitability. The Group has also defined a low preference towards catastrophic risk, both life and non-life, and for health technical risks for which it adopts suitable containment action; also with regard operating risks and risks of non-compliance with legislation, the preference for the risk is low and suitable organisational safeguards are envisaged. In conclusion, the Group means to avoid any risk not associated with insurance activities, with particular reference to reputational risks by means of ethically and morally correct conduct. The taxonomy of the risks adopted is consistent with the classification envisaged by ISVAP regulation No. 20 dated March 26th, 2008, and suitably adjusted on the basis of the Solvency II regulations. 65

66 Risk map The Group collects information on an on-going basis on the risks to which it is exposed. These activities are carried out by the heads of the operational areas who are responsible for the management of the risks pertaining to the area they are responsible for (risk owner) by means of the analysis of their pertinent processes which present significant risks and the identification of the individual events which are sources of risk and the related controls set up to oversee the same. The risk identification operating processes are indicated in the management policies of the individual risks. The relevance of the individual risks is assessed by means of quantitative and qualitative approaches defined by the Risk Management function. With regard to the risks of non-compliance with legislation and reputational risks, the expected loss is considered (frequency and impact) on the basis of the method-based framework agreed with the Compliance, Information Security and Anti-money Laundering unit. Stress test For each of the sources of risk identified as more significant on the basis of the risk assessment and identification processes, forecast analysis is carried out for the purposes of internal assessment of the risk and quantitative solvency (so-called ORSA), also by means of the use of stress tests; in particular, three different approaches are used. 1. Economic balance sheet Assets and liabilities under normal conditions and stress are valued using a consistent market approach in line with the Solvency II regulations. This approach, also adopted by the European Supervisory Authority EIOPA for the sector stress tests, is used at least once a year within the sphere of the process for the internal assessment of the risk profile (ORSA). 2. Market risks Sensitivity analysis is carried out quarterly on the main risk factors of the investments (rate, credit, share and real estate risk) quantifying the impact on the income statement and on the solvency margin (Solvency I Ratio); furthermore, with the same frequency, the recalculation of the capital absorption according to the Solvency II metrics must be carried out. 3. Scenario analysis Calculation of the impact on the income statement and the solvency margin (Solvency II ratio) of macro-economic and sector scenarios defined internally, having also taken into account the most significant risk factors identified in the risk map; this analysis must be carried out at least once a year. Propensity to risk and tolerance levels In consideration of the current legislative and regulatory provisions and having taken into account the numerous aspects still being defined, with regard to the new Solvency II regulations, the decision was made to adopt the following indicators: Solvency II Ratio, Solvency I Ratio and normalised consolidated net profit. Specifically, by means of resolution dated March 18th, 2015 the Parent Company s Board of Directors fixed the risk appetite values and the tolerance threshold. 66

67 Management Report The monitoring process is activated at least quarterly and after any trigger events capable of changing the risk profile of the company. The monitoring of the quantitative statements is formalised by the Risk Management unit and presented to the Board of Directors, the Control and Risks Committee of the Parent Company and Senior Management. The monitoring of tolerances is carried out: on closure of the final balance (quarterly) by the Risk Management unit and by the business units with the support of the Administrative department; before the closure of the final balance by the business units with the support of Management control, with the preliminary figures. The quarterly report is formalised by the Risk Management unit and presented to the Board of Directors, the Control and Risks Committee of the Parent Company and Senior Management, for all the Group companies. Operating limits The operating limits define - in detail - the maximum exposure to the risks permitted by the operating structures on a consistent basis with the propensity to the risk, both in quantitative and qualitative terms; they therefore outline the management activities both in the undertaking and in the risk management stage. The operating limits have been defined by Senior Management with the contribution of the Risk Management unit; the latter has defined the procedures for the prompt verification of the same limits. The risk control and monitoring activities are carried out first of all and during by the heads of the first level controls, while the Risk Management unit carries out a quarterly ex-post check. The performance of these activities takes place on a consistent basis with the matters indicated in the policies for management of the individual risks. In order to mitigate the risk, Senior Management - in compliance with the responsibilities assigned to the same - adopts procedures which ensure the consistency of the choices made with the risk management objectives, on a consistent basis with the Group s organisational setups. The risk mitigation operating processes are indicated in the management policies of the individual risks. INSURANCE RISK - NON-LIFE BUSINESS Risk concerning tariff rating, proposal selection and the estimate process for provisions and allowances The motor and elementary classes tariff divisions, located within the Group s Non-Life Actuarial service, put together tariffs on technical bases referable to company or market data and appropriate safety loads in line with the levels of capital absorption and combined ratio target. The needs to review the existing tariffs or those drafted are indicated in management control reports and requests from the divisions. When achieving their mission, each Group company must guarantee its own stability and soundness, ensuring a satisfactory risk/return ratio. So as to limit the volatility of the risk undertaken in favour of equity soundness, the Group uses common risk selection and assumption policies, and defines a re-insurance structure so as to reduce the variable nature of the portfolio results within set limits. Within the sphere of the 67

68 assumptive subscription policies, particular attention is paid to the risk concentrations relating to acquired portfolios; specifically, with reference to disaster risks (earthquakes and floods), the risk plurality is monitored, divided up by territorial area and measured by means of the amounts insured and the compensation limits, so as to quantify the overall exposure. So as to determine the foreseeable charges for claims, the results of the inventory for the classes with slow settlement are flanked by statistical-actuarial type methods, based on the analysis of the historic data. The latter represents the information flow necessary for the definition of the hypothesis on which the method structures used are based, with particular reference to the development of the average cost and the rate of inflation endogenous to the claims. Simulations are periodically carried out on these variables in order to estimate the effect of the same on the reserve, also checking the consistency with the choices adopted for the annual financial statements. In order to optimise the process for the correct reservation at last cost of the claims, particular attention was paid to the analysis and monitoring of the claims pointer. Credit risk The Group has adopted a prudent re-insurance and joint-insurance policy in the non-life business with third-party delegation, showing preference for re-insurers and delegates with an adequate rating. No significant losses due to insolvency have been reported. Table 10 - Group exposure to re-insurers by rating category Rating ( thousands) exposure % of total AA+ 131, AA 2, AA- 178, A+ 82, A 126, A- 85, BBB+* 67, BBB BBB BBB- 2, BB BB 4, Not rated 6, TOTAL 688, * Associated with a public body Mismatching risk Due to the singularity of its process which sees the payment of the premiums (revenues) prior to the sustaining of the claims (costs), the non-life insurance business is characterised by a necessary correlation between assets and liabilities. The investments covering the non-life business technical provisions have the purpose of optimising the risk/return profile, taking into account the timing profile of the obligations visà-vis the policyholders, within a context of joint management of the assets and the liabilities. 68

69 Management Report INSURANCE RISK - LIFE BUSINESS Risk concerning tariff rating, proposal selection, mortality/ longevity/ invalidity and the estimation process for provisions and allowances For the determination of the pure premiums of the life assurance tariff rates, the Group insurance companies adopt prudent hypotheses in terms of population tables and financial guarantees given. The tariffs are periodically updated in order to take account of changes in the mortality of the Italian population or that of the outstanding portfolio and the change in the interest rates. This permits on-going adaptation to the demographic and financial evolution, as well as any timely adjustments to sudden changes in said factors. If appropriate, additional provisions are provided for the pre-existing portfolio, which cover any changes for the worse in the hypotheses adopted at the time of tariff rating. The products placed by the Group s insurance companies, in particular those where the pure risk component is significant, envisage assumptive methods structured on the basis of the personal characteristics of the policyholders and the guarantees given. This limits any antiselection phenomena. The life business insurance risks are demographic type risks (risk of mortality, longevity and invalidity), risk of insufficiency of first-order bases with respect to the costs of portfolio management (expense risk) and risk of early cancellation of the policy portfolio (redemption risk). The actuarial provisions are determined by using the first-order technical bases, in other words those used for the calculation of the pure premiums, in compliance with Italian accounting standards. So as to deal with any insufficiency (estimated on the basis of simulations of scenarios relating to the dismantling of the reference portfolios due to deaths or redemptions and to the propensity towards exercising the life annuity options on maturity) of the population and technical bases with respect to the guarantees given and commitments, additional provisions are provided, if necessary. On a yearly basis, the effective deaths are compared with those anticipated by the population bases adopted for the calculation of the pure premiums of the tariffs placed. Over the last few accounting periods, the effective mortality - with reference to portfolios with prevailing mortality risk - was overall lower than that envisaged, estimated using updated population bases, with possible mortality peaks due to non-recurrent and statistically insignificant events. The technical hypotheses, such as the propensities to exercise the contractual options (e.g.: maturity and return), the mortality incidences, the exercise of early redemptions, are adopted on the basis of the time series detected on the portfolios of the insurance companies and by means of a comparison with the available market data. Such hypotheses are subsequently corrected as a result of qualitative valuations, such as the analysis of the commercial agreements with the placers, the legislative amendments and the type of the new products being placed. The international accounting standards envisage that the insurance companies assess the adequacy of their insurance liabilities, recording any deficit in the income statement. Accordingly, the liability adequacy test verifies whether the provisions are adequate for covering future cash flows relating to financial insurance contracts with Discretionary Participation Features, according to hypotheses which define the scenario considered to be the best and most consistent for the representation of the corporate situation. The analysis carried out revealed the adequacy of the Group s insurance liabilities as of 69

70 December 31st, This result is confirmed both at individual insurance company level and at aggregate level. Therefore no integration of the provisions was necessary according to the liability adequacy test. Credit risk Mismatching risk The Group has adopted a prudent re-insurance and joint-insurance policy, showing preference for re-insurers and delegates with an adequate rating. No significant losses due to insolvency have been reported. Due to the singularity of its process which sees the payment of the premiums (revenues) prior to the sustaining of the services (costs), the life insurance business is characterised by a necessary correlation between assets and liabilities. This implies a potential mismatching risk which is dealt with by means of Asset and Liability Management (ALM) techniques, thanks to which the Group adopts policies for the investment of the assets covering the provisions linked to the duration and the return. The technical provisions are influenced by the interest rate trends. In order to manage the risk of insufficiency of interest rates, additional provisions are made in accordance with Italian legislation, which requires simulations of performance scenarios of interest rates and hypotheses on the strategies of re-investment or sale of the assets covering the mathematical provisions. Financial hypotheses, such as interest rate curves or strategies adopted for reinvestment purposes, are adopted on the basis of interest rates published by leading financial providers and the comparison between the durations of assets and liabilities within an ALM context. By means of the latter process, in its various forms, the Group controls the liquidity and mismatching risk, in relation to residual contractual obligations. Sensitivity / disclosure risk analysis The hypotheses adopted in the various assessments and estimates are usually modified so as to check the impact on the valorisations and eventually gain indications for subsequent strategies. In particular, scenarios concerning positive and negative shocks regarding the interest rates, change in the propensity towards the exercise of the options on maturity, change in the recourse to early redemptions, changes in the mortality of the policyholders and change in the spending hypotheses for the management of the policy portfolio, are adopted. In detail, within the context of the liability adequacy test, sensitivity analysis is performed on the main risk factors with an impact on the valuation of the liabilities. The scenario of best estimate hypotheses, adopted as the basis for the determination of any deficit to be recorded in the income statement, is changed by adopting a second scenario of worst case hypothesis for all the risk factors considered potentially significant. With reference to market risks, a variation of the risk free curve used for the discounting of future cash flows is simulated. In relation to the analysis of the population risks, fundamentally the mortality and longevity risk, mortality tables or survival tables increased to the extent of 10% are adopted. The hypotheses of propensity towards redemption are modified by 50%, up or down on a differentiated basis for sub-portfolios with a view to prudence. Lastly, a deterioration hypothesis of 10% of the annual operating costs for the policy portfolio is adopted. The valuation of the liabilities obtained in this second prudent scenario makes it possible to estimate the reduction in the adequacy margin of the liabilities, or the eventual 70

71 Management Report deficit which should be recognized in the income statement, if the extreme shock hypotheses simulated on all the significant risk factors were to be achieved at the same time. The adequacy of the Group s insurance liabilities as of December 31st, 2015 has been confirmed. MARKET RISK Risk management activities relating to investments are aimed at identifying, assessing and controlling market risks, or the probability of suffering losses due to: changes in financial market conditions (interest rates, share prices, credit spreads, exchange rates, etc.); misalignments between the timing profiles of assets and liabilities; unforeseen liquidity requirements that call for the liquidation of portfolios of assets, in order to preserve the solvency of the Parent Company and companies in the Group. The basis of the control system is defined by the Outline Resolutions approved by the Boards of Directors, which discipline the investment activities of the individual Group insurance companies. Specifically, each resolution contains a definition of the qualitative and quantitative limits of the investments for each type of financial instrument, distinguishing between life classes, non-life classes and unrestricted equity. The management of the securities portfolio is carried out in part within the Group and in part by professional outside managers. In the latter case, the management appointments are granted in line with the investment limits established by the Boards of Directors in the outline resolutions, in order to guarantee consistency, correctness, prudence and observance of the legislation in the asset management policies. The close collaboration between the divisions tasked with managing the assets and liabilities of each insurance company, guarantees continual attention towards the objectives of optimising and stabilising the operating results and represents the basis for the adoption of the financial and commercial management strategies. Interest rate risk The Group s investment policy is focused on the optimisation of the management results and on the reduction of the volatility of the same, taking into account the Asset and Liability Management requirements. In particular, within the life sector the time mismatching is monitored between the liabilities due to policyholders (provisions) and the covering assets, taking into account the fact that the liabilities incorporate guaranteed minimums. The Group uses a procedure to manage the exposure to interest rates which considers: the assets pertaining to each segregated management fund and all the associated future flows; the liabilities represented by the aggregation of the policies outstanding per individual tariff and by the recurrent premiums which they will develop. The system, having set the interest rate scenario variables, simulates the annual return of the segregated life management fund, taking into account both the stripping of the liabilities and 71

72 any re-investments of the liquidity generated by the financial assets. In order to illustrate the Group s exposure to interest rate risk, steps were taken to make a stratification of the portfolio by maturity. The analysis below shows that the portfolio is 54% invested in securities with a maturity of less than 5 years and cumulatively around 87.8% invested in securities with a maturity of less than 10 years. The table below and the subsequent ones contained in this section do not include the investments associated with index or unit-linked policies and pension funds, since the risk is borne by policyholders for nearly all the former. Table 11 - Stratification of the portfolio on the basis of the maturity date ( thousands) Loans and receivables Held to maturity investments Available for sale financial assets Financial assets at fair value through profit or loss Total % of total Within 12 months since the date of the financial statements Between 2 and 3 years since the date of the financial statements Between 4 and 5 years since the date of the financial statements 360 5, , ,659 1,135, ,884 15,657 3,617,629 28,825 3,818, ,871 26,117 3,874,281 6,646 4,017, Between 6 and 10 years 162, ,836 5,291,010 3,376 5,610, Between 11 and 15 years 242,105 42, , ,219, More than 15 years 122,260 3, , , TOTAL 795, ,567 14,979, ,712 16,615, Sensitivity analysis Share risk The sensitivity analysis on the interest rate was carried out by hypothesising parallel shocks on the rates curve. Two scenarios were considered, a negative one, with hypothesis of an increase in the rates of 75 bp, and a positive one, featuring a decrease of an equal extent. The extent of the duration was used as modified in order to quantify, security by security, the amount of the deviation in the market value prior and post shock. For certain particular types of securities, in a prudential light, the residual duration data item of the security was considered more representative in this estimate. The results obtained reveal that the effect of the negative shock hypothesised, net of tax effects and without considering the effects deriving from the retrocession to the insured parties, would come to around 330 million on shareholders equity and around 1.7 million on the result. With reference to loans and receivables, the effect would have been 18.3 million in unrealised capital losses and with reference to investments held until maturity, the effect would have been 8.7 million. The effect would be perfectly symmetrical in the case of positive rate shocks. The sensitivity analysis indicates a concentration of exposure to rate risk, for an ample portion of investments held by the Company in the bond segment, both at fixed and floating rate. With a view to a medium/long-term investment policy, a limited position was maintained, on shares with solid fundamentals and reasonable prospects of dividends, splitting the investment during the year, especially in periods of greater weakness of the markets. Preference has been shown for Italian issuers and those of other European Union countries, 72

73 Management Report chosen on the basis of the individual growth prospects with a view to sector-based diversification and dividend sustainability, paying particular attention to the issuers with global exposure from the point of generation of revenues. Sensitivity analysis Credit risk The sensitivity analysis on the share component was carried out by hypothesising a first shock of 5% and a second shock of 25% on share market indicators. The results obtained show that the impact, net of the tax component and without considering the effects deriving from the retrocession to the insured parties, of the first shock would come to 20.8 million on shareholders equity and 56 thousand on the income statement; that of the second shock would come to 104 million on shareholders equity and 283 thousand on the income statement. Again in this case, the greater volatility in shareholders equity derives from the classification of securities, for which reference should be made to the notes to the accounts. With reference to total Group investments, the reduced component of investments in shares and UCITs referable to the share segment leads to a low exposure to this risk. The extent of the exposure of the bond portfolio to credit risk is expressed by the stratification by rating which follows. With regard to information on activities carried out on securities of governments in EU nations, reference should be made to the notes to the accounts and the tables contained therein. Table 12 - Stratification of the bond portfolio by rating ( thousands) Loans and receivables Held to maturity investments Available for sale financial assets Financial assets at fair value through profit or loss Total % of total AAA ,629 1,710 44, AA ,167 22,713 88, A 27, , , BBB 649, ,261 13,335, ,464 14,789, BB 118,080 8, ,358 1, , B , , CCC , , Without rating ,769 1, , In default TOTAL 795, ,567 14,979, ,712 16,615, Sensitivity analysis In order to assess the credit risk, the application of a margin to the corporate bond portfolio, equal to the deviation between the returns of a reference curve and a rating curve lower by two notches was hypothesised. The BBB curve was taken as the reference curve, since it is representative of the average rating level of our corporate bond investment portfolio. In this analysis, only the negative scenario was taken into consideration, which envisages an adjustment from the BBB curve to the BB one; the positive scenario was not hypothesised, with adjustment from the BBB curve to the higher one. The results obtained reveal that the effect of the negative shock hypothesised, net of tax effects 73

74 and without considering the effects deriving from the retrocession to the insured parties, would come to around 80 million on shareholders equity and around 33 thousand on the income statement. With reference to loans and receivables, the effect - net of income taxes - would have come to around 4.3 million in unrealised capital losses and with reference to investments held until maturity, the effect would have come to around 667 thousand. Liquidity risk The liquidity risk is associated with the possibility that the portfolio assets are difficult to disinvest or that said difficulty translates into a capital loss. The Group handles this type of risk by following the guidelines adopted in the outline resolutions. In particular, as already mentioned, it is envisaged that the portfolio be invested in listed financial instruments with an adequate rating, on the basis of pre-established quantitative and qualitative limits, to encourage the rapid disinvestment of the financial instruments. Derivatives The use of derivative products within the Group complies with the needs to optimise the return and risk profile of the assets covering the provisions, taking into account the restrictions placed by the liability structure. These are mainly call options linked to index-linked contracts. OPERATING AND REPUTATIONAL RISK The operating and reputational risk gauges the probability of suffering losses due to the inefficiency of individuals, processes and systems, external events (such as fraud or supplier activities), failure to adapt to developments in legislation or conduct which may damage the corporate image. The operational risk management system which the Group has adopted aims to prevent and reduce losses deriving from operating risks by means of their correct identification, gauging and mitigation and the systematic disclosure of the risk culture in an operating sphere. This approach makes it possible to enhance the internal audit system, improve the efficiency and efficacy of the management processes and encourage dialogue with the Board of Directors, Senior Management, the Board of Statutory Auditors and the Supervisory Authority. With regard to 2015 as well, the Group continued to adopt a three-dimensional approach for managing operating risks based on: self-assessment of the operational risks: the identification, assessment of the absolute risk and the associated control are carried out by the process head (in this sense, this is known as self assessment) with the support of the Risk management unit; analysis of the key processes and monitoring of the mitigation plans: partly for the purpose of overcoming the method-related limits in the self assessment approach, the Risk management unit carries out analysis independently on the key processes by means of collating data/objective checks. Furthermore, the unit takes steps to monitor the mitigation actions identified over time; calculation of the economic capital: the economic capital represents the endowment of assets which every company must put aside to cover operating risks; the calculation is made according to a regulatory approach (Solvency II). The risk of belonging to the Group in the risk map has been assessed in relation to the amount 74

75 Management Report of the recapitalisations which the Parent Company would have to carry out to reset the risk tolerance threshold of the subsidiaries. Other information The available solvency margin of the Parent Company, pursuant to section IV of the Private Insurance Code and ISVAP Regulation No. 19 dated March 14th, 2008, amounted to 1,315.9 million for the non-life classes and million for the life classes. The amount of the required margin totals million for the non-life classes and million for the life classes. Therefore, the solvency margin is, for the non-life classes, 5.7 times that required by law, and 1.92 times for the life classes, as per the law. The Group s solvency margin is equal to around 1.89 times the regulatory minimum (taking into account the dividend proposal of the Parent Company) and compares with the margin relating to 2014 which was 1.90 times the regulatory minimum. 75

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77 Management Report The Group in 2015 Business performance for the period Risk management Headcount and sales network Significant events and other information

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79 Management Report Headcount and sales network HUMAN RESOURCES As of December 31st, the Group headcount included 1,626 staff, compared with 1,654 in the previous year (-28). The staff is broken down as follows: 45 executives (+1 with respect to 2014), 310 officials (+10 with respect to 2014) and 1,271 office workers (-39 with respect to 2014). Taking into account the exit at year end of 46 co-workers, of which 35 members of the Intersectorial Solidarity Fund, the number comes to 1,580 (-74), broken down as follows: 45 executives (+1 with respect to 2014), 295 officials (-5 with respect to 2014) and 1,240 office workers (-70 with respect to 2014). The number of full time equivalent Group employees came to 1,567 (compared with 1,595 as of December 31st, 2014). Taking into account the exit at year end of 45 co-workers, of which 34 members of the Intersectorial Solidarity Fund, the number comes to 1,522 (-73). Temporary employment relationships, excluding maternity replacements, were 13. Part-time employment relationships came to ,000 1,800 1,600 1,400 1,200 1,000 1,654 1, Headcount number ,310 1, Employees Officers Executives Management and development of the human resources The projects and the activities of the Human Resources division have been oriented towards increasing the efficiency and productivity, improving and supporting the individual and group performances, constantly monitoring and containing the personnel costs in line with the Plan objectives and increasing the competitiveness, extending and renewing the skills and the professional qualities present in-house. The Business Plan has provided a boost to recruitment and selection processes on the outside market. The managerial team has been enhanced with the inclusion of six new executives who have bought new expertise within the Group, singular and significant, for the innovative horizons established by the plan. Again by means of external searches, important specialist skills have been tracked down, not present within the organisation, to support the Plan projects. 79

80 Table 13 - Group headcount Group companies (*) Registered offices 2014 Increases Decreases Change 2015 Leavers as of Dec. 31st, 2015 (**) 2015, net of leavers as of Dec. 31st, 2015 ABC Assicura Verona BCC Assicurazioni Milan FATA Assicurazioni Danni Rome ) TUA Assicurazioni Milan BCC Vita Milan Berica Vita Vicenza Cattolica Life Dublin (Ireland) Cattolica Previdenza Milan ) Lombarda Vita Brescia Cattolica Assicurazioni Verona ) 28 4) Cattolica Agricola Verona Cattolica Beni Immobili Verona Cattolica Immobiliare Verona Cattolica Services Verona ) 53 6) Cattolica Services Sinistri Verona C.P. Servizi Consulenziali Verona ) Group total 1, , ,580 (*) Number of employees relating to companies consolidated line-by-line excluding the resources covering maternity leave. (**) Due to 35 employees joining the Intersectorial Solidarity Fund and another 11 leaving. 1) of which 1 transferred to Cattolica 2) of which 49 intercompany transfers 3) of which 47 intercompany transfers 4) of which 11 intercompany transfers 5) of which 14 intercompany transfers 6) of which 20 intercompany transfers 7) intercompany transfers The extension of know-how of the individual has been strengthened by the institute of internal mobility, which supplements the training in a synergic manner and responds, at the same time, to the changing workforce needs. In fact, in order to construct a virtuous job rotation, which is a strategic change management lever and instrument for professional development available to each resource of the company, a Moving Up process has been launched. It is a highinvestment development process which provides each resource with some of the most innovative instruments and methods on the market for developing their skills and their career path for the purpose of identifying and seizing new opportunities within the organisation. Again with a view to development, the Group has constantly striven to discover and grow future talent, offering internship opportunities in many company divisions, to students and recent graduates. 80

81 Management Report 2015 was characterised by the launch, within the Group, of the Performance Management Process (PMP). Via the assessment of the objectives assigned by each manager, this process guides the activities of each worker and their development path. All the managers of resources have been coached as from the start of each stage of the process. At the end, targeted measures were activated (individual training and coaching) which had the objective of preparing them for the final interview with their workers. The initiatives put into action go in the direction of establishing and consolidating considerable stewardship expertise in all the managers, called directly to become facilitators of development and growth of their workers. Industrial relations and disputes During the year, several trade union meetings were held to better understand issues related to personnel. Specifically, agreements were signed to obtain significant loans from Fondo Banche Assicurazioni (FBA) to provide training for employees. The training plan presented was entitled New scenarios: consolidation, development and training for new professional skills. The value of the plan which can be financed amounts to over 400 thousand in total. An important agreement was entered into in June relating to the total spin-off of Cattolica Previdenza within the Parent Company with regard to the insurance business, and within C.P. Servizi Consulenziali with regard to the relationships outstanding with the staff and coworkers of the commercial and commercial support services. An agreement was also entered into with all the FATA trade union delegations, relating to the variable bonus envisaged by their supplementary in-house agreement (that applied by the Generali Group), dropping the parameters which were linked previously to the performance of the management of Generali. In July, an agreement was entered into with all the trade unions which made the activation of the Intersectorial Solidarity Fund possible, permitting 35 employees to avail themselves of early retirement for 2015 on a voluntary basis and which will permit the use also for A number of legal disputes are ongoing, the estimated liability for which was prudently provided for. ACADEMY Academy, with its contents, methods and instruments, ever increasingly presents itself as a strategic lever for the company and its business. The activities continue with the aim of supporting development and keeping the skill level high, on the basis of the guidelines of the Business Plan. Training of human resources In line with the turning point which characterised the previous year, the active and participative involvement of the workers of each Division in the realisation of training courses as from the planning stage was consolidated. 81

82 Measures meeting with the real business needs were achieved. Here are a number of examples: the agricultural and food programme created with the aim of developing know-how and internal skills useful for the development of the insurance activities in relation to the opportunities existing in this sector and achieved in collaboration with experts and privileged observers, both Italian and international; the Solvency II process which contributed towards divulging the culture and best practices for adaptation to the requirements of the legislation in a widespread manner; the digital transformation of the business is accompanied by training experiences: Digital R-evolution is the project which dealt with the aspect of digital innovation and the continual social transformations which derive therefrom; the process for the non-life retail division, which placed at its centre the awareness of the role in a context of on-going change in which the customer covers a central role, and that for the Special Risks and Businesses division which worked on the culture of product innovation; the process for the IT Division s Non-life System department, launched last year and still underway, on the introduction of the Agile method, a new work system aimed at simplifying the issue of the projects of the Division; the processes for the Claims division regarding anti-fraud, general civil liability and updating with regard to compensation of damages to the individual. Supporting the personal and organisational skills, the Collabor-Azioni: experiences and instruments for improving team work project has been proposed which, in particularly complex, structured contexts with a significant past such as that of the Group, concentrated on experimenting with the instruments so as to facilitate the achievement of the objectives by means of streamlining of the processes and the relationships with the collaboration between individuals and different areas. With regard to sector legislative training, the on-line training course has been released, for all the Group workers, regarding the latest innovations introduced in relation to Italian Legislative Decree No. 231 dated June 8th, 2001, for the purpose of raising awareness on the implications which the legislation has in the organisational structures. On a parallel with the activities achieved within the company, participation in training events organised outside the company by universities, associations and sector institutes was considerable, including Sacro Cuore University in Milan (Cetif, Altis), Bocconi University in Milan (Business Management School), Pricewaterhouse Coopers and The European House Ambrosetti. During 2015, 5,932 man training days were held at Group level. Training for the Board of Directors On the basis of the long-tem training plan, which involves the members of the Boards of Directors of all the Group companies, a training session was held during June on the subject of New Solvency II capital requirements and implications for the insurance business. In November, the members of the Board of Directors of the Parent Company and FATA took part in a training event entitled Risk management in agriculture. The training events addressing members of the Board of Directors also include the encounter within the sphere of the conference: The commitment of the Cattolica Group to corporate social responsibility: the 82

83 Management Report Cattolica Foundation and Life Project. Cattolica for youngsters and, in conclusion, concerning evolution of the reference legislative framework for the insurance sector and responsibility of the board of directors, the event entitled Protection of the insured parties as the duty of the board of directors: internal control systems and Product Oversight Governance, which was held in December. SALES NETWORK 7,000 6,000 5,985 5,744 Sales channels number 5,000 4,000 3,000 2,000 1,535 1,516 1, , Agencies Bank branches Financial advisors Pension advisors Agency coverage Agent network training The Group closed the year with a total of 1,516 agencies, distributed as follows: 52% in Northern Italy, 27% in Central Italy and 21% in Southern Italy and the islands. Training and development activities for the Cattolica sales network involved 200 classroom training events, in which 4,000 individuals took part. In relation to the strategic objectives, where the handling of the motor customers is one of the main aspects, specific workshops were organised during the first half. The events were organised by a leading firm of consultants and saw the participation of 909 agents in 34 editions and 1,174 front office workers in 53 editions. A training campaign was carried out again during the first half on life products which saw the participation of 1,500 individuals in 80 editions. In line with the matters required by IVASS Regulation No. 6 dated December 2nd, 2014, 67 e- learning courses were adapted to the new specifications; these courses were made available to all the users. With reference to the training of the FATA network, a course was organised on the handling of the customers via commercial activities aimed at satisfying several areas of need with a consequent greater level of loyalty retention. Further to the introduction of the new issue application Omnia, various course editions were held in classroom mode which saw the participation of agents and agency staff. 4 editions of the course on the 2015 agricultural insurance plan complete the scenario, involving 106 individuals. With the support of the training structure, FATA agents provided 340 editions of courses dedicated to the respective co-workers, involving 3,600 individuals. 83

84 Bank coverage Bank-assurance partner training The bank-assurance channel is overseen by the Parent Company by means of a partnership strategy with banking operators based on both commercial agreements with numerous institutions for the sale of insurance policies via bank branches, and through the insurance companies in which the Parent Company, thereby obtaining control, and banking partners invest. The number of branches distributing Pension Planning products increased from 5,985 at the end of last year to 5,744. The bank branches of the UBI Group numbered 585. The alliance with ICREEA HOLDING launched in the second half of 2009 makes it possible to distribute products via 3,857 branches of the co-operative lending banks, while that with Banca Popolare di Vicenza, underway since 2007, permits the Cattolica Group to access a network of 579 branches. The leading banks operating as Cattolica s partner, in addition to those already indicated, include Banca Carim, Banca Popolare Pugliese, Banca Popolare di Torre del Greco, Barclays Bank, Nuova Cassa di Risparmio di Ferrara and Cassa di Risparmio di San Miniato. IVASS Regulation No. 6 dated December 2nd, 2014, introduced a series of important innovations within the sphere of the up-dating and training of the broker network which the insurance companies avail themselves of, which came into force as from January 1st. Among the innovations, a specific discipline overseeing the traceability, interactivity and multi-media nature of the e-learning contents has been established. Particular attention has also been assigned to the initial training and to the trainers, who must possess specific requisites defined on the basis of experience and pertinence of the subject matter training is provided on. With the enforcement of the new provisions on a definitive basis, the brokers formed their own network with respect to the legislation in force both on-line and with presence in the classroom. Financial and pension and welfare product advisor coverage Welfare and pension product advisor training The Group s financial advisors are 1,039, compared to 910 at the end of the previous year. Welfare and pension product advisors, represented by the C.P. Servizi Consulenziali subagents, numbered 362 compared with 485 as of December 31st, The network training and development department, further to the envisaged assessments, obtained certification as per the technical quality standard UNI (Quality Financial, Insurance and Welfare Education), as well as that for the UNI ISO standard (nonformal training). Within the sphere of the matters envisaged by the UNI ISO technical standard, pertaining to the international standards on the quality of training services, 9 editions of the Financial Educators course were organised and provided, for a total of 90 classroom training days and 4,717 hours of on-line training, which permitted the certification of 106 new financial educators. With regard to training preparatory to enrolment in the RUI, around 282 candidates for the role of welfare and pension product advisor were included in the corresponding training courses. For the purpose of increasing the skills in the financial field, during the first few months of the year 18 editions of courses pertaining to unit-linked funds were organised for a total of 436 individuals involved. 84

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87 Management Report The Group in 2015 Business performance for the period Risk management Headcount and sales network Significant events and other information

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89 Management Report Significant events and other information SIGNIFICANT TRANSACTIONS CARRIED OUT DURING THE YEAR The significant events that occurred during the year as part of managing the investments in Group companies, the corporate reorganisation and the consequent rationalisation of activities 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 February 4th, the Parent Company s Board of Directors and the shareholders meetings of Cattolica Previdenza and C.P. Servizi Consulenziali authorised the total spin-off of Cattolica Previdenza within the Parent Company with regard to the insurance business, and within C.P. Servizi Consulenziali with regard to the relationships outstanding with the staff and co-workers of the commercial and commercial support services. Within the sphere of the procedure for the spin-off, in May the transformation from limited liability concern to Italian joint stock company became effective for C.P. Servizi Consulenziali, as per the shareholders resolution adopted on April 20th, On June 25th, the deed for the spin-off of Cattolica Previdenza was entered into, within the sphere of which the Parent Company acquired the entire holding in C.P. Servizi Consulenziali. It became effective as from p.m. on June 30th, 2015, while the accounting and tax effects commenced as from January 1st, C.P. Servizi Consulenziali continues with the usual distribution activities for Cattolica Group insurance products. The Parent Company s shareholders meeting, held on April 25th, 2015, approved the distribution of a single dividend for a total of 0.35 per share. In extraordinary session, the shareholders meeting approved the amendment of Articles 6, 9 bis, 11, 20, 24, 30, 43 and 54 of the Articles of Association. Further to the queries formulated by a number of shareholders pursuant to Article 2408 of the Italian Civil Code during the shareholders meeting held on April 25th, 2015, the Board of Statutory Auditors took steps to carry out the checks required, drawing up for this purpose a report which, subject to disclosure to the Supervisory Authority of the market and to the petitioning shareholders, was made available on September 23rd, 2015 on the Parent Company s website and on the authorised storage mechanism NIS-Storage. Revealing that said report with regard to the considered profiles and the queries posed did not reveal any cases which can be qualified as reprehensible action, reference is made to the aforementioned document for more complete information. Furthermore, CONSOB subsequently requested, with regard to the aspects as per the aforesaid complaint pursuant to Article 2408 of the Italian Civil Code, additional explanations as well as acquired documents for inspection, which were provided by the Parent Company. In December, the final liquidation statements and the related allocation plan of Prisma s.r.l. were filed care of the Milan Companies Register. During the year, around 219 thousand was collected for the liquidation of the company. 89

90 Recapitalisations and share capital increases In March, the Parent Company - as single member of Cattolica Previdenza - paid over 4 million towards share capital, as expressly requested by the subsidiary, so as to cover the foreseeable operating situation and the solvency forecasts. In March and May, further to the requests made to the shareholders by BCC Vita, for a prudent recapitalisation, each for 5 million, involving a total of 10 million, the Parent Company paid over the total sum relating to it ( 5.1 million) towards the share capital. In May, Banca Popolare di Vicenza exercised the option for the early conversion of the bonds of the convertible 5% bond issue as approved by the general meeting of the Bondholders in February The Parent Company, which - within the sphere of the equity strengthening transactions carried out by the bank in had subscribed its portion of the bond issue, was assigned 25,875 new shares, at a price of 48, for an equivalent value of about 1.2 million. In December, Banca Popolare di Vicenza assigned shares as a loyalty bonus acknowledged further to the subscription of the share capital increase of the bank in 2013, to the extent of one new share for each 5 subscribed. The Parent Company was assigned 3,613 shares. To-date, the Parent Company has a holding of 0.89% in the share capital of the bank At the end of August, the Parent Company made a payment towards share capital in favour of Cattolica Beni Immobili for 1.6 million. In August and December, the Parent Company made two payments towards share capital in favour of C.P. Servizi Consulenziali for a total of 5 million. In order to support the envisaged investment processes, in November and December, the Parent Company made two payments towards share capital in favour of Cattolica Agricola for a total of 4 million. In December, for the purpose of achieving within the subsidiaries, the minimum solvency target as per the Solvency II approach, the following recapitalisation transactions were carried out: 19 million for BCC Vita, of which 51% by the Parent Company ( 9.7 million) and 49% by the shareholder ICCREA Holding; 4 million for ABC Assicura, of which 60% by the Parent Company ( 2.4 million) and 40% by Banca Popolare di Vicenza; 53.6 million for TUA Assicurazioni, 99.99% subsidiary company, entirely by the Parent Company; 23.4 million for FATA Assicurazioni, wholly-owned, entirely by the Parent Company. 90

91 Management Report In December, for the purposes of a rationalisation of the shareholders equity structure and linearity of its availability, the payment of dividends to the Parent Company was organised with regard to the 2014 profits generated and not yet distributed to the following extents: million by TUA Assicurazioni ( million relating to the profits of years prior to 2014); million by FATA Assicurazioni. Other events In May, H-FARM VENTURES (now H-FARM ) shareholders meeting resolved the transaction for the merger via incorporation in said H-FARM of the wholly-owned subsidiaries H-FARM ITALIA S.r.l. and ACCELERATORE S.r.l.. The shareholders also approved the issue of two convertible bonds for a total of 19 million, to serve the financial consolidation of the H-FARM Group. The Parent Company approved the subscription of part of one of the two loans, which was finalised in July, for a total of 478 thousand. In November, Cattolica subscribed 1,225,000 new H-FARM shares, at a price of 1 for a total equivalent value of million, deriving from the share capital increase serving the listing process of the company care of AIM Italia. In the days prior to the start of trading of its shares, H-FARM also exercised, as issuer of the two bonds indicated above, the conversion option as per the terms envisaged by the regulations of the financial instruments. Further to the transactions described, the Parent Company currently holds 4.49% of H-FARM s share capital. Cattolica has entered into an agreement with the other permanent shareholders, which disciplines the governance of the company and envisages a lock-up restriction on the shares held for a period of 560 days. With reference to the resolution adopted by the shareholders meeting of Profin Finanziaria, by means of which the partial proportional spin-off of the same was decided, in February the Parent Company announced its wish to withdraw from the afore-mentioned company, with reimbursement of the shareholding. In June, since the shareholding had not yet been repaid and in the meantime the conditions for a possible alternative divestment had come about, Cattolica finalised the sale of the entire shareholding for a price of 20 thousand. The transfer of 20,000 shares held by the Parent Company in Europ Assistance Italia in favour of Europ Assistance Holding S.A. was finalised at the end of June, for an equivalent value of 1.24 million and a gross capital gain of around 1.21 million. In August, the sale of the investment held by the Parent Company in Banca di Valle Camonica in favour of UBI Banca was finalised, for an overall equivalent value of 11.9 million, represented by 174,662 shares equating to 5.5% of the bank s share capital. The sale generated a capital gain of around 9 million. With regard to the proposed sale of the investment held in Vegagest, the conditions for the execution did not occur by the originally envisaged deadline of July 31st and as things stand an extension or a different structuring of the transaction has not been agreed. In September, the commitment - which had an original maturity of December 31st, of Banca Popolare di Vicenza to maintain ownership of a number of Cattolica shares equal to at 91

92 least 4,120,976, representing an investment of 2.364% in Cattolica s share capital, was tacitly renewed until December 31st, In November, UBI Banca confirmed the exclusive right in the Distribution Agreement entered into on September 30th, 2010 with Lombarda Vita S.p.A. and the Parent Company, for the intermediation of the insurance products of Lombarda Vita by the UBI Group banks, for another 5 years ( ). In December, an arbitration procedure furthered by the Parent Company vis-à-vis Banca Popolare di Bari was settled for 3.4 million, in relation to certain life policies issued in 2002 by Eurosav, whose equity investment had been transferred by the bank to the Parent Company. In December, the Parent Company sold the equity investment held in Mapfre RE S.A., a Spanish reinsurance company forming part of the Spanish Mapfre Group, at a price of 23.3 million, represented by 1,552,968 shares equal to 2.15% of the share capital of the investee company. The sale generated a capital gain of 10.3 million. Italian Revenue Agency In December, by means of the serving of a report on findings, the tax inspection on the Parent Company by the Italian Revenue Agency, Veneto Regional Division, Major Taxpayers Office in relation to 2011 was concluded, having been initiated in January. The audit falls within the annual plan for the inspection of large taxpayers. Supervisory Authority (IVASS) With reference to the inspection activities which IVASS launched in October 2014 on the Parent Company, with regard to the system of controls for contrasting fraud, an inspection report was served in March with a partially favourable opinion, which contained some irregularities of an operational nature, but no irregularity with regard to compliance. In April, the feedback document - signed by the members of the Board of Directors and the Board of Statutory Auditors - was drawn up, containing the comments regarding the findings and observations made. With reference to the request to use undertaking-specific parameters in the calculation of the capital requirement according to Solvency II, in April IVASS initiated a visit care of the Parent Company, aimed at directing the activities of the insurance company towards the observance of the minimum requirements envisaged by the legislation, on a preliminary basis with respect to the formal authorisation request. In November, the supervisory authority presented the Parent Company with a document containing the outcome of the inspections concluded in September. With reference to the preliminary proceedings launched by the AGCM (Anti-trust Authority) in February vis-à-vis the Parent Company, relating to alleged improper commercial practices on the debt collection activities, the same presented various briefs, the last dated September 4th, in which the Authority was requested to ascertain and declare that Cattolica s conduct did not violate the rights of the consumers and, subordinately, declare that the Parent Company is not responsible for said conduct. In October, the AGCM - rejecting the defence arguments put forward by Cattolica - imposed a 92

93 Management Report fine of 2 million on the Parent Company. An appeal has already been filed before the competent Regional Administration Courts against the measure, deemed to be unfounded. With reference to the inspection by COVIP which began in July 2014 and ended in November 2014, on the Cattolica Previdenza Progetto Pensione Bis and Cattolica Previdenza per la Pensione individual pension plans, it is hereby stated that the Supervisory Authority, on conclusion of the proceedings, imposed fines for a total of around 126 thousand. INTERNAL CONTROL SYSTEM The Internal Control System is made up of a series of rules, procedures and organisational structures which aim to ensure the correct functioning and satisfactory performance of the Parent Company and the companies belonging to the insurance Group, also guaranteeing: - efficiency and effectiveness of the business processes; - suitable control of the current and forecast risks; - promptness of the system for reporting business information; - reliability and integrity of the accounting and operational information; - protection of the company assets also with a view to the mid/long-term; - compliance of the companies with current legislation, self-governance provisions and company procedures. The System is structured according to proportionality criteria in relation to the nature, extent and complexity of the current and future risks inherent to the business activities or rather each type of risk identified according to a medium/long-term and asset protection prospective. The effective implementation of the Internal Control System, in terms of tangible exercise and running of audit devices, mechanisms, procedures and rules, is widespread and integrated in the company structures and involves all the staff according to the respective responsibilities, etc. The main guidelines which characterise the Internal Control System, taking into account the different regulations applicable and the various spheres of activities, aspire - in a general context of internal control culture, also guaranteed by the Code of Conduct - to principles of pervasiveness and unequivocalness, separation of the duties and responsibilities, formalisation of the acts, independence of the controls. In line with the most advanced governance systems, the Group adopts a structuring for its Internal Control System with three levels of protection which, complying with specific and differentiated control objectives, contributes towards ensuring a satisfactory functioning of said System: First level: this type includes the controls inherent to the operating processes which involve checks carried out both by whomever undertakes a specific activity, and whomever is responsible for supervision of the same. They are defined within the organisational procedures which describe the business processes; they are present in each company activity or function and are the responsibility, in the first place, of the executive responsible for the individual organisational unit. Second level: these controls oversee the process for the assessment and management of the risks linked to the operations ensuring the consistent observance of the business objectives. 93

94 They are entrusted to specialised structures which contribute, together with the company bodies, towards the definition of the policies for handling the risks. These are the units established in accordance with ISVAP Regulation No. 20 dated March 26th, 2008, Risk Management and Compliance. Within the sphere of the Group, additional parties are present which have the control duties envisaged by other legislative sources such as the Anti-money laundering unit and the Executive in charge of drawing up the corporate accounting documents. Third level: it monitors and assesses the efficacy and efficiency of the internal control system and its needs with regard to adaptation, by means of independent assessments which extend also to the suitability of the first and second levels safeguards. These are periodic control activities carried out by the Internal Audit unit. The purpose of the control units is to support the company, each within the sphere of their own responsibilities, in the optimisation of the overall risk management and internal control system, indicating any improvement action. The Board of Directors has drawn up a specific policy and related dedicated connection procedures for each of the company internal control units. The activities of the control units are also overseen by the Disciplinary Code. INTERNAL CONTROL UNITS Internal audit The internal audit is entrusted on a centralised basis to the Group Audit Division which is organised into two units dedicated to the control of the internal management processes and the peripheral processes of the distribution network, respectively. The Audit Division is tasked with monitoring and assessing the efficacy and efficiency of the internal audit system and its needs with regard to adaptation, in accordance with the legislative regulations and the policy approved by the Board of Directors. It is an independent unit reporting to the Chairman of the Parent Company s Board of Directors, and has free access to the corporate information useful for the performance of its audit activities. It has a suitable annual budget and does not avail itself of outsourcing. In 2015, its ISO 9001:2008 quality certification was renewed. During the year, the Audit division executed its annual plan of activities approved by the Board of Directors in November 2014, operating in line with the timescales envisaged therein. The related reporting was disclosed to the competent corporate bodies as per the formalities and timescales defined in the unit s policy. 94

95 Management Report Risk Management The Risk Management division, in accordance with section IV of ISVAP Regulation No. 20 dated March 26th, 2008 and the Solvency II Directive, contributes towards the definition and implementation of the risk management system which the Group uses to identify, measure, evaluate, monitor, manage and report on an ongoing basis the current and forecast risks at individual and aggregate level which the company is or could be exposed to and the related interdependencies. Within the sphere of the Enterprise Risk Management (ERM) process, the Risk Management division takes part in the implementation of the risk management system contributing towards the identification, evaluation and control of the most significant risks, these being understood to be the risks whose consequences may undermine the solvency of the company or seriously prevent it from achieving its goals. The Risk Management unit is an independent and separate unit from the heads of the operating areas and the other control units present within the Parent Company. The unit is on the staff of the Chairman of the Board of Directors to ensure the observance of the level of independence and autonomy. During the year, the Risk Management unit executed its annual plan of activities approved by the Board of Directors on November 12th, The related reporting was disclosed to the competent corporate bodies as per the formalities and timescales defined in the unit s policy. In compliance with the IVASS letter to the market dated April 15th, 2014 regarding application of the EIOPA approaches on the governance system, a unit was established, within the Risk Management unit, with actuarial-related supervisory tasks. During the year, further to the legislative developments, it became necessary to up-date - with validity as from the following year - the organisational solution resolved foreseeing the internalisation of said unit. Compliance The Compliance unit was established by means of the resolution of the Board of Directors dated November 12th, 2008, subsequently amended by means of resolution dated January 21st, It is made up of a specific unit concentrated within the more extensive Group Compliance, Information Security and Anti-money laundering service, which has also been assigned the Anti-money laundering, Fraud Contrast and Corruption, Information Security units, and in conclusion, as from January 2014, also the Privacy unit. The Unit, reporting to the Chairman of the Board of Directors, is entrusted with the task of assessing whether the organisation of the company and the internal procedures adopted are in line with the objective of preventing the risk of violating norms, whether they be laws, regulations or provisions of the supervisory authorities, or self-regulatory norms, and therefore of incurring legal and administrative fines, equity losses and associated reputational damage. For the purpose of more fully complying with the need to prevent the compliance risks (legal and non-compliance risks), the Compliance unit is separated into two separate organisational units: Regulatory compliance/consumer protection and Compliance of the Processes and the Systems. During the year, the Compliance unit continued to further the in-house consolidation of the 95

96 Supervisory Body pursuant to Italian Legislative Decree No. 231 dated June 8th, 2001 compliance and controls culture, carried out advisory activities and various topics vis-à-vis the business areas, also continued its commitments aimed at both the progressive extension of the perimeter of the KPIs (key performance indicators), and KRIs (key risk indicators) by means of which it carries out on-going monitoring activities, as well as performs ex-post checks (remotely and in situ) on a consistent basis with the plan of activities approved by the Board of Directors. OTHER CONTROL UNITS AND BODIES The Parent Company has set up the Supervisory Body pursuant to Italian Legislative Decree No. 231 dated June 8th, 2001, with specific supervisory tasks on the effective functioning of the Organisation, Management and Control Body, adopted to protect the administrative liability of the companies, and available on the website in the Governance section. Composition, duties, operational work methods are detailed in the Regulations of the Body approved by the Board of Directors. Anti-money Laundering Unit Fraud and Corruption Contrast Unit Appointed Executive The Group s Anti-money Laundering Unit is made up of a specific unit placed within the sphere of the Group Compliance, Information Security and Anti-money laundering service as per ISVAP Regulation No. 41 dated May 15th, It is established as a function tasked with preventing and combating the risk of episodes of money laundering and terrorism funding. Besides the unit, a Group SOS Officer has been appointed for reporting suspect transactions, in accordance with Article 15 and 22 of said Regulation, for the Italian companies which carry out life insurance. The Fraud and Corruption Contrast unit was established by means of the resolution of the Parent Company s Board of Directors dated November 13th, 2013: it is made up of a specific organisational unit placed within the Group Compliance, Information Security and Anti-money laundering service and is located care of the Parent Company. As a second level control unit it is tasked with preventing and combating the risk of fraud and corruption. The Parent Company, in its capacity as listed issuer, has appointed the executive appointed with the drawing up of the corporate accounting documents as per Article 154 bis of the Consolidated Finance Law, who is granted suitable powers and means for the exercise of the duties assigned by law. With regard to the financial disclosure process, this individual sees to the drafting and presentation to the Board of Directors of the periodic reports, the other accounts envisaged by legal and regulatory provisions and the annual financial statements, ensuring the specific periodic information flows established by legislation. The related checks carried out confirmed the adequacy of the internal control system pursuant to Italian Law No. 262 dated December 28th,

97 Management Report ANTI-FRAUD MANAGEMENT The Organisational model for combating fraud adopted by the Group is divided up into six main protocols which intend to discipline the structuring of the functional, interfunctional and intercompany relationships of the fight against fraud. The companies and the Parent Company have adopted a policy for the prevention and combating of fraud, approved by the respective Boards of Directors during 2015 and published on the company intranet. The objective of this policy is to provide an outline discipline of the company systems and the safeguards regarding the combating of fraud, both with reference to preventive profiles (socalled fraud avoidance) and deterrence and risk management profiles (so-called fraud detection and fraud handling), with the aim that said safeguards are prompt, solid, safe, reliable, effective, efficient and resilient. The model envisages a second level control and policy Unit (Fraud and Corruption Contrast), within the sphere of the Group Compliance, Information Security and Anti-money laundering Service, which avails itself of Operative Contacts, belonging to the various business areas and the various legal bodies of the Group, which have the responsibility of assisting the Unit with its duties, forming an active part within the related organisational area. The model also envisages first level operating safeguards, including - in particular - the Claims Anti-fraud Operational Service. In compliance with the matters established by Article 30 of Italian Law No. 27 dated March 24th, 2012 and the IVASS Protocol No dated March 11th, 2014, the estimate of the reduction of the charges for motor TPL claims deriving from the assessment of fraud, consequent to control and fraud suppression activities, for the Group, was quantified as 13.6 million ( 9.5 million as of December 31st, 2014). GROUP COMPLAINTS MANAGEMENT The handling of the complaints is entrusted to a specific unit within the Legal and Corporate Affairs division of the Parent Company, known as the Complaints group service, appointed as per ISVAP Regulation No. 24 dated May 19th, 2008; it sees to the handling of the complaints made by those who avail of the insurance activities (customers, injured parties, legal advisors, consumer associations). The unit also contributes towards monitoring the service levels and the company areas in view of possible improvements. Further to the enforcement of IVASS Provision No. 30 dated March 24th, 2015, which amended and supplemented ISVAP Regulation No. 24 dated May 19th, 2008, which disciplines the procedure for the presentation of claims, the Group companies took steps to make the envisaged implementations within the established timescales. During the year, with reference to the Group, a total of 3,133 written complaints were registered, of which 1,098 were upheld. The complaints were dealt with, on average, in 14.5 days. 97

98 STAGE OF COMPLETION OF SOLVENCY II The programme for Solvency implementation can be effectively applied to the Group with the structured involvement of the Board of Directors and Senior Management. Accordingly, the structuring of certain company governance guidelines has been reviewed by means of: - formalisation of the role of the Board of Directors in the business policy with regard to the strategic direction, risk management, organisation set-up; - formalisation of the role of Senior Management in the implementation of the risk management system; - strengthening of the actuarial function with considerable responsibilities vis-à-vis the Board of Directors; - strengthening of the role of the Committees in terms of support for the decision-making processes and in the instruction of the matters to the Board of Directors; - in-depth review and analysis of the impacts with a view to Solvency II of the company policies reviewed and up-dated on an annual basis, for the purpose of being able to implement structured processes. During the last quarter of 2015, the Board of Directors of the Parent Company, and of the subsidiaries, took steps to approve the company policies envisaged by current legislation. In December 2014, the Parent Company s Board of Directors resolved on the request to use specific parameters without prejudice to the possibility of achieving the validation of the internal model with the aim of representing and handling the company profile in a more consistent manner. The sphere of application of the use of the specific parameters concerns the Group and the following insurance companies: Cattolica Assicurazioni, FATA Assicurazioni and TUA Assicurazioni. For the purpose of complying with the indications of the Supervisory Body, the Parent Company is finalising the documentation necessary for the formal request for approval to use the specific business parameters. The Group is currently dealing with a developmental process with regard to IT for the purpose of creating a skill centre so as to ensure the governance of the data quality and the integrated rationalisation of the information systems. The Group has taken steps to send IVASS the results of the internal assessment of the risk and solvency profile on June 30th, 2015, further to the approval of the Board of Directors on June 29th, 2015 and the supervisory quantitative disclosure reports (so-called QRT) envisaged for the transitory period (so-called Interim measures). 98

99 Management Report INFORMATION SYSTEMS The most important action taken by the IT Division of Cattolica Services during the year is presented below. Applicative measures Within the sphere of the programme for the integration of FATA in the Group systems, to-date the conversion has been completed of the claims, finance, accounting and hail applications. Activities are underway and expected to be completed in the first few months of 2016, to migrate the motor and elementary class portfolios of FATA to the non-life information systems of the Group. The IT activities for making the Cattolica Previdenza spin-off in the Parent Company operative have been carried out. The unification of the databases of the Cattolica and former Duomo non-life policies has been completed. A new consolidated register of the intermediaries (agents, brokers and branches of the partner banks in the bank-assurance sector) was created. Activities continue for the consolidation of the administrative/accounting systems within the SAP platform and in particular the measures for integrating the reinsurance accounts with the SAP FS-CD module have been completed and the adaptation of the systems supporting the new financial planning processes has been achieved. The new Group data warehouse for the non-life and claims areas and the new ALM (Asset- Liability Management) system supporting the integrated management of the balance sheet assets and liabilities have also been brought into production. Digital insurance company model Distribution of the non-life platform is underway for the direct and multi-channel sale (bankassurance) care of banks which place the Group s insurance products; the roll-out is expected to be completed by the end of the first half of 2016 with the consequent casting off of the legacy applications currently in use. The solution for managing advanced electronic signatures (graphometric signatures) has been completed and following an initial test phase distribution of the solution has been launched care of an initial batch of agencies. The advanced electronic signature solution is available for the non-life products. On a parallel, measures have been achieved which will make it possible to make electronic payments while on the move. Legislative adaptations In this context, system enhancements to comply with Solvency II regulations continue. The software platforms have been defined and the project activities launched for complying with the legislative obligations envisaged including the activities for the application of the Data Quality solution. The production of the reports envisaged by Pillar III (QRT) and Pillar II (ORSA) has been completed. Infrastructures Within the sphere of the IT infrastructures: measures have been completed for the optimisation of the management of the network traffic; 99

100 a second Storage Area Network has been brought onto stream; re-hosting activities have been concluded, making it possible to cast off the mainframe system; the casting off of the private Agencies-HQ network is being completed, with parallel activation of the internet so as to access the HQ applications. IT governance Significant review and renegotiation activities have been completed for contracts with the main suppliers, bringing important benefits both in terms of cost reduction and improvement in the contractual conditions and the agreed quality levels for the provision of the services. The governance and control of the projects portfolio was further enhanced, in particular with the support of the Enterprise PMO unit, recently established, and the on-going involvement of the Organisation unit. With a view to on-going improvement of the provision of the service to the users, modern logics have been implemented for the management of the Quality of the IT processes. This evolution took place by means of the introduction of innovative instruments for monitoring the critical systems, the gauging of the IT performance, the definition of new processes for managing/providing the service and the activation of a new communication model, both internal and towards the agencies. Management and co-ordination activities according to Article 2497 et seq. of the Italian Civil Code The Parent Company has exercised its management and co-ordination powers in observance of the principles of correct corporate and business management and on a consistent basis with the roles assigned to the individual Group companies. With specific reference to the transactions expressly influenced by the Parent Company, in addition to the transactions indicated in other parts of this report, it should be noted that said transactions concerned, among other things: resolutions and subsequent activities for adaptation to ISVAP Regulation No. 20 dated March 26th, 2008; the approval of the guidelines for the handling of the risks at Group level, as well as the forecast assessment of the risk and solvency profile within the sphere of the ORSA process; the approval of the risk propensity systems, setting the risk tolerance levels; the adoption of the guidelines for intercompany transactions pursuant to ISVAP Regulation No. 25 dated May 27th, 2008; the adoption of governance and management approaches and controls which are standard at Group level; the implementation of co-ordinated operating policies; the adoption and review of company policies in accordance with ISVAP Regulation No. 20 dated March 26th, 2008, ISVAP Regulation No. 36 dated January 31st, 2011, the IVASS letter to the market dated April 15th, 2014, the Solvency II Directive and the EIOPA Guidelines; the re-definition of certain developmental lines of the strategic approach; the review of the directives concerning the internal controls; the establishment of the Actuarial Unit as per the Private Insurance Code; the choices concerning the composition, formation and the remuneration of the corporate 100

101 Management Report bodies, management and other significant roles with respect to the governance set up. So as to ensure an evolution of the Group consistent with the lines identified at Parent Company level, the management and co-ordination activities concerned the implementation of coordinated management policies and the definition of a number of development lines of the Group s strategic layout. In detail, a number of extraordinary transactions were executed in 2015, as already fully described under significant events during the period. The Parent Company also intervened with the recapitalisation transactions necessary for ensuring observance by the subsidiaries of the individual capital ratios envisaged by legislation and by internal regulations concerning the risk tolerance. With regard to financial, tax and administration matters, the central role of the Parent Company is highlighted in the definition of the operating lines in which the Group s companies are involved. Tax consolidation The subsidiaries which comply with the national tax consolidation system are: ABC Assicura, Berica Vita, BCC Assicurazioni, BCC Vita, Cattolica Agricola, Cattolica Beni Immobili, Cattolica Immobiliare, Cattolica Services, Cattolica Services Sinistri, C.P. Servizi Consulenziali, FATA Assicurazioni Danni, Lombarda Vita, TUA Assicurazioni and TUA Retail. The reasons why the option has been exercised lie in the appropriateness of offsetting the tax positions with an opposite sign between the Group companies, consequently optimising the financial aspects. For the purposes of the regulation of the economic transactions deriving from the compliance with the tax consolidation regime, an agreement was entered into with the Parent Company by each investee company. With reference to the allocations of the economic effects associated with the exercise of the option, the subsidiaries transfer the amounts corresponding to the taxes and advances deriving from their taxable position to Cattolica; by contrast, they receive from the same the amount corresponding to lower tax paid by the same due to the effects of the use of tax losses transferred by subsidiaries. OWN SHARES HELD BY THE PARENT COMPANY AND BY ITS SUBSIDIARIES The shareholders meeting held on April 25th, upon the proposal of the Board of Directors, approved the plan for the purchase and sale of own shares pursuant to the law, which concerns a maximum number of shares equal to 5% of the share capital, for a maximum total equivalent book value of the own shares of 60 million for a period of 18 months from the date of the shareholders meeting resolution. The purchase and sale of own shares has a twofold purpose: the possibility of availing in advance of a block of shares available for extraordinary transactions, and for contained measures on the market aimed at providing liquidity and stable volumes for security trading, and to avoid uncertainties and unjustified fluctuations in listed prices. Furthermore, the purchase 101

102 of own shares can be carried out with a view to medium and long-term investment or in any event in order to seize market opportunities, each time it is appropriate, both on the market and (only with regard to that which concerns sale) on the so-called over the counter markets or also outside any market, providing this takes into account the listings of the organised market. During the year, 2,641,057 shares were purchased and 251,750 sold, for a total price of 17.3 million for purchases and 1.7 million for sales. As of December 31st, the Parent Company held 3,295,545 own shares, equal to 1.89% of the share capital, recorded in the separate financial statements for an equivalent book value of 24.2 million. REPORT ON CORPORATE GOVERNANCE AND THE OWNERSHIP STRUCTURES In pursuance of Article 89 bis, paragraph 5, of the Issuers Regulations, you are hereby informed that the report on corporate governance and the ownership structures envisaged by Article 123 bis of Italian Legislative Decree No. 58 dated February 24th, 1998, is available on the website in the Governance section. TRANSACTIONS WITH RELATED PARTIES Pursuant to CONSOB Regulation No dated March 12th, 2010, and subsequent amendments and additions, as from January 1st, 2011 the Procedure for the management of related party transactions approved by the Board of Directors on November 29th, 2010, applies to the situations envisaged by the regulations. The document relating to this procedure - which should be referred to for details - is published on the website in the Governance section. With reference to disclosure on transactions with related parties, please see Part D - Other information in the notes to the accounts. ATYPICAL OR UNUSUAL TRANSACTIONS AND NON-RECURRENT SIGNIFICANT EVENTS AND OPERATIONS Pursuant to CONSOB DEM/ dated July 28th, 2006, you are hereby informed that no atypical and/or unusual transactions were entered into during the year nor are any non-recurrent significant events or operations with important effects on the Parent Company s accounts indicated. PERFORMANCE OF CATTOLICA STOCK During the year, Cattolica shares recorded a minimum price of 5.50 and a maximum price of The capitalization of the stock on the market as of December 31st, 2015 came to 1,279 million. The performance of the stock in 2015 disclosed an increase of 26.2% with respect to an increase of 12 % in the FTSE Mib index and an increase of 3.1% in the FTSE Italia All-Share Insurance Index. Average volumes traded in 2015 were 912,361 transactions. 102

103 Management Report Ratios per share A summary of the main ratios per share is presented below as of December 31st: Table 14 - Ratios per share (in ) Number of outstanding shares (*) 171,774,210 66,956,691 Premiums written per share (insurance premiums and investment contracts) Group profit per share Group shareholders equity per share (*) The number of shares in circulation is calculated in pursuance of IAS 33 SIGNIFICANT EVENTS DURING THE FIRST FEW MONTHS OF 2016 On January 7th, 2016 the Parent Company informed Veneto Banca S. p. A. of the exercise of the right to withdraw, made further to the decision to transform the bank into an Italian jointstock company, with regard to the entire investment held in the bank (277,777 shares). This investment, held since 2014, was acquired within the sphere of the transaction for the early exercise of the option agreed in 2014 relating to Cassa di Risparmio di Fabriano e Cupramontana shares, which subsequently become Veneto Banca shares, after the absorption of the former in the latter. On February 17th, 2016 a consultation agreement was established between some of UBI Banca S.p.A. s shareholders. The shareholders represented conferred, at the time of establishment of the Agreement, 107,765,134 ordinary shares equal to 11.95% of UBI Banca s share capital. On its part, the Parent Company complied conferring 4,850,000 ordinary shares of the bank from among the 5,100,000 shares held by the same in total. Among the terms of the agreement it is contemplated that the participants in said Agreement will meet also to discuss the choice of the most suitable candidates to cover the role of members of the Supervisory Board presenting their own list for the shareholders meeting which will be called to renew the offices with the consequent commitment to vote for the same. On March 5th, 2016 Banca Popolare di Vicenza (BPVi), with which well-known and important commercial and investment partnerships exist, resolved its transformation into an Italian joint-stock company. In the 15 days after the recording of the resolution, the shareholders, including Cattolica, who did not participate in the afore-mentioned resolution may exercise the right to withdraw, which what is more was limited by the bank with regard to all and without time limits. Furthermore, as a consequence of said resolution, Cattolica has the right to withdraw from the outline agreement which disciplines the partnership in the 180 days after the event and with effectiveness 180 days after the exercise of this right and, consequently, BPVi is obliged to repurchase the entire ownership of the three product companies Berica Vita S.p.A., ABC Assicura S.p.A. and Cattolica Life Ltd, in which BPVi and Cattolica respectively hold 40% and 60% of the related share capital, according to the terms and conditions disciplined in said outline agreement; accordingly, BPVi will obviously be free to proceed with the negotiation of new bank-assurance agreements with third party partners. 103

104 OUTLOOK FOR BUSINESS ACTIVITIES During the year underway, the Group will continue in accordance with the policies of the Business Plan, both in terms of projects and in terms of the profitability trend of the insurance business, despite a highly competitive market context. During the current period of high volatility of the financial markets and low yield rates, the Group pays particular attention to seizing any return opportunities, whilst maintaining the traditional prudent approach with regard to management of the assets. With regard to the enforcement of the Solvency II Directive, the Group is ready since it has been involved for some time in the process for adoption of the new legislation. The soundness of the Group and its prudent risk profile are also confirmed by the Solvency II metrics, as occurred in the previous regulatory system. THE BOARD OF DIRECTORS Verona, Italy, March 9th,

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107 Consolidated Financial Statements

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109 Statement of financial position CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st 2015 Company: CATTOLICA ASSICURAZIONI GROUP ASSETS ( thousands) INTANGIBLE ASSETS 321, , Goodwill 203, , Other intangible assets 117, ,265 2 TANGIBLE ASSETS 150, , Property 137, , Other tangible assets 13,870 13,564 3 TECHNICAL PROVISIONS - REINSURANCE AMOUNT 729, ,380 4 INVESTMENTS 20,732,422 19,399, Investment property 367, , Investments in subsidiaries, associated companies and joint ventures 35,112 87, Held to maturity investments 246, , Loans and receivables 876, , Available for sale financial assets 15,841,390 14,542, Financial assets at fair value through profit or loss 3,365,426 3,199,555 5 SUNDRY RECEIVABLES 515, , Receivables deriving from direct insurance transactions 403, , Receivables deriving from reinsurance transactions 62,236 86, Other receivables 49,370 46,066 6 OTHER ASSET ITEMS 1,072,562 1,179, Non-current assets or disposal group held for sale Deferred acquisition costs 12,891 12, Deferred tax assets 565, , Current tax assets 364, , Other assets 129, ,911 7 CASH AND CASH EQUIVALENTS 521, ,694 TOTAL ASSETS 24,043,496 22,768,

110 CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st, 2015 SHAREHOLDERS EQUITY AND LIABILITIES Company: CATTOLICA ASSICURAZIONI GROUP ( thousands) SHAREHOLDERS EQUITY 2,158,699 2,188, pertaining to the Group 1,911,823 1,962, Share capital 522, , Other equity instruments Capital reserves 790, , Revenue reserves and other equity reserves 444, , (Own shares) -27,144-12, Reserve for net exchange differences Gains or losses on available for sale financial assets 121, , Other gains or losses recognised directly in equity -1, Profit (loss) for the period pertaining to the Group 60,914 90, pertaining to minority interests 246, , Capital and reserves pertaining to minority interests 215, , Profits or losses recognised directly in equity 11,107 15, Profit (loss) for the period pertaining to minority interests 20,722 16,407 2 PROVISIONS AND ALLOWANCES 55,321 44,774 3 TECHNICAL PROVISIONS 18,899,621 17,811,541 4 FINANCIAL LIABILITIES 1,904,895 1,605, Financial liabilities at fair value through profit or loss 1,622,514 1,290, Other financial liabilities 282, ,954 5 PAYABLES 322, , Payables deriving from direct insurance transactions 82,978 91, Payables deriving from reinsurance transactions 49,375 33, Other payables 190, ,133 6 OTHER LIABILITY ITEMS 701, , Liabilities of disposal group held for sale Deferred tax liabilities 454, , Current tax liabilities 187, , Other liabilities 60, ,369 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 24,043,496 22,768,

111 Income statement CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st 2015 Company: CATTOLICA ASSICURAZIONI GROUP INCOME STATEMENT ( thousands) Net premiums 4,850,632 5,050, Gross premiums written 5,176,279 5,376, Ceded premiums -325, , Commissions income 5,722 3, Income and charges from financial instruments at fair value through profit or loss 48,024 88, Income from investments in subsidiaries, associated companies and joint ventures 4 2, Income from other financial instruments and investment property 806, , Interest income 499, , Other income 76,675 59, Realised gains 223,761 70, Valuation gains 6,307 3, Other revenues 94,231 91,841 1 TOTAL REVENUES AND INCOME 5,804,771 5,862, Net charges relating to claims -4,520,699-4,807, Amounts paid and change in technical provisions -4,716,164-5,026, Reinsurance amount 195, , Commissions expense Charges from investments in subsidiaries, associated companies and joint ventures -50,114-4, Charges from other financial instruments and investment properties -204, , Interest expense -36,731-35, Other charges -6,062-12, Realised losses -74,422-26, Valuation losses -87,259-26, Operating expenses -588, , Commissions and other acquisition costs -409, , Operating expenses relating to investments -27,227-24, Other administrative expenses -151, , Other costs -216, ,973 2 TOTAL COSTS AND CHARGES -5,580,465-5,649,689 PROFIT (LOSS) FOR THE YEAR BEFORE TAXATION 224, ,877 3 Taxation -142, ,755 PROFIT (LOSS) FOR THE YEAR NET TAXATION 81, ,122 4 PROFIT (LOSS) FROM DISCONTINUED OPERATIONS 0 0 CONSOLIDATED PROFIT (LOSS) 81, ,122 pertaining to the Group 60,914 90,715 pertaining to minority interests 20,722 16,

112 Statement of comprehensive income CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st, 2015 STATEMENT OF COMPREHENSIVE INCOME - Net amounts Company: CATTOLICA ASSICURAZIONI GROUP ( thousands) CONSOLIDATED PROFIT (LOSS) 81, ,122 Other income components net of taxation without reclassification in the income statement 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 Other items 0 0 Other income components net of income taxes with reclassification in the income statement -32,027 66,124 Change in reserve for net exchange differences 0 0 Gains or losses on available for sale financial assets -29,515 63,952 Profits or losses on cash flow hedging instruments 0 1,340 Profits or losses on instruments hedging a net investment in foreign operations 0 0 Change in the equity of investee companies -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 -31,893 65,937 TOTAL OF THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 49, ,059 pertaining to the Group 33, ,519 pertaining to minority interests 16,626 18,

113 The undersigned declare that these financial statements are true and consistent with the underlying accounting records The legal representatives of the company (*) The Chairman PAOLO BEDONI (**) (**) (**) The Statutory Auditors GIOVANNI GLISENTI LUIGI de ANNA FEDERICA BONATO CESARE BRENA ANDREA ROSSI (*) For foreign companies, the signature must be that of the general representative for Italy. (**) Indicate the office covered by the signee. 113

114 Cash flow statement CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st 2015 Company: CATTOLICA ASSICURAZIONI GROUP ( thousands) Profit (loss) for the year before taxation 224, ,877 Changes in non-monetary items 1,163, ,474 Change in non-life premiums provision -16,748-33,601 Change in provision for outstanding claims and other non-life technical provisions 20,680-4,962 Change in mathematical provisions and other life technical provisions 1,019, ,858 Change in deferred acquisition costs -3,323-3,196 Change in provisions and allowances 10,547 6,549 Non-monetary income and charges from financial instruments, investment property and equity investments 147,205-44,295 Other changes -13,647 41,121 Change in receivables and payables generated by operating activities 125,296 49,431 Change in receivables and payables deriving from direct insurance and reinsurance transactions 115,814 89,582 Change in other receivables/payables, other assets/liabilities 9,482-40,151 Taxes paid -114,018-94,332 Net liquidity generated/absorbed by monetary items pertaining to investments and financing activities 302, ,272 Liabilities from financial contracts issued by insurance companies 302, ,272 Payables due to banking and interbank customers 0 0 Loans and receivables due from banking and interbank customers 0 0 Other financial instruments at fair value through profit or loss 0 0 TOTAL NET LIQUIDITY DERIVING FROM OPERATIONS 1,701,963 1,336,722 Net liquidity generated/absorbed by investment property -25,717-21,151 Net liquidity generated/absorbed by investments in subsidiaries, associated companies and joint ventures 0-7,361 Net liquidity generated/absorbed by loans and receivables 95, ,634 Net liquidity generated/absorbed by held to maturity investments 7,628 17,000 Net liquidity generated/absorbed by available for sale financial assets -1,374,338-2,076,535 Net liquidity generated/absorbed by tangible and intangible assets -51,814-54,697 Other net liquidity flows generated/absorbed by investment activities -150,372 42,720 TOTAL NET LIQUIDITY DERIVING FROM INVESTMENT ACTIVITIES -1,498,671-1,826,390 Net liquidity generated/absorbed by capital instruments pertaining to the Group 0 504,799 Net liquidity generated/absorbed by own shares -15,121-3,488 Distribution of dividends pertaining to the Group -60,164-25,557 Net liquidity generated/absorbed by capital and reserves pertaining to minority interests 5,390-19,657 Net liquidity generated/absorbed by subordinated liabilities and by participative financial instruments Net liquidity generated/absorbed by sundry financial liabilities -32,630-50,630 TOTAL NET LIQUIDITY DERIVING FROM FINANCING ACTIVITIES -102, ,694 Effect of the exchange differences on cash and cash equivalents 0 0 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 420, ,668 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 100,767-83,974 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 521, ,

115 Statement of changes in shareholders equity CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st 2015 Company: CATTOLICA ASSICURAZIONI GROUP ( thousands) Balance December 31st, 2013 Change in closing balances Charges Adjustments from reclassificati on to income statement Transfers Changes in investment holdings Balance December 31st, 2014 Share capital 170, , ,882 Other equity instruments Shareholders equity Capital reserves 656, , ,211 pertaining to Revenue reserves and other equity reserves 387, ,213-25, ,055 the Group (Own shares) -8, ,488-12,023 Profit (loss) for the year 44, , ,715 Other components of the statement of comprehensive income 84, ,683 8,944 1, ,858 Total pertaining to the Group 1,334, ,363 8,944-27, ,962,698 Shareholders equity Capital and reserves pertaining to minority interests 193, ,914-24, ,777 pertaining to Profit (loss) for the year 19, , ,407 minority interests Other components of the statement of comprehensive income 13, ,606 4, ,203 Total pertaining to minority interests 226, ,804 4,576-24, ,387 TOTAL 1,560, ,167 13,520-52, ,188,085 ( thousands) Balance December 31st, 2014 Change in closing balances Charges Adjustments from reclassificati on to income statement Transfers Changes in investment holdings Balance December 31st, 2015 Share capital 522, ,882 Other equity instruments Shareholders equity Capital reserves 791, ,877 pertaining to Revenue reserves and other equity reserves 422, ,342-60, ,233 the Group (Own shares) -12, ,121-27,144 Profit (loss) for the year 90, , ,914 Other components of the statement of comprehensive income 147, ,225-15, ,061 Shareholders equity Total pertaining to the Group 1,962, ,982-15,572-75, ,911,823 Capital and reserves pertaining to minority interests 193, ,691-10, ,047 pertaining to Profit (loss) for the year 16, , ,722 minority interests Other components of the statement of comprehensive income 15, , ,107 Total pertaining to minority interests 225, , , ,876 TOTAL 2,188, ,642-16,322-85, ,158,

116 The undersigned declare that these financial statements are true and consistent with the underlying accounting records The legal representatives of the company (*) The Chairman PAOLO BEDONI (**) (**) (**) The Statutory Auditors GIOVANNI GLISENTI LUIGI de ANNA FEDERICA BONATO CESARE BRENA ANDREA ROSSI (*) For foreign companies, the signature must be that of the general representative for Italy. (**) Indicate the office covered by the signee. 116

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118

119 Reconciliation statement of the result of the period and shareholders equity of the Group and the Parent Company

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121 Reconciliation statement of the result of the period and shareholders equity of the Group and the Parent Company CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31st 2015 Company: CATTOLICA ASSICURAZIONI GROUP ( thousands) Capital and reserves Profit (loss) for the period Shareholders equity Parent Company amounts It Gaap 1,864,954 44,075 1,909,029 Adjustment Ias/Ifrs - Parent Company 204,198 9, ,922 Parent Company amounts IAS/IFRS 2,069,152 53,799 2,122,951 Netting of the book values of the equity investments included in the consolidation area: - difference between the book value and the pro-quota value of the shareholders equity -194, ,660 - pro-quota results of investee companies 0 55,102 55,102 - capital gains from sale of equity investments recorded in the consolidated fin. stat goodwill 184, ,479 - value of portfolio 12,382-2,260 10,122 Netting of infra-group transactions: - dividends from consolidated companies 51,552-51, write-back of effects of equity investment transfers reversal of infra-group real estate transactions reversal of effects of mergers/disposals of business segments among Group companies -267,846 1, ,682 - writebacks of writedowns -4,526 4, shadow accounting on writedowns Tax effects of above-mentioned consolidation adjustments ,173-2,087 Effects associated with non-consolidated companies: Effects associated with the valuation of non-consolidated companies ,896 Dividends from associated companies Shareholders equity and net profit pertaining to the Group 1,850,909 60,914 1,911,823 Shareholders equity and net profit pertaining to minority interests 226,154 20, ,876 CONSOLIDATED SHAREHOLDERS EQUITY AND NET PROFIT 2,077,063 81,636 2,158,

122 The undersigned declare that these financial statements are true and consistent with the underlying accounting records The legal representatives of the company (*) The Chairman PAOLO BEDONI (**) (**) (**) The Statutory Auditors GIOVANNI GLISENTI LUIGI de ANNA FEDERICA BONATO CESARE BRENA ANDREA ROSSI (*) For foreign companies, the signature must be that of the general representative for Italy. (**) Indicate the office covered by the signee. 122

123

124

125 Notes to the accounts

126

127 Notes to the accounts Part A - Basis of presentation and consolidation area

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129 Part A Basis of presentation and consolidation area Notes to the accounts FOREWORD For a proper analysis of changes during the year, note that the income statement balances as of December 31st, 2014 also include those relating to FATA as from the date of acquisition which took place in June Applicable legislation The consolidated financial statements have been drawn up by the Parent Company Cattolica di Assicurazione Soc. Coop. pursuant to Article 154 ter paragraph 1 of Italian Legislative Decree No. 58 dated February 24th, 1998, Regulations concerning financial brokers and Article 95 of Italian Legislative Decree No. 209 dated September 7th, 2005, in compliance with the provisions of the IAS/IFRS international accounting standards and the SIC/IFRIC interpretations, taking as reference those approved by the European Commission by December 31st, 2015; they are compliant with the indications of ISVAP Regulation No. 7 dated July 13th, 2007, relating to the technical forms of the consolidated financial statements drawn up on the basis of the international accounting standards (IAS/IFRS) and their subsequent amendments made under ISVAP Provision No dated March 8th, 2010, IVASS Provision No. 14 dated January 28th, 2014, IVASS Provision No. 21 dated October 21st, 2014 and IVASS Provision No. 29 dated January 27th, The provisions set forth by Consob Regulation No dated May 14th, 1999 and subsequent additions and amendments, and Consob recommendations, have also been followed. Recommendations contained in the joint Bank of Italy/Consob/ISVAP Documents No. 2 dated February 2009 and No. 4 dated March 2010 regarding the application of the IAS/IFRS, the Consob communication No dated January 19th, 2015 and the Consob communication No dated January 28th, 2016 regarding the areas deemed of greater significance highlighted by ESMA in the public statement European common enforcement priorities for 2015 financial statements (ESMA/2015/1608) dated October 27th, 2015, were also taken into consideration. Accounting reference date The consolidated financial statements closed as of December 31st, 2015, a date which coincides with that of the financial statements of all the companies included within the consolidation area. The statements drawn up according to the international accounting standards (IAS/IFRS) as approved by the Boards of Directors of the respective companies who are not obliged to adopt the afore-mentioned international accounting standards for the purpose of drawing up the annual financial statements have been used for the preparation of the consolidated financial statements. Cattolica Life and Cassa di Risparmio di San Miniato prepared their financial statements in compliance with the international accounting standards. The statements drawn up by the management companies have been used for the funds. 129

130 CONSOLIDATION METHODS a) Line-by-line consolidation Pursuant to IFRS 10, the line-by-line method was used to consolidate all subsidiaries in relation to which the Parent Company is exposed to variable returns, or holds rights on these returns, deriving from its relationship with the same, and at the same time has the ability to affect said returns by exercising its power over the subsidiaries. When using the line-by-line consolidation method, the book value of the investments is eliminated against the related shareholders equity and all the assets and liabilities of the subsidiary company, including potential liabilities, are included. The positive difference which is generated between the purchase cost and the fair value of the net shareholdings acquired, independently identifiable, with reference to the date of acquisition of control over the investment, is recorded under the items Goodwill or Other intangible assets. This value is subject to an annual impairment test as governed by IAS 36. In the periods subsequent to the acquisition of control, the difference between the book value of the investment and the portion of shareholders equity pertaining to the Group is recorded, for the part exceeding the above described allocation referring to the acquisition date, in the item revenue reserves and other reserves. The portions of shareholders equity, inclusive of the fair value as of the date of acquisition of the equity investment, and of the net result for the year pertaining to minority interests, are recorded in specific statement of financial position liability and income statement accounts. b) Equity method In accordance with IAS 28, the equity method is applied to investments in associated companies. By means of this method, the book value of the investment is adjusted in the consolidated financial statements in order to reflect the book value of the shareholders equity pertaining to the Group, which can be taken from the last set of financial statements of the investee company and adjusted by the sum total of the dividends distributed by said company. If the cost is greater than the pertinent portion of shareholders equity, the difference remaining from the recognition to amortisable/depreciable assets is identified as goodwill implicitly recognised in the item Investments in associated companies, and subject to impairment testing as governed by IAS 36. The effects of the equity method on the Group s shareholders equity and consolidated result for the year are identical to those produced by line-by-line consolidation. c) Companies carried at cost d) Main consolidation adjustments The cost method is used to value investments in subsidiaries which, due to their size, are considered not to be significant and whose exclusion from the consolidation area does not prejudice the reliability of the representation of the equity and financial standing, the economic result and the financial flows of the Group. The main consolidation adjustments are: the elimination of balances and of infragroup transactions, including revenues, costs and 130

131 Notes to the accounts dividends collected; elimination of gains and losses deriving from infragroup transactions included in the book value of the assets and liabilities; the determination of the deferred taxation, in accordance with the methods envisaged by IAS 12, on the temporary differences deriving from the elimination of gains or losses originating from infragroup transactions; adjustment of the effects recorded in individual financial statements, generated by extraordinary infragroup transactions. The decreases in value emerging subsequent to infragroup transactions are maintained in the consolidated financial statements. CONSOLIDATION AREA The consolidation area includes the financial statements of the Parent Company and those of the subsidiaries, in accordance with IFRS 10. During the year, the consolidation area changed from that as of December 31st 2014 due to: the total spin-off of Cattolica Previdenza within the Parent Company (with regard to the insurance business), and within C.P. Servizi Consulenziali (with regard to the relationships outstanding with the staff and co-workers of the commercial and commercial support services) on June 25th, 2015 with accounting and tax-related effects as from January 1st, The transaction was preceded by the transformation of C.P. Servizi Consulenziali into an Italian joint stock company. As of December 31st, 2015, the consolidation area comprised nine insurance companies, two companies which carry out agricultural-real estate activities, five service companies (one of which in liquidation) and three real estate property mutual funds. In addition to the companies in the consolidation area, the Group includes a banking company and two service companies. Significant assumptions and assessments for establishing the consolidation area The reason why the Cattolica Group believes it does not control the internal insurance funds (in relation to which it holds 100% of the units in circulation), the equity and real estate funds and the SPV segments held, lies in the failure to jointly observe all the conditions envisaged for control as per IFRS 10. In detail, in relation to these investments, the Cattolica Group believes that the following conditions are not satisfied: exercise of power over the entity subject to investment; being subject in a significant manner to the variable returns of the entity subject to investment; being able to exercise its power over the entity subject to investment so as to affect the amount of the returns of the same. The analysis carried out by the Cattolica Group, also by means of the aid of independent experts, concerned the following non-consolidated structured entities in particular: 131

132 the open-end mutual investment fund Leadersel Dynamic; the closed-end mutual investment fund Vegagest Networth; the notes issued by special purpose vehicles (SPVs). These activities, having taken into account that the conditions envisaged for the control by IFRS 10 are not satisfied, are classified in the consolidated financial statements in the category Available for sale in item 4.5 of the statement of financial position - available for sale financial assets (AFS) and in the category Loans and receivables (LOANS) in item 4.4 of the statement of financial position, on a consistent basis with the characteristics and the provisions of IAS 39. The valuation of these entities recognised in the Available for sale category is at fair value; the amortised cost for the entities recognised under LOANS. The following table lists the companies included in the consolidated financial statements on a consolidated line-by-line basis, in accordance with IFRS 10. Table 15 - Consolidation area (ISVAP Regulation No. 7 dated July 13th, 2007) Name Registere d offices Method (1) Activity (2) % direct investment % total holding (3) % of votes available during ordinary shareholders meetings (4) % consolidation Società Cattolica di Assicurazione - Soc. Coop. 086 G 1 ABC Assicura s.p.a. 086 G % 60.00% 100% BCC Assicurazioni s.p.a. 086 G % 51.00% 100% BCC Vita s.p.a. 086 G % 51.00% 100% Berica Vita s.p.a. 086 G % 60.00% 100% Cattolica Services Sinistri s.p.a. 086 G % 99.99% 100% C. P. Servizi Consulenziali s.p.a. 086 G % % 100% Cattolica Agricola s.a.r.l. 086 G % % 100% Cattolica Beni Immobili s.r.l. 086 G % % 100% Cattolica Immobiliare s.p.a. 086 G % % 100% Cattolica Life l.t.d. 040 G % 60.00% 100% Cattolica Services s.c.p.a. 086 G % 99.99% 100% FATA Assicurazioni Danni s.p.a. 086 G % % 100% Fondo Euripide 086 G % 78.64% 100% Fondo Macquarie Office Italy 086 G % 87.88% 100% Fondo Perseide 086 G % 83.32% 100% Lombarda Vita s.p.a. 086 G % 60.00% 100% Prisma s.r.l. in liquidazione 086 G % % 100% TUA Assicurazioni s.p.a. 086 G % 99.99% 100% (1) Method of consolidation: Line-by-line=G, Proportional=P, Line-by-line by single HQ=U. (2) 1=Italian insurance; 2=EU insurance; 3=non-EU insurance; 4=insurance holding company; 4.1 = mixed financial holding company; 5=EU reinsurance; 6=non-EU reinsurance; 7=banks; 8=SGR; 9=other holding; 10=property 11=other (3) This is the product of the investment relationships relating to all the companies which, placed along the investment chain, may be interposed between the company that draws up the consolidated financial statements and the company in question. If the latter is directly invested in by several subsidiaries, it is necessary to add together the individual products. (4) Overall percentage available of the votes at ordinary shareholders meeting if different from direct or indirect shareholding. 132

133 Notes to the accounts The subsidiaries linked to bankassurance agreements are as follows: Berica Vita, Cattolica Life and ABC Assicura with the banking partner Banca Popolare di Vicenza; Lombarda Vita with the banking partner UBI; BCC Vita and BCC Assicurazioni with the partner ICCREA. These agreements contain rights of protection of the minority interests which cannot significantly limit Cattolica s ability to access the assets, or use them, or discharge the liabilities of the Group (IFRS 12, section 13, letter b). The Cattolica Group in fact controls all the significant activities, with the exception of the sale of the product, carried out by the banking partner. The agreements also envisage that the Cattolica Group and the banking partners must operate in favour of the investee companies making sure that in the same the protective rights of the minorities are recognised, in particular within the sphere of extraordinary transactions and/or the undertaking of strategic policies inconsistent with the shared objectives of the partnerships. Mention is also made of the possibility for the party which has control (Cattolica) to recover the value of the assets in the event the partnership ceases. The agreements have the purpose of protecting both the parties from the risk of any conduct not consistent with the pacts. In conclusion, these protection rights relate to qualified majorities envisaged for deeds of transfer of assets or rights in bulk, deeds of transfer of businesses or business segments, as well as equity investments, provided that the fee for the individual transaction is higher than a pre-established threshold, as well as to financial transactions of any kind when the related fee of the individual transaction is higher than pre-established thresholds of the shareholders equity. The table which follows includes the information pursuant to IFRS 12 on Group subsidiaries with significant minority controlling interest. In detail, all the minority interests relating to bank-assurance agreements outstanding with reference to Berica Vita, Cattolica Life, ABC Assicura, Lombarda Vita, BCC Vita and BCC Assicurazioni are considered significant. Furthermore, so as to provide complete disclosure, also the minority interests over 10% relating to consolidated funds are represented. 133

134 Table 16 - Consolidation area: equity investments in companies with significant minority interests (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) Name % minority interests % of votes available during ordinary shareholde rs meetings to minority interests (1) Consolida ted profit (loss) pertainin g to minority interests Sharehold ers equity pertainin g to minority interests Total Assets Investme nts Summary income statement-financial figures Technical provisions Financial liabilities Sharehol ders equity Net profit (loss) for the year Dividends distributed to minority interests Gross premiums written ABC Assicura s.p.a % 457 6,971 66,613 31,943 40, ,428 1, ,722 BCC Assicurazioni s.p.a % 34 8,046 71,923 24,855 39,873 1,209 16, ,133 BCC Vita s.p.a % 4,819 66,658 2,660,219 2,536,490 2,449, ,036 9, ,051 Berica Vita s.p.a % 3,752 33,798 1,574,381 1,476,243 1,438, ,494 9,381 1, ,915 Cattolica Life l.t.d % 780 8, , , , ,158 22,470 1, ,186 Fondo Euripide 21.36% 1,141 32, , , , ,468 5,344 1,585 0 Fondo Macquarie Office Italy 12.12% , , , ,544 3, Fondo Perseide 16.68% ,096 64,320 57, ,527 2, Lombarda Vita s.p.a % 11, ,631 6,813,593 6,465,045 6,118, , ,078 29,854 8,598 1,363,819 (1) Overall percentage available of the votes at ordinary shareholders meeting if different from direct or indirect shareholding Table 17 - Interest holdings in non-consolidated structured entities (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) Name of the structured entity Revenues received from the structured entity during the reference period Book value (as of the transfer date) of the assets transferred to the structured entity during the reference period Book value of the assets recognised in the financial statements and related to the structured entity Corresponding item of the statement of financial position assets Book value of the liabilities recognised in the financial statements and related to the structured entity Corresponding item of the statement of financial position liabilities Maximum exposure to impairment risk Boats Investment (NL) B.V. 1,972 31, Investments Dunia Capital B.V. 4, , Investments Elm B.V. 1,938 75, Investments Novus Capital (LU) S.A. 7, , Investments Transalp One Securities P.l.c. 3,268 60, Investments Novus Capital (IE) P.l.c. 3,428 50, Investments Lunar Funding V P.l.c. 1,650 25, Investments Vegagest Networth A 0 14, Investments Leadersel Dynamic 3, , Investments The structured entities identified by the Group include million represented by special purpose vehicle (SPVs) with underlying securities issued by the Italian government and swaps and million represented by investment funds. There are no circumstances which might compromise the recovery of the initial investment for reasons not attributable to the deterioration of the credit of the issuer or the assets of the 134

135 Notes to the accounts structured entity, as well as for any other financial instrument. The companies valued using the equity or cost method follow: 1) The following companies are accounted for using the equity method in accordance with IAS 28: Associated companies Cassa di Risparmio di San Miniato s.p.a. with headquarters in San Miniato (PI), share capital of million; it carries out banking activities. The Parent Company holds a direct investment of 25.12%; All Risk Solutions s.r.l. with headquarters in Rome, share capital 10 thousand, carries out insurance agency activities. The Parent Company holds a direct investment of 20.00%. 2) The following company is carried in the consolidated financial statements at cost, since it is not significant and its exclusion from the consolidation area does not prejudice the reliability of the representation of the financial and equity standing, the economic result and the financial flows of the Group: Subsidiary company TUA Retail s.r.l. with headquarters in Milan, share capital of 50 thousand. It is whollyowned by TUA Assicurazioni. It carries out the general agency activities of TUA Assicurazioni. A schedule of the Group companies with indication of the consolidation method adopted is shown below. 135

136 136

137

138

139 Notes to the accounts Part B - Accounting principles

140

141 Part B Accounting principles Notes to the accounts Format Accounting standards New standards and interpretations acknowledged by the EU The statement of financial position, income statement, statement of comprehensive income, statement of changes in shareholders equity, cash flow statement and these notes to the accounts have been drawn up in accordance with the formats laid down by the instructions in ISVAP Regulation No. 7 dated July 13th, The accounting standards adopted for the preparation of the consolidated financial statements are consistent with the provisions of each IAS/IFRS standard and each SIC/IFRIC taking as reference those ratified by the European Commission. Applicable since 2015 The following amendments came into force as from January 1st, 2015: IFRS 3 Business Combinations - Scope exception for joint ventures. The amendment clarifies that section 2(a) of IFRS 3 excludes the formation of all the types of joint arrangement from the sphere of application of IFRS 3, as defined by IFRS 11; IFRS 13 Fair value Measurement - Scope of portfolio exception. The amendment clarifies that the portfolio exception included in section 52 of IFRS 13 applies to all the contracts included within the sphere of application of IAS 39 irrespective of whether they satisfy the definition of financial asset or liability provided by IAS 32 or not. IAS 40 Investment Properties - Interrelationship between IFRS 3 and IAS 40. The amendment clarifies that IFRS 3 and IAS 40 do not mutually exclude one another and that, for the purpose of determining whether the purchase of a property falls within the sphere of application of IFRS 3 or IAS 40, it is necessary to make reference respectively to the specific indications provided by IFRS 3 or IAS 40. Furthermore, on May 20th, 2013 the interpretation IFRIC 21 - Levies was published. This interpretation provides clarifications on the moment of recognition of a liability linked to levies (other than income taxes) imposed by a government body. The standard deals with both the liabilities for levies which fall within the sphere of application of IAS 37 - Provisions, contingent liabilities and contingent assets, and those for the levies whose timing and extent are certain. The adoption of these amendments/interpretations has not had any effect on the Group s consolidated financial statements. Reporting currency used in the financial statements Foreign currency items The reporting currency for the consolidated financial statements is the Euro. The report has been drawn up in thousands of Euro without decimals, duly rounded off as per the applicable legislation. The amounts have been rounded up or down to the closest unit. The rounded off amount of totals and subtotals in the balance sheet and income statement is the sum of the rounded off amounts of the individual items. In accordance with IAS 21 the monetary assets and liabilities in foreign currency, with the exception of financial instruments, are recorded using the spot exchange rate ruling as of the 141

142 period end date and the related exchange gains and losses are recognized to the income statement. Section 1 Illustration of the accounting principles The accounting principles used to draw up the consolidated financial statements are the same as those used to prepare the IAS/IFRS statements of the Parent Company and the other Group companies who are not obliged to adopt the afore-mentioned international accounting standards for the purpose of drawing up the statutory financial statements. Cattolica Life prepared its financial statements in compliance with the international accounting standards. No significant consolidation adjustments were necessary in order to adapt the consolidated companies accounting standards and policies to those of the Parent Company, with the exception of investment property held by the Euripide, Macquarie Office Italy and Perseide Funds which in their accounts value said properties at fair value and therefore, for the purpose of the consolidated financial statements, are stated at historic cost net of the related accumulated depreciation. The preparation of the Group s financial statements requires the directors to make discretional evaluations, estimates and hypotheses which influence the revenue, cost, asset and liability values, and the indication of potential liabilities at the date of the financial statement. These estimates were carried out with particular attention to the impact of the market conditions on the disclosure made in the financial statements and mainly concerning: the impact deriving from the application of the new accounting standards on the financial statements in the year of initial application, which could lead to significant changes with regard to the recognition, measurement and presentation of assets, liabilities, revenues, costs and cash flows; the technical provisions; the fair value of the assets and liabilities if not directly observable on active markets; the disclosure of the fair value of non-financial assets and liabilities; the analysis for the purpose of the impairment test on intangible assets; the recoverable nature of the prepaid taxes; the defined-benefit plans; the provisions and allowance for risks and charges. The uncertainty regarding these hypotheses and estimates could lead to results which in the future require a significant adjustment in the book value of these assets and/or liabilities. Going concern According to the provisions of Bank of Italy/CONSOB/ISVAP document No. 2 dated February 6th, 2009, it should be noted that the economic outlook is positive, even though there are uncertainties linked to the performance of the markets and rates in particular, taking account of the timescales and ways in which the current situation is developing. The Group s solid fundamentals do not generate or leave any doubts regarding the company as a going concern. 142

143 Notes to the accounts INTANGIBLE ASSETS STATEMENT OF FINANCIAL POSITION Goodwill The item comprises the goodwill acquired in the business combinations as established by IFRS 3. The goodwill deriving from consolidation represents the additional value of the purchase cost when compared with the value of the assets, liabilities and potential liabilities, valued at fair value, of the subsidiary company. The goodwill is stated as an asset and recorded at cost less the accumulated impairment losses. As prescribed by IAS 36, an impairment test is carried out at least once a year, the procedure having been approved by the Board of Directors. On the basis of the provisions of IAS 36, it is analysed whether any trigger events have taken place such as stock market capitalisation lower than the Group s shareholders equity or whether the flows of the cash generating units to which the goodwill is allocated have registered significant negative deviations; if this occurs, the value of the goodwill is subjected to a specific impairment test, based on discounted cash flow techniques. A permanent loss in value is recorded if the book value of the cash generating unit to which the goodwill refers is greater than its recoverable value, or the greater value between the value in use and the fair value net of the sales costs; this loss in value reduces the book value of the goodwill and residually that of the other assets of the cash generating unit in proportion to their book value. Other intangible assets In the event of the disposal of a subsidiary company, the residual amount of the goodwill ascribable to the same is included in the disposal value and therefore in the determination of the capital gain or loss on the disposal. The item comprises the assets defined and disciplined by IAS 38. It also includes the value of the insurance portfolio acquired as part of the business combination transaction and by contrast, excludes deferred purchase costs. An intangible asset is recorded among the assets, and therefore capitalised, only when it is subject to the control of the company, it is identifiable and it is probable that it will generate future economic benefits and when the cost can be reliably determined. These assets are valued at cost net of accumulated amortisation and write-downs against impairment losses. There are no intangible assets present in the financial statements with an unspecified useful life as established in IAS 38. The depreciable value is systematically allocated to the accounting periods which make up the useful life of the asset, starting off from the moment that said asset becomes available for use, or finds itself in the position and under the conditions necessary for being used according to the intentions of the Company. In general, except in specific cases, the useful life is established as 5 years with an amortisation rate of 20% per annum for all the intangible assets with the exclusion of insurance portfolios whose period of amortisation ranges from six to twelve years. Intangible assets are periodically subject to the impairment test. 143

144 TANGIBLE ASSETS Property This item includes the property intended to be used for business activities. These assets are valued at cost net of related accumulated depreciation and any impairment losses. Cost comprises the related charges directly ascribable to the purchase and the putting into operation of the asset. For entire premises, the value of the land is separated from the value of the building; the latter is depreciated. The depreciation of the buildings is calculated, on a straight-line basis, in relation to the useful life estimated as thirty-three years. Ordinary maintenance costs are charged to the income statement; those which by contrast lead to an increase in value, or the functionality or useful life of the assets, are allocated to the assets and depreciated. Property intended to be used for business activities is periodically subject to verification of whether the book value is recoverable or not, and is eliminated from the financial statements following disposal or in the event of the depletion of the expected economic benefits. Other tangible assets This category includes movable assets, furnishings, office machines, means of transport, plant and equipment. These assets are valued at cost net of accumulated depreciation and any impairment losses. The depreciation is calculated, on a straight-line basis, in relation to the estimated useful life of the related assets using economic-technical rates. The book value of the tangible assets is subject to verification so as to reveal any impairment losses. INVESTMENTS Investment property This item includes the property held for investment purposes (IAS 40); the purpose of the ownership of said property is so that the Company receives rental payments, or so as to increase the value of the investments, or both. This category also includes property intended to be sold, which in any event does not comply with the requisites anticipated by IFRS 5, since these are assets originally held so as to gain profit from the appreciation of the capital. For entire premises, the value of the land is separated from the value of the building; the latter is depreciated. These assets are valued at cost net of related accumulated depreciation and any impairment losses. The depreciation of the buildings is calculated, on a straight-line basis, in relation to the useful life. 144

145 Notes to the accounts Ordinary maintenance costs are charged to the income statement in the year that they are incurred; those which by contrast lead to an increase in value, or the functionality or useful life of the assets, are allocated to the assets and depreciated. Investment property is periodically subject to verification of whether the book value is recoverable or not, and are eliminated from the financial statements following disposal or in the event of the depletion of the expected economic benefits. Investments in subsidiaries, associated companies and joint ventures When determining the investment relationship, the definitions of control, significant influence and joint control anticipated by IFRS 10 and 11 have been used. This item also includes equity investments in subsidiaries considered to be of an insignificant entity with respect to the Group. Equity investments in subsidiaries are stated by adopting the line-by-line consolidation method in pursuance of IFRS 10. Equity investments in associated companies are accounted for in the financial statements using the equity method. The book value is subject to assessment so as to reveal any losses due to permanent reductions in value. Equity investments in subsidiary and associated companies and in joint ventures are eliminated from the financial statements when, following disposal or other events, the requisites envisaged by IFRS 10 and 11 for their recording cease to exist. FINANCIAL ASSETS The definition of financial assets includes the receivables from financing activities, debt securities and equities, units in mutual investment funds, loans on policies, reinsurance deposits and other assets. Financial assets are eliminated from the financial statements when, subsequent to maturity, disposal or another event, the contractual rights on the related financial flows are transferred, in addition to the associated risks and benefits. The purchases and sales of a financial asset are recorded as at the settlement date. The main accounting principle with regard to financial assets is the fair value which is determined by means of the use of prices acquired from public listings, in the event of instruments listed on active markets, or by means of the use of valuation models. An instrument is considered as listed on an active market if the listed prices are promptly and duly available via stock markets, brokers, intermediaries, companies specialized in the sector, listing services or regulatory bodies and represent effective and regular market transactions which have taken place within an adequate reference interval promptly adapting to market changes. In the absence of an active market or a market which does not have a sufficient or permanent number of transactions, the fair value is determined by means of the use of valuation models, generally applied and accepted by the market, with the aim of determining the exchange price of a hypothetical transaction which has taken place under market conditions which can be defined as normal and independent. 145

146 Recourse to the valuation techniques aims to minimise the use of the inputs not observable on the market, favouring the use of observable data. The main techniques used are as follows: market approach: prices and other significant information are used generated by market transactions carried out on identical or similar instruments; cost approach: this reflects the approach which would be requested at the time of the valuation to replace the service capacity of an asset; income approach: the future cash flows are converted to their current value. Essentially for the financial assets and liabilities in the portfolio as of the valuation date, the market approach and income approach type techniques are used. The fair value hierarchical levels are based on the nature and the degree of observability of the inputs used in the valuation techniques employed: level 1: these are listed prices (not adjusted) observed on active markets; level 2: these are inputs other than the prices listed on active markets as per level 1 and which can be observed for the asset or liability both directly and indirectly (for example prices listed on active markets for similar assets and liabilities, prices listed for identical assets and liabilities on non-active markets, input other than listed prices which can be observed on the market, input corroborated by the market); level 3: these are input which cannot be observed for the asset or liability, which reflect the assumptions that the market participants should use in the recognition of the assets and liabilities, including the risk hypotheses. The identification of the hierarchical level to be assigned to a financial instrument is carried out on the basis of the hierarchical level corresponding to that of the lowest significant input used. Suitable controls are carried out on all the valuations used, including those deriving from third parties. The instruments for which the inputs used are not corroborated by the market are considered at level 3 of the fair value hierarchy. Unlisted securities or those listed on non-active markets, such as corporate and government bonds securities issued by Special Purpose Vehicles and unlisted derivatives valued using models which use inputs which can be observed on the market, mortgage debt securities, unlisted UCITS and SICAV units, are classified as level 2 in the fair value hierarchy. Corporate and government bonds, securities issued by Special Purpose Vehicles and unlisted derivatives valued using models which use inputs which cannot be observed on the market, instruments unlisted or listed on inactive and illiquid markets such as unlisted real estate funds, unlisted hedge funds, private equity, are classified as level 3 in the fair value hierarchy. This level also includes debt securities and equities in default if valued at the recovery value on the basis of non-observable input and Enel Ania notes. With regard to financial liabilities valued at fair value, the estimate of the fair value is carried out with reference to the level of the corresponding asset. 146

147 Notes to the accounts Held to maturity investments (HTM) Financial assets considered to be of long-term use, excluding financial derivative instruments, with a pre-established maturity and payments which are fixed or can be determined, which the individual Group companies intend to and have the ability to hold until maturity, are classified in this category. The initial recording takes place at cost inclusive of the charges and income directly attributable thereto. Subsequently, the investments are valued at amortised cost, net of any impairment losses, using the effective interest rate. The amortisation rate thus calculated is recorded in the income statement. On the closure of each set of financial statements, it is assessed if objective proof exists of any impairment losses. In accordance with the provisions of IAS 39, it is possible to make a reversal of impairment, if the reasons for the impairment losses have been removed, up to the limit of the previous writedown. In the event of early disposal or transfer to another category, of a significant amount not justified by particular events, the entire category is reclassified among the assets available for sale. Loans and receivables Assets, excluding financial derivative instruments, 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 classified in this category. Specifically, the category includes all the loans and financing, the deposits from re-insurers with ceding companies and bonds not listed on active markets considered to be of long-term use. Loans and receivables are valued at amortised cost, net of any impairment losses, using the effective interest rate. The amortisation rate thus calculated is recorded in the income statement. On the closure of each set of financial statements, it is assessed if objective proof exists of any impairment losses. Available for sale financial assets (AFS) On a residual basis, this category includes all the equities, debt securities which are not classified as loans and receivables, held to maturity investments, and financial assets at fair value through profit or loss. As a rule, equities classified as available for sale are valued at fair value with a matching balance represented by a net equity reserve. In the event that the equities do not have a market price listed on an active market and whose fair value cannot be reliably determined, they are valued at cost, as are any related derivatives. By contrast, the mixed accounting method is used for debt securities, characterised by the joint existence of the amortised cost method and the valuation at fair value (with a matching balance represented by the same net equity reserve anticipated for equities). The net equity reserve remains recorded until the assets are disposed of or undergo a permanent loss in value. On occurrence of such events, the gains and losses recorded in the reserve are freed up and recorded in the income statement. 147

148 On the closure of each set of financial statements, it is assessed if proof exists of a reduction in value of the financial assets. Indicators of a possible reduction in value of the financial assets are for example: significant financial difficulties of the issuer; defaults or lack of payment of interest and principal; the disappearance of an active market. The process for recognising any impairment in particular envisages the identification of the assets which have lost value by checking of the presence: for equities, of a performance of the fair value under more than 40% with respect to the initial value recorded or a price lower than the initial value recorded for a continuous period of more 24 months; for debt securities, factors originating inside the company subject to the evaluation; for example, significant difficulties of the issuer with deviations from budget targets, announcement of restructuring plans, downward review of the rating assigned by specialised companies greater than class C. Financial assets at fair value through profit or loss (At fair value through profit or loss) This category comprises the classification of all the financial assets included under trading activities, including derivatives, and all those which, despite not having been acquired in order to be sold over the short term, are included therein due to the Group s decision as from their initial statement. Specifically, the designated assets include the financial assets covering insurance or investment polices whose investment risk is borne by the policyholders and those relating to the management of pension funds. Initial recording takes place at cost, understood to be the fair value of the instrument net of costs or income directly or indirectly ascribable. Valuation gains and losses emerging subsequently from the changes in the fair value, are recorded directly in the income statement. SUNDRY RECEIVABLES This category comprises the classification of the amounts receivable for premiums relating to policyholders not yet received, amounts receivable from insurance agents and brokers and distributing banks, and co-insurance and reinsurance companies, amounts receivable for liability excesses and other receivables. The receivables are recorded at face value; since they are short-term, discounting back methods are not used. On the closure of each set of financial statements, an assessment is carried out on whether there is objective proof of any impairment losses and, following the implementation of the impairment test, steps may be taken to effect a write-down. 148

149 Notes to the accounts OTHER ASSET ITEMS Non-current assets or disposal group held for sale All the non-current assets or those undergoing disposal whose sale is highly probable in accordance with the provisions established by IFRS 5, are recorded in this item. The non-current assets or disposal group held for sale are recorded at their book value or the fair value, whichever is the lower, net of the sales costs (discounted back in the event of sales which will conclude beyond 12 months). Deferred acquisition costs This category includes the acquisition commissions relating to life insurance contracts. Life acquisition commissions is divided up, net of the portions pertaining to re-insurers, for a period of no longer than the duration of the contracts and in any event within the limit of the premium loadings present in the tariff. Acquisition commissions relating to non-life insurance contracts is not amortised as a result of the so-called Decreto Bersani bis which introduced the faculty - for the policyholders - of withdrawing annually from long-term policies, without charges and by giving notice of sixty days. Deferred tax assets Deferred tax assets are recorded - except in the cases expressly anticipated by IAS 12 - for all the temporary differences, to the extent that it is probable that taxable income against which they can be used will be generated. In the presence of tax losses which can be carried forward or tax credits not utilised, deferred tax assets are recorded to the extent that it is probable that future taxable income will be available against which the afore-mentioned tax losses or unused tax credits can be used. The deferred tax assets are calculated on the basis of the tax rates and tax legislation in force or effectively in force since the date of the financial statement, and are subject to verification with regards to the recoverable nature if changes in the applicable tax legislation have occurred. Current tax assets Other assets Current tax assets include the assets relating to current taxes as established and disciplined by IAS 12. These assets are recorded on the basis of the tax rates in force. The other assets comprise deferred acquisition costs relating to investment contracts. The deferred acquisition costs are spread out over the estimated life of said policies according to a constant percentage of the current value of the income generated by the investment contracts for the entire period of their permanence in the portfolio. The income margin determined at the time of the issue of policies is checked on a periodic basis and any discrepancies are recorded directly in the income statement as additional amortisation of capitalised acquisition costs. CASH AND CASH EQUIVALENTS Cash and cash equivalents and on-demand deposits recorded at face value are classified in this category. 149

150 SHAREHOLDERS EQUITY Shareholders equity pertaining to the Group Share capital This account group includes the instruments representative of the share capital, the components representative of capital included in compound financial instruments and the associated equity reserves pertaining to the Group. The ordinary shares are stated at their nominal value as share capital. Capital reserves Revenue reserves and other equity reserves Own shares In particular, the item includes the share premium reserve of the Parent Company. The item includes: the gains and losses deriving from the initial application of the international accounting standards in accordance with the matters envisaged by IFRS 1; the disaster reserves and the equalisation reserves not permitted among the technical liabilities in accordance with IFRS 4; the reserves anticipated prior to the adoption of the international accounting standards; the consolidation reserves. In accordance with the provisions of IAS 32, this item includes any instruments representative of the share capital of the company which draws up the consolidated financial statements, held by the company itself and the other consolidated companies. Reserve for net exchange differences Gains or losses on available for sale financial assets This item includes the exchange differences to be charged against the shareholders equity, in accordance with IAS 21, deriving from foreign currency transactions. The item includes the gains and losses deriving from the valuation of available for sale financial assets, as previously described in the corresponding item of the financial investments. The amounts are stated net of the corresponding deferred taxation and the portions pertaining to the policyholders. Other gains or losses recognised directly in equity Shareholders equity pertaining to minority interests The item includes the reserve deriving from changes in the shareholders equity of the investee companies in accordance with IAS 28, the gains and losses on instruments hedging a cash flow and the actuarial gains and losses and adjustments relating to defined-benefit plans as per IAS 19. This account group comprises the instruments and components representative of the share capital which make up the shareholders equity pertaining to minority interests. Specifically, the account group includes gains or losses on available for sale financial assets referable to shareholders equity pertaining to minority interests. 150

151 Notes to the accounts PROVISIONS AND ALLOWANCES The provisions are recorded when it is believed that steps will have to be taken to meet an obligation (legal or implied) deriving from a past event or in relation to which deployment of resources is possible whose amount can be reliably calculated. TECHNICAL PROVISIONS LIFE PROVISIONS This item includes the technical provisions associated with insurance contracts, insurance policies involving discretionary participation features and investment contracts involving discretionary participation features. Annually, at year end, an assessment is made of the adequacy of these provisions by means of the liability adequacy test. This test is carried out by comparing the mathematical provisions, net of the deferred acquisition costs and the value of any other related intangible assets, with the current value of the future cash flows expected by the portfolio. These flows are obtained by projecting the expected flows as of the valuation date on the basis of hypothesis, considered reasonable, relating to the trend in reversals, expenses, redemption and the mortality. With regards to investment contracts not involving discretional profit-sharing, the separation of the component relating to the insurance risk is carried out if present. The technical provisions, for the exercise of private life assurance, have been valued on the basis of the Actuarial Standards set forth by ISVAP Regulation No. 21 dated March 28th, The technical calculation bases adopted are consistent with the provisions of titles IV, V and VI of the aforementioned regulation. The additional provisions provided to cover mortality or other risks, such as guaranteed benefits on maturity or guaranteed redemption values, are included among the mathematical provisions. The provisions of Articles 36 et seq. of ISVAP Regulation No. 21, dated March 28th, 2008, have been applied, regarding the determination of the foreseeable return of the additional provisions for financial risk, along with those of Articles 50 et. seq., regarding the establishment and calculation of an additional provision for demographic risk. Furthermore, Article 55 of said regulation has been applied, envisaging the coverage of the credit risk of index-linked agreements with benefits falling due guaranteed by the companies. The provisions relating to acceptances are calculated in relation to the criteria envisaged in title I, chapter II, section I of the IIIrd part of the ISVAP Regulation No. 33 dated March 10th, The provisions relating to reinsurers include the gross amounts pertaining to the same and are determined in compliance with the contractual reinsurance agreements, on the basis of the gross amounts of the technical provisions. 151

152 Provision for outstanding claims Technical provisions for contracts where the investment risk is borne by the policyholders and provisions deriving from the management of pension funds Shadow accounting Provision for risk of insolvency (default) and liquidity The provisions for outstanding claims are made up of the amounts necessary for covering the payment of capital and accrued returns, redemptions and claims to be settled. The provisions relating to index-linked and unit-linked contracts and pension funds have been calculated taking into account both the contractual commitments and the financial assets linked to said contracts. They are formed in accordance with title VI of ISVAP Regulation No. 21 dated March 28th, 2008 and Article 38 of Italian Legislative Decree No. 173 dated May 26th, 1997 and cover the commitments deriving from the insurance of the life classes whose return is determined in relation to investments for which the policyholder bears the risk or in relation to an index. The application of the IAS/IFRS standards involves misalignments between the methods for valuing the assets and those for the related liabilities, the only exception being in relation to index-linked type contracts. The misalignments can be traced back to the recording in the accounts of both the capital losses and capital gains from the valuation of the assets valued at fair value against liabilities which are not affected by these changes. In relation to life contracts linked to separate management arrangements, by means of an accounting technique known as shadow accounting, IFRS 4 makes it possible to limit the effects of these misalignments. This technique makes it possible to allocate part of the fair value changes in the related hedging assets to the technical provisions associated with segregated funds. An additional provision has been made, based on Article 55 of ISVAP Regulation No. 21, dated March 28th, 2008, for the hedging of the risk of insolvency which constitutes an allocation aimed at protecting the company against the risk of insolvency of issuers of securities provided to cover the technical provisions of policies with guarantee on maturity given by the company. On the basis of Article 54 of the afore-mentioned regulation, the need for a provision against the liquidity risk of the assets hedging the reserves of index-linked contracts has also been ascertained. NON-LIFE PROVISIONS Premium provision This item includes the technical provisions associated with insurance contracts. The provision for non-life insurance premiums comprises both the provision for unearned premiums and the provision for current risks. The provision for unearned premiums is calculated analytically using the pro-rata accruals method (title II, chapter I, section I of ISVAP Regulation No. 16, dated March 4th, 2008) on the basis of the gross premiums recorded, as established by Article 45 of Italian Legislative Decree No. 173 dated May 26th, 1997, having deducted the acquisition commissions and the other acquisition costs, limited to the directly chargeable costs, for the portion ascribable to the accounting period. 152

153 Notes to the accounts The book value thus obtained has been supplemented by the provisions for security, calculated according to the criteria set out in title II, chapter I, section III of ISVAP Regulation No. 16, dated March 4th, The provision for current risks is calculated by class and represents the value to make provision for, covering the risks threatening individual companies after the end of the accounting period, so as to cover all the compensation and costs deriving from insurance policies stipulated by the end of the accounting period, if their amount exceeds that of the provision for unearned premiums and the premiums which will be collectable by virtue of these policies, according to title II, chapter I, section II of ISVAP Regulation No. 16, dated March 4th, The premiums provisions relating to transfers to re-insurers have been determined on the basis of methods consistent with those for direct business and, in any event, in accordance with reinsurance contractual agreements. Provision for outstanding claims The provisions relating to acceptances are calculated in relation to the criteria envisaged in title I, chapter III, section I of the IIIrd part of ISVAP Regulation No. 33 dated March 10th, The provision for outstanding claims is determined on the basis of a prudent evaluation of the claims which occurred during that accounting period or in previous ones which have not yet been settled, based on objective elements, as well as of the related settlement costs. The companies make reference, when defining the claims provisions, to the concept of last estimated cost, identifying this value in accordance with the provisions of ISVAP Regulation No. 16 dated March 4th, 2008 (title II, chapter II, section I), in accordance with a mixed evaluation system. Specifically, for the calculation of the charge relating to the claims, the companies adopted a two-stage procedure: during the first stage, which is applied for all the business classes, steps are taken to separately evaluate each claim (inventory method), based on the analysis of the documentation relating to each individual damage case, carried out by the staff tasked with settling the claims. During the second stage, adopted where the requisites for significance and consistency from a method point of view are present, in compliance with the provisions of Article 27.4 of the afore-mentioned regulation, an additional check is made carried out via statistical-actuarial procedures. With regard to the assessment of the cost of the current generation, the companies avail themselves, as envisaged by Article 27.5, of the average cost approach (with the exception of the credit and security classes) for the classes which due to technical features lend themselves to the application of the same criteria. With regard to the claims for the current generation, which do not present sufficient numerousness and quantitative and qualitative standardisation, the inventory method is applied. With reference to the credit and security classes, the provision for claims is established on the basis of the provisions laid down by ISVAP Regulation No. 16 dated March 4th, 2008 (title II, chapter II, section IV). The provision includes the evaluation of the claims which have occurred but have not been reported as of the year end date, determined on the basis of the provisions laid down by ISVAP Regulation No. 16 dated March 4th, 2008 (title II, chapter II, section II). 153

154 The provision for outstanding claims regarding Card and No Card claims of the land vehicle TPL class is established on the basis of Article 33.1 of ISVAP Regulation No. 16 dated March 4th, 2008, in the event that the company is the handler of the same, and Article 33.2 of the same regulation if the Company is the debtor. The total amount of the claims provision is calculated in relation to the provisions of Article 34 of said regulation. The portions of the claims provisions pertaining to re-insurers are determined adopting the same criteria used for the direct business provisions and taking into account the contractual clauses of the agreements. The claims provisions relating to acceptances are calculated in relation to the criteria envisaged in title I, chapter III, section II of the IIIrd part of ISVAP Regulation No. 33 dated March 10th, The criteria used for the determination of the non-life technical provisions, the premiums provisions (supplemented by a possible allocation to the current risk provisions) and provisions for outstanding claims are in line with the matters envisaged by the LAT former IFRS 4. Other technical provisions They include the senescence provision of the health class for the rise in the age of the policyholders, determined in accordance with Article 45 et seq. of ISVAP Regulation No. 16, dated March 4th, 2008, and title I, chapter III, section IV of the IIIrd part of ISVAP Regulation No. 33 dated March 10th, FINANCIAL LIABILITIES This account group includes the financial liabilities valued at fair value with effects on the income statement and the financial liabilities valued at amortised cost. Financial liabilities at fair value through profit or loss Other financial liabilities This item includes the financial liabilities falling within the sphere of trading activities, and the liabilities relating to index and unit-linked investment contracts and pension funds, where the risk of the investments is borne by the policyholders. The valuation is made at fair value and the gains or losses which emerge are booked to the income statement. The item includes the financial liabilities defined and disciplined by IAS 39 not included in the category financial liabilities at fair value through profit or loss, but valued at amortised cost. Subordinated liabilities, for which the right to reimbursement by the creditor - in the event of winding up of the company - may only be exercised after all the other creditors and bonds have been satisfied, are classified in this item. The item also includes deposits received from reinsurers, other loans obtained and provisions linked to agreements with specific provision of assets. PAYABLES The item includes the payables deriving from insurance and other transactions. In particular, the account group includes the payables from direct and indirect insurance transactions. The account group also includes the liabilities associated with defined benefit plans in favour 154

155 Notes to the accounts of the employees, which involve disbursements subsequent to the termination of the employment relationship and the other long-term benefits (including therein the employee severance indemnity) which, in compliance with IAS 19, are subject to an actuarial assessment by means of use of the so-called Project Unit Credit Method. According to this method, the liability is determined by taking into account a series of variables (such as the mortality rate, the forecast of future salary changes, the estimated rate of inflation, the foreseeable return on the investments, etc.). The liability recorded in the financial statements represents the effective value of the foreseeable obligation, net of any assets serving the plans, adjusted to reflect any actuarial losses or gains not amortised. The discounting back of the future cash flows is carried out on the basis of the interest rate of high quality corporate securities. The actuarial hypotheses used for the purposes of the calculation are periodically reviewed so as to confirm their validity. The other long-term benefits concern the health premiums for retired staff and length-ofservice premiums which mature in the 25th and 35th year of service with some companies as anticipated by the related CCNL (National Collective Labour Agreement). The frequency of the evaluations and the method of accounting are similar to those used for the defined benefit pension plans. Following the reform of the employee severance indemnity (TFR), culminating in the implementing decrees of the law Finanziaria 2007 concerning the transfer of employee severance indemnities (TFR) and Supplementary welfare (Italian Official Gazette No. 26 dated February 1st, 2007), the application of the afore-mentioned method differs according to whether the company being assessed has a number of employees less than or at least equal to 50. On the basis of Italian Law No. 296/06, for companies with at least 50 employees, the transfer of the portions of employee severance indemnities (TFR) to a specific Treasury Fund set up with INPS (national social security institute) is envisaged. In line with the matters indicated by the OIC (Italian Accounting Organisation) in the attachment to Operating Guide No. 1 for the transition to the international accounting standards (section 13), steps were not taken to make the actuarial calculation relating to the employee severance indemnity (TFR) accruing as from January 1st, 2007 for companies with at least 50 employees. This is equivalent to considering the employee severance indemnity accrued up until December 31st, 2006 to be a defined benefit plan (and therefore subject to actuarial calculation) and the severance indemnity as from January 1st, 2007 to the Treasury Fund set up with INPS to be a fixed contribution plan (and therefore not subject to actuarial calculation). With reference to the employee severance indemnity accrued up until December 31st, 2006, since the contribution period has fully matured, the weighting of the outlays no longer applies. With regards to companies with less than 50 employees, in the absence of transfer of the contributions subsequent to December 31st, 2007 to the Treasury Fund set up with INPS, the entire liability has been considered to be a defined benefit plan. Actuarial gains and losses realised during the year have been recorded in the financial statements for all companies in the Group. 155

156 OTHER LIABILITY ITEMS Liabilities of disposal group held for sale This item contains all the non-current liabilities or liabilities of disposal group whose sale is highly probable. The non-current liabilities or liabilities of disposal group held for sale are stated at their book value or the fair value, whichever is lower, net of the sales costs (discounted back in the event of sales which will be finalised beyond 12 months). Current and deferred tax liabilities Current taxes are calculated on the basis of the taxable income for the period. The liabilities for current taxes are stated at the value which is expected to be paid, applying the rates and tax legislation in force. Deferred taxes are included which have arisen from taxable temporary differences due to the deferral in the taxability of positive income elements realised and recorded in the income statement, which will be settled in subsequent accounting periods when the afore-mentioned revenues will be taxed. When the results of the transactions are booked directly to the shareholders equity, the current taxes and liabilities for deferred taxes are also booked to shareholders equity. Other liabilities The other liabilities include deferred revenues (DIR - deferred income reserve) relating to investment contracts. The IAS/IFRS standards envisage a different method of determination and representation of the provision for management costs; specifically, the component referring to contracts no longer classified as insurance but as investment (DIR - deferred income reserve) is classified among the other liabilities and is assigned to the income statement on the basis of the timing of the costs incurred for the management of the contracts. REVENUES INCOME STATEMENT Net premiums Income and charges from financial instruments at fair value through profit or loss This item includes the net premiums relating to insurance policies and investment contracts featuring discretional profit-sharing, net of transfers under reinsurance. This item comprises realised gains and losses, interest, dividends and positive and negative changes in the value of the financial assets and liabilities at fair value through profit or loss. The item also includes the charges on the financial liabilities linked to investment contracts without discretional profit-sharing. 156

157 Notes to the accounts Income from investments in subsidiaries, associated companies and joint ventures This account group includes the income generated by investments in subsidiaries, associated companies and joint ventures recorded in the corresponding asset item. Income from other financial instruments and investment property The income from financial instruments and other investments includes the income deriving from financial instruments not valued at fair value through profit or loss and from investment property. In detail, the following is included: interest income on financial instruments valued using the effective interest method, other income from investments, including dividends and revenues which derive from the use, by third parties, of the properties intended for investment purposes; the gains realised following the sale of a financial asset or liability or investment property, and the positive changes deriving from the write-back of a permanent loss in value (reversal of impairment). Other revenues Other revenues include the commissions income for financial services provided, revenues deriving from the sale of assets, from the provision of services other than those of a financial nature and from the use by third parties of the tangible assets and the other assets of the Company. Also included are realised gains and reversal of impairment losses relating to intangible assets and other assets, the exchange differences to be charged to the income statement in accordance with IAS 21 and other net technical income associated with insurance contracts. Specifically, the account group includes commissions income associated with investment contracts. COSTS Net charges relating to claims Charges from investments in subsidiaries, associated companies and joint ventures The charges relating to claims include the amounts paid out during the period for claims, maturities and redemptions as well as the amount relating to the changes in the technical provisions, net of the recoveries and the transfers under reinsurance. This account also includes the component to be booked to the income statement concerning the change in the deferred liabilities due to policyholders and the change in the provision for the risk of insolvency. This item includes the charges deriving from investments in subsidiaries, associated companies and joint ventures recorded in the corresponding asset item. 157

158 Charges from other financial instruments and investment property The item includes the charges deriving from financial instruments not valued at fair value with effects on the income statement and charges deriving from investment property. Specifically, the costs relating to investment property include condominium fees and maintenance and repair expenses not increasing the value of the investment property, the losses realised following the elimination of an investment property, amortisation and depreciation and impairment. Charges deriving from financial instruments include interest expenses stated using the criteria of the effective interest rate, the losses realised following the derecognition of a financial asset or liability and impairment. Operating expenses Other costs Current taxes Deferred taxes Profit (loss) from discontinued operations For the insurance companies, operating expenses mainly include commissions, other acquisition costs and the administrative costs relating to contracts falling within the sphere of IFRS 4 and to investment contracts without discretional profit-sharing. The account also includes the administrative costs of the companies who do not carry out insurance activities. This account also includes administrative costs, comprising general expenses and staff costs, as well as those relating to the management of financial instruments, investment property and equity investments. The item includes commissions expense for financial services received, the other net technical charges associated with insurance contracts, the exchange differences to be charged to the income statement in accordance with IAS 21, the portions of provisions for the year, the losses generated, the impairment losses and the amortisation/depreciation relating to both the tangible assets, not otherwise allocated to other cost items, and intangible assets. The income taxes calculated in accordance with current legislation are recorded in this item. Compliance with the tax consolidation scheme does not lead to exceptions or changes to the standards illustrated above. The item includes income taxes due in future accounting periods, relating to taxable or deductible temporary differences This item contains the non-current profits (losses) or those belonging to disposal group whose sale is highly probable. 158

159

160

161 Notes to the accounts Part C - Information on the consolidated statement of financial position and income statement

162

163 Part C Statement of financial position - Assets Notes to the accounts In accordance with ISVAP Regulation No. 7 dated July 13th, 2007, the statement of financial position by sector of activities is presented below. Table 18 - Statement of financial position by sector of activities (ISVAP Regulation No. 7 dated July 13th, 2007) Non-life business Life business Other Eliminations between sectors Total ( thousands) INTANGIBLE ASSETS 183, , ,239 64,957 99,957 90,056-72,081-25, , ,416 2 TANGIBLE ASSETS 55,915 57, ,442 93, , ,078 3 TECHNICAL PROVISIONS - REINSURANCE AMOUNT 662, , , , ,205-23, , ,380 4 INVESTMENTS 4,398,576 4,188,893 17,602,290 16,452,905 20,713 18,042-1,289,157-1,260,353 20,732,422 19,399, Investment property 112, , , ,415 18,195 14, , , Investments in subsidiaries, associated companies and joint ventures 724, , , ,473 1,400 1, , ,347 35,112 87, Held to maturity investments 108, , , , , , Loans and receivables 310, , , ,397 1, ,001-5, , , Available for sale financial assets 4.6 Financial assets at fair value through profit or loss 2,833,791 2,714,260 13,336,966 12,134, , ,187 15,841,390 14,542, , ,947 3,056,808 2,974, , ,365,426 3,199,555 5 SUNDRY RECEIVABLES 506, , , ,538 18,086 15, , , , ,876 6 OTHER ASSET ITEMS 353, , , ,282 7,049 7, ,468 1,072,562 1,179, Deferred acquisition costs ,891 12, ,891 12, Other assets 353, , , ,504 7,049 7, ,468 1,059,671 1,166,242 7 CASH AND CASH EQUIVALENTS 167, , , ,712 14,763 12, , ,694 TOTAL ASSETS 6,328,612 6,256,844 18,993,267 17,746, , ,667-1,533,393-1,469,927 24,043,496 22,768,951 1 SHAREHOLDERS EQUITY 2,003,507 1,953,418 1,366,295 1,379, , ,525-1,369,118-1,288,898 2,158,699 2,188,085 PROVISIONS AND 2 ALLOWANCES 38,964 32,374 11,122 10,980 5,235 1, ,321 44,774 3 TECHNICAL PROVISIONS 3,629,334 3,608,110 15,304,624 14,224, ,337-21,294 18,899,621 17,811,541 4 FINANCIAL LIABILITIES 173, ,008 1,695,433 1,404,453 40,532 26,921-5,001-5,063 1,904,895 1,605, Financial liabilities at fair value through profit or loss 0 0 1,622,514 1,290, ,622,514 1,290, Other financial liabilities 173, ,008 72, ,088 40,532 26,921-5,001-5, , ,954 5 PAYABLES 276, , , ,252 52,996 57, , , , ,823 6 OTHER LIABILITY ITEMS 206, , , ,917-1,768 5, , , ,409 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 6,328,612 6,256,844 18,993,267 17,746, , ,667-1,533,393-1,469,927 24,043,496 22,768,

164 1. INTANGIBLE ASSETS Table 19 - Intangible assets Changes ( thousands) Amount % Goodwill 203, , Other intangible assets: 117, ,265 5, insurance portfolios 10,275 13,811-3, software 79,381 66,814 12, models and projects 4,718 2,516 2, patent rights, trademarks and similar rights 3,564 3, assets in process of formation 19,922 25,406-5, Total 321, ,416 5, Goodwill The item goodwill did not undergo any change with respect to last year. Table 20 - Goodwill - changes during the year ( thousands) Goodwill Gross balance as of December 31st, ,648 Accumulated amortisation 23,194 Cumulative impairment losses 31,303 Net balance as of December 31st, ,151 Increases due to: 0 Other 0 Decreases due to: 0 Other 0 Gross balance as of December 31st, ,648 Accumulated amortisation 23,194 Impairment losses 0 Other 0 Cumulative impairment losses 31,303 Net balance as of December 31st, ,151 The goodwill, as illustrated in the accounting principles is recorded at the related cost, net of any impairment losses in accordance with the provisions of IFRS 3. The accumulated amortisation in the above table refers to depreciation prior to the application of the international accounting standards. In order to ascertain any impairment losses, goodwill has been allocated to cash generating units (CGUs) or to groups of units in observance of the maximum aggregation restriction which cannot exceed the individual operating sector (non-life, life and other). 164

165 Notes to the accounts Therefore, when assigning goodwill to cash generating units, the minimum level at which goodwill is monitored for internal management control purposes was considered, or rather the Cattolica Danni CGU, Cattolica Vita CGU and legal entities included within the consolidation area, taking into account the corporate restructuring operations that took place over the years which do not make it possible in the future to map out the value of the individual goodwill amounts which were allocated previously to the cash generating units identified in C.I.R.A., Duomo Previdenza, Duomo Uni One Assicurazioni, Eurosav, Persona Life and San Miniato Previdenza. The goodwill was assigned to the following business units: million concerning the cash generating unit known as Cattolica Danni, represented by the goodwill relating to the purchase transactions of Duomo Assicurazioni and Uni One Assicurazioni which are now included in the Cattolica Danni CGU; million concerning the Cattolica Vita CGU, represented by the goodwill relating to the purchase transactions of Duomo Previdenza, Persona Life and Eurosav and the acquisition of a further 50% of Cattolica Previdenza; million in BCC Vita, relating to the purchase of 51% of the company; million in Cattolica Life, relating to the initial purchase of 50% of the company; million in Berica Vita, relating to the initial purchase of 50% of the company; million in FATA, for the acquisition of the full ownership stake in the company. The following goodwill consolidated by line from the individual IAS financial statements was also recognised: million in Cattolica, relating to the partial spin-off of B.P.Vi. Fondi SGR within the same; million in TUA Assicurazioni, relating to the purchase of the UBI business segment. The recoverable value of the CGUs is defined as the fair value less cost to sell, or the value in use, whichever is higher. It should be noted that due to the drop in Cattolica stock prices, the test based on fair value - which associated the goodwill with the listed prices of the entity under review - fails to express the real value of the CGUs in question. In order to establish the recoverable value and subsequently compare with the book value of the CGUs, the value in use was therefore used, since it provides an impairment opinion guided by principles of economic rationality. The value in use of all the insurance CGUs is estimated on the basis of a two or three-stage accounting approach of the economic capital. In the application of the economic capital method, the first stage is represented by the discounting back of economic profit (calculated on the basis of the RoEV - Return on Embedded Value - for life insurance companies, or the profitability of the Embedded Value and on the basis of the RoNAV - Return on Net Asset Value - for the non-life insurance companies, or the profitability of the adjusted shareholders equity, net of intangible assets). The second stage is obtained by hypothesising the linear convergence of the economic profit of the last plan year towards the perpetually sustainable level. The third stage derives from the terminal value of the business unit, obtained by capitalising the perpetually sustainable economic profit by means of an appropriate capitalisation rate. The Group s impairment test is carried out along with the approval of the annual financial statements and only in the presence of trigger events is the test updated at the time of the interim report. The impairment tests carried out as of December 31st, 2015 are based on the projections of the economic results relating to the period, approved during the Board of Directors Meeting. Prior to the impairment test, the reconstructability of these projections was assessed on the basis of external disclosure, including therein the consolidated Group estimates made by the equity analysts who follow Cattolica stock and the estimates produced by the equity analysts relating to comparable companies. 165

166 With reference to the Berica Vita, Cattolica Life and ABC Assicura CGUs, account was taken of a plan until 2022, as envisaged by the bank-assurance agreements renewed during With reference to the Vita CGU, a 5-year plan was used since the three-year time span is too brief to be able to represent the future income-earnings prospects. For the calculation of the terminal values, long-term estimates of two key variables were used: the book rate of return on the Economic capital (RoEC) and the long-term nominal growth rate. The underlying hypotheses to which the value in use of each group of units is most sensitive are: the combined ratio for the cash generating units falling within the non-life business and the new business for cash generating units falling within the life business; the cost of own capital (Rs); the long-term RoEC (ratio between economic profit and economic capital); the long-term growth rate (g). The cost of capital has been estimated using the CAPM - Capital Asset Pricing Model. The parameters used for the purposes of the estimate of the value in use are: the beta ratio by class of activities, formulated on the basis of market betas of European insurance companies; the equity risk premium, in line with the consensus value disclosed in market analysts reports; the risk free rate. The cost of own capital (Rs) for each business unit has been estimated on the basis of these elements, equal to 8.92% for life insurance companies (this estimate was equal to 9.63% as of December 31st, 2014) and 7.90% for non-life companies (the corresponding estimate was 8.28% as of December 31st, 2014). The long-term growth rate ( g ) was 2% for all CGUs, unchanged with respect to the growth rate used in the previous impairment tests. These basic assumptions, besides being in line with the long-term nominal growth rate of Italian GDP, are also consistent with the values used by financial analysts of the insurance sector. The tests carried out on December 31st, 2015 did not indicate any impairment losses. An analysis by scenarios on the level of the Rs cost of capital and the growth rate in the terminal value (g) was conducted for purposes of sensitivity analyses. The table below shows the excess of the recoverable value (ViU) with respect to the pro rata book value (C) and the estimates of the cost of capital and the long-term g growth rate necessary for rendering the recoverable value of each CGU equal to their book value. 166

167 Notes to the accounts Table 21 - Changes in the cost of own capital and the long-term growth rate necessary for rendering the recoverable amount equal to the book value. Excess/Impairment Loss in the consolidated financial statements [ViU vs C] Rate which renders ViU = C Rate g which renders ViU = C Cattolica Danni % 0.40% TUA Assicurazioni % -0.27% NON-LIFE FATA Assicurazioni % 1.83% n.s. = not significant BCC Assicurazioni 0 n.s. n.s. ABC Assicura % n.s. BCC Vita % 1.55% Lombarda Vita % -4.85% LIFE Berica Vita % n.s. Cattolica Life % n.s. Cattolica Vita % -0.18% 1.2 Other intangible assets As per IAS 38, the item other intangible assets includes assets which can be autonomously identified and which will generate future economic benefits in terms of cost savings or future income. Table 22 - Other intangible assets - changes during the year ( thousands) Insurance portfolios Software Models and projects Patent rights, trademarks and similar rights Assets in process of formation Total Gross balance as of December 31st, , ,089 6,081 5,737 26, ,598 Accumulated amortisation 29, ,635 3,565 2, ,633 Cumulative impairment losses 0 1, ,700 Net balance as of December 31st, ,811 66,814 2,516 3,718 25, ,265 Increases due to: 0 48,581 3, ,324 68,182 purchase 0 26,956 3, ,316 46,549 Other 0 21, ,633 Decreases due to: 0 100, , ,111 sale Other 0 99, , ,291 Gross balance as of December 31st, , ,525 9,017 5,737 20, ,669 Amortisation 3,536 35,975 1, ,890 Other changes in acc. amortisation 0-100, ,414 Accumulated amortisation 33, ,504 4,299 2, ,109 impairment losses Cumulative impairment losses 0 1, ,700 Net balance as of December 31st, ,275 79,381 4,718 3,564 19, ,

168 The other intangible assets held by the Group are characterised by a finite useful life and as such these are subjected, as indicated in the accounting principles, to a systematic amortisation process whose period: varies between 6 and 12 years for the insurance portfolios, on the basis of the average residual duration of the underlying contracts; is on average 5 years for software, models and projects, patent rights, trademarks and similar, except in specific cases. There were no significant changes in the amortisation methods used during the accounting period. Pursuant to section 31 of IFRS 4, other intangible assets specifically include the following values of insurance contracts and brands portfolios acquired as a result of business combinations: 507 thousand for the acquisition of BCC Vita, in July The related amortisation period is 7 years; 381 thousand relating to the cash generating unit known as Cattolica Danni, deriving from Duomo Uni One. This portfolio, estimated with reference to the forecast income flows which can be achieved, has an amortisation plan envisaged over 11 years; million for the acquisition of FATA, in June The purchase price allocation made it possible to identify the following intangible assets: agency network, for a total of million and an amortisation period of 12 years, brand, for a total of million and an amortisation period of 22 years and customer relationship, for a total of million and an amortisation period of 11 years. The following values of the insurance contracts portfolio recorded in the individual financial statements are also present: million in relation to the matters envisaged in the non-life agreement entered into with ICCREA Holding for the acquisition of 51% of BCC Vita which became effective due to the transfer of 49% of BCC Assicurazioni, in October The related amortisation period is 10 years; 450 thousand for the conclusion of a business transaction with the banking partner Banco di Credito Popolare di Torre del Greco by Cattolica. The transaction implemented in two instalments envisages amortisation plans of 6 years for the first instalment and 7 years for the second. The other intangible assets held by the Group are mainly represented by software in use and by software being created or being developed held mainly by Cattolica Services; software already operative is present used in previous years, along with software which during the year has been subject to development processes and adaptation to legal provisions, as well as software under construction referring to projects launched but not yet concluded and therefore not yet used during the year. The item software changed during the year for 100 million, of which 99 million for the disposal of obsolete software completely amortised. The impairment tests on other intangible assets, as governed by IAS 36 and carried out during the year, did not reveal any impairment losses. The cumulative impairment losses during previous years were justified by the obsolescence of certain software. 2. TANGIBLE ASSETS Tangible assets, disciplined by IAS 16, showed the following changes during the year: 168

169 Notes to the accounts Table 23 - Tangible assets Changes ( thousands) Amount % Property 137, , Other tangible assets: 13,870 13, furniture, office machines and internal means of transport 9,323 9, movable assets recorded in public registers 1,659 1, plant and equipment 2,710 2, inventories and miscellaneous assets Total 150, , Property The item includes property used for the performance of the Group companies activities; in particular it includes the property belonging to the Parent Company, Cattolica Agricola and FATA. 2.2 Other tangible assets The item comprises the assets disciplined by IAS 16, not included under the property category. Table 24 - Property and other tangible assets - changes during the year ( thousands) Property Property under construction and advance payments Furniture, office machines and internal means of transport Movable assets recorded in public registers Plant and equipment Inventories and miscellaneou s assets Total Gross balance as of December 31st, , ,159 2,835 5, ,528 Accumulated depreciation 10, , , ,450 Cumulative impairment losses Net balance as of December 31st, , ,131 1,975 2, ,078 Increases due to: , ,851 purchase , ,106 Other Decreases due to: , , ,290 sale 0 0 3, ,427 change in intended use Other , , ,803 Gross balance as of December 31st, , ,395 2,809 4, ,089 Depreciation 1, , ,444 Other changes in acc. depreciation , , ,729 Accumulated depreciation 12, ,072 1,150 1, ,165 Cumulative impairment losses Net balance as of December 31st, , ,323 1,659 2, ,

170 The increases in the item Furniture, office machines and internal means of transport include million in purchases made by Cattolica Services. The decreases in the item Furniture, office machines and internal means of transport represent sales by Cattolica Services for million and disposals of furnishings and other obsolete material by Cattolica for million. The fair value of the properties held by the Group, at the end of the year, came to million. As indicated in the accounting principles, total property and other tangible assets held by the Group are subject to a systematic depreciation process using a rate of 3% for properties used for the Group s business activities and, except in specific cases, using a rate: of 12% for ordinary office furniture and machines; of 20% for electronic machines and hardware; of 25% for movable assets recorded in public registers; of 15% for plant and equipment; between 9% and 20% for other agricultural assets. No significant changes took place during the year, either in the accounting estimates or the depreciation methods used. 3. TECHNICAL PROVISIONS - REINSURANCE AMOUNT Table 25 - Analysis of technical provisions - reinsurance amount (ISVAP Regulation No. 7 dated July 13th, 2007) Direct business Indirect business Total book value ( thousands) Non-life provisions 614, ,080 10,167 9, , ,263 Premium provision 141, ,982 4,783 3, , ,891 Provision for outstanding claims 470, ,673 5,384 5, , ,947 Other provisions 1,455 1, ,455 1,425 Life provisions 105, , , ,117 Provision for outstanding claims 8,325 7, ,325 7,484 Mathematical provisions 97,083 97, ,083 97,171 Technical provisions for contracts where the investment risk is borne by the policyholders and provisions deriving from the management of pension funds Other provisions Total technical provisions - reinsurance amount 719, ,197 10,167 9, , ,380 The reinsurance amount of technical provisions is calculated using the method adopted for provisions pertaining to direct business. 170

171 Notes to the accounts 4. INVESTMENTS Table 26 - Investments Changes ( thousands) Amount % Investment property 367, ,412 20, Investments in subsidiaries, associated companies and joint ventures 35,112 87,934-52, Held to maturity investments 246, ,415-6, Loans and receivables 876, ,409-92, Available for sale financial assets 15,841,390 14,542,762 1,298, Financial assets at fair value through profit or loss 3,365,426 3,199, , Total 20,732,422 19,399,487 1,332, Investment property Investment property is represented by the properties not occupied by Group companies. The item includes land and buildings belonging to the Euripide, Macquarie Office Italy and Perseide funds, as well as Cattolica Beni Immobili and FATA. Table 27 - Investment property - changes during the year ( thousands) Investment property Property under construction and advance payments Total Gross balance as of December 31st, , ,710 Accumulated depreciation 15, ,298 Cumulative impairment losses Net balance as of December 31st, , ,412 Increases due to: 27, ,553 purchase 25, ,451 change in intended use Other 1, ,042 Decreases due to: 1, ,835 Other 1, ,835 Gross balance as of December 31st, , ,428 Depreciation 5, ,605 Other changes in acc. depreciation Accumulated depreciation 20, ,903 Cumulative impairment losses Net balance as of December 31st, , ,525 The increases mainly include million for the purchase of new photovoltaic installations by Fondo Perseide, million for the purchase of a property complex and land by the subsidiary Cattolica Beni 171

172 Immobili and 526 thousand for the finalisation of the purchase of a property with attached land by the subsidiary Cattolica Agricola. Decreases are mainly attributable to the depreciation charged during the year for million. Revenues for rents generated during the year amounted to million ( million as at December 31st, 2014). As indicated in the accounting principles, buildings included under investment property are subject to a systematic depreciation process calculated in relation to the useful life, generally equal to 50 years (2% depreciation rate), with the exception of the properties owned by the Perseide Fund for which the useful life is estimated in relation to the duration of the related surface rights. No significant changes took place during the year, either in the accounting estimates or the depreciation methods used. The fair value of the investment property held by the Group, estimated by an external and independent expert, at the end of the year, amounted to million. The Cattolica Group adopts three main procedures for estimating the value of the properties: Market Approach: this provides an indication of the value comparing the asset subject to assessment with identical or similar assets for which information on prices is available. The comparison between the assets subject to estimation and similar assets takes place on the basis of the technical parameter represented by the measurement of the land registry surface areas for the agricultural land and the uncovered appurtenances of the buildings and the commercial surface areas for the buildings, structured differently in relation to the intended uses of the same. If the asset being estimated presents differences with respect to the comparable assets and the reference types of the sources, weighting (or differentiation) factors are resorted to, which permit a correct comparison procedure. The estimate of these factors is carried out with reference to the indications of specialised literature in the sector. Cost Approach: based on the depreciated replacement cost used for certain properties, with particular characteristics. The estimate of the fair value of the assets by means of the depreciated replacement cost is broken down into three phases and is carried out on the basis of the technical parameter of the gross surface area: o o o the estimate of the current value of the land referring to the purchase cost of similar land in terms of location and intended use; the estimate of the depreciation reconstruction cost obtained from the estimate of the reconstruction cost as new of the building appropriately depreciated in relation to the useful and residual life of the buildings; the estimate of the market value of the assets as the sum of the market value of the area and the depreciated replacement cost of the constructions. Financial Profit Method based on two approaches: o direct capitalisation: this is based on the capitalisation at a rate taken from the property market, of the net future income generated; 172

173 Notes to the accounts o discounted cash flow, based on the determination: for a period of n years of the future income deriving from the lease; on the market value of the property by means of perpetual capitalisation, at the end of this period, of the net income and in conclusion on the discounting, as of the date of assessment, of the net income (cash flows). Following impairment testing, as disciplined by IAS 36, no impairment losses were reported. As explained in the accounting principles and the table presented below, the Group has applied the cost criteria, net of accumulated depreciation and any impairment losses, to total assets disciplined by IAS 40, IAS 16 and IAS 38. Table 28 - Analysis of tangible and intangible assets (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) At cost At re-determined value or at fair value Total book value Investment property 367, ,525 Other property 137, ,054 Other tangible assets 13,870 13,870 Other intangible assets 117, , Investments in subsidiaries, associated companies and joint ventures The item includes investments in subsidiaries excluded from the consolidation area and in associated companies over which the Group exercises significant influence, which are accounted for using the equity method. Table 29 - Investments in subsidiaries, associated companies and joint ventures Changes ( thousands) Amount % Subsidiaries Associated companies 35,062 87,884-52, Total 35,112 87,934-52, For the purpose of estimating the recoverable value in the associated equity investment in Cassa di Risparmio di San Miniato, in the absence of a new business plan and in light of the loss as a result of which the previous plan cannot be up-dated, the estimate of the fair value less cost to sell taken from the Price to Tangible Book Value implicit in comparable transactions was opted for, differentiating the transactions which took place in the banking sphere between transactions aimed at control, withdrawal and transactions aimed at acquiring minority interests. Prior to the application of the method, a back-test was performed aimed at checking that the application of the method in question for the years prior to 2015 ( ) had returned results in line with the value estimates previously made and based on the business plans. 173

174 The analysis revealed a loss in value of million, which is joined by the negative pro rata result provided by the investee company and used for the purposes of the consolidation amounting to million, for a total of million. Investments in subsidiaries The item mainly comprises the cost of the equity investment in TUA Retail, a company which is not significant for consolidation purposes. Investments in associated companies The item includes equity investments accounted for using the equity method, in companies over which the Group exercises a significant influence. Table 30 - Analysis of non-consolidated equity investments (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) Registered Name offices Assets (1) Type (2) % direct investment % total holding (3) % of votes available during ordinary shareholders meetings (4) Book value Cassa di Risparmio di San Miniato s.p.a b 25.12% 25.12% 35,054 All Risks Solutions s.r.l b 20.00% 20.00% 8 TUA Retail s.r.l a 0.00% 99.99% 50 (1) 1=Italian insurance; 2=EU insurance; 3=non-EU insurance; 4=insurance holding companies; 4.1=mixed financial holding companies; 5=EU reinsurance; 6=non-EU reinsurance; 7=banks; 8=SGR; 9=other holding; 10=property 11=other. (2) a=subsidiaries (IFRS 10) ; b=associated companies (IAS 28); c=joint ventures (IFRS 11). (3) this is the product of the equity investment relationships relating to all the companies which, placed along the equity investment chain, may be interposed between the company that draws up the consolidated financial statements and the company in question. If the latter is directly invested in by several subsidiaries, it is necessary to add together the individual products. (4) Overall percentage available of the votes at ordinary shareholders meeting if different from direct or indirect shareholding. A summary of the most significant equity and income highlights of the companies not included within the consolidation area is presented below. Table 31 - Summary data of non-consolidated subsidiary and associated companies and joint ventures ( thousands) Registered Name or business name offices Share capital Total assets Total liabilities Shareho lders equity of which profit (+) or loss (-) for the year Revenues Dividends received in the period Subsidiaries TUA Retail s.r.l. Milan Associated companies Cassa di Risparmio di San Miniato s.p.a. (*) (**) S. Miniato (PI) 177,215 3,274,340 3,085, ,777-62, , All Risks Solutions s.r.l. Rome (*) The revenues include interest and commissions income. (**) Consolidated financial statement data as of December 31st, 2015, provided by the associated company and used for consolidation purposes. 174

175 Notes to the accounts Financial Investments Financial investments included the financial instruments disciplined by IAS 39: held to maturity investments, loans and receivables, available for sale financial assets and financial assets at fair value through profit or loss. The benefits on the shareholders equity deriving from reclassification carried out in 2008 amounted to 196 thousand (net of tax effects); during the year, greater income of 275 thousand would have been recognised in the income statement. The reclassifications carried out in 2008 concern: securities transferred from the category financial assets at fair value through profit or loss to the category available for sale financial assets for a book value of million as of December 31st; securities transferred from the category financial assets at fair value through profit or loss to the category loans and receivables for a book value of million as of December 31st, with a fair value of million; securities transferred from the category available for sale financial assets to the category loans and receivables for a book value of million, with a fair value of million. No significant category reclassifications have taken place during the year and in previous periods, therefore compilation of the analysis of reclassified financial assets and the effects on the income statement and on comprehensive profitability pursuant ISVAP Regulation No. 7 dated July 13th, 2007 was not carried out. Table 32 - Financial Investments Changes ( thousands) 2015 % 2014 % Amount % Held to maturity investments 246, , , Loans and receivables 876, , , Available for sale financial assets 15,841, ,542, ,298, Financial assets at fair value through profit or loss 3,365, ,199, , Total 20,329, ,964, ,365,

176 Table 33 - Analysis of financial assets (ISVAP Regulation No. 7 dated July 13th, 2007) Financial assets at fair value through profit or loss Financial investments (disciplined by IAS 39) Held to maturity investments Loans and receivables Available for sale financial assets Financial assets held for trading Financial assets at fair value through profit or loss Total book value ( thousands) Equities and derivatives carried at cost ,148 10, ,148 10,148 Equities at fair value , , ,651 17, , ,303 of which listed securities , , ,651 17, , ,881 Debt securities 246, , , ,689 14,979,178 13,551, , ,086 1,347,237 1,608,145 17,962,737 17,101,151 of which listed securities 246, , ,892,325 13,432, , ,536 1,166,653 1,252,369 16,896,217 15,725,035 UCIT units , , ,357, ,673 1,902,118 1,343,807 Loans and receivables due from banking customers Interbank loans and receivables Deposits with ceding companies Receivable financial components of insurance contracts ,072 8, ,072 8, Other loans and receivables ,179 65, ,179 65,682 Non-hedging derivatives ,625 2,614 32,584 42,968 34,209 45,582 Hedging derivatives Other financial investments , , Total 246, , , ,409 15,841,390 14,542, , ,490 2,768,195 2,403,065 20,329,785 18,964,141 Reference should be made to the related table in the comments on the income statement for an analysis of the financial income and charges from investments. 4.3 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. In detail, the item mainly includes Italian government securities. 4.4 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 classified in this category. Specifically, the category includes all the loans and financing, amounts receivable for agent compensation, deposits from re-insurers with ceding companies and bonds not listed on active markets. 4.5 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, this category comprises 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. In particular, the valuation methods adopted were chosen taking into account the pertinent sector. 176

177 Notes to the accounts Following the performance of the impairment test on all the financial instruments included in the loans and receivables, held to maturity investments, and available for sale financial assets categories, as disciplined by IAS 39, permanent losses in value were revealed (impairment losses), before tax effects, on shares totalling million, on bonds for 327 thousand and on mutual investment funds for million. 4.6 Financial assets at fair value through profit or loss This category comprises the classification of 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. Derivatives The Group does not have any hedging derivatives. With regard to non-hedging derivatives, those classified as for trading amount to million and essentially comprise options, while those at fair value through profit or loss come to million and are mainly represented by options (Class D). *** The tables below provide a breakdown of the Cattolica Group s residual exposures as of December 31st, 2015, in government debt securities issued or guaranteed by European Union nations. As of December 31st, 2015 the Group did not have any exposures in Greek Government debt securities. 177

178 Table 34 - Exposure in government debt securities issued or guaranteed by EU zone countries - Available for sale financial assets Country Maturing Maturing between Maturing Total Gross AFS ( thousands) up to 5 years between 5 and 10 beyond 10 years fair value provision years Italy 6,351,519 4,247,196 1,172,163 11,770,878 1,027,389 Spain 43,868 98,613 91, ,193-2,267 Portugal 0 21, , Ireland 46,029 4,514 3,359 53,902 8,529 Other EU countries 8,951 26,611 2,262 37,824 1,258 TOTAL 6,450,367 4,398,161 1,269,496 12,118,024 1,034,583 Table 35 - Exposure in government debt securities issued or guaranteed by EU zone countries - Financial assets at fair value through profit or loss Country Maturing Maturing between Maturing Total ( thousands) up to 5 years between 5 and 10 beyond 10 years fair value* years Italy 1,240, ,801 12,040 1,497,012 Spain 94,749 24,104 6, ,701 Portugal Ireland Other EU countries 18,613 15,464 8,556 42,633 TOTAL 1,354, ,369 27,444 1,666,270 * of which the value of financial assets at fair value through profit or loss amounts to 1, million. Table 36 - Exposure in government debt securities issued or guaranteed by EU zone countries - Held to maturity investments Country Maturing Maturing Maturing Total value Total ( thousands) up to 5 years between 5 and 10 beyond 10 years book value fair value years Italy 23, ,836 42, , ,660 Spain 15, ,657 17,330 Portugal Ireland Other EU countries TOTAL 38, ,836 42, , ,990 *** 178

179 Notes to the accounts Table 37 - Assets and liabilities valued at fair value on a recurrent and non-recurrent basis: breakdown by fair value hierarchy (ISVAP Regulation No. 7 dated July 13th, 2007) Level 1 Level 2 Level 3 Total ( thousands) Assets and liabilities valued at fair value on a recurrent basis Available for sale financial assets 14,901,666 13,463, , , , ,052 15,831,242 14,532,614 Financial assets at fair value through profit or loss Financial assets held for trading Financial assets at fair value through profit or loss 588, ,858 5,914 4,331 2,918 4, , ,490 1,440,970 1,514,209 1,324, ,137 3,170 2,719 2,768,195 2,403,065 Investment property Tangible assets Intangible assets Total assets at fair value on a recurrent basis 16,931,035 15,765,794 1,801,340 1,428, , ,072 19,196,668 17,732,169 Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities at fair value through profit or loss ,622,514 1,290, ,622,514 1,290,365 Total liabilities at fair value on a recurrent basis 0 0 1,622,514 1,290, ,622,514 1,290,365 Assets and liabilities valued at fair value on a nonrecurrent basis Non-current assets or disposal group held for sale Liabilities of disposal group held for sale Fair value valuation techniques for financial investments The valuation techniques are used when a listed price is not available. Generally, for the measuring of the fair value the use of observable data collected is maximised and the use of non-observable data is reduced. Debt securities If available and if the market is defined as active, the fair value is equal to the market price. Otherwise, the fair value is determined using the market approach and the income approach. The main input for the market approach are prices listed for identical or comparable assets on active markets, where the comparability between the security and the benchmark determines the fair value level. Depending on the possibility of observing these parameters, the security is classified in level 2 or level 3. They are valued by making reference respectively: to the price provided by the counterparty, if binding (executable) for the counterparty; at the price recalculated by means of internal valuation instruments or provided by third parties and corroborated by suitable disclosure on the model and on the input data used. 179

180 In the event that the use of a valuation model is necessary, the plain vanilla debt securities are valued applying the discounted cash flow model technique, while structured securities are valued by splitting the security into a portfolio of elementary instruments; the fair value of the structured product can thus be obtained by adding together the individual valuations of the elementary instruments into which it has been split. Debt securities and equities in default are recognised at the recovery value based on information originating from the appointed law firm. Equities If available and if the market is defined as active, the fair value is equal to the market price. Otherwise, the fair value is determined using the market approach and the income approach. The main input for the market approach are prices listed for identical or comparable assets on active markets, where the comparability between the security and the benchmark determines the fair value level; depending on the possibility of observing these parameters, the security is classified in level 2 or level 3. UCIT units With regard to undertakings for collective investment (UCITs), the reference value, for the purposes of the determination of the fair value, is represented by the official NAV communicated by the asset management company (SGR) or the fund administrator or obtained from information providers. Derivatives The fair value of the over the counter (OTC) derivatives is determined by making reference to the price provided by external counterparties (if binding executable ), to the price provided by the central counterparties (CCP) for the derivatives which fall within the sphere of the EMIR procedures or to the price recalculated by means of internal valuation instruments or provided by third parties and corroborated by suitable disclosure on the model and on the input data used. Financial assets where the risk is borne by the policyholder and related to the management of pension funds If available and if the market is defined as active, the fair value is equal to the market price. Otherwise, the valuation methods listed above for the various classes of assets are used. Level 3 financial assets and liabilities at fair value on a recurrent basis Securities present in the portfolio at fair value hierarchy level 3 are measured based primarily on valuations and analysis by the issuer or third parties, which cannot be directly found on the market but only monitored by dynamics observed indirectly on market factors and on the basis of objective elements communicated by said counterparties. Based on the securities in the portfolio, the parameters that cannot be observed, but are capable of influencing the valuation of Level 3 instruments are represented specifically by: estimates and assumptions used to value unlisted hedge funds, private equity, unlisted real estate property funds: with regard to these investments, it is very difficult to estimate the fair value s sensitivity to changes in various, non-observable inputs, which together could have off-setting effects, therefore the reasonableness of the effects caused by the stated changes on the objective elements considered in the valuations are verified; 180

181 Notes to the accounts increase or decrease in the rate of recovery of securities in default; given the scant materiality of the securities, the sensitivity analysis produced in the event of an increase or decrease, even significant, in the recovery value has not brought about significant results in quantitative terms; estimates and assumptions used for the valuation of investments in unlisted companies via the complex equity model based on ratios for measuring goodwill and models based on warranted multiples, which use the cost of capital and historical standardised profitability as inputs. The ratios for measuring goodwill used for the estimate of the fair value of bank investments varies between 1% and 5%, according to the type of funding (direct, in particular: current accounts, bonds, certificates of deposit, repurchase agreements, and indirect divided between managed and administrated); the cost of capital used is around 6%. The sensitivity analysis performed on ratios for measuring goodwill, cost of capital and ROE did not reveal any significant impacts on the value. Table 38 - Analysis of changes in level 3 financial assets and liabilities valued at fair value on a recurrent basis (ISVAP Regulation No. 7 dated July 13th, 2007) Financial assets at fair value through profit or loss Financial liabilities at fair value through profit or loss Available for sale financial assets Financial assets held for trading Financial assets at fair value through profit or loss Investment property Tangible assets Intangible assets Financial liabilities held for trading Financial liabilities at fair value through profit or loss ( thousands) Opening balance 531,052 4,301 2, Purchases/Issues 25, Sales/Repurchases -142,123-2,177-1, Reimbursements Gain or loss through profit or loss - of which valuation profits/losses -14, , Gain or loss recorded in other components of the statement of 31, comprehensive income Transfers in level 3 80,480 1,207 1, Transfers to other levels -54, Other changes Closing balance 458,205 2,918 3,

182 During the year, the balance of the transfers in the available for sale financial assets category amounted to million. In particular, the following were transferred: from level 1 to level 3: o bonds for an equivalent value of 986 thousand; o closed-end real estate funds for an equivalent value of 501 thousand; from level 2 to level 3: o bonds for an equivalent value of million. from level 3 to level 1: o equities for an equivalent value of million further to the listing of H-FARM on the AIM market on November 13th, 2015; from level 3 to level 2, relating to the equity investments in Veneto Banca and Popolare di Vicenza. With regard to the latter, it should be noted that the Boards of Directors of Veneto Banca and Banca Popolare di Vicenza resolved the project for the transformation of the bank into an Italian joint-stock company in the second half of 2015 and the stock market listing to take place in Spring With the listing, the trading securities of the two banks will no longer take place within the network of branches (so-called branch market), but on the stock market. The process for the listing of the Veneto Banca and Banca Popolare di Vicenza shares will lead to a price review, due to the different valuational paradigm underlying the new reference market. The valuational paradigms current on the two markets (stock and branch market) on which the securities are traded are very different: the prices negotiated on the stock market reflect the results envisaged over the short-term; prices negotiated on the branch market reflect the intrinsic/fundamental value, based on the medium/longterm prospects (the price established each year by the shareholders meeting of the two companies, upon the proposal of the respective Boards of Directors, reflects the intrinsic value). For the purpose of the financial statement valuation of these securities, the price resolved for the purposes of withdrawal is adopted, having checked that this value is in line with the prices implicit in multiples of listed comparable banks. Accordingly, the fair value of the shares of the two banks has been estimated simulating the trading price of the shares on the stock market, using the stock market multiples, in particular the Market Cap/Tangible Book Value multiple of the banks forming part of the Stoxx 600 Bank index. The different multiples have been retroceded with respect to variables of a fundamental nature, inclusive of the level of capitalisation of each company, as can be obtained from the last Common Equity Tier 1 Ratio indicated in the financial statements and market variables such as the liquidity level, as can be obtained from the annual turnover, provided by the ratio between the number of shares traded in a year and the total number of shares. The use among the other variables of measurements of the liquidity level of the securities has made it possible to reconstruct the Price to Tangible Book Value multiple of Banca Popolare di Vicenza and Veneto Banca according to two different perspectives: the listing on the stock market with liquidity levels for Veneto Banca and Banca Popolare di Vicenza in line with the average ones of listed Italian banks; the listing on the stock market with liquidity levels in line with the original ones observed on the branch market of Veneto Banca and Banca Popolare di Vicenza. This perspective is similar to that of valorisation of the shares on the so-called branch market and has therefore provided the possibility of reconciling the valuations previously made. The simulations carried out led to an estimate value in line with the prices established for the purposes of withdrawal of the two companies. The withdrawal price was therefore taken as the value. 182

183 Notes to the accounts The adoption of the withdrawal price led to losses of million for Banca Popolare di Vicenza and million for Veneto Banca. The remaining transfers in level 3 concerned the following categories: Financial assets held for trading with the transfer from 2 to 3 which concerned derivative instruments, options, for an equivalent value of 652 thousand and with the transfer from level 1 to level 3 relating to closed-end funds for an equivalent value of 555 thousand; Financial assets at fair value through profit or loss, with the transfer from level 2 to level 3 relating to options for an equivalent value of million. Furthermore, the transfer concerned the changeover from level 2 to 1 for funds classified under financial assets at fair value through profit or loss, for an equivalent value of million. In conclusion, the transfers from level 1 to 2, for a total of million, concerned: Available for sale financial assets : bonds for an equivalent value of million; Financial assets at fair value through profit or loss : bonds for a value of million and funds for an equivalent value of million. Table 39 - Assets and liabilities not valued at fair value: breakdown by fair value hierarchy (ISVAP Regulation No. 7 dated July 13th, 2007) Book value Fair value Level 1 Level 2 Level 3 Total ( thousands) Assets Held to maturity investments 246, , , , , ,437 Loans and receivables 876, , ,636 1,016, ,790 85,685 1,033,426 1,101,785 Investments in subsidiaries, associated companies and joint ventures 35,112 87, , ,945 35,124 87,945 Investment property 367, , , , , ,192 Tangible assets 150, , , , , ,524 Total assets 1,676,530 1,808, , , ,690 1,016,100 1,310, ,346 1,954,566 2,051,883 Liabilities 282, , , ,616 53,262 55, , ,619 Other financial liabilities 282, , , ,616 53,262 55, , ,619 Loans and receivables include the deposits with re-insurers and receivables for right of offset whose book value is considered to be a good approximation of the fair value. The fair value of investment properties is estimated on the basis of the methods described previously. The equity investment in the associated company Cassa di Risparmio di San Miniato (liaison investment) in previous years had been valued using the mixed equity method which estimated the value on the basis of the 183

184 shareholders equity adjusted for the goodwill on funding inferred by factors and on the current value of the extraincome with respect to the shareholders equity calculated with respect to the plan income. The fair value level assigned was therefore 3. Since as of December 31st, 2015 there was no new plan and in light of the loss which meant that the previous plan could not up-dated, for valuation purposes a method based on comparable transactions was preferred (input observable on the market) and therefore a fair value level of 2 is assigned for an equivalent value as of December 31st, 2015 equal to million. The fair value of the other financial liabilities is recognised using the income approach technique. Table 40 - Analysis of assets and liabilities relating to contracts issued by insurance companies where the investment risk is borne by the policyholder and deriving from pension fund management (ISVAP Regulation No. 7 dated July 13th, 2007) Benefits associated with investment funds and stock market indices Benefits associated with the management of pension funds Total ( thousands) Assets in the financial statements 1,918,143 1,470,874 1,088, ,903 3,007,125 2,468,777 Intercompany assets* Total assets 1,918,143 1,470,874 1,088, ,903 3,007,125 2,468,777 Financial liabilities in the financial statements 641, , , ,784 1,622,384 1,290,235 Technical provisions in the financial statements 1,276,737 1,079, ,004 99,119 1,384,741 1,178,542 Intercompany liabilities * Total liabilities 1,918,143 1,470,874 1,088, ,903 3,007,125 2,468,777 * Assets and liabilities eliminated during the consolidation process 184

185 Notes to the accounts 5. SUNDRY RECEIVABLES Table 41 - Sundry receivables Changes ( thousands) Amount % Receivables deriving from direct insurance transactions 403, ,353-39, Policyholders 193, ,300-7, Insurance brokers 144, ,287-21, Insurance companies - current accounts 36,807 42,827-6, Policyholders and third parties for claims to be settled 29,077 33,939-4, Receivables deriving from reinsurance transactions 62,236 86,457-24, Insurance and reinsurance companies 62,236 86,457-24, Reinsurance brokers n.a. Other receivables 49,370 46,066 3, Total 515, ,876-60, n.a. = not applicable On the basis of the experience of previous accounting periods, the item was adjusted for a total of million for write-downs due to doubtful collection. The item Other receivables mainly includes amounts due for management fees deriving from the management of internal and external funds of unit-linked products, as well as amounts receivable for advances to suppliers, amounts due from employees, amounts due from tenants, amounts due from guarantee funds and guarantee deposits. 6. OTHER ASSET ITEMS Other asset items are made up as follows: Table 42 - Other asset items Changes ( thousands) Amount % Deferred acquisition costs 12,891 12, Deferred tax assets 565, ,033-47, Current tax assets 364, ,298-31, Other assets 129, ,911-28, Total 1,072,562 1,179, , Deferred acquisition costs The deferred acquisition costs relate to insurance contracts, as agreed upon by IFRS

186 Deferred and current tax assets 6.3 Deferred tax assets The decrease in the item deferred tax assets is mainly attributable to the adjustment of the prepaid and deferred tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from In accordance with the definition contained in IAS 12, these comprise the amounts of income taxes recoverable in future accounting periods. Amounts receivable for deferred tax assets, recorded under Deferred tax assets derive from the deductible timing differences, such as the write-down of receivables, the deductible portion of the change in the provision for outstanding non-life business claims, the capital losses on securities, the amortisation of the insurance portfolio, the allowances to provisions for risks and charges, as well as from the carrying forward of tax losses not used and the freeing up as per Italian Decree Law No. 185/2008, for 93.2 million, of the prepaid taxes recorded on goodwill and on other intangible assets, having taken into account the effect of the decrease in the IRES rate as from They also comprise deferred tax assets which have arisen from the temporary misalignment between accrual-basis accounting laid down by the international accounting standards and Italian tax legislation. This misalignment is mainly due to the representation in the income statement and under shareholders equity of capital gains from valuation generated on financial assets at fair value through profit or loss and on available for sale financial assets, recalculation of the employee severance indemnity in accordance with IAS 19, calculation of deferred income revenue (DIR) associated with investment contracts held by the Group, recalculation of depreciation plans for properties and investment properties in accordance with IAS 16 and 40 and the recording of the shadow accounting provision. Deferred tax assets were determined according to the rate established by Article 1, paragraph 33 (with reference to IRES) and Article 1, paragraph 50 (with reference to IRAP) of Italian Law No. 244 dated December 24th, 2007, 2008 Finance Law, taking into account the amendments introduced by Article 23, paragraph 5 of Italian Decree Law No. 98 dated July 6th, 2011, containing Urgent provisions for financial stabilisation (so-called corrective manoeuvre ). They were also determined taking into consideration Italian Law No. 208 dated December 28th, Stability Law), on the basis of which the reduction of the IRES rate from 27.5% to 24% is envisaged as from January 1st, Current tax assets This item is represented by amounts due from tax authorities and mainly derives from the surplus emerging from the tax returns submitted, withholdings made on bank interest, tax credits on income deriving from equity investments in mutual investment funds, the advance tax on employee severance indemnities as per Article of Italian Law No. 662 dated December 23rd, 1996 and from amounts due from tax authorities transferred to the Parent Company by the subsidiaries who have complied with the tax consolidation system. Amounts due from tax authorities also comprise prepaid taxes pursuant to Italian Law No. 265 dated November 22nd, 2002, concerning the taxation of the life provisions, and amounts due from tax authorities for the payment of the annual advance of tax on premiums envisaged by Article 9.1 bis of Italian Law No Other assets This item includes transitory reinsurance accounts, deferred commissions expense (DAC - deferred acquisition cost), and other assets. 186

187 Notes to the accounts Table 43 - Other assets Changes ( thousands) Amount % Transitory reinsurance accounts Deferred commissions expense associated with investment contracts 7,712 4,713 2, Accruals and deferrals 3,762 3, Sundry assets 117, ,676-31, Total 129, ,911-28, The item transitory reinsurance accounts concerns the cost items of reinsurance receivable for 2015, which will be booked to the income statement during the subsequent accounting period, when all the cost and revenue components will be known. The item deferred commissions expense associated with investment contracts refers to deferred acquisition costs associated with investment contracts or contracts not complying with the definition of insurance contract as per IFRS 4. The accruals and deferrals item mainly refers to rental fees. Sundry assets include the amount relating to taxation on the mathematical provisions of the life classes accrued during the year for million and the balance of the liaison account between the life and non-life sectors of the Group insurance companies for million, which has a matching balance under other liabilities, and the balances of transactions to be settled for million. 7. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents represents the balance as of the end of the accounting period of the current accounts held with various banks. Cash and cash equivalents amount to million. During the year, the item reported an increase by million. The book value of these assets significantly approximates their fair value. Deposits and bank current accounts are remunerated at both fixed and floating rates. 187

188 Part C Statement of financial position - Liabilities 1. SHAREHOLDERS EQUITY As of December 31st, 2015 this item was made up as follows: Table 44 - Shareholders equity Changes ( thousands) Amount % Shareholders equity pertaining to the Group 1,911,823 1,962,698-50, Share capital 522, , Other equity instruments n.a. Capital reserves 790, , Revenue reserves and other equity reserves 444, ,055 22, (Own shares) -27,144-12,023-15,121 n.s. Reserve for net exchange differences n.a. Gains or losses on available for sale financial assets 121, ,323-25, Other gains or losses recognised directly in equity -1, ,383 n.s. Profit (loss) for the period pertaining to the Group 60,914 90,715-29, pertaining to minority interests 246, ,387 21, Capital and reserves pertaining to minority interests 215, ,777 21, Gains and losses recognised directly in equity 11,107 15,203-4, Profit (loss) for the period pertaining to minority interests 20,722 16,407 4, Total 2,158,699 2,188,085-29, n.s. = not significant n.a. = not applicable 1.1 Shareholders equity pertaining to the Group This item totals 1, million and comprises the following items: Share capital The fully subscribed share capital amounts to million and is made up of 174,293,926 ordinary shares lacking par value, further to the amendment of Article 6 of the Articles of Association approved by the extraordinary shareholders meeting held on April 25th, Capital reserves This item includes the share premium reserve of the Parent Company Revenue reserves and other equity reserves This item comprises the gains and losses deriving from initial application of international accounting standards (IFRS 1) and the reserves envisaged by the Italian Civil Code (consolidation reserve, legal reserve and extraordinary reserve) and by special laws prior to the adoption of international accounting standards. The change is attributable to the distribution of profit for the previous year and the performance of consolidation reserves. During the year, the Parent Company paid out dividends for million. 188

189 Notes to the accounts Own shares As of December 31st, 2015 the Parent Company held 3,295,545 own shares Gains or losses on available for sale financial assets The changes, net of related deferred taxation, recorded during the year are mainly attributable to: the transfer of net capital gains to the income statement following disposals for million, and net capital losses from impairment for million; net negative fair value changes in financial instruments included in the corresponding asset item for million Other gains or losses recorded directly under equity The change in this item is due to the decrease of million in the valuation reserve for associated companies. This item also includes actuarial gains and losses from valuation of the employee benefits as per the matters envisaged by revised IAS Shareholders equity pertaining to minority interests This account comprises the values pertaining to minority interests regarding the companies included in the consolidation area. With reference to the item gains or losses recognised directly in equity, changes during the year, net of the related deferred taxation, are due to: net negative fair value changes in financial instruments included in the corresponding asset item for million; the transfer of net capital gains from realisation and deterioration to the income statement for 750 thousand. 2. PROVISIONS AND ALLOWANCES Table 45 - Provisions and allowances - changes during the year ( thousands) 2014 Increases Decreases 2015 Provisions and allowances 44,774 24,439 13,892 55,321 As of December 31st, the item mainly comprised amounts set aside for: legal disputes and costs for million ( million was provided and million used during the year); formal notices or reports on findings which can be served for the violations of Italian Law No. 57/01 or for other findings for million ( million was provided and 358 thousand used during the year); sums which will be paid for the acceptance of any requests by beneficiaries for services depending on life assurance policies in relation to which prescription has taken place in favour of the Group for 699 thousand ( 32 thousand was used during the year); disputes open relating to employment matters or tax aspects for million ( million was provided and million used during the year); the defence expense provision for 862 thousand ( 117 thousand was provided and 487 thousand used during the year). 189

190 the provision for the agents leaving indemnity for million ( 1 million was provided during the year); intersectorial solidarity fund for million provided during the year. The outlays are envisaged over the short-term and therefore are not subject to any discounting. With regard to the legal and tax-related disputes, account is taken of the advice of legal/tax advisors with regard to the outcome of the same. With regard to the IVASS sanctions has taken into account those already communicated as well as the time series in the past registered by the insurance companies in the Group. 3. TECHNICAL PROVISIONS This item includes, as mentioned in the accounting principles, provisions associated with insurance contracts, and those deriving from investment contracts involving discretionary profit sharing (DPF), gross of reinsurance. The fairness of the liabilities as of December 31st, 2015, was ascertained by means of the method envisaged by section 15 et seq. of IFRS 4 (liability adequacy test). The assessment was carried out on liabilities relating to portfolios classified as insurance contracts or financial contracts with Discretionary Participation Features (DPF). The test was carried out by comparing the technical provisions, decreased by the acquisition costs still to be amortised and the value of any other related intangible assets, with the current value of the expected cash flows generated by the policy, including the liquidation and management costs. In the event of insufficiency of the provisions, the difference is booked to the income statement with an increase in liabilities. With regard to non-life classes, for the purpose of checking the fairness of the insurance liabilities, in replacement of the LAT, a control was used at individual ministerial class level by testing the calculation of the supplementary provision for risks underway with the simplified method as envisaged by Article 11 of ISVAP regulation No. 16 dated March 4th, Since the claims for the period were valued at ultimate cost, and not discounted back, it is possible to consider the future flows of the payments as implicitly checked. The current estimates have confirmed that the provisions as of December 31st, 2015 are adequate and therefore no supplementary provision is required. 190

191 Notes to the accounts Table 46 - Analysis of technical provisions (ISVAP Regulation No. 7 dated July 13th, 2007) Direct business Indirect business Total book value ( thousands) Non-life provisions 3,572,296 3,563,505 18,833 21,455 3,591,129 3,584,960 Premium provision 762, ,348 6,792 6, , ,912 Provision for outstanding claims 2,807,934 2,795,039 12,035 14,887 2,819,969 2,809,926 Other provisions 2,122 2, ,128 2,122 of which provisions provided following the assessment of fairness of the liabilities Life provisions 15,304,293 14,222,496 4,199 4,085 15,308,492 14,226,581 Provision for outstanding claims 254, , , ,036 Mathematical provisions 12,550,678 11,793,629 4,105 4,000 12,554,783 11,797,629 Technical provisions for contracts where the investment risk is borne by the policyholders and provisions deriving from the management of 1,384,742 1,178, ,384,742 1,178,542 pension funds Other provisions 1,114,473 1,023, ,114,547 1,023,374 of which provisions provided following the assessment of fairness of the liabilities of which deferred liabilities due policyholders from ,044, , ,044, ,575 Total technical provisions 18,876,589 17,786,001 23,032 25,540 18,899,621 17,811,541 NON-LIFE BUSINESS Premium provision In accordance with Italian legislation, the item comprises both the provision for unearned premiums, supplemented by the premium provision, calculated for certain classes as per specific ministerial requirements, and the provision for unexpired risks. LIFE BUSINESS Mathematical provisions Mathematical provisions include those envisaged by ISVAP Regulation No. 21 dated March 28th, Technical provisions for contracts where the investment risk is borne by the policyholders and provisions deriving from the management of pension funds. This item exclusively comprises the provisions relating to index-linked and unit-linked polices and the provisions relating to pension funds. 191

192 Other provisions Other provisions mainly comprise provisions for future costs associated with insurance contracts for million ( million as of December 31st, 2014) and the shadow accounting provision totalling 1, million ( million as of December 31st, 2014). 4. FINANCIAL LIABILITIES 4.1 Financial liabilities at fair value through profit or loss The item includes the financial liabilities at fair value through profit or loss, defined and disciplined by IAS 39, relating to: investment contracts, not falling within the scope of IFRS 4, issued by Group insurance companies, where the risk of the investment is borne by the policyholders, management of pension funds, not falling within the scope of IFRS 4. The item represents 85.2% of total financial liabilities. In detail, the technical provisions relating to investment contracts, which mainly comprise the provisions against index and unit-linked policies, amount to million ( at the end of the previous year) and the technical provisions for pension funds amount to million ( at the end of the previous year). 4.2 Other financial liabilities The item represents 14.8% of total financial liabilities. The item includes the financial liabilities defined and disciplined by IAS 39 not included in the category Financial liabilities at fair value through profit or loss, and therefore subordinated liabilities for million, the deposits received from reinsurers which amount to million and loans for million. In detail, the features of the subordinated liabilities and loans are as follows: a subordinated loan with an unspecified maturity amounting to 80 million taken out with UBI and disbursed in September The possibility of early repayment as from September 2020 is envisaged. A subordination condition is envisaged with respect to all the unsubordinated creditors including the policyholders. This loan is allowed in full within the calculation of the elements making up the solvency margin; subordinated loan for million maturing on December 2043, issued on December 2013, subscribed by institutional investors. The possibilities for optional early repayment are envisaged after 10 years from issue and on each payment date of the subsequent coupon. The securities can be reimbursed in advance and subject to IVASS authorisation, also in the presence of regulatory or tax changes or changes in the valuation standards made by the rating agencies. This loan is allowed in full within the calculation of the elements making up the solvency margin; mortgage loan of million taken out with the Banca Intesa Group on March 24th, 2004 pertaining to Fondo Euripide. The loan is repayable in quarterly instalments and matures in December 2019; loan of million taken out with Banca Popolare di Sondrio in December 2012 and pertaining to Cattolica Services. The loan is repayable in quarterly instalments and matures in January 2017; loan of million taken out with Banca di Verona in March 2014 and pertaining to Cattolica Services. The loan is repayable in quarterly instalments and matures in March 2017; loan of 4 million taken out with Banca di Verona in October 2015 and pertaining to Cattolica Services. The loan is repayable in quarterly instalments and matures in October 2018; 192

193 Notes to the accounts loan of million taken out with Banca Popolare di Sondrio in December 2015 and pertaining to Cattolica Services. The loan is repayable in quarterly instalments and matures in January 2019; debt balance of 5 thousand on the current account open care of Banca di Sondrio for the credit facility granted to Cattolica Services; loan of 372 thousand taken out with Banca di Verona on May 28th, 2013 and pertaining to Cattolica Agricola. The loan is repayable in six-monthly instalments and matures in May 2018; loan of 428 thousand taken out with Banca di Verona in November 2013 and pertaining to Cattolica Beni Immobili. The loan is repayable in monthly instalments and matures in November 2018; unsecured loan for 265 thousand granted by Unicredit on December 18th, 2015 in favour of Fondo Perseide Energie maturing on December 31st, The contract envisages the possibility of partial repayments at any time and without penalties; loan with maximum commitment of 40 million, of which million called-up as of December 31st, through a credit line granted by Mediobanca - Banca di Credito Finanziario in May 2014, valid through May 2017, and pertaining to the Parent Company. The table below provides an analysis of the financial liabilities undertaken by the Group, expressed according to nature and in accordance with the IAS classification criteria. 193

194 Table 47 - Analysis of financial liabilities (ISVAP Regulation No. 7 dated July 13th 2007) Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities at fair value through profit or loss Other financial liabilities Total value for the period ( thousands) Participative financial instruments Subordinated liabilities , , , ,856 Liabilities from investment contracts issued by insurance companies deriving 0 0 1,622,514 1,290, ,622,526 1,290,395 from contracts where the investment risk is borne by the policyholders , , , ,451 from the management of pension funds , , , ,784 from other policies Deposits received from re-insurers ,250 54,973 53,250 54,973 Financial liability components of insurance contracts Debt securities issued Payables due to banking customers Interbanking payables Other loans received Non-hedging derivatives Hedging derivatives Sundry financial liabilities ,052 81,095 50,052 81,095 Total 0 0 1,622,514 1,290, , ,954 1,904,895 1,605,

195 Notes to the accounts 5. PAYABLES The account group comprises trade payables disciplined by IAS 39, mainly represented by payables deriving from direct insurance transactions, reinsurance payables and other payables. Table 48 - Payables Changes ( thousands) Amount % Payables deriving from direct insurance transactions 82,978 91,208-8, Insurance brokers 50,787 46,813 3, Insurance companies - current accounts 6,140 10,804-4, Policyholders for guarantee deposits and premiums 25,210 32,551-7, Guarantee funds in favour of policyholders 841 1, Payables deriving from reinsurance transactions 49,375 33,482 15, Insurance and reinsurance companies 49,375 33,482 15, Insurance brokers n.a. Other payables 190, ,133-25, For taxes payable by policyholders 31,511 32,551-1, Amounts due to social security and welfare institutions 4,258 4, Sundry payables 154, ,149-24, Total 322, ,823-17, n.a. = not applicable 5.1 Payables deriving from direct insurance transactions Payables deriving from direct insurance transactions mainly comprise the amounts due to insurance brokers. In detail, amounts due to insurance brokers take into account the supplementary year-end registrations pertaining to the assessment of the production premiums and the timing mismatch registered in the settlement of the commissions with the bank-assurance channel. 5.2 Payables deriving from reinsurance transactions Payables deriving from reinsurance transactions include the items with debt balances associated with reinsurance. 5.3 Other payables These include payables for taxes payable by insurers, amounts due to welfare and social security institutions and other sundry payables. In detail, the item sundry payables included amounts due to suppliers, due to employees, payables for premiums being collected and for employee benefits as per revised IAS 19. The employee benefits as per revised IAS 19 include the employee severance indemnity for million, seniority bonuses for million and health bonuses for retired staff for million. 195

196 The employee severance indemnity is subject to actuarial calculation which takes into account the future developments of the employment relationship. The future flows of the employee severance indemnity have been discounted back as of the reference date on the basis of the method expressly requested by section 68 of IAS 19, known as the Projected Unit Credit Method. The projected benefits which can be disbursed in the event of death, incapacity, resignation or retirement based on the applicable actuarial bases have been determined for all the employees active as of the date of assessment and distributed uniformly over all the years of service for each employee as from the date of employment until the date the events take place. As stated in the accounting principles, with regard to Group companies with at least 50 employees, the employee severance indemnity accrued up to December 31st, 2006 is treated like a defined benefit plan and is therefore subject to actuarial calculation, while the employee severance indemnity allocated as from January 1st, 2007 to a specific Treasury Fund set up with INPS (national social security institute) is treated as a defined contribution plan. For the companies with less than 50 employees, the entire liability has been treated as a defined benefit plan. The employee severance indemnity represents the effective value of the foreseeable obligation, net of any assets serving the plans, adjusted to reflect any actuarial losses or gains not amortised. The discounting back of the future cash flows is carried out on the basis of the interest rate of high quality corporate securities. The main hypotheses used are: discount rate of 2.0%, inflation rate of 1.5%, revaluation rate of 2.17% (net of the substitute tax which from January 1st, 2015 rose from 11% to 17%), salary increases of 2.9%, mortality based on the most recent ANIA A62 mortality tables broken down by gender and the disability/invalidity, adopted in the INPS model for 2010 projections. For the retirement age of the generic asset, it was assumed that the pension requirements valid for Compulsory General Insurance (AGO, 67 years of age for males and females) were met. In relation to the resignation frequency, a table has been used in line with the expected value of the resignation rate over the longterm for the Parent Company. The categories of employee benefits which are disciplined by IAS 19 include the indemnities represented by length-of-service bonuses. In compliance with the international accounting standard IAS 19, the actuarial valuations were carried out on the basis of the method of the benefits accrued using the Projected Unit Credit Method. This method makes it possible to calculate the length-of-service bonuses at their date of maturity in an actuarial sense, distributing the liability for all the years of residual permanence of the outstanding workers. No longer as a liability to be settled in the event the company ceases its business activities as of the financial statements date, but gradually providing for this liability in relation to the residual duration of the workers in service. The method makes it possible to calculate certain amounts in a demographic - financial sense as of the reference date of the valuation, including in particular the liability pertaining to the service already provided by the workers represented by the DBO Defined Benefit Obligation (also known as the Past Service Liability). It is obtained by calculating the current value of the services due to the workers deriving from the length-of-service already accrued as of the valuation date. The demographic and financial hypotheses used are identical to those used for the valuation of the severance indemnity described previously. The categories of benefits, identified by IAS 19 as other long term benefits, for which an actuarial-type valuation is required, include the indemnities represented by health bonuses provided to retired staff. 196

197 Notes to the accounts With reference to the health bonuses for retired employees, IAS 19 confirms the needs to make valuations taking into due consideration the period in which the afore-mentioned benefits will presumably be provided with the consequent need to quantify them in terms of average current values. The provisions which discipline the afore-mentioned benefits are presented in the National Collective Labour Agreement for employees and executives and in the in-house collective contract of the Cattolica Assicurazioni Group companies. Explicit reference was made to these provisions and rules for the creation of the technical valuation model. The actuarial valuations of the health bonuses were carried out, in compliance with the international accounting standard IAS 19, on the basis of the method of the benefits accrued using the Projected Unit Credit Method. With reference to the demographic hypotheses, the recent ANIA A62 mortality tables were used. For the retirement age of the generic asset (officer or executive), it was assumed that the pension requirements valid for Compulsory General Insurance (AGO, 67 years of age for males and females) were met. With regard to the probability of leaving work activities, for reasons other than death, the turn-over probabilities detected in the companies were used, equal to 7% both for active officials and active executives. The financial hypotheses used are identical to those used for the valuation of the severance indemnity described previously. In accordance with revised IAS 19, sensitivity analysis has been carried out on the value of the obligation for defined benefits (DBO) based on changes in the main valuation hypotheses. In detail, the change in the value of the DBO has been gauged consequent to a change in the amount of the discount rate, a change in retirement age, a change in the inflation rate, a change in the mortality table and a change in the frequency of voluntary resignations. In light of these changes, also the parameters associated with the figure amended in accordance with the matters indicated in the following table have been changed, again in observance of the central hypothesis. Table 49 - Sensitivity test hypotheses Central hypotheses Hypothesis 1 Hypothesis 2 Hypothesis 3 Hypothesis 4 Hypothesis 5 Hypothesis 6 Hypothesis 7 Hypothesis 8 Hypothesis 9 Hypothesis 10 Discount rate +1% Discount rate -1% Retirement age + 2 years Retirement age - 2 years Inflation rate +1% Inflation rate -1% Mortality table increase of 10% Mortality table decrease of 10% Resignation frequency increase of 10% Resignation frequency decrease of 10% Discount rate 2.0% 3.0% 1.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Retirement age Inflation rate 1.5% 1.5% 1.5% 1.5% 1.5% 2.5% 0.5% 1.5% 1.5% 1.5% 1.5% Salary increase rate 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% Severance indemnity revaluation rate 2.6% 2.6% 2.6% 2.6% 2.6% 3.4% 1.9% 2.6% 2.6% 2.6% 2.6% Mortality table A 62 A 62 A 62 A 62 A 62 A 62 A 62 A % A 62-10% A 62 A 62 Voluntary resignation frequency 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.2% 1.8% The results of the sensitivity test on the value of the DBO as of December 31st, 2015 are shown in the table below. 197

198 Table 50 - Sensitivity test results ( thousands) Value of the obligation for defined benefits as of December 31st, 2015 Sensitivity % Central hypotheses 28,201 Hypothesis 1 25, % Hypothesis 2 30, % Hypothesis 3 28, % Hypothesis 4 28, % Hypothesis 5 29, % Hypothesis 6 26, % Hypothesis 7 27, % Hypothesis 8 28, % Hypothesis 9 27, % Hypothesis 10 28, % Table 51 - Employee severance indemnity, length-of-service bonus and premiums on health contracts ( thousands) Employee benefits as per IAS 19R Balance as of December 31st, ,958 Interest cost 454 Service cost 657 Change in the demographic actuarial component 661 Change in the rate actuarial component -875 Disbursements and transfers -1,654 Other changes 0 Balance as of December 31st, ,

199 Notes to the accounts 6. OTHER LIABILITY ITEMS Table 52 - Other liability items Changes ( thousands) Amount % Deferred tax liabilities 454, ,112-53, Current tax liabilities 187, ,928 18, Other liabilities 60, ,369-40, Total 701, ,409-76, Deferred tax liabilities This item comprises the deferred tax liabilities defined and disciplined by IAS 12. As of December 31st, deferred tax liabilities included: deferred taxes which have arisen from taxable timing differences due to the deferral of the taxability of positive income elements realised and recorded through profit or loss, which will be settled when the aforementioned revenues are taxed; the deferred taxes which have arisen from the temporary misalignment between the principle of economic competence laid down by the international accounting standards and tax legislation, due mainly to the statement in the income statement and under shareholders equity of the capital gains on valuations recorded respectively on the financial assets at fair value through profit or loss and on the available for sale financial assets. Deferred tax liabilities were determined according to the IRES and IRAP rates in force. The decrease in the item is mainly attributable to the adjustment of the tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from Current tax liabilities This item comprises the current tax liabilities defined and disciplined under IAS 12. The item comprises the current residual liability for income taxes for the year, the liability deriving from the tax assessment on the life business mathematical provisions pertaining to the period, liabilities for withholding taxes made, and VAT to be paid. 6.4 Other liabilities The item mainly comprises the deferred fee income associated with contracts not falling with the scope of IFRS 4, accrued expenses and deferred income and sundry liabilities. 199

200 Table 53 - Other liabilities Changes ( thousands) Amount % Deferred income revenue (DIR) Transitory reinsurance accounts Liaison account 26,411 64,224-37, Other liabilities 26,500 25, Accrued expenses and deferred income 6,886 10,431-3, of which for interest 6,251 9,518-3, Total 60, ,369-40, The deferred income revenue was mainly chargeable to index and unit-linked type investment contracts, where the risk of the investments is borne by the policyholders. Other liabilities include the liaison account between the life and non-life businesses for Group companies that provide both life and non-life insurance. The amount of million is recorded for an equal balance under Other assets. The balances for premiums collected on policies being issued as of December 31st are also included, for million along with the amount of million relating to items under settlement for transactions to be settled as at the year-end date on the balances of the cash in bank and cash equivalents. Deferred income includes the Parent Company s portion of the extraordinary coupon relating to bonds acquired for the restructuring transactions of the main segregated fund entered into in 2005 and deferred to subsequent years on the basis of the residual duration of the securities. 200

201 Part C Income statement Notes to the accounts The income statement closed with a consolidated profit of million ( million as of December 31st, 2014). INSURANCE BUSINESS With reference to insurance business, in addition to the matters illustrated below, reference should be made to the table in the management report Reclassified consolidated income statement by segment of activities. The table below shows the breakdown of the gross premiums written relating to direct and indirect business. Table 54 - Breakdown of direct and indirect gross premiums written Classes Direct business Indirect business % ( thousands) Italy Italy Abroad Total business of total Accident and injury 202, , Health 68, , Land vehicle hulls 131, , Goods in transit 9, , Fire & natural forces 122, , , Other damage to assets 219, , TPL - Land motor vehicles 991, , TPL - General 178, , Credit n.s. Suretyship 19, , Sundry financial losses 29, , Legal protection 15, , Assistance 35, , Other classes (1) 4, , Total non-life classes 2,028, ,175 2,044, Class I 2,473, ,473, Class III 410, , Class IV n.s. Class V 229, , Class VI 13, , Total life classes 3,127, ,127, Total insurance premiums 5,156, ,175 5,172, Class III 305, , Class VI 133, , Total investment contacts 439, , TOTAL PREMIUMS WRITTEN 5,595, ,175 5,611, (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 Analysis is presented below relating to the technical insurance items and the insurance operating expenses net of eliminations between sectors. 201

202 Table 55 - Insurance business ( thousands) Gross balance Reinsurance amount Net balance Gross balance Reinsurance amount Net balance Non-life business NET PREMIUMS 2,048, ,761 1,766,865 1,927, ,235 1,647,811 a Premiums written 2,044, ,847 1,740,592 1,907, ,357 1,618,439 b Change in premium provision 4,187 22,086 26,273 19,250 10,122 29,372 NET CHARGES RELATING TO CLAIMS -1,313, ,699-1,138,244-1,293, ,649-1,097,675 a Claims paid -1,324, ,770-1,140,535-1,305, ,633-1,099,142 b Change in provision for outstanding claims -9,876-8,101-17,977-11,556-11,473-23,029 c Change in recoveries 20, ,838 23, ,876 d Change in other technical provisions Life business NET PREMIUMS 3,127,653-43,886 3,083,767 3,449,772-46,990 3,402,782 NET CHARGES RELATING TO CLAIMS -3,402,221 19,766-3,382,455-3,733,027 23,481-3,709,546 a Claims paid -2,381,588 19,449-2,362,139-2,727,896 20,004-2,707,892 b Change in provision for outstanding claims -27, ,529 74,214 1,905 76,119 c Change in mathematical provisions -757, ,243-1,464,243 1,521-1,462,722 d Change in technical provisions related to contracts where the investment risk is borne by the policyholders and derive from the management of pension funds -206, , , ,949 e Change in other technical provisions -29, ,345-6, ,000 Table 56 - Analysis of insurance operating expenses Non-life business Life business ( thousands) Commissions and other acquisition costs, net of commissions and profit-sharing received from re-insurers -331, ,035-78,093-74,038 Acquisition commissions -326, ,273-59,916-61,805 Other acquisition costs -68,814-55,614-25,832-20,799 Change in deferred acquisition costs Collection commissions -12,907-9,261-9,929-10,433 Commissions and profit-sharing received from re-insurers 77,132 73,113 17,472 18,826 Operating expenses relating to investments -7,065-6,656-18,715-16,385 Other administrative expenses -119, ,843-32,086-38,623 Total -457, , , ,

203 Notes to the accounts In addition to the matters observed in the above table, operating expenses relating to the investments, recorded during the year, comprise general expenses and expenses for employees relating to the management of investment property and equity investments. Commissions and other acquisition costs, net of commissions and profit sharing received from re-insurers, include acquisition costs relating to insurance contracts and investment contracts with discretionary participation features. FINANCIAL OPERATIONS The table which follows discloses the income and charges deriving from financial operations as presented in the income statement for the year. Table 57 - Financial operations Changes ( thousands) Amount % Net income from financial instruments valued at fair value through profit or loss 48,024 88,466-40, Income from investments in subsidiaries, associated companies and joint ventures 4 2,723-2, Charges from investments in subsidiaries, associated companies and joint ventures -50,114-4,965-45,149 n.s. Result deriving from equity investment in subsidiaries, associated companies and joint ventures -50,110-2,242-47,868 n.s. Income from other financial instruments and investment property 806, , , Charges from other financial instruments and investment property -204, , ,764 n.s. Result deriving from other financial instruments and investment property 601, ,776 76, n.s. = not significant 203

204 Table 58 - Financial and investment income and charges (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) Interest Other income Other charges Realised gains Realised losses Total income and charges realised Result of investments 510,617 88,522-29, ,020-93, ,727 a Deriving from investment property 0 25,024-1, ,169 b Deriving from investments in subsidiaries, associated companies and joint ventures , ,789 c Deriving from held to maturity investments 12, ,054 d Deriving from loans and receivables 45, ,705-1,054 46,906 e Deriving from available for sale financial assets 415,281 50,940-4, ,056-73, ,711 f Deriving from financial assets held for trading 2, , ,228 g Deriving from financial assets at fair value through profit or loss 34,761 11,686-7,705 55,364-18,658 75,448 Result of sundry receivables 1, ,347 Result of cash and cash equivalents Result of financial liabilities -10, ,893 a Deriving from financial liabilities held for trading b Deriving from financial liabilities at fair value through profit or loss c Deriving from other financial liabilities -10, ,893 Result of payables Total 500,413 88,522-29, ,020-93, ,

205 Notes to the accounts Valuation gains Valuation losses Valuation capital gains Value writeback Valuation capital losses Writedown Total unrealised income and charges Total income and charges 2015 Total income and charges ,764 1,908-52, , , , , , ,605 17,564 16, ,321-34,321-50,110-2, ,054 12, ,906 51,347 4,381 1, ,654-75, , ,092 1, ,705 3,594 43, , ,447 72, , ,347 1, , ,664-40,557-99, , , ,682-29,682-84, ,875-13, ,535 48,782 1,908-82, , , , ,

206 Commissions income Commissions income mainly comprises the commissions relating to investment contracts issued by the Group s insurance companies (DIR); specifically, the item includes the explicit and implicit premium loading encumbering the investment contracts issued. Commissions expense The item comprises the acquisition costs associated with investments policies (DAC) recorded during the year. OTHER REVENUES AND OTHER COSTS Other revenues The item amounts to million, of which million in other net technical income associated with insurance contracts. Other revenues amount to million of which million relating to recoveries from provisions for risks and charges and million relating to withdrawals from the writedown allowance. Other costs The item, which amounts to million, comprises other net technical charges associated with insurance contracts for million and other charges for million, mainly represented by amortisation on intangible assets for million, provisions for risks and charges for million and loan adjustments totalling million. INCOME TAXES Table 59 - Income taxes for the year Changes ( thousands) Amount % Current taxes -114,018-94,332-19, Change in prepaid taxes -39,185-11,206-27,979 n.s. Change in deferred taxes 10, ,750 n.s. Balance of deferred taxes -28,652-11,423-17,229 n.s. TOTAL -142, ,755-36, n.s. = not significant This item records current taxes (IRES - company earnings tax and IRAP - regional business tax), deferred taxes of individual Group companies recorded in observance of accounting standard No. 25 on income taxes, and deferred taxes which have arisen from the temporary misalignment between accrual-basis accounting as laid down by the international accounting standards (IAS 12) and tax legislation. The reconciliation between the effective average tax rate and the applicable tax rate is illustrated below. 206

207 Notes to the accounts Table 60 - Reconciliation of the tax rate - analysis (Balances as %) Rate applicable 34.32% 34.32% Effect of increases/decreases 29.28% 15.36% Tax rate on pre-tax profit 63.60% 49.68% The change in the tax rate on profit before taxation is essentially attributable to the adjustment of the prepaid and deferred tax due to the decrease in the IRES (company earnings tax) rate from 27.5% to 24%, as from 2017, for a total of 18 million. STATEMENT OF COMPREHENSIVE INCOME The statement of comprehensive income for the year 2015 amounted to million, of which million pertaining to the Group. The analysis of other components in the statement of comprehensive income pursuant to ISVAP Regulation No. 7 dated July 13th, 2007, is presented below. The balances are stated net of income taxes, which is in any event indicated in the specific column. 207

208 Table 61 - Analysis of the statement of other comprehensive income - net amounts (ISVAP Regulation No. 7 dated July 13th, 2007) Charges Adjustments from reclassification to income statement Other changes Total changes Taxation Balance ( thousands) Other income components net of income taxes without reclassification in the income statement Provisions deriving from changes in the shareholders equity of investee companies Intangible assets revaluation reserve Tangible assets revaluation reserve Income and charges relating to non-current assets or disposal group held for sale Actuarial gains and losses and adjustments related to definedbenefit plans Other items Other income components net of income taxes with reclassification in the income statement Reserve for net exchange differences Gains or losses on available for sale financial assets -15,705 51,264-16,322 13, ,340-32,027 66,124-16,736 34, , , ,193 50,432-16,322 13, ,515 63,952-15,423 33, , ,494 Profits or losses on cash flow hedging instruments Profits or losses on instruments hedging a net investment in foreign operations Provisions deriving from changes in the shareholders equity of investee companies Income and charges relating to non-current assets or disposal group held for sale , , , , , , Other items TOTAL OF THE OTHER COMPONENTS OF THE STATEMENT OF COMPREHENSIVE INCOME -15,571 51,077-16,322 13, ,340-31,893 65,937-16,666 34, , ,

209 Notes to the accounts OTHER IVASS TABLES Pursuant to ISVAP Regulation No. 7 dated July 13th, 2007, the income statement by sector of activities, the analysis of the technical insurance items and the analysis of the insurance operating expenses, gross of eliminations within sectors, are presented as follows. Table 62 - Income statement by sector of activities (ISVAP Regulation No. 7 dated July 13th, 2007) Non-life Business Life Business Other Eliminations between sectors Total ( thousands) Net premiums 1,768,093 1,649,414 3,085,123 3,404, ,584-3,318 4,850,632 5,050, Gross premiums written 2,078,648 1,955,732 3,129,009 3,451, ,378-30,401 5,176,279 5,376, Ceded premiums -310, ,318-43,886-46, ,794 27, , , Commissions income 0 0 5,722 3, ,722 3, Income and charges from financial instruments at fair value through profit or loss 1.4 Income from investments in subsidiaries, associated companies and joint ventures 1.5 Income from other financial instruments and investment property ,105 87, ,024 88,466 30,574 38,563 9,419 18, ,989-54, , , , , , ,999-12, , , Other revenues 199, ,159 65,155 76,562 3,410 3, , ,166 94,231 91,841 1 TOTAL REVENUES AND INCOME 2,204,898 1,974,023 3,827,194 4,117,402 3,728 3, , ,495 5,804,771 5,862, Net charges relating to claims -1,182,737-1,139,316-3,380,997-3,709, ,035 42,090-4,520,699-4,807, Amounts paid and change in technical provisions -1,374,241-1,353,874-3,400,764-3,733, ,841 60,999-4,716,164-5,026, Reinsurance amount 191, ,558 19,767 23, ,806-18, , , Commissions expense Charges from investments in subsidiaries, associated companies and joint ventures 2.4 Charges from other financial instruments and investment property -50,774-7,051-4,790-1, ,450 3,837-50,114-4,965-77,365-24, ,828-78, ,812 5,516 3, , , Operating expenses -523, , , ,024-2,022-2,092 97, , , , Other costs -174, ,730-68,396-78,044-3,464-2,553 30,000 17, , ,973 2 TOTAL COSTS AND CHARGES -2,008,980-1,776,213-3,746,348-4,034,952-6,283-6, , ,933-5,580,465-5,649,689 PROFIT (LOSS) FOR THE PERIOD BEFORE INCOME TAXES 195, ,810 80,846 82,450-2,555-2,821-49,903-64, , ,

210 Table 63 - Analysis of technical insurance items (ISVAP Regulation No. 7 dated July 13th, 2007) ( thousands) Gross balance Reinsurance amount Net balance Gross balance Reinsurance amount Net balance Non-life business NET PREMIUMS 2,078, ,555 1,768,093 1,955, ,318 1,649,414 a Premiums written 2,079, ,254 1,741,820 1,930, ,943 1,620,041 b Change in premium provision ,699 26,273 24,748 4,625 29,373 NET CHARGES RELATING TO CLAIMS -1,374, ,504-1,182,737-1,353, ,558-1,139,316 a Claims paid -1,379, ,997-1,185,028-1,380, ,268-1,140,782 b Change in provision for outstanding claims -15,454-2,523-17,977 2,169-25,199-23,030 c Change in recoveries 20, ,838 23, ,876 d Change in other technical provisions Life business NET PREMIUMS 3,129,009-43,886 3,085,123 3,451,487-46,990 3,404,497 NET CHARGES RELATING TO CLAIMS -3,400,764 19,767-3,380,997-3,733,476 23,481-3,709,995 a Claims paid -2,384,832 19,449-2,365,383-2,731,356 20,004-2,711,352 b Change in provision for outstanding claims -27, ,528 74,214 1,905 76,119 c Change in mathematical provisions -757, ,243-1,464,243 1,521-1,462,722 d Change in technical provisions related to contracts where the investment risk is borne by the policyholders and derive from the management of pension funds -206, , , ,949 e Change in other technical provisions -25, ,644-3, ,989 Table 64 - Analysis of insurance operating expenses (ISVAP Regulation No. 7 dated July 13th, 2007) Non-life business Life business ( thousands) Gross commissions and other acquisition costs -433, , , ,271 a Acquisition commissions -337, ,809-66,443-67,915 b Other acquisition costs -83,457-68,279-29,708-26,784 c Change in deferred acquisition costs d Collection commissions -12,906-9,263-10,259-10,745 Commissions and profit-sharing received from re-insurers 87,689 79,526 17,472 18,826 Operating expenses relating to investments -8,394-7,635-23,167-20,494 Other administrative expenses -169, ,496-47,961-59,085 Total -523, , , ,

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212

213 Notes to the accounts Part D - Other information

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215 Part D Other information Notes to the accounts Group headcount Directors, Statutory Auditors and strategic directors fees Group employees calculated as per FTE, amounted to 1,567, compared with 1,595 as of December 31st, Taking into account the exit at year end of 45 co-workers, of which 34 members of the Intersectorial Solidarity Fund, the FTE workers as of December 31st came to 1,522 (-73). CONSOB resolution No , published in 2011, implemented the provisions concerning remuneration contained in Article 123 ter of the Testo unico della finanza and envisages the drawing up and subsequent resolution by the 2016 shareholders meeting of the report on remuneration for the companies, to be made public in accordance with the deadlines as per the formalities envisaged by current legislation, which in Section II includes the analytical indication of the fees paid during the year for any reason by the Parent Company and the subsidiary and associated companies. Atypical and unusual transactions and non-recurrent significant events and operations With reference to non-recurrent significant events and transactions and positions or transactions deriving from atypical and/or unusual operations, reference should be made to the section Other information in the Management Report. Earnings for shares in circulation Information on risks Transactions with related parties With reference to earnings per share in circulation, reference should be made to the section Significant events and other information in the Management Report. With regard to the disclosure required by IFRS 13 concerning outstanding risks, reference should be made to the section Risk management in the Management Report. As already disclosed in the Management Report, pursuant to CONSOB Regulation No dated March 12th, 2010, and subsequent amendments and additions, as from January 1st, 2011 the Procedure for the management of related party transactions approved on November 29th, 2010, applies to the situations envisaged by the regulations. Note that Cattolica Group has entered into several extraordinary transactions with related parties, not atypical and/or unusual, aimed at rationalising and reorganising the corporate structure of the same, or growth by external lines. These transactions, some of which directly involved the Parent Company, are illustrated in another section of the Management Report. With regard to transactions with related parties, without prejudice to the approval procedures described in the Parent Company s Report on Corporate Governance on the website shareholders are hereby informed that, for reporting purposes, a procedure has been set up for detecting outstanding transactions, via the prior acquisition of the necessary information to identify related parties in relation to international accounting standard IAS 24 and subsequent extrapolation of the transactions relating to the same. The table below shows the equity transactions and relationships resulting from the aforementioned related party transactions as of December 31st, The values presented represent the transactions between Cattolica Group companies and 215

216 related parties: Cassa di Risparmio di San Miniato Group and Banca Popolare di Vicenza Group. As already indicated in under significant events, in May, Banca Popolare di Vicenza exercised the option for the early conversion of the bonds of the convertible 5% bond issue as approved by the general meeting of the Bondholders in February The Parent Company, which - within the sphere of the equity strengthening transactions carried out by the bank in had subscribed its portion of the bond issue, was assigned 25,875 new shares, at a price of 48, for an equivalent value of about 1.2 million. In December, Banca Popolare di Vicenza assigned shares as a loyalty bonus acknowledged further to the subscription of the share capital increase of the bank in 2013, to the extent of one new share for each 5 subscribed. The Parent Company was assigned 3,613 shares. To-date, the Parent Company has a holding of 0.89% in the share capital of the bank In particular, the following are indicated: the class C and D investments (shares and bonds) and current accounts which are subscribed under market conditions. The related financial income is also indicated (including the income of class D zero coupons); other receivables, payables, costs and revenues linked to the ordinary insurance business (mainly payables for commissions); commissions paid to the sales network which is under market conditions. The column Other related parties includes all the dealings with the directors, the statutory auditors as well as the General Managers and the executives with strategic responsibilities of the Parent Company and related parties. The column also includes compensation paid for activities performed in the Parent Company and in the Group companies. 216

217 Notes to the accounts Table 65 - Transactions with related parties Equity transactions and relationships ( thousands) Associated companies and their subsidiaries Banca Pop. VI and its subsidiaries Other related parties Total 2015 Assets Shares 35,062 5, ,698 Loans granted Bonds 5, ,157 3, ,268 Provisions 0 0 1,891 1,891 Derivatives Other receivables Current account transactions 7, , ,595 Total 48, ,940 5, ,452 Liabilities Loans received Other payables 102 4,276 1,553 5,931 Total 102 4,276 1,553 5,931 Economic transactions and relationships ( thousands) Associated companies and their subsidiaries Banca Pop. VI and its subsidiaries Other related parties Total 2015 Revenues and income Premiums Financial income , ,473 Other revenues Total , ,473 Costs and charges Claims Financial charges 15 1, ,007 Commissions 1,647 32, ,005 Other costs ,108 10,432 Total 1,662 34,674 10,108 46,

218 The undersigned declare that these financial statements are true and consistent with the underlying accounting records The legal representatives of the company (*) The Chairman PAOLO BEDONI (**) (**) (**) The Statutory Auditors GIOVANNI GLISENTI LUIGI de ANNA FEDERICA BONATO CESARE BRENA ANDREA ROSSI (*) For foreign companies, the signature must be that of the general representative for Italy. (**) Indicate the office covered by the signee. 218

219 Attestation of the consolidated financial statements pursuant to Article 81 ter of Consob Regulation No dated May 14th, 1999 and subsequent amendments and additions 1. The undersigned, Giovan Battista Mazzucchelli, as Managing Director, and Giuseppe Milone, as Executive in charge of preparing the financial reports of Cattolica Assicurazioni Soc. Coop., hereby certify, taking into account the provisions of Article 154 bis, paragraphs 3 and 4 of Italian Legislative Decree No. 58 dated February 24th, 1998: - The adequacy with respect to the Company s structure and - the effective application, of the administrative and accounting procedures in place for preparing the consolidated financial statements as of financial year The adequacy of the administrative and accounting procedures in place for preparing the consolidated financial statements as at December 31st, 2015, has been assessed through a process established by Cattolica Assicurazioni Soc. Coop. on a consistent basis with the Internal Control Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission which represents the reference framework generally accepted at international level. 3. It is also hereby certified that: 3.1 the consolidated financial statements as at December 31st, 2015: a) are prepared in compliance with applicable international accounting standards recognized by the European Community pursuant to EC Regulation No. 1606/2002 of the European Parliament and of the Council dated July 19th, 2002, as well as the provisions pursuant to Italian Legislative Decree No. 38 dated February 28th, 2005, the Italian Civil Code, Italian Legislative Decree No. 209 dated September 7th, 2005 and applicable provisions, regulations and circular letters issued by ISVAP; b) correspond to the related books and accounting records; c) provide a true and correct representation of the balance sheet, income statement and financial position of the issuer and of all the companies included in the scope of consolidation. 3.2 The management report includes a reliable analysis of the performance and of the management result, as well as of the position of the issuer and all the companies included in the scope of consolidation, together with the description of the main risks and uncertain situations to which they are exposed. Verona, March 9 th, 2016 Signature of Chief Executive Officer Giovan Battista Mazzucchelli Signature of Corporate Financial Reporting Mananger Giuseppe Milone

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221 Indipendent Auditors Report