Agenda
Generali 2021 Strategy updatePhilippe Donnet Group Chief Executive Officer
Accelerating Generali's strategic | Frédéric de Courtois | Group General Manager |
transformation | ||
Generali | Lucia Silva |
ESG approach | Bruno Servant |
Group Head of Sustainability and Social Responsibility
Head of Group Investment Management Solutions
Break
Investments & Asset Management: | Timothy Ryan |
Delivering in a challenging context | |
Group Chief Investment Officer
and CEO Asset & Wealth Management
Financial strength and resilience | Cristiano Borean | Group Chief Financial Officer |
Closing remarks | Philippe Donnet | Group Chief Executive Officer |
Q&A session |
1
GENERALI 2021
STRATEGY UPDATE
PHILIPPE DONNET
Group Chief Executive Officer
Generali 2021 strategy validated
RESILIENT FINANCIAL
Effectively navigating the COVID-19 crisis by leveraging Generali's core
PERFORMANCEstrengths: clearly defined strategy, focus on technical excellence and
well-diversified business model
PROACTIVE AND | Decisive actions taken to protect shareholder value and better serve |
DECISIVE EXECUTION | customers in line with Generali's Lifetime Partner promise |
GENERALI 2021 | Strategic plan underpinned by a set of core convictions that allow |
CORE CONVICTIONS | |
Generali to capitalize on emerging trends and opportunities | |
REINFORCED |
2021 EARNINGS PER SHARE TARGET CONFIRMED
COMMITTED TO DIVIDEND TARGET
3
Resilient financial performance underpinned by best-in-class, diversified operations
DIVERSIFIED BUSINESS MODEL WITH OPTIMIZED | ESTIMATED P&C COVID-19 CLAIMS EXPOSURE | ||
c. € 100 million | |||
RISK SELECTION MINIMIZES COVID-19 IMPACT | |||
TOP-LINE RESILIENCE MAINTAINED DESPITE | P&C GWP | LIFE NET INFLOWS ON RESERVES | |
+3% YoY (flat like for like) | 3% annualised | ||
MARKET HEADWINDS | |||
CONTINUED DELIVERY OF BEST-IN-CLASS | P&C COMBINED RATIO | LIFE NEW BUSINESS MARGIN | |
89.7% | 4.10% | ||
TECHNICAL PERFORMANCE | |||
ASSET MANAGEMENT STRATEGY DELIVERING | EARNINGS GROWTH | EXTERNAL CUSTOMERS GROWTH | |
+32.8% YoY | 32% of revenues (FY16: 6%) | ||
GREATER REVENUE DIVERSIFICATION | |||
STRONG BALANCE SHEET WITH ROBUST CAPITAL | SOLVENCY II RATIO | NET HOLDING CASH FLOW | |
203% | AHEAD OF PLAN | ||
BUFFERS AND SOLID CASH REMITTANCES |
Results as of September 2020
4
Full commitment to Generali 2021 financial targets
FINANCIAL TARGETS | CURRENT STATUS |
PROFITABLE GROWTH
CAPITAL MANAGEMENT
AND FINANCIAL OPTIMIZATION
INNOVATION AND DIGITAL TRANSFORMATION
6% - 8%
EPS CAGR RANGE1
2018 - 2021
€4.5 - 5.0 billion
CUMULATIVE DIVIDENDS
2019 - 2021
55% - 65%
DIVIDEND PAY-OUT RANGE2
>11.5%
AVERAGE RETURN ON EQUITY3
2019 - 2021
ON TRACK
ON TRACK
SUBJECT TO
REGULATORY ENVIRONMENT
2019 and 2021e ROE >11.5%
X 2020 impact of COVID-19 and one-offs
1. | 3 year CAGR; adjusted for impact of gains and losses related to disposals | |
5 | 2. | Adjusted for impact of gains and losses related to disposals |
3. | Based on IFRS Equity excluding OCI and on total net result |
Decisive actions to successfully deliver Generali 2021 plan
Extensive portfolio review to identify, quantify and mitigate direct business impacts
Effective capital and liquidity management actions to optimize remittances and cash utilization
Accelerated expense reduction plans to protect profitability margins
ALM actions to further de-risk the balance sheet and strengthen resilience against volatile markets
Proactive approach to protect Generali employees while minimizing business disruption
6
Core convictions underpinning Generali 2021 reinforced
CONVICTIONS | CURRENT CONTEXT | STRATEGIC ACTIONS | ||
EUROPEAN MARKETS | ▪ Strong ECB response and framework for fiscal stimulus | REINFORCE LEADERSHIP | ||
REMAIN ATTRACTIVE | ▪ Wave of consolidation and M&A opportunities expected | THANKS TO GENERALI 2021 |
RETAIL AND SMEs
DRIVING PROFITABLE GROWTH
- Greater propensity for household savings
- Increased awareness of insurance needs, notably in areas of Health and Protection
EFFECTIVELY COMBINE INSURANCE LEADERSHIP
INTEGRATED P&C, | ▪ Customers increasingly seeking integrated protection |
LIFE AND ASSET | and savings solutions as interest rates likely to remain |
MANAGEMENT | lower for (even) longer |
WITH GROWING AM PROPOSITION
DISTRIBUTION | ▪ Increasing customer demand for omni-channel solutions, |
ENHANCED BY DIGITAL | blending digital and physical offers |
ACCELERATE PACE OF DIGITAL TRANSFORMATION ACROSS PROPRIETARY AGENT NETWORK
7
Generali's Lifetime Partner ambition underpins strategy
"A LIFETIME PARTNER TO ITS CUSTOMERS, OFFERING INNOVATIVE, PERSONALIZED
SOLUTIONS THANKS TO ITS UNMATCHED DISTRIBUTION NETWORK"
STRATEGIC PRIORITIES & PROGRESS
BEST IN CLASS OFFER USING DIGITAL AND DATA ANALYTICS
SEAMLESSLY CONNECT GENERALI, AGENTS AND CUSTOMERS
STRENGTHEN GENERALI BRAND TO ENSURE 1ST CHOICE IN KEY MARKETS
- New generation of digitally-born products bundled with a range of personalized value added services
- 3.8 million1 customers registered online,
of which 61%1 are active mobile and web hub users - 82%2 of agents are now fully remote and digitally enabled
- Record increase in Relationship Net Promoter Score
- Q3 2020 figures
- HY 2020 figures
8
Generali 2021 driven by empowered people, strong brand and commitment to sustainability
EMPOWERED PEOPLE
- Creating a highly engaged, customer-centric and innovation culture
- Covid-19reinforces need for simple, agile and adaptive organization
STRONG BRAND
- Building a consistent and distinctive brand experience
- Generali's Global Lifetime Partner Brand Campaign launched
SUSTAINABILITY COMMITMENT
- Long-termgrowth by integrating sustainability into business
- Delivering on targets aligned to Charter of Sustainability targets and Climate Strategy
9
Providing immediate support and longer term solutions for all stakeholders
€100M INTERNATIONAL | ▪ Deployed across more than 25 different countries in addition to Business Unit funding |
EXTRAORDINARY FUND | ▪ Generali employees and top management contributed |
- Provided digital tools and protective gear to ensure business continuity
AGENTS & DISTRIBUTORS
- Supported with loans, subsidies and prizes; paying loyalty benefits and claims
- Extended coverage, assistance and policy terms
CLIENTS
- Expanded remote medical consultation and public health information services
- Free life insurance for healthcare workers
COMMUNITIES
- Equipped The Human Safety Net partners to operate virtually
PROMOTING INDUSTRY-WIDE | ▪ Pandemic Risk Pool, a European solution to address the protection gap |
SOLUTIONS | ▪ European Alliance for Green Recovery and supporting ambitious energy transition policies |
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M&A and partnerships accelerate the strategy
STRATEGIC PRIORITY
STATUS UPDATE
CLEARLY DEFINED M&A CRITERIA
- Financial attractiveness
- Strategic fit
- Execution risk
REINFORCE LEADERSHIP IN EUROPE
ADRIATIC SLOVENICA AND CONCORDIA
- #2 player in the Slovenian insurance market
- Consolidated Generali presence in Polish insurance market
SEGURADORAS UNIDAS
- #2 P&C player in the Portuguese insurance market
- Operating performance and synergies ahead of plan
CATTOLICA
- Strategic investment in high quality franchise
- Partnership agreements to deliver incremental value
INTEGRATION COMPLETED
INTEGRATION COMPLETED
STRATEGIC PARTNERSHIP
FULL ACCOUNTABILITY OF DELIVERY
ENHANCE
ASSET MANAGEMENT CAPABILITIES
LUMYNA CARVE-OUT AND SYCOMORE PARTNERSHIP
- Leadership in the Alternative UCITS and ESG areas
KD SKLADI AND UNION-POLAND
- Consolidated Generali presence in Slovenian and Polish markets
COMPLETED
INTEGRATED INTO CEE PLATFORM
INCREASE SERVICE- BASED REVENUES
ADVANCECARE | CONTRIBUTING | |
▪ | Leading healthcare services platform in Portugal | TO BUSINESS |
▪ | Highly profitable capital-light fee business | DIVERSIFICATION |
11
Clear strategic priorities to deliver Generali 2021 and beyond
Maintain disciplined approach to managing cash, capital and redeployment
Deliver strong results in Life and P&C leveraging best-in-class technical expertise
Further enhance multi-boutique asset management strategy
Increase customer preference while increasing digitalization of distribution channels
Relentless focus on expenses above planned 2021 target
EXECUTION UNDERPINNED
BY GENERALI'S LIFETIME PARTNER CUSTOMER AMBITION
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ACCELERATING GENERALI'S STRATEGIC TRANSFORMATION
FRÉDÉRIC DE COURTOIS
Group General Manager
Generali's clearly defined strategic transformation priorities
PROFITABLE GROWTH
CAPITAL MANAGEMENT
AND FINANCIAL OPTIMIZATION
INNOVATION AND DIGITAL TRANSFORMATION
LEADERSHIP | Increasing technical sophistication and expertise generating best-in-class Life and P&C margins |
IN PROFITABILITY | |
STRONG DELIVERY | Growing external customer base expected to deliver 2021 organic profit ambitions one year |
IN ASSET MANAGEMENT | ahead of Plan |
REINFORCING | Generali Lifetime Partner transformation delivering higher customer loyalty and accelerated digital |
STRENGTH OF BRAND | capabilities |
POWERFUL | Leveraging the strengths of Generali's Agent and Direct channels to deliver profitable growth |
DISTRIBUTION MODEL | |
ACCELERATED | |
TRANSFORMATION | Relentless focus on expense reduction delivering additional € 100 million in savings by 2021 |
DRIVING PROFITABILITY | |
CAPITAL AND CASH | Strong and sustainable capital generation resulting in an increase of cash remittance |
DISCIPLINE | to holding |
14
Delivering profitable growth in Life and Pensions by capitalizing on macro trends
Increased customer savings trend, with household savings rate at all time high in the Euro area
Greater customer awareness of protection needs and biometric risks, as well as company's reputation and social commitments Growing demand for life-savings products, with Unit-Linked solutions expected to outperform
Unique opportunity in private pensions, with a growing demand for retirement products
FULLY ALIGNED TO GENERALI'S CORE STRENGTHS
Unmatched proprietary/
exclusive distribution network with integrated advisory capabilities
Best in class technical expertise, evidenced by market-leading technical margins
Comprehensive product proposition including AM solutions with ESG options, biometric riders and focus on seniors
15
Industry first mover in de-risking Savings business
STRATEGIC ACTIONS
CHANGING THE | #1 in Agents channel | #1 in UL AuM | Dominant |
UL Retail NBP ratio | (€ 22.4 billion; | UL GWP ratio | |
BUSINESS MIX | (23% vs market 14%)1 | 36% UL AuM ratio vs 11% market)2 | (53% compared |
to market 35%)1 |
MOVING AHEAD
Generali France reducing general account business and developing new Euro croissance offering (with 80% guarantee)
RESHAPING GUARANTEES
1st mover to maturity | 1st mover among peers - |
guarantees | main products with guarantee |
linked only to small part (less | |
than 35%) of premiums | |
(Exclusive channel). | |
Overall average German Savings | |
New Business guarantee at 0.11%1 |
1st mover to
negative guarantee
Leadership in
crediting
rate management
Generali Italy to further reshape portfolio by moving to whole life investment products with death guarantee only and hybrid solutions
PROACTIVE | Portfolio duration lengthening to mitigate interest rate risk |
(from 8.4 to 9.9 years)3 and improved risk-adjusted asset allocation | |
ALM STRATEGY | |
to sustain portfolio yields | |
TARGETED | Landmark Generali Leben sale (€ 37 billion traditional reserves) |
IN-FORCE DISPOSALS | Exit from high guaranteed businesses in Belgium and Netherlands |
Greater investments into real assets with further geographical diversification and full ESG integration
Further significant in-force actions being evaluated
1. | HY 2020 figures | |
16 | 2. | FY 2019 figures |
3. | FY 2016 vs HY 2020 figures |
Attractive and predictable P&C cash flows
2015-2019 P&C COMBINED RATIO & 1H 2020 TREND
Avg. Combined Ratio | Avg. Ex-Generali | |||||||||||||||||||
104% | ||||||||||||||||||||
103% | Strong competences in risk selection, | |||||||||||||||||||
102% | ||||||||||||||||||||
101% | prudent reinsurance and technical | |||||||||||||||||||
100% | ||||||||||||||||||||
99% | Peer 4 | excellence programs leveraging | ||||||||||||||||||
98% | data analytics | |||||||||||||||||||
97% | Peer 1 | Avg. | ||||||||||||||||||
96% | Peer 3 | Ex-Generali | ||||||||||||||||||
95% | Peer 2 | |||||||||||||||||||
Resilience of Generali P&C business | ||||||||||||||||||||
94% | ||||||||||||||||||||
93% | Generali | underpinned by limited exposure | ||||||||||||||||||
92% | to large accounts and diversified | |||||||||||||||||||
91% | ||||||||||||||||||||
high-quality portfolio structure | ||||||||||||||||||||
90% | ||||||||||||||||||||
89% | Generali 1H2020 | |||||||||||||||||||
88% | ||||||||||||||||||||
0.0% | 0.1% | 0.2% | 0.3% | 0.4% | 0.5% | 0.6% | 0.7% | 0.8% | 0.9% | 1.0% | 1.1% | 2.5% | 2.6% | 2.7% | ||||||
Standard Deviation | ||||||||||||||||||||
Size denotes P&C YE 2019 GWP | Trajectory denotes P&C 1H 2020 CoR | |||||||||||||||||||
Source: Company disclosure. Note: Large-Cap European peers include AXA, Allianz, Zurich and Aviva |
17
Asset Management is growing revenues with strong margins that provides sustainable cash flows with low capital absorption
SUSTAINABLE PROFITS
BEST IN CLASS MARGINS AND GROWING REVENUES | 54% |
OPERATING MARGIN1 |
GROWING | 2020 TOTAL CASH CONTRIBUTION | 93% |
CASH MACHINE | > € 250 million | PAYOUT RATIO IN 20202 |
CAPITAL LIGHT | LOW CAPITAL ABSORPTION | 2.6 BPS |
BUSINESS | Required capital: c. € 140 million2 | REQUIRED CAPITAL ON AUM1 |
- 9M 2020 figures
- Calculated on 2019 net profit (after minorities)
18
Customer and distributor experience excellence resulting in higher customer loyalty
LIFETIME PARTNER HALLMARKS DRIVE SUPERIOR RELATIONSHIP WITH CUSTOMERS
CUSTOMER | DISTRIBUTOR |
HUMAN & | SIMPLE | DIFFERENTIATING | SEAMLESS | DIGITAL | MANAGEMENT | NEEDS' - BASED | PAPERLESS |
CARING | LANGUAGE | VALUE | OMNICHANNEL | VISIBILITY | OF GENERATED | ADVISORY | |
EXPERIENCE | PROPOSITIONS | EXPERIENCE | LEADS |
ON A JOURNEY TO BEST-IN-CLASS RELATIONSHIP NPS BY 2021
Generali is increasing Relationship NPS¹ faster than international peers with a growth of +7 points in Q3 2020 compared to Q1 2019
COMMITTED TO FURTHER IMPROVE CUSTOMER RETENTION
Generali is improving its customer retention with a growth of +2.7 p.p. in Q3 2020 compared to 2018
1. Perimeter: Generali units in Europe, Asia, Argentina and Turkey.
The baseline was set at the Q1 2019 at the beginning of the Strategic Plan
19
Jeniot IoT proprietary platform enabling integrated services solutions
Since 2018 Jeniot has developed innovative services for urban mobility, intelligent homes, health and connected workplace
Jeniot provides services leveraging on a proprietary IoT platform which enables increase of fee-based revenue streams
SMART HOME
MOBILITY DEVICES | SMART PET |
& SERVICES |
BABY | WORKER |
CARE | SAFETY |
SANITIZATION | |
AIR HEALTH | & THEFT |
MONITORING | PROTECTION |
1.5 M+ MANAGED DEVICES
- 55 M+ ANNUALREVENUES
1 PB+ | DATA |
MANAGED | |
10 BN+ | ANNUAL KM |
REGISTERED |
6 COUNTRIES SERVED
20
Proprietary network relationships powered by cutting-edge digital tools
DIGITALLY-ENABLED PHYSICAL DISTRIBUTION MODELS
GENERALI GROUP CAPABILITIES
CUSTOMER
MOBILE
& WEB HUB
START | 4 | |||
Lifetime | ||||
2 | 7 | Partner | ||
Continuous | ||||
1 | Get in | Bond by human/ | engagement | 5 |
Touch/ | functional Lock-in | |||
Discover | Caring/ assistance | |||
Buy | ||||
BEFORE | SERVICE | AFTER |
SERVICE | EXPERIENCE | SERVICE |
8 | ||
Ask for | ||
advice | ||
9 | 6 | |
Look Generali | 3 | New |
Offer | needs | |
Use of Generali | ||
services |
PUBLIC
WEBSITEAGENT
HUB
AGENT HUB | INNOVATION IN INSURANCE | |||
AWARDS 2020 | ||||
1 | 2 | 3 | 4 | 5 |
RECRUITING | DIGITAL | PRE-SALES | SALES | POST-SALES |
& ONBOARDING | VISIBILITY | |||
& LEADS | ||||
Customer | Customer | Task | Performance | Campaigns |
profile | search | management | dashboard | |
BUSINESS UNITS
ACTORS | CHANNELS | |||
AGENT | GENERALI | AGENT'S APP | ||
ILLUSTRATIVE
21
Leveraging the strengths of Generali's Agent and Direct channels
AGENT CHANNEL1 | DIRECT CHANNEL | |
(GDWP Life and P&C, Europe2, € million) | (GDWP Life and P&C, Europe2, € million) |
1.7% | |
16,993 | 17,247 |
HY19 | HY20 |
Italy's agent channel positive performance
(+2.6% in Life business at HY 2020)3
Germany exclusive channel resilient performance
(+2.0% in Life business at HY20)
France's agent channel growing above 3.0% both in Life and P&C
2.0% | |
2,404 | 2,448 |
HY19HY20
Italy's Genertel excellent growth of +18.9%
Germany's CosmosDirekt +21.9%, outpacing Life market
ACEER direct operations growing by +12.5%4 in Non-Life, led by Poland and Hungary
1. | Includes Agents, Employed salesforce and DVAG network | |
2. | Includes Italy (excluding Cometa fund impact), Germany, France and ACEER; variation on a like for like basis | |
22 | 3. | Excluding Cometa fund impact |
4. | At constant exchange rate |
Accelerated business transformation to drive further profitability
NEW EXPENSE REDUCTION TARGET (Insurance Europe, € million)
300
55 | 100 | ||||||
200 | 45 | ||||||
+50% | 200 |
VS GENERALI 2021 TARGET | |
Generali 2021 expense reduction target | New ways of working | External services | New 2021 expense reduction target |
optimization | |||
€ 200 million | In 2021 Generali will fully consolidate new ways | ||
secured by disciplined execution | of working and further optimize external services delivering |
of savings & transformation initiatives | € 300 million expense reduction | |
€ 1 billion | ||
vs. 2018 baseline expenses | ||
strategic investments confirmed | ||
23
Cash redeployed to deliver profitable growth and attractive shareholder returns
DEBT REDUCTION
€ 1.5-2.0 billion
ALREADY
DELIVERED
DIVIDENDS | > € 10 bn |
- 4.5-5.0 billion
AHEAD | ||
ON TRACK | ||
OF PLAN | ||
SUBJECT TO | ||
REGULATORY ENVIRONMENT | CAPITAL REDEPLOYMENT |
€ 3.0-4.0 billion
ON TRACK
UP TO € 2.5 BILLION LEFT
24
Accelerating delivery of Generali's strategy and transformation journey
Operating resilience underpinned by Generali's retail focused business model, leadership in technical profitability and digitally enabled propriety distribution capabilities
Generali 2021 strategy validated and reaffirmed; even more relevant in current market context
Well-positioned to capture the benefit from digitalization and new ways of working
EXECUTION UNDERPINNED
BY GENERALI'S LIFETIME PARTNER CUSTOMER AMBITION
25
GENERALI ESG APPROACH
LUCIA SILVA
Group Head of Sustainability and Social Responsibility
BRUNO SERVANT
Head of Group Investment Management Solutions
Creating long-term value with a clear pathway to sustainable business transformation
A CLEAR TRANSFORMATION | Generali has a clear purpose and a defined sustainability ambition, built on strong foundations |
PATHWAY | |
FULLY INTEGRATED | Our Sustainability strategy is firmly embedded into our governance structure and driven by clear |
AT ALL LEVELS | objectives and responsibilities |
DEFINED STRATEGY | We are committed to meeting sustainability targets, driving engagement through flagship projects |
and ensuring we deliver on our promises when it comes to climate change and supporting | |
& GOALS | |
the green economy | |
REAL PROGRESS | Generali is making good progress across all key strategic areas and is playing an active role |
TO DATE | in creating an effective Responsible Consumer ecosystem |
CLEAR COMMITMENT ON | We are a responsible investor and have established a strong framework to fully integrate |
SUSTAINABLE INVESTMENT | sustainability into long-term investment strategies |
27
The path to Generali's sustainable business transformation
OUR | To enable people to shape a safer future |
PURPOSE | by caring for their lives and dreams |
OUR | Pursuing long-term growth, integrating |
SUSTAINABILITY | sustainability into our core business and acting |
AMBITION | as Lifetime Partner to our stakeholders |
Integrated | Control functions | ||
governance driving | |||
looking at ESG | |||
sustainability | |||
OUR | |||
Remuneration | |||
SUSTAINABILITY | Integrated | ||
incentivizing | |||
FOUNDATIONS | reporting | ||
ESG targets | |||
Engagement with our stakeholders
PROUD OF OUR
SUSTAINABLE
BUSINESS
INNOVATIONS
- Climate Change Strategy to promote a Just Transition1
- First European insurer to issue a Green bond and create a framework for Green Insurance-Linked Securities
- Champion Diversity and Inclusion focusing on gender, generations, culture and inclusion
-
A global initiative to extend Generali's purpose to the most vulnerable
in our communities
PART OF POWERFUL SUSTAINABILITY PLATFORMS
GREENRECOVERY
REBOOT & REBOOST our economics for a
sustainable future
- EU Alliance for a Green Recovery
RECOGNIZED AS A SUSTAINABLE PLAYER BY KEY INDICES AND OUR OWN PEOPLE
81% of our people see Generali as a
sustainable company
1. A transition towards a low-carbon economy which integrates the social dimension
28
Integrated governance driving sustainability at all organizational levels
BOARD
TOP
MANAGEMENT
BODIES | KEY CHARACTERISTICS | |||
▪ | 61.5% independent board members | |||
BOARD OF DIRECTORS | ▪ | 38.5% female representation | ||
▪ | Chair: Non-ExecutiveNon-CEO | |||
CORPORATE GOVERNANCE | ▪ Chaired by the Chairman of the Generali Board of Directors | |||
SOCIAL & ENVIRONMENTAL | ▪ Advisory, recommendatory and preparatory role for the Board of Directors | |||
SUSTAINABILITY COMMITTEE | ▪ | 5 non-executive members | ||
▪ Sponsored by Group CEO | ||||
SUSTAINABILITY | ▪ | Drives the strategic integration of sustainability | ||
COMMITTEE
▪ 13 executive members including heads of Group functions and country CEOs
OPERATIONAL
LEVEL
RESPONSIBLE INVESTMENT COMMITTEE
GROUP ENGAGEMENT COMMITTEE
INTEGRATED REPORTING LAB
RESPONSIBLE BUSINESS LAB
- Specific committees and working groups with cross-functional composition and expertise
- In charge of delivering the strategic view of Sustainability
- Providing technical input to ensure appropriate implementation of the strategy
GENERALI IS INTEGRATING STRATEGIC SUSTAINABILITY OBJECTIVES
INTO TOP MANAGEMENT REMUNERATION SCHEMES
29
A clear sustainability strategy and defined goals
1. GENERALI 2021
New 2021 strategy goals aligned with the Charter of Sustainability Commitments:
▪ Sustainability KPIs: | ▪ Flagship projects : |
− + € 4.5 billion in new green and sustainable investments | − Responsible Consumer to create distinctive and customized product offering |
− 7- 9% GWP growth in Green and Social Products | for responsible consumers |
− EnterPRIZE to award the best sustainable SMEs | |
− The Human Safety Net expand Generali global community support initiative | |
in and beyond existing 18 countries |
2. CLIMATE STRATEGY
Positioning on carbon intensive business | Supporting the "green" economy | Reducing direct impacts | ||
▪ Underwriting: not insuring any new coal and tar sands- | ▪ Underwriting: | ▪ Reduce our greenhouse gas emissions by 20% by 2020 | ||
related customer; no increase of minimal insurance | - Increase green offering for retail and SMEs market | (base year 2013) | ||
exposure to coal-related activities (0.1% of P&C GWP) | ||||
▪ Increase purchases of green power | ||||
▪ Investments: no new investment in coal and tar sands- | - Community of Experts for underwriting risks of the | |||
renewable energy sector | ||||
related issuers; gradual divestment of € 2 billion exposure | ||||
to coal-related issuers | ▪ Investments: € 4.5 billion in new green and sustainable | |||
▪ Engagement to support transition to a low carbon | investments | |||
economy | Green innovation in our financial management |
Issuing of two green bonds and definition of a framework for green Insurance Linked Securities
Managing climate-relatedrisk: definition of a framework for climate change risks management
Transparency and reporting: disclosure on how we manage climate-related risks and opportunities
30
Sustainability integration brings tangible progress in all areas
1,414 AGMs
About € 35 billion
attended in 2019
80%
- 4 billion
investments with dedicated ESG mandates
90% of employees in remote working
32%
reskilled employees as of 1H 2020
82%
Engagement Index in 2019
of direct listed investment covered by ESG analysis
77%
D&I Index in 2019
46 | active in 22 countries |
partners collaborating | |
as of 1H 2020 | as of 1H 2020 |
of new green and sustainable investments as of 1H 2020
-20%
in GHG emissions in 2019 vs 2013
Giving visibility to sustainable SMEs
- 15.3 billion
GWP from green and social products in 2019
+7 Relationship NPS1
as at Q3 2020
Decarbonization of the P&C underwriting portfolio
99%
purchased green power in 2019
1. Delta vs Q1 2019 baseline
31
Becoming a Lifetime partner for Responsible Consumers
THE RESPONSIBLE
CONSUMER ECOSYSTEM
GREEN | RESPONSIBLE | |
0.7% | 0.3% | CONSUMER |
SOCIAL
78.7% | 2.3% |
Pollution
39.2%
Risk reduction
- 1.4 billion
Other | Products aimed | ||||
SUSTAINABLE | GREEN | ||||
at targeted | |||||
INVESTMENT | & SOCIAL | ||||
clients/ | |||||
SOLUTIONS | PRODUCTS | ||||
58.2% | events | ||||
Mobility | 2019 | ||||
- 13.9 billion
Products promoting responsible behaviour
€ 15.3 billion | 19.0% | ||
0.1% | 1.5% | GWP green and social products | Health |
products providing | |||
Efficiency | Renewable energy | payout or services | |
Agence Bas | |||
Carbone |
32
Clear commitments taken on Investments
OUR CONVICTION ON RESPONSIBLE INVESTMENTS (RI)
Proactive integration of Environmental, Social and Governance (ESG) factors into the investment process, across all asset classes, will support the Group to achieve
both long-term financial returns and social good,
while reinforcing our risk management approach
INITIATIVES ON RESPONSIBLE INVESTMENTS SUPPORTED
2011 | UN Principles for Responsible Investing | |
2018 | G7 Investor Leadership Network | |
2020 | UN-convened Net Zero Asset Owner Alliance |
IMPLEMENTATION THROUGH A MIX OF RI APPROACHES / STRATEGIES
33
Strong framework for Sustainable Investing
Strong commitment on Sustainability in creating long-term for stakeholders
As Asset Owner (with delegated Asset Management) investments play a key role in implementing such commitment
ASSET OWNER
Group insurance companies
Integrating Sustainability
into long-term /liability-driven
investment strategy:
Enhancing long-term performance
Managing Sustainability Risk/Opportunity
ASSET MANAGEMENT
Generali
Global
Infrastructure
Generali Investments Partners | Generali Insurance Asset Management | Generali Investments CEE |
(under Solvency 2 framework) | INSURANCE ASSETS | THIRD PARTY CLIENTS | ||
Implementing Group specific policies | Offering valuable Sustainable | |||
on Responsible investments | solutions / products to clients | |||
PORTFOLIO KEY FEATURES
DEDICATED RESOURCES
▪ | General Account | All asset classes: ▪ | Traditional liquid (Equity, Credit, Sovereign) | ▪ | Direct investments (including Mandates and Funds reserved) | |
▪ | Own / shared risk | ▪ | Real Assets (RE, PD, PE) | ▪ | Indirect investment (Third Party Asset Managers & Funds) | |
More than 50 ESG-dedicatedpeople to Responsible Investments including ESG analysts, voting and engagement specialists, dedicated SRI portfolio managers and actively involved in communication with markets, identified key reference persons among portfolio managers and credit analyst teams
34
Comprehensive ESG coverage of our investments
Weight of ESG
ACTIVE OWNERSHIP
in Investment | ▪ Encouraging ESG practices in investee companies | |
decisions | ▪ | Voting at AGM (1,414 meetings attended and 18,472 resolutions in 2019) |
▪ | Dialogue with investee companies on ESG topics |
IMPACT & THEMATIC INVESTMENT
- € 4.5 billion new Green & Sustainable and Infrastructure Investments by 2021: already achieved € 4 billion of target ahead of schedule
- € 1 billion sustainable investments - Covid-19 EU Recovery Plan (June 2020)
ESG INTEGRATION
- ESG criteria for selecting direct investment in liquid Corporates and Sovereigns:
- 80% of investments covered by ESG analysis
- € 35 billion of dedicated ESG mandates
- New Real Estate Guidelines embedding Sustainability
- Infrastructure debt investments covered by ESG assessment and contribution to UN SDGs (€ 1 billion)
- Selection of new 3rd party AuM based on ESG screening criteria
EXCLUSION POLICIES
- Cover direct listed investments
- Unethical Behaviors and breach of UN Global Compact
- Controversial business sectors (unconventional weapons)
- Risky activities for the environment (coal, tar sands)
35
Direct investments: c. € 300 billion AuM as of June 2020 (c. %80 General account investments)
Indirect investments (Funds): Selection of new funds aligned with Group's ESG convictions
Value creation through a clear Sustainability Strategy
SUSTAINABILITY | A clear strategy allows us to capitalise on the growing number |
LEADERSHIP | of sustainability related opportunities |
DISCIPLINED FOCUS | This approach supports our value creation for shareholders |
ON VALUE CREATION | and all stakeholders, in line with our Lifetime Partner commitment |
LONG TERM VIEW | Sustainability is key to ensuring Generali's success now and in the future |
36
INVESTMENTS & ASSET MANAGEMENT: DELIVERING IN A CHALLENGING CONTEXT
TIMOTHY RYAN
Group Chief Investment Officer and CEO Asset & Wealth Management
Investments, Asset & Wealth Management Business Unit highlights
INSURANCE | WEALTH MANAGEMENT | ||||
INVESTMENTS | ASSET MANAGEMENT | BANCA GENERALI | |||
▪ | Maintaining good spread on | ▪ Confirming targets for 2021 | ▪ Record level of assets | ||
assets yields vs liability costs | ▪ Strong development of external | ▪ Robust net inflows, also in 2020, | |||
▪ | Steady development of Real | customers business | with high quality mix | ||
Assets investments | |||||
▪ | Leveraging the 2020 context to | ▪ Strong discipline on costs | ▪ Growing revenues despite | ||
▪ Attractive return on investments | financial market and context | ||||
accelerate strategic initiatives | |||||
on boutiques | ▪ Solid capital position |
- Strong contribution from multi- boutique to over-performances
- Leveraging fully ESG integration
38
New investment framework delivers greater flexibility while preserving risk discipline
DECEMBER 2016 ASSET PORTFOLIO¹ | HY 2020 ASSET PORTFOLIO¹ | |
Total AUM: € 406 billion | Total AUM: € 404 billion | |
Cash &
Others
Real Assets
3.7%
Equity 7.5%
3.6%
42.4%
Corporate Bonds & Other Fixed Income²
Government Bonds
42.9%
Cash &
Others Government
Bonds
Real Assets | 6.3% |
10.1% | 44.3% |
Equity | |
4.1% |
35.3%
Corporate Bonds
& Other Fixed Income²
- A transformed investment framework based on:
- Capital efficiency
- Risk adjusted returns
- Stochastic modeling
- Expected credit losses budget framework implemented
- Concentration limits on illiquid assets set based on:
- Forward-lookingcompany liquidity ratios
- Liquidity haircuts applicable to different instruments
- Sum of General Accounts Investments book values and fair value of Real Estate assets including self-use and inventories
- Including mortgage loans, policy loans, time deposits other than cash equivalents, indirect investments in Fixed Income
39
Tangible results delivered with enhanced yields and improved asset-liability duration
ATTRACTIVE SPREAD ON LIFE GUARANTEES BOOK
ACTIVE MANAGEMENT
OF NEW BUSINESS PROFITABILITY
SPREAD ABOVE | SPREAD ABOVE | ||
AVG. IN-FORCE GUARANTEE | AVG. NEW BUSINESS GUARANTEE | ||
BPS | BPS | ||
157 | 186 | 158 | 195 |
20171201920172019
LIFE | P&C |
Years | Years |
DISCIPLINED ALM MANAGEMENT | +1.5 | +0.5 | |||||
UNDERPINNED BY LENGTHENING OF ASSET | 9.9 | 5.9 | |||||
DURATION | 8.4 | 5.4 | |||||
2016 | 1H 20 | 2016 | 1H 20 |
IMPROVED ASSET ALLOCATION THROUGH HIGHER EXPOSURE TO REAL ASSETS
REAL ASSET SHARE | REAL ASSET EXPOSURE | ||||||
% AUM | € billion | ||||||
+10.4 | |||||||
+2.6 | |||||||
10.1 | 30 | 41 | |||||
7.5 | |||||||
2016 | 1H 20 | 2016 | 1H 20 |
GENERALI'S DISCIPLINED INVESTMENT APPROACH CREATING VALUE FOR ITS CUSTOMERS
1. The 2017 figure does not reflect the methodological refinement applied in 2019
40
Improved investment resilience throughout YTD 2020
LOWER RATING DOWNGRADES VS THE MARKET AND DE-RISKING OF EQUITY PORTFOLIO
PUBLIC CREDIT DOWNGRADES
(Generali portfolio vs European Index1, from investment to non-investment grade)
GENERALI | INDEX1 | ||
Generali AuM: € 130 billion | |||
15% | |||
0.9% | 2.3% |
NOMINAL EQUITY EXPOSURE
(€ billion, net sales on direct equities and funds)
Q2 2020 | Q3 2020 |
-1.3
-3.1
- € 4.4 billion sold representing 31% of initial portfolio
A GEOGRAPHICAL DIVERSIFIED REAL ESTATE PORTFOLIO FOCUSED ON PRIME LOCATION AND TENANTS
Long term strategy focused on core European cities and assets
- c. 70% of the portfolio in prime European locations
- c. € 1.3 billion sales of non core assets in 2017-2019
Reinforced relationships with c. 1,700 tenants during CoViD crisis
- One off impact of -3% on passing rent from review of contractual agreements
YIELDS | 3.2% | 5.0% | |
ANNUALIZED | on market value | on book value | |
CHANGE | 2018 | 2019 | 2020 |
OF VALUE | +3.3% | +5.5% | +/- 0% |
MARKET VALUE | 2018 | 2019 | Sept 2020 |
(€ billion) | 26.5 | 29.2 | 29.7 |
1. Reference period: 29 February - 2 October 2020. Perimeter of the analysis: General Account including funds,
excluding covered bonds and unit-linked. Reference index: BofA/ICE EUR
41
Private Equity: a well diversified portfolio, with growing commitments to capture market opportunities
OVERVIEW¹
(€ billion)
13.6
6.3 | |||
Commitment | NAV² | ||
PERFORMANCES | |||
CUMULATED DIVIDENDS³ | TOTAL VALUE PAID IN³ | ||
2017-2020 | |||
€ 757 million | 1.37 X |
COMMITMENT BY VINTAGE
(€ billion)
Secondary | ||||||
3.00 | 2.50 | 2.85 | 2.85 | Primary | ||
2.18 | ||||||
1.32 | 1.35 | |||||
0.89 | ||||||
1.53 | 1.50 | 1.28 | 0.24 | |||
1994 | 2013 | 2017 | 2018 | 2019 | 9M 2020 | |
2012 | 2016 |
BREAKDOWN BY GEOGRAPHY
24% Asia
U.S.A. 41%
35% Europe
1. | Data as of 9M 2020 | |
2. | Net Asset Value - net of expected future performance fees | |
3. | Paid to Generali Insurance companies | |
42 | 4. | Calculated as ratio of distributed capital and NAV over funded capital |
Translating market challenges into opportunities
GLOBAL MARKETS CONTEXT | GENERALI PRIORITIES GOING FORWARD | |
▪ Lower for longer interest rates
▪ Increase investments in Real Assets
▪ Tighter credit spreads
▪ Accelerate geographical diversification
▪ Increased desynchronization of Equity markets
▪ Leverage ESG / SRI in all asset classes
▪ Real Estate with multiple challenges
▪ Use innovation to enhance the value chain
and opportunities
▪ Further use capabilities in alpha-strategies
▪ Growing needs to finance real economies
▪ Restructuring on in-force and new business
43
Increase Real Assets by € 15 billion in the next three years
INCREASE SHARE OF REAL ASSETS | |||||||
OF THE WHOLE PORTFOLIO… | …BY ALLOCATING 20% OF FUTURE CASH FLOWS | ||||||
Today | 2023 Ambition | ||||||
20% | |||||||
10% | 13% |
- € 15 billion
90% | 87% | 80% | ||
Real Assets Investments / Private Assets | Public assets | |||
PLANNED KEY ACTIONS
- Expand Real Estate in terms of location (U.K., U.S.A. and Asia) as well as sectors, including residential and debt
- Leverage boutiques' specialized expertise in key areas such as Infrastructure Debt and Equity, Private Credit and Private Equity
44
Mitigating low interest rates impact by leveraging on proven real assets, alpha strategies and ESG excess returns
PRIVATE
EQUITY
LIQUID α
STRATEGIES
ESG STRATEGIES
ASSET MANAGERS
Happy @ Work
Sélection Responsable
SRI European Equity
SRI Ageing Population
RETURNS
∆ RETURN vs EQUITY
+ 3.3%¹
1-Y PERFORMANCE vs BENCHMARK³
+ 8.6%
1-Y PERFORMANCE vs BENCHMARK³
+ 7.6%
VALUE OF EXCESS RETURN²
+ € 210 million
+ € 250 million
+ € 55 million
LEVERAGING OUR ASSET MANAGEMENT BOUTIQUES EXPERTISE TO BETTER SERVE CLIENTS
1. | Public Market Equivalent multiple using the Morgan Stanley World Index - as of September 2020 | |
45 | 2. | On General Account Investments, For policyholders and shareholders, before taxes |
3. | Data as of 23rd October 2020, source Morningstar |
Significant growth of Asset Management since strategy launch in May 2017
SIGNIFICANT GROWTH OF REVENUES…
(€ million) | ||||
>910 | ||||
>230 | ||||
103 | ||||
482 | 91 | |||
Revenues | Realignment | M&A | Organic | Forecast |
FY 2016 | of Group | 1st year impact | Growth | revenues |
General | 2020 | |||
Accounts | ||||
fees |
…AND PROFITS¹
(€ million)
Revenues | 10 bps | 17 bps |
/ AuM | ||
>350 |
115
FY 2016 | Forecast 2020 |
1. Net result after taxes, before minorities
46
Asset Management strategy is delivering for our clients
BROADER INVESTMENT STRATEGIES OFFERING
ADDITIONAL INVESTMENT STRATEGIES From 5 to 10 (+5) in Fixed Income
From 7 to 12 (+5) in Equity / Multi Assets From 2 to 19 (+17) in Real Assets and others
ACTIVE MANAGEMENT FUNDS | MORNINGSTAR | PERFOMANCE |
POSTING STRONG PERFORMANCES | PERFORMANCE¹ | vs BENCHMARK² |
(1 YEAR PERFORMANCE) | 67% Top quartiles | 80% higher |
HIGHER ASSET MANAGEMENT | #11 OUT OF 40 IN 2020 |
"Ranking of preferred Asset Management Firms | |
BRAND RECOGNITION | |
by European fund selectors" 3 | |
SIGNIFICANT GROWTH OF EXTERNAL | NET REVENUES |
CUSTOMERS SHARE | From 6% (FY 2016) to 32% (9M 2020) |
Source: Generali, Morningstar. Data as of October 2020 | ||
1. | Percentage of AUM (scope: assets for which a comparison with the respective Morningstar category is available - AUM: € 34.3 billion) | |
47 | 2. | Percentage of AUM (scope: assets for which a comparison with the respective benchmark is available - AUM: € 27.4 billion) |
3. | Source: Cerulli Associates, 2020 |
New smart-ups boutiques are already providing positive returns
PARTNER CONTRIBUTIONS
- Skilled investment team with strong track record
- Entrepreneurial mindset
- Alignment with clients
- Attractive performances
GENERALI GROUP CONTRIBUTION
- Strategic capital and support in product structuring
- Cost benefits from Generali economies of scale
- Generali network and global distribution capabilities to reach external clients
- Control functions framework and oversight
Generali Global Infrastructure | |||||
LAUNCH DATE | December 2017 | September 2018 | December 2018 | ||
BREAK-EVEN YEAR | 2020 | 2020 | 2020 | ||
ROI (ON 2020 EARNINGS) | 11% | 16% | 13% |
48
Newly acquired boutiques such as Lumyna driving external client growth
LUMYNA - ASSETS UNDER MANAGEMENT EXTERNAL CLIENTS
($ billion)
16.5
MARKET RECOGNITION
Established market leader in Liquid | |
#1 | Alternatives |
▪ Partners with Best-in-Classthird-party |
asset managers to offer innovative alternative investment strategies in public and private markets
7.4 | "Best UCITS platform" at the | |
HFM European Services Awards 2020 | ||
▪ Winner 8 years in a row | ||
"Best Alternative UCITS Distribution | ||
Platform" in the HFR European | ||
Performance Awards 2020 | ||
December 2016 | October 2020 |
23% RETURN ON INVESTED CAPITAL FOR LUMYNA
49
Maintaining a competitive edge on margins thanks to efficiency levers
OPERATING MARGIN¹
GENERALI VS PEERS²
% FY 2019 Data
52.0% | ||
30.5% | 29.0% | |
Generali | Multi-Boutique | Insurance |
Asset Managers | Asset Managers |
KEY LEVERS ON ASSET
MANAGEMENT EFFICIENCY
- Economies of scale
- Tight cost control - Zero Based techniques
- Centralized procurement
- Near-shoringof Middle & Back-office in Generali CEE
- Access to Generali Insurance distribution networks
- Operating margin calculated as 1-cost income
- Source: Companies' annual reports. Insurance Asset Managers median of four peers; Multi-Boutique Asset Managers: median of six peers
50
Relentless focus on control and fiduciary duties
GOVERNANCE | ▪ Generali has a majority representation on all Boutique board of directors |
▪ Highly experience board members with an average 26 years' industry experience | |
RISK | ▪ Adoption and implementation of Generali Risk policies at all Boutiques |
▪ Appointment of a Chief Risk Officer reporting to local board of directors and Group Risk Officer at all Boutiques | |
COMPLIANCE | ▪ Adoption and implementation of Generali Compliance and Risk Assessment Policies at all Boutiques |
▪ Appointment of a Compliance Officer reporting to local board of directors and Group Compliance at all Boutiques | |
AUDIT | ▪ Adoption and implementation of Generali Group Audit policy at all Boutiques |
▪ Systematic Audit performed by Group Investments Audit team, reporting to Board of Directors | |
▪ Adoption and implementation of Generali financial policies at all Boutiques, ensuring a common | |
FINANCE | framework for monthly and quarterly reporting |
▪ Appointment of Local CFOs, with dotted line to Business Unit CFO |
51
Confirming all our targets for 2021
FY17 | Forecast | Target | |||
2020 | 2021 | ||||
KPIs | |||||
Net Result A.M. Global (€ million) | 189 | 350 | 4001 | ||
Global | |||||
External Client Revenues | 32% | ||||
Asset | 6% | 35% | |||
(% of operating revenues) | |||||
Management | |||||
Operating Margin (%)2 | 46% | 52% | |
Asset | Net Result A.M. Europe (€ million) | >310 | |
Management | 152 | ||
(announced in May 2017) | |||
Europe |
> 45%
Target 2020
300
- Including € 50 million from M&A
- Calculated as 1-cost income
52
FINANCIAL STRENGTH
AND RESILIENCE
CRISTIANO BOREAN
Group Chief Financial Officer
Operational, capital and liquidity strength underpin delivery of Generali 2021 plan
FULL COMMITMENT TO GENERALI 2021 FINANCIAL TARGETS EVEN IN A CHALLENGING CONTEXT
Increased contribution from additional expense reduction and debt optimization
COMMITMENT TO TECHNICAL EXCELLENCE REAFFIRMED AND ACCELERATED PRODUCT REBALANCING
Resilient Life margins and unmatched combined ratio track record
OUTPERFORMANCE VS. DEBT OPTIMIZATION TARGETS, WITH FURTHER POTENTIAL OPPORTUNITIES
- 200 million reduction in gross interest expense and € 1.9 billion deleverage
STRONG AND RESILIENT CAPITAL POSITION
Robust Solvency II at Group and major BUs, even in further stress scenarios
SUCCESSFUL IMPLEMENTATION OF CASH & CAPITAL MANAGEMENT FRAMEWORK
Ahead of Generali 2021 plan on Net Holding Cash Flow
54
Full commitment to Generali 2021 financial targets
FINANCIAL TARGETS | CURRENT STATUS |
PROFITABLE GROWTH
CAPITAL MANAGEMENT
AND FINANCIAL OPTIMIZATION
INNOVATION AND DIGITAL TRANSFORMATION
6% - 8%
EPS CAGR RANGE1
2018 - 2021
€4.5 - 5.0 billion
CUMULATIVE DIVIDENDS
2019 - 2021
55% - 65%
DIVIDEND PAY-OUT RANGE2
>11.5%
AVERAGE RETURN ON EQUITY3
2019 - 2021
ON TRACK
ON TRACK
SUBJECT TO
REGULATORY ENVIRONMENT
2019 and 2021e ROE >11.5%
X 2020 impact of COVID-19 and one-offs
1. | 3 year CAGR; adjusted for impact of gains and losses related to disposals | |
55 | 2. | Adjusted for impact of gains and losses related to disposals |
3. | Based on IFRS Equity excluding OCI and on total net result |
Delivery of EPS growth underpinned by increased contribution from expense reduction and debt optimization
COMPONENTS OF EARNINGS PER SHARE GROWTH
2018-2021 CAGR1 | PROFITABLE | CAPITAL MANAGEMENT | INNOVATION AND |
GROWTH | AND FINANCIAL OPTIMIZATION | DIGITAL TRANSFORMATION |
ca. 2% | 6-8% | |||||
Investor | ca. 2% | ca. 1% | >6% | |||
Day 2018 | ||||||
ca. 2% | ca. 1% | |||||
Growth | Efficiency | Investments, Asset | Active debt | Total before | Capital | Total |
and profitability | and Wealth Management | management | capital | redeployment | ||
redeployment | ||||||
Update | = | = | ON TRACK | |||
vs Investor | ||||||
Day 2018 |
▪ Strong delivery in P&C | ▪ Increased expense | ▪ On track to deliver on | ▪ Savings of gross | ▪ 4-5%2018-2021 | ▪ Selective and | ||
with best-in-class | reduction target | Global asset and | interest expense | CAGR1 | disciplined approach | ||
underwriting and | by € 100 million | wealth management | of € 200 million | to capital | |||
limited COVID-19 | to € 300 million with | strategy | (vs target of € 70-140 | redeployment | |||
impacts | further cost actions | million) | ▪ Up to € 2.5 billion | ||||
and new ways of | |||||||
▪ Apart from the adverse | working in Insurance | ▪ € 1.9 billion stock | still available | ||||
impact from | Europe | reduction from | |||||
Switzerland, resilient | repayment of bonds | ||||||
Life underlying | already securing target | ||||||
performance despite | of € 1.5-2.0 billion | ||||||
rates headwinds | |||||||
1. Adjusted for impact of gains and losses related to disposals |
56
Life: sustainable growth driven by Protection and Unit-Linked business
Active and progressive portfolio rebalancing: net inflows concentrated in preferred protection and unit-linked lines
Evolution of net inflows and total reserves (€ billion) | Savings | Protection | Unit Linked | Reserves | |||||||||
NET INFLOWS
8 | 160 | 4 | 110 | 6 | 110 | |||||||
4 | 90 | |||||||||||
6 | RESERVES | |||||||||||
Fondo | 0 | |||||||||||
2 | 100 | 2 | 90 | 70 | ||||||||
Cometa | ||||||||||||
2 | ||||||||||||
4 | ||||||||||||
50 | ||||||||||||
40 | 0 | 70 | ||||||||||
30 | ||||||||||||
0 | (20) | -2 | 50 | -2 | 10 | |||||||
2018 | 2019 | 2020 | 2023 | 2018 | 2019 | 2020 | 2023 | 2018 | 2019 | 2020 | 2023 | |
Expected | Projection | Expected | Projection | Expected | Projection |
Reshaping traditional savings: continuous decrease and reshaping of guarantees allowing to sustain financial margins even in the current low interest rate environment
Italy benefits from fee-based business and strong development of non-guaranteed savings business
Weight of Savings business on total reserve and average guarantee (%) | Savings with Guarantee | Savings w/o Guarantee | Guarantees | ||||||||
100% | ||||
2% | 14% | |||
80% | ||||
1.2% | 1.1% | |||
60% | 1.0% | |||
86% | 0.9% | |||
40% | ||||
20% | * | |||
0.7% | ||||
0% | ||||
2018 | 2019 | 2020 | 2023 | |
Expected | Projection |
1.5% | 100% | 1.1% | 100% | ||||
80% | 1.0% | 80% | |||||
1.3% | |||||||
73% | 0.9% | ||||||
1.1% | 60% | 0.8% | 60% | ||||
0.9% | 40% | 0.7% | 0.7% | 40% | |||
0.7% | 0.7% | ||||||
0.6% | |||||||
0.7% | 20% | 0.6% | 0.5% | 20% | |||
0.5% | 0% | 2018 | 2019 | 2020 | 2023 | 0.4% | 0% |
Expected | Projection |
1.9% | 1.7% | 2.0% |
1.5%
1.6%
1.1% | 1.2% | |||
0.8% | ||||
47% | ||||
0.4% | ||||
0.0% | ||||
2018 | 2019 | 2020 | 2023 | |
Expected | Projection |
*Illustrative level, associating a conservative 0% guarantee to the 14% business | Average guarantees allowing for the impact of the ZZR reference rate |
without guarantee (i.e. with guarantee in case of death only) |
57
Management of the Swiss Unit Linked with guarantees run-off portfolio
PORTFOLIO | ▪ | Regular premium closed portfolio with c. CHF 8 billion in-force reserves |
and 2.4% average guarantees at maturity (YE19), partially hedged | ||
DESCRIPTION | ||
▪ | Product with high loadings and fees and with attached risk coverages | |
ILLUSTRATIVE CUMULATIVE CONTRIBUTION TO IFRS GUARANTEE RESERVE BEFORE PRODUCT TECHNICAL PROFITS & FEES
Path after increased contribution and acceleration
PROACTIVE CAPITAL MANAGEMENT ACTIONS BEING IMPLEMENTED
- Lengthening of the asset duration
- Dynamic hedging extension
- Capital increase of CHF 400 million in 4Q20 to provide an additional cushion in order to land to about 150% SST1 ratio as of current conditions
Path before increased contribution and acceleration
ACCOUNTING GROUP IFRS VIEW GUARANTEE RESERVE
- Guarantee reserve put aside progressively to finance in advance future cost of guarantees. (stock at YE19 CHF 1.3 billion)
- In view of lower interest rates and COVID-19 impact on equity markets:
- More prudent financial assumptions
- Accelerated reserving pattern
- Future variances to be financed linearly in the next seven years
2020 Acceleration | Increased contribution |
2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049
CONTRIBUTION TO THE GUARANTEE RESERVE
(Group IFRS view), CHF billion
0.6
▪ Solvency II already embeds the full economic view | |
▪ Solvency II PVFP of the Unit Linked runoff portfolio, mainly in view | |
ECONOMIC | of the deteriorated market conditions moved from breakeven at YE18 |
VIEW | to CHF -0.6 billion at HY20 (CHF -1.1 billion decrease not considering |
guarantee reserves contributions) | |
▪ Solvency II PVFP for the whole Swiss life business is slightly positive |
0.4
0.3
0.2 0.2
2017 | 2018 | 2019 | 2020 | 2021 |
Exp. | Exp. |
1. Swiss Solvency Test
58
Commitment to maintaining technical excellence in P&C
GROSS WRITTEN PREMIUMS1 (€ billion; ∆ LFL2)
20.7 | 20.6 | 21.5 | 16.6 | ||
(+1.7%) | (+3.3%) | (+3.9%) | (+0.0%) | ||
International & Other | 26% | 24% | 24% | 26% | |
Austria, CEE & Russia | 17% | 18% | 20% | 20% | |
France | 12% | 13% | 13% | 13% | |
Germany | 18% | 18% | 18% | 18% | |
Italy | 27% | 26% | 26% | 23% | |
YE17 | YE18 | YE19 | 9M20 | ||
Share of Non Motor GWP | 59.8% | 60.7% | 61.7% | 60.7% |
COMBINED RATIO1
(%)
- Leadership position in retail / SME segment with high quality, diversified portfolio
- Robust top-line growth, with a focus on high margin markets and products
- Consistent delivery of best-in-class CoR underpinned by disciplined underwriting across markets
- Continued actions to further drive technical excellence
100%
Italy
95%
France
90%
Germany
Austria, 85%
CEE &
Russia 80%
YE17 | YE18 | YE19 | 9M20 |
- Claims management optimization
- Technical pricing
- Product design
- Strong reserving levels maintained
Group | 92.8% | 93.0% | 92.6% | 89.7% |
- Figures are presented on historical basis, without excluding asset disposals
- Like for like comparison versus previous year
59
Successful delivery of debt optimization with a commitment to sustainability
INTEREST EXPENSE REDUCTION
Gross of tax (€ million)
FINANCIAL DEBT REDUCTION
(€ billion) |
11.53 |
673 |
473 |
Plan Baseline | Exp YE 2021 |
Plan seline | End of January 020 |
2017 |
OVERACHIEVED
€ 200 million
reduction vs target
of € 70-140 million
9.68 |
ACHIEVED |
€ 1.9 billion |
debt reduction |
already securing target |
of € 1.5-2.0 billion |
Plan Baseline | 1 |
9M 2020 | |
Plan eline | End of January 2020 |
2018 |
- Since the launch of Generali 2021 strategic plan, the Group has reduced its external debt position by € 1.9 billion2
- Average interest cost reduced from 5.71% at FY17 to 4.91% as of 9M20
- Development of the Green Bond Framework with the issuance of the 2 green bonds with maturities 2030 and 2031 backed mainly by Green Real Estate assets
- The Adriatic Slovenica subordinated debt of € 50 million is not included, consistently with the Investor Day 2018 target definition.
- The c. €1.9 billion is composed by € 1.75 billion of nominal amount of bonds reimbursed and additional € 150 million debt reduction related to FX hedges on GBP debt reimbursed,
60 | partly compensated by hedging derivatives MtM movements. The Adriatic Slovenica subordinated debt is not included, consistently with the Investor Day 2018 target definition. |
Well-balanced debt maturity profile with opportunities for further improvement in cost
DEBT MATURITY PROFILE EVOLUTION
(€ million equivalent)
FY18 | 9M20 | ||||||||||||||||||||||
Senior | average interest cost | ||||||||||||||||||||||
Hybrid | |||||||||||||||||||||||
of 6.4% | |||||||||||||||||||||||
2,000 | Subordinated | ||||||||||||||||||||||
1,750 | 1,000 | 1,750 | 1,000 | Green Bonds | |||||||||||||||||||
1,500 | 1,516 | ||||||||||||||||||||||
1,250 | 1,250 | 769 | 1,250 | ||||||||||||||||||||
850 | 850 | ||||||||||||||||||||||
750 | 552 | 500 | 750 | 600 | |||||||||||||||||||
31 | 390 | 185 | 386 | ||||||||||||||||||||
- | |||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 |
- Proactive management of refinancing risk: the 2.6 billion debt maturity in 2022 has been reduced by 1.6 billion in 2019 through two liability management transactions 2019 and 2020:
- This lengthened the average maturity from 5.3 years at YE18 to 5.9 years today
- Final residual amount to be refinanced in 2022 gives flexibility in timing and potential capital management optimization actions
- Smoother and longer debt profile will help insulate the Group from financial markets volatility
- The group will maintain a proactive and opportunistic approach to manage its 2022-2024 senior and subordinated liabilities having an overall average interest cost of around 6.4%
61
Solvency still resilient to external shocks
MAJOR BUs1 SOLVENCY POSITION
(Regulatory, %)
THE MOVEMENTS BETWEEN | Expected impact of Internal Model extension to Operational Risk | |
FY2019 AND 9M2020 | ||
INCLUDE: | 214 | 203 |
▪ Yield curve ≈ -45 bps | ||
150 |
▪ Equities ≈ -15%
With +125 bps of BTP spread, no activation of Italian country VA
- BTP spread ≈ -5 bps
▪ Corp. spreads ≈ +25 bps | |
343 | 324 |
STRESS SCENARIO | 150 |
HYPOTHESIS ON 9M2020 |
- Yield curve -25 bps
▪ Equities -20% | |||
▪ BTP spread +125 bps | 228 | 189 | |
150 | |||
▪ Corp. spreads +125 bps | |||
YE19 | 9M20 | 9M20 Proforma | |
stress scenario2 |
GROUP SOLVENCY POSITION
(%)
Expected impact of Internal Model extension to Operational Risk
224 | 203 | 150 |
YE19 | 9M20 | 9M20 Proforma |
stress scenario2 |
- Ability to manage capital position underpinned by capital management actions including asset duration lengthening and equity de-risking performed in the last months
- Solvency position supported by the strong capital generation, driven by Life New Business and Non Life Current Year Best Estimate result
- Generali Italia and Generali Deutschland solo view; Generali France consolidated view
- Stress scenarios with the hypothesis presented on this slide
62
Capital flexibility and reinforced capital management framework ensure strong remittances
TOTAL REMITTANCE FROM OPERATING ENTITIES, SPLIT BY THEIR SOLVENCY II RATIO1, 2
2019 | 2020 | 2021E | |||
2% | 3% | 15% | 9% | ||
34% | 26% |
>250%2
170% - 250%
<170%
64% | 71% | 76% |
- Significant part of Group remittances originated from operating entities with very strong standalone solvency position
- Business units solvency position proved to be resilient to external shocks, providing a positive outlook on future remittance capacity in full compliance with the Group Risk Appetite Framework and Solvency II regulation
- Despite COVID-19 related external shocks, 100% of the expected Group remittance for 2020 has been secured, fueling the strong cash position of the Parent Company
Coverage: 22 operating entities representing ca. 95% of intra-group remittances (excluding dividends paid by pure financial holdings, not regulated under Solvency II) | ||
63 | 1. | Cash view remittances, compared to previous year's Year End solvency position |
2. | Including intra-group dividends from Asset Management companies |
Successful implementation of Capital Management and Cash Management Strategies
REMITTANCE | NET HOLDING CASH | NORMALIZED |
FROM BUs | FLOW | CAPITAL |
GENERATION |
> € 9.5 billion | > € 7 billion | > € 10.5 billion |
(+35% on 3 years)
cumulative
ON TRACK | AHEAD OF GENERALI | ON TRACK | ||
2021 PLAN | ||||
CASH CENTRALIZATION STRATEGY
- Treasury centralization extension to new entities (incl. newly acquired entities) & new centralization levers enabled
- Enhanced further cash planning discipline and control
ON TRACK
- Optimized capital allocation processes across businesses resulted in improved capital and cash management at holding level
- Strong cash position even after deduction of dividend and of capital increase in Switzerland
64
Operational, capital and liquidity strength underpin delivery of Generali 2021 plan
Full commitment to Generali 2021 financial targets despite challenging context
Continued focus on technical excellence with accelerated product rebalancing
Outperformance vs. Debt optimization targets, with further potential opportunities
Strong and resilient capital position secures our commitment towards dividend distribution
Effective Cash & Capital Management framework to further enhance financial flexibility
65
CLOSING REMARKS
PHILIPPE DONNET
Group Chief Executive Officer
Q&A SESSION
ANNEXES
Disclaimer
Certain of the statements contained herein are statements of future expectations and other forward-looking statements.
These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.
The user of such information should recognise that actual results, performance or events may differ materially from such expectations because they relate to future events and circumstances which are beyond our control including, among other things, general economic and sector conditions.
Neither Assicurazioni Generali SpA nor any of its affiliates, directors, officers employees or agents owe any duty of care towards any user of the information provided herein nor any obligation to update any forward-looking information contained in this document.
The manager charged with preparing the company's financial reports, Cristiano Borean, declares, pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Financial Intermediation, that the accounting information contained in this presentation corresponds to document results, books and accounts records.
The use by Assicurazioni Generali S.p.A. of any MSCI ESG Research LLC or its affiliates ("MSCI") data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of Assicurazioni Generali S.p.A. by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided 'as-is' and without warranty. MSCI names and logos are trademarks or service marks of MSCI.
69
Team
Assicurazioni Generali | Giulia Raffo | Emanuele Marciante | Stefano Burrino | ||
Group Head of Investor & Rating Agency Relations | Credit & Rating Agency Relations | Investor Relations | |||
Piazza Duca degli Abruzzi 2 | |||||
34132 Trieste, Italy | Giulia.Raffo@Generali.com | Emanuele.Marciante@Generali.com | Stefano.Burrino@Generali.com | ||
Fax: +39 040 671338 | |||||
+39 02 43535324 | +39 040 671347 | +39 040 671202 | |||
e-mail: ir@generali.com | |||||
www.generali.com | |||||
Rodolfo Svara | Martina Vono | Marta Porczynska | Anna Jagiello | ||||
Investor & ESG Relations | Investor Relations Associate | Event Coordinator | Event Coordinator | ||||
Rodolfo.Svara@Generali.com | Martina.Vono@Generali.com | Marta.Porczynska@Generali.com | Anna.Jagiello@Generali.com | ||||
+39 040 671823 | +39 040 671548 | +39 040 671402 | +39 040 671571 | ||||
70
Glossary (1/2)
Acronym | Description |
ACEER | Austria, Central and Eastern Europe and Russia |
AUM | Total market value of all the financial assets which a financial institution manages on behalf of its clients and themselves including general accounts |
(Assets Under Management) | investments, all Group Unit Linked, third party AuM |
CAGR | Mean annual growth rate of an investment over a determined period of time longer than one year; it describes the rate at which an investment would |
(Compound Annual Growth Rate) | have grown if it had grown at a steady rate |
CoR | Loss ratio plus expense ratio (acquisition expenses + general expenses) divided by retained premiums |
(Combined Ratio) | |
DPS | Dividend per Share |
Earnings | Net Result |
ESG | Environmental, Social and Governance |
EPS | Earnings per Share |
GDPR | The General Data Protection Regulation (GDPR) sets guidelines for the collection and processing of personal data of individuals within the European |
(General Data Protection Regulation) | Union |
GDWP | Gross written premiums of direct business |
(Gross Direct Written Premium) | |
GWP | Gross written premiums of direct business and accepted by third parties |
(Gross Written Premiums) | |
IoT | Internet of Things |
M&A | Transactions in which the ownership of companies, other business organizations or their operating units are transferred or combined |
(Mergers & Acquisitions) | |
71
Glossary (2/2)
Acronym | Description |
PP / p.p. / ppt | Percentage points |
P&C | Property and Casualty lines of business |
Relationship NPS | Management tool used to gauge the loyalty of a firm's customer relationships |
RoE | Ratio between net profit and Equity |
(Return on Equity) | |
SCR | Level of eligible own funds that enables insurance and reinsurance undertakings to absorb significant losses, giving reasonable assurance to |
(Solvency Capital Requirement) | policyholders that payments will be |
SME | Businesses whose personnel number falls below <250 people, and either turnover <50 million € or balance sheet total <43 million € |
(Small - Medium Enterprises) | |
YTD | Year To Date |
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Assicurazioni Generali S.p.A. published this content on 18 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2020 09:02:02 UTC