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    UNI   IT0004810054

UNIPOL GRUPPO S.P.A.

(UNI)
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SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Unipol Gruppo S p A : 2019 Integrated Consolidated Financial Statements

03/23/2020 | 01:05pm EST

2019

Integrated Consolidated Financial Statements

Graphic design by

Mercurio GP Srl

UnipolGruppo

Annual Integrated Report

and Consolidated Financial Statements

2019

Translation from the Italian original solely for the convenience of international readers

EVOLVING. GOING BEYOND.

Financial year 2019 is the starting point for a new and ambitious mission: evolution.

In the current economic scenario, in which the entire insurance sector is undergoing extensive changes, we want to continue looking forward, backed by our role as market leader, which we have built over time alongside our stakeholders.

Evolving with a change in pace that enables the Unipol Group to become leader in three major ecosystems: Mobility-Welfare-Property.

The strength of our assets - people, technology and sustainability - will allow us to overcome the single concept of insurance in order to evolve together, continuing to create shared value.

Company bodies

BOARD OF DIRECTORS

CHAIRMAN

Pierluigi Stefanini

VICE CHAIRMAN

Ernesto DalleRive

CHIEF EXECUTIVE OFFICER

GENERAL MANAGER

Carlo Cimbri

GROUP CEO

DIRECTORS

Paolo Alemagna

Antonietta Mundo

Gianmaria Balducci

Milo Pacchioni

Roberta Datteri

Maria Antonietta Pasquariello

Patrizia De Luise

Annamaria Trovò

Massimo Desiderio

Adriano Turrini

Daniele Ferrè

Rossana Zambelli

Giuseppina Gualtieri

Carlo Zini

Pier Luigi Morara

SECRETARY OF THE BOARD

Fulvia Pirini

OF DIRECTORS

BOARD OF STATUTORY

CHAIRMAN

Mario Civetta

AUDITORS

STATUTORY AUDITORS

Silvia Bocci

Roberto Chiusoli

ALTERNATE AUDITORS

Massimo Gatto

Rossella Porfido

MANAGER IN CHARGE OF

Maurizio Castellina

FINANCIAL REPORTING

INDEPENDENT AUDITORS

PricewaterhouseCoopers SpA

Board of Directors and Board of Statutory Auditors appointed by the Shareholders' Meeting on 18 April 2019

Unipol Group | Integrated Report 2019 | 5

Contents

Business outlook

113

Synoptic table with non-financial information

114

Summary table of climate change-related disclosures

Letter from the Chairman

8

(TCFD)

116

Letter from the Chief Executive Officer

9

Glossary

117

1.Annual Integrated Report

11

2. Consolidated Financial Statements at 31 December

Consolidated Non Financial Statement pursuant to Italian

2019

123

Legislative Decree no. 254/2016

12

Tables of Consolidated Financial Statements

123

The Unipol Group

14

Unipol Group Vision, Mission and Values

14

Statement of Financial Position

124

Activities and sectors

16

Income Statement

126

Highlights

18

Comprehensive Income Statement

127

Significant events in 2019 and after 31 December 2019

20

Statement of Changes in Shareholders' equity

128

Risks, opportunities and strategy

23

Statement of Cash Flows (indirect method)

129

Macroeconomic background and market performance

23

3. Notes to the Financial Statements

131

Main regulatory developments

26

1. Basis of presentation

133

Future orientation in the use of capital

29

2. Main accounting standards

139

"Mission Evolve": the 2019-2021 strategies

31

3. Notes to the Statement of Financial Position

166

Stakeholder engagement tools and processes

34

4. Notes to the Income Statement

182

Material topics

35

5. Other Information

188

The creation of value

38

5.1 Hedge Accounting

188

Capital performance

40

5.2 Information relating to the actual or potential effects of

Shared value: the impacts generated by the Unipol Group

57

netting agreements

188

Governance

64

5.3 Earnings (loss) per share

190

Corporate Governance

64

5.4 Dividends

190

Internal Control and Risk Management System

66

5.5 Non-current assets or assets of a disposal group held for

Capital requirements

76

sale

191

Remuneration system and incentives

77

5.6 Transactions with related parties

192

Other information

109

5.7 Fair value measurements - IFRS 13

197

Transactions with related parties

109

5.8 Information on public funds received

200

Solvency II solvency position

110

5.9 Share-based compensation plans

201

Report on corporate governance and ownership structures

5.10 Non-recurring significant transactions and events

201

pursuant to Art. 123-bis of Legislative Decree 58

of

5.11 Atypical and/or unusual positions or transactions

201

24 February 1998.

110

5.12 Additional information on the temporary exemption from

Ethics Report

111

IFRS 9

201

Communication on Progress Global Compact

112

5.13 Criteria to determine the recoverable amount of goodwill

with an indefinite useful life (impairment test)

203

5.14 Notes on Non-life business

206

5.15 Notes on Life business

209

5.16 Risk Report 2019 of the Unipol Group

210

4. Tables appended to the Notes to the Financial

Statements

229

Consolidation scope

230

Consolidation scope: interests in entities with material non-

controlling interests

236

Details of unconsolidated investments

236

Statement of financial position by business segment

240

Income statement by business segment

242

Details of property, plant and equipment and intangible assets244

Details of financial assets

244

Details of assets and liabilities relating to insurance contracts where the investment risk is borne by policyholders and arising

from pension fund management

246

Details of technical provisions - reinsurers' share

246

Details of technical provisions

247

Details of financial liabilities

248

Details of technical insurance items

249

Investment income and charges

250

Details of insurance business expenses

252

Details of the consolidated comprehensive income statement 252 Details of reclassified financial assets and their effects on the

income statement and comprehensive income statement

254

Assets and liabilities at fair value on a recurring and non-

recurring basis: breakdown by fair value level

256

Details of changes in level 3 financial assets and liabilities at fair

value on a recurring basis

257

Assets and liabilities not measured at fair value: breakdown by

fair value level

258

5. Summary of fees for the year services provided by

the Independent Auditors

261

6. Statement on the Consolidated Financial Statements in accordance with art. 81-Ter of Consob

regulation 11971/1999

265

Letter from the Chairman

2019 was a particularly important year for the increased sensitivity, focus and awareness as regards sustainable development topics, for institutions and economic operators alike, driven by the dramatic intensification of crises generated by social and environmental unsustainability of the current system, and by the development of a more proactive approach by citizens, starting especially from the younger generation.

The UN 2030 Agenda stimulated reflection on public policies and on the assessment of operations and strategies of the production companies, adopting as starting point the assumption that only through engagement of all society's players will it be possible to steer the transition towards a sustainable development model.

In this context, the insurance industry can make a decisive contribution. The Unipol Group is committed every day to fully performing its social role. Insurance, centred on a strategy of creating shared value, protects individuals and businesses, intervening not only at times of difficulty, but above all by creating the conditions to allow investment without fear in development and in the future. The industry's experience in risk-related matters can help both the public and private sectors to adopt effective preventive policies and through its own resources and those of policyholders as an institutional investor, it can act as transition agent for the economy, supporting the development of a business system that firmly contributes to the sustainable development goals. In their respective countries, in fact, insurance companies are the co-players for welfare and, in this respect, we believe that to reason in terms of public-private partnership is fundamental.

With the Three-Year "Mission Evolve" Plan, we have chosen to consolidate our commitment not only to our reference stakeholders, but above all to the financial market, bringing our distinctive assets into play (digital, data, relations with the distribution network and our network's partners) to create shared value with our stakeholders and contribute to Italy's sustainable development.

Pierluigi Stefanini

8 | Integrated Report 2019 | Unipol Group

Letter from the Chief Executive Officer

Dear reader, dear Unipol Gruppo shareholder,

Despite the persisting weakness of the economy, in 2019 the Unipol Group recorded financial results that saw strong growth and strengthened the capital solidity, creating the conditions for offering shareholders a remuneration at the highest market levels.

The Group consolidated its leadership in sectors where, in recent years, it has shown its ability to reach technical and operating standards of excellence that exceed those of the market. The Group plans to continue along this path, following the guidelines indicated in the 2019-2021 Business Plan, named "Mission Evolve". The Plan outlines a transition from "insurance leadership" to "ecosystems leadership", focusing on the Mobility, Welfare and Property sectors.

The sale of the entire interest in Unipol Banca to the BPER Group marked the completion of the Group streamlining process. Unipol remains the lead shareholder of the BPER Group and intends to support its capital strengthening and dimensional growth process. The streamlining of the Group has allowed us to focus business on the strategic sectors that characterise the core business development defined in the Business Plan, through investments in the mobility and healthcare sectors that could generate strong synergies with traditional business activities. This will enhance the mix of integrated high value-added products and services, and offer our customers personalised solutions to their insurance needs.

The Group has continued to invest in new technology developments to expand process automation and improve the assessment of underwriting risks, exploiting the enormous wealth of information in its possession. This has allowed the optimisation of costs and leveraging of economies of scale, through the streamlining of operating processes based on increasing recourse to digitalisation and the use of artificial intelligence. It has meant that the coverage offered could be further developed, as well as the development of pricing models highly customised to our customer profiles, expansion of the product mix based on a multichannel approach and the integration of insurance coverage with services linked to a wide spectrum of mobility and welfare needs.

The Group has also strengthened its position in the Life business, with premiums growing at rates much faster than those of the market, aided by an excellent financial management performance despite the difficult context of negative or close to zero interest rates.

I am certain that, again in 2020, the Group will show that it can achieve its ambitious goals and will successfully overcome the new and complex challenges that will be triggered by developments in the economy and the market.

Carlo Cimbri

Unipol Group | Integrated Report 2019 | 9

1

ANNUAL INTEGRATED REPORT

CONSOLIDATED NON FINANCIAL STATEMENT PURSUANT TO ITALIAN LEGISLATIVE DECREE NO. 254/2016

Through the "Annual Integrated Report" (or "Integrated Report"), Unipol presents the big picture, connecting within a single document the information contained in the traditional consolidated financial statements and environmental, social and governance performance. Unipol thus presents the set of factors that determine its capacity to generate value, as a result of the Group's commitment to protecting the company's assets and profitability, identifying solutions that meet stakeholder needs and promoting the sustainable development of the communities in which it carries on its business.

The Group's Annual Integrated Report meets the requirements of Italian Legislative Decree 254/2016, which implemented European Directive 2014/95, as regards disclosure of non-financial and diversity information, in Italy, as amended by Italian Law 145/2018 (2019 Budget Law).

As set forth by the legislation, the Consolidated Non-Financial Statement (NFS) covers environmental and social matters as well as topics relating to personnel, respect for human rights and the fight against corruption, which are relevant taking into account the Group's activities and characteristics, and which are addressed to the extent necessary to ensure an understanding of the Group's activities, performance, results and the impact it generates. The relevance of the topics is determined through the materiality analysis process described in the "Material topics" section, the results of which are summarised in the materiality matrix also published there.

To meet the multiple information and transparency expectations of the various stakeholders (beginning with institutions and investors), for the preparation of this document the Group has taken a plurality of methodological contributions as a reference, integrating them and showing in special tables how and where they are applied:

  • the Integrated Report was developed on the basis of the standards laid out in the International Integrated Reporting Framework ("IIRF") issued by the International Integrated Reporting Council (IIRC) in December 2013;
  • the "Guidelines on non-financial reporting" published by the European Commission in 2017 (2017/C 215/01) constitute the general framework of the content and method considered for the preparation of the NFS and guide the creation of the materiality matrix;
  • non-financialperformance indicators were defined by using the "Sustainability Reporting Standards" issued in 2016 by the Global Reporting Initiative (GRI) as a methodological reference, and using the "GRI-Referenced" approach. In addition, several indicators of the Financial Services Sector Disclosure belonging to the GRI G4 guidelines were also reported on;
  • for the reporting of information connected to climate change, reference should be made to the recommendations published in June 2017 by the Task Force on Climate-related Financial Disclosures (TCFD), as well as to the European Commission's recently published "Guidelines on reporting climate-related information" (June 2019), to further support reporting regarding an issue that is becoming increasingly relevant and complex, in light of growing stakeholder expectations.

The scope of reporting of non-financial information, as requested by Italian Legislative Decree 254/2016, coincides with that of the Consolidated Financial Statements, including fully consolidated companies for the financial reporting at 31 December 2019. All scope exceptions are appropriately described in the relative sections of the document. Such exceptions are insignificant in terms of understanding the activities of the company, its performance, its results and its impact.

The data needed to compile this information were gathered and processed using a dedicated IT system which makes it possible to ensure full traceability of the data collection and consolidation process. The information relating to 2019 was provided with a comparison with that disclosed in the previous year, as required by Italian Legislative Decree 254/16.

The table below supports the traceability of the non-financial information within the document; said information can subsequently be clearly identified in the Annual Integrated Report by using the following icon, with the goal of further improving use of the information.

The content published in reference to the TCFD recommendations is identified by the following icon, with the goal of further improving use of the information.

Pursuant to Art. 5 of the Consob Regulation dated 18 January 2018, the Unipol Group has appointed the independent auditors PwC S.p.A., currently responsible for audit of the consolidated financial statements for the years 2012-2020, for the limited assurance engagement in reference to the NFS. Their report is attached to this document.

12 | Integrated Report 2019 | Unipol Group

In light of the Unipol Group's commitment to contribute to reaching the Sustainable Development Goals (SDGs) of the UN's 2030 Agenda, a commitment reported in the Sustainability Policy and adopted at strategic level, it has been deemed appropriate to also explain the correlations of the content reported on with such Goals in the following table.

Issue indicated in Italian

Italian Legislative

Page reference in the Annual Integrated Report

SDGs *

Legislative Decree

Decree 254/2016

254/2016

Page 12: "Consolidated Non-Financial Statement pursuant to Italian Legislative Decree no. 254/2016"

Material topics

Art. 3, par. 1

Pages 31-35: "Risks, opportunities and strategy" - "Mission Evolve": the 2019-2021 strategies" - "Stakeholder engagement

tools and processes"; Pages 35-36: "Risks and opportunities" - "Mission Evolve": the 2019-2021 strategies" - "Material

topics"

Pages 16-17: "The Unipol Group" - "Activities and sectors"; Pages 18-19: "The Unipol Group" - "Group highlights"

Organisation and

Art. 3, par. 1a

Pages 46-49: "The creation of value" - "Capital performance" - "Human capital"; Pages 50-54: "The creation of value" -

"Capital performance" - "Social and relational capital"; Pages 59-62: "The creation of value" - "Shared value: the impacts

management model

generated by the Unipol Group" - Support to the realisation of the 2030 Agenda and contribution to combatting the climate

emergency; Pages 66-75: "Governance" - "Internal Control and Risk Management System"

Pages 8-9: "Letter from the Chairman and Letter from the Chief Executive Officer"

Pages 29-30: "Future orientation in the use of capital"

Business policies, results,

Art. 3, par. 1b

Pages 40-41: "The creation of value" - "Capital performance" - "Financial Capital"

Pages 50-54: "The creation of value" - "Capital performance" - "Social and relational capital"

indicators

Pages 57-63: "The creation of value" - "Shared value: the impacts generated by the Unipol Group"

Pages 64-65: "Governance" - "Corporate Governance"

Pages 29-30: "Future orientation in the use of capital"

Main risks

Art. 3, par. 1c

Pages 32-33: "Mission Evolve": the 2019-2021 strategies - "The Unipol Group's climate strategy"

Pages 66-75: "Governance" - "Internal Control and Risk Management System"

Energy resources,

Art. 3, par. 2a

Pages 54-56: "The creation of value" - "Capital performance" - "Natural capital"

water resources, emissions

Art. 3, par. 2b

Page 75: "Governance" - "Internal Control and Risk Management System" - "Sanctions"

Impact on the environment,

Art. 3, par. 2c

Pages 40-41: "The creation of value" - "Capital performance" - "Financial Capital"

health and safety

Pages 50-54: "The creation of value" - "Capital performance" - "Social and relational capital"

Human Resource

Pages 46-49: "The creation of value" - "Capital performance" - "Human capital"

management

Art. 3, par. 2d

Pages 64-65: "Governance" - "Corporate Governance"

and gender balance

Pages 77-78: "Governance" - "Remuneration system and incentives"

Pages 14-15: "The Unipol Group" - "Unipol Group Vision, Mission and Values"

Respect

Art. 3, par. 2e

Pages 64-68: "Governance" - "Internal Control and Risk Management System" - The monitoring of social, environmental and

for human rights

governance risks ("ESG risks")

Pages 110-111: "Other information" - "Ethics Report" and "CoP"

Pages 67-71: "Governance" - "Internal Control and Risk Management System" - "The monitoring of social, environmental and

Fight against

Art. 3, par. 2f

governance risks ("ESG risks")"; Pages 72-73: "Governance" - "Internal Control and Risk Management System" - "Protection

corruption

of personal data"; Page 74: "Governance" - "Internal Control and Risk Management System" - "Anti-corruption"

Page 75: "Governance" - "Internal Control and Risk Management System" - "Sanctions"

Reporting

Art. 3, par. 3, 4

Page 12: "Consolidated Non-Financial Statement pursuant to Italian Legislative Decree no. 254/2016"

standard adopted

and 5

Pages 114-115: "Synoptic table with non-financial information"

Diversity among

Pages 64-65: "Governance" - "Corporate Governance"

members of the

Art. 10, par. 1a

Pages 66-75: "Internal Control and Risk Management System"

administration bodies

Pages 77-78: "Governance" - "Remuneration system and incentives"

  • For greater details of the Sustainable Development Goals (SDGs), reference should be made to the Glossary and to the website http://asvis.it/ for an up-to-date overview of their relationship to the business models of companies in Italy.

Unipol Group | Integrated Report 2019 | 13

THE UNIPOL GROUP

Unipol Group Vision, Mission and Values

The Unipol Group is committed to creating shared, sustainable value from the economic, social and environmental perspective. Unipol aims to contribute to giving people more security and confidence in the future, by offering them opportunities for protection and integrated solutions capable of fully meeting everyone's complex needs, through the active presence of local networks and the responsible development of emerging technological opportunities.

OUR CORE VALUES

through a shared process, are expressed in our Charter of Values and outlined in the Code of Ethics as behavioural principles towards the various stakeholders.

The levers for putting the commitments made in the Code of Ethics into practice are formalised in the Sustainability Policy, which defines the Group's strategies, goals and commitments for improving its sustainability results and managing and mitigating the environmental, social and governance risks ("ESG risks") to which it is exposed, in line with the overall Group risk management system. The Policy specifies the roles and responsibilities of the company bodies and structures involved in the process of managing ESG risks and refers to the Specific Risk Management Policies (for example those relating to investments and underwriting) for the operational details of the defined strategies.

14 | Integrated Report 2019 | Unipol Group

The Sustainability Policy, inspired by the Sustainable Development Goals and the UN Global Compact principles, commits the company with respect to:

In the course of 2019, this Policy was updated by defining the roles and responsibilities of the players involved in more detail, in particular as regards the governance of risks, opportunities and impacts linked to climate, and outlining a specific commitment on responsible data management. The Group has also committed to adopting increasingly widespread systems for planning, assessing and measuring the impact of its activities, to better understand their effects and orient them towards implementing changes consistent with its values, strategies and commitment in terms of sustainability.

For further details on the Unipol Group's Sustainability Policy, please refer to the Sustainability governance section of the Unipol Group's website.

Unipol Group | Integrated Report 2019 | 15

Activities and sectors

Unipol Gruppo ("Unipol") is the holding company at the top of the Unipol Insurance Group, a leading Italian insurance group,

first in terms of premiums in the Non-Life business. It is listed on the Milan Stock Exchange, present in the FTSE MIB, and manages and coordinates all the subsidiaries.

The investees operate in three main sectors.

Insurance Sector: activities are carried out primarily through UnipolSai Assicurazioni ("UnipolSai"), a company in turn listed on the Milan Stock Exchange which carries out insurance and reinsurance activity in all Non-Life and Life segments. Aside from UnipolSai, the Unipol Group operates in this segment through the following specialised companies:

  • Linear, a company specialised in direct sales, online and through a call centre, of MV products;
  • SIAT, a company operating in the Transport class, with Corporate customers that are reached primarily through brokers;
  • UniSalute, the top health insurance company in Italy by number of customers managed, specialised in the Healthcare segment (Health and Assistance).

Outside Italy, UnipolSai operates in Serbia through the subsidiary DDOR Novi Sad.

Unipol distributes its products primarily through the agency network. The Group also presides over the bancassurance channel through joint ventures with leading Italian banks. Again in the course of 2019, UnipolSai placed Life products through the branches of Unipol Banca, now incorporated within BPER Banca.

The companies Arca Assicurazioni and Arca Vita distribute their products through the branches of banks with which dedicated agreements have been entered into, including primarily BPER and Banca Popolare di Sondrio; BIM Vita through agreements with Banca Intermobiliare, Banca Consulia and, as regards after-sales only, with Cassa di Risparmio di Fermo; Incontra Assicurazioni thanks to agreements with Unicredit Group.

The companies specialised in reinsurance are UnipolRe, a company that offers reinsurance services to small and medium sized companies headquartered in Europe and Ddor Re, the Serbian reinsurance company.

The Group also includes companies instrumental to the insurance business which characterise and make Unipol's insurance offer distinctive with the direct and integrated governance of service processes:

  • Auto Presto&Bene, network of repair shops present throughout the country to offer MV policyholders certified repairs with no cash advance;
  • APB Car Service (MyGlass), for repair and glass replacement services;
  • Car Server for the management of company fleets and long-term car rental;
  • Pronto Assistance Servizi - PAS, for assistance services dedicated to customers, professionals and agencies of the Group, concerning the release of technical and sales information, marketing activities, and collection of the notifications of inefficiencies or complaints;
  • AlfaEvolutionTechnology, the telematics provider of UnipolSai and other Group companies.

Real Estate Sector: the Unipol Group manages real estate assets worth €3.8bn, in line with last year, held primarily by real estate sector companies for €1.4bn and by UnipolSai for €2.1bn.

Holding and Other Businesses Sector: the Group operates in the Italian hospitality sector through its subsidiary UNA Group, with assets consisting of 38 facilities (hotels, residences and resorts), of which 32 managed directly or under management and 6 affiliates with franchising agreements in some of the main cities and most renowned tourist destinations in Italy. It is active in the agricultural sector with the company Tenute del Cerro, which owns roughly 5,000 hectares of land in central Italy and is active in the production of high quality wine. In the healthcare sector, the Group is present through the Villa Donatello healthcare facility (Florence) and the Dyadea multi-specialist centres.

Leithà is the company specifically dedicated to innovation.

Unipolis is the business foundation of the Unipol Group, of which it is one of the most important tools for implementing social and civil responsibility initiatives, within the framework of the more comprehensive sustainability strategy.

Through UnipolSai Investimenti, the Unipol Group manages mutual real estate investment funds. UnipolReC is the company specialised in the management of non-performing loans.

The performance of the various business areas in which the Group operates is reported in the Unipol Group Performance section

16 | Integrated Report 2019 | Unipol Group

Unipol Group | Integrated Report 2019 | 17

Highlights

6,643 5,694

Employees

Operating Network

12,337

Agencies

2,610

Sub-agencies

5,585

Bancassurance branches

5,547

Competitiveness in the Market

Solvency

Group Shareholders'

Ratio

Equity

182%

+19 b.p.

6,687 €mln

vs 2018

+32.9%

vs 2018

18 |

Customers and

PolicyholdersPerformance

INDIVIDUALS 15.2 million

LEGAL ENTITIES 0.9 million

PREMIUMS

Non-Life direct insurance

Life direct insurance

  • of which Life investment products
    Direct insurance premiums

RATIOS

Non-Life Loss Ratio - net of reins. Non-Life Expense Ratio - net of reins. Non-Life Combined Ratio - net of reins. Group pro-rata APE (€m)

Life Expense Ratio - net of reins.

Risultato consolidato

€m Var. vs 2018

+2.7%

+33.0%

−22.6%

+13.5%

2018

6666.8%

27.27.4%

9494.2%

397

  • 5.1%

Var. vs 2018

Investments and cash and

67,757

+14.0%

cash equivalents

Technical provisions

57,567

+8.2%

Non-Life

15,067

-1.0%

Life

42,500

+11.8%

Financial liabilities

+12.3%

Consolidated profit (loss)

+1,087 €m

Normalised result

on a like-for-like basis(**)

+732 €m

Value for

ROE

8.18%

EPS

1.26

Shareholders

BVPS

9.32

(*) Result on a like-for-like basis

(**) Operating figure excluding the effects of extraordinary transactions on a like-for-like basis

Significant events in 2019 and after 31 December 2019

On 7 February 2019, Unipol Gruppo's Board of Directors approved an extraordinary transaction regarding the banking sector, to be carried out in a unique setting through the

  • transfer to BPER Banca S.p.A. of the entire investment held by Unipol, also through UnipolSai, in Unipol Banca S.p.A., equal to the entire share capital of the latter, for a cash consideration of €220m;
  • UnipolRec's purchase of two separate portfolios composed of bad and doubtful loans, one owned by BPER Banca and one by Banco di Sardegna for a gross total of €1.3bn, for a consideration of €130m.

Again on 7 February 2019, UnipolSai's Board of Directors resolved to exercise the put option relating to 27.49% of the share capital of Unipol Banca and UnipolReC, held by Unipol based on the option contract signed on 31 December 2013 between Unipol and former Fondiaria-Sai.

In addition, as part of the exercise of the aforementioned put option, UnipolSai's Board of Directors resolved to grant a 5-year loan of €300m to Unipol, also repayable early, at an interest rate of the 3-month Euribor plus a spread of 260 basis points. For Unipol, the aforementioned loan is targeted at maintaining a high level of financial flexibility with an important available liquidity buffer. The loan was disbursed on 1 March 2019.

On 9 May 2019, the Board of Directors of Unipol approved the 2019-2021 Strategic Plan "MISSION EVOLVE - Always one step ahead". The Strategic Plan has the objective of strengthening the leadership of the Unipol Group in the next three years, establishing the basis for confirming its leadership position also beyond the Plan's scope.

On 29 May 2019, the Fitch Ratings rating agency announced its upgrade of the Insurer Financial Strength (IFS) rating of UnipolSai Assicurazioni to "BBB+", with negative outlook, from "BBB", and confirmed the Long-Term Issuer Default Rating (IDR) assigned to Unipol Gruppo and UnipolSai Assicurazioni at "BBB", with negative outlook. Also the ratings of the debt securities issued by the Unipol Group were confirmed: the Unipol Gruppo senior loans were confirmed at "BBB-", the subordinated loans with maturity of UnipolSai Assicurazioni were confirmed at "BBB-" and the perpetual bond loan of UnipolSai Assicurazioni was confirmed at "BB+".

In June 2019 the Boards of Directors of UnipolSai and the subsidiaries concerned, insofar as they were respectively responsible, approved the following mergers and spin-offs involving UnipolSai and its wholly-owned subsidiaries:

  • project for the merger by incorporation of Pronto Assistance SpA into UnipolSai;
  • project for the full spin-off of Ambra Property Srl in favour of UnipolSai, UNA SpA Group and Midi Srl;
  • project for the partial spin-off of Casa di Cura Villa Donatello SpA in favour of UnipolSai, as well as the full spin-off of Villa Ragionieri Srl in favour of the Company itself and of Casa di Cura Villa Donatello SpA.

Again in June 2019, the Board of Directors of the subsidiaries UniSalute and Unisalute Servizi approved, within their areas of respective competence, the proportional partial spin-off of Unisalute Servizi, with transfer to a new company of the business consisting in the provision of specialist medical-healthcare services. The proportional partial spin-off was completed on 1 October 2019, with the simultaneous setup of "Centri Medici Dyadea".

In the second quarter of 2019, based on the authorisations obtained in the previous year from the European Central Bank and the competent national Supervisory Authorities, Unipol acquired BPER Banca ordinary shares on the market, representing roughly 4.9% of the share capital of the Bank, so it now holds, directly and indirectly through UnipolSai, a qualified investment in BPER equal to 19.97% of its share capital. As a result, also taking into account the relevant transactions already performed and in place between the Unipol Group and the BPER Group, starting in June 2019 Unipol qualified its interest held in BPER as an interest with significant influence, therefore to be consolidated using the equity method. Later, in August 2019, following the finalisation of certain transactions with the effect of increasing the share capital of BPER, Unipol and UnipolSai acquired further BPER shares on the market in order to restore the previously held interest. As an overall result of the acquisitions made, at the end of 2019 the Unipol Group held a total interest of 19.73% in the BPER share capital, a percentage thus reduced due to additional capital transactions by the bank finalised in December 2019.

20 | Integrated Report 2019 | Unipol Group

The 2019 consolidated financial statements reflect the effects of first-time adoption of the consolidation at equity of the investee, with a positive non-recurring impact on the consolidated income statement for €421m.

On 2 July 2019, Unica, the Unipol Group's Corporate Academy, obtained the ISO 9001:2015 Quality Certification.

On 18 July 2019 a trade union agreement was signed regarding voluntary pre-retirement arrangements for UnipolSai employees meeting pension requirements by the end of 2023. The Agreement of 18 July 2019 envisaged early retirement for a maximum of 760 individuals, but as over 800 subscribed to the option, on 20 November 2019 a further trade union agreement was signed that will allow all employees subscribing to access the arrangements envisaged in the previous Agreement. In February 2020, the agreement was also extended to the Group's other insurance companies, for which the number of potential applications is not expected to exceed 20.

On 24 July 2019, in application of the contractual repayment plan, UnipolSai arranged repayment of the first of five annual instalments in equal amounts of €80m of the Restricted Tier 1 subordinated loan disbursed on 24 July 2003 by Mediobanca - Banca di Credito Finanziario SpA for a total nominal amount of €400m, maturing on 24 July 2023.

On 31 July 2019 - with all conditions precedent set forth in the contract being met and, in particular, with the necessary authorisations having been received from the competent Supervisory Authorities - the extraordinary transaction relating to the Group's banking sector, in execution of the agreements entered into on 7 February 2019 between Unipol Gruppo SpA and UnipolSai Assicurazioni SpA, on one hand, and BPER Banca SpA, along with the subsidiary Banco di Sardegna SpA, on the other, was completed within a single context.

On 1 August 2019, UnipolSai finalised the acquisition of 100% of the share capital of Car Server SpA, one of the main operators active in the Italian long-term company fleet rental market, for a price of €96m.

On 27 September 2019, Fleet Magazine presented its "Rental&Quality" research during the Customer Centricity event. One hundred large companies were analysed and some of the aspects studied included: commercial relationships, customer service, information technology, consulting and telecommunications and administrative management, the section in which Car Server was awarded the best score, thanks to the management of the obligations laid out in Article 94 of the Highway Code and the clarity and comprehensibility of the documents sent.

For the second year, UnipolSai confirmed its support to the Sport Festival, a large national and international event dedicated to the world of sport to bring champions into contact with fans: debates and analyses along with Olympic and Paralympic athletes, trainers, institutional representatives, technical and other experts and fans. UnipolSai was a Premium Partner of this edition, planned from 10 to 13 October 2019 in Trento.

On 17 October 2019, during the XVIII edition of Insurance Day 2019, the exclusive annual event for the top management of major insurance companies, the Group was awarded a number of recognitions. Amongst other awards, our Group received:

  • the "Companies of Value" Award for the best stock exchange performance at 30 June 2019;
  • the "Golden lion" for the best Creative IVASS capable of combining detailed service information with appropriate positioning in commercial advertising;
  • the MF Innovazione Awards Award in the "Home protection" category for the UnipolSai product Condominio&Servizi;
  • the "Best Company for direct premiums 2018" Awards in the Non-Life business;
  • the "Elite Insurance and Pension Scheme" Award for the MV segment service platform communication strategy.

Unipol Group | Integrated Report 2019 | 21

On 21 January 2020, after concluding the required corporate procedures, both the deed of merger, and the deeds relating to the spin-offs approved by the Boards of Directors of UnipolSai and the subsidiaries concerned in the course of June 2019 were signed. Such transactions became legally effective as of 1 February 2020. They became effective for accounting and tax purposes as of 1 January 2020 as regards the merger and total spin-offs of Ambra Property and Villa Ragionieri, and as of 1 February 2020 as regards the partial spin-off of Villa Donatello.

On 27 January 2020, UnipolSai confirmed its partnership that will once again see the company as the official sponsor of Ducati Corse in the MotoGP 2020 World Championship. The partnership with the Ducati Team will entail the UnipolSai brand appearing on the tail of the two red sport bikes of Borgo Panigale and on the team uniforms.

On 17 February 2020, UnipolSai Assicurazioni and Unipol Gruppo, in relation:

  1. to the promotion by Intesa Sanpaolo of a surprise voluntary public exchange offer on all shares of UBI Banca SpA (the
    "PEO");
  2. to the acquisition by BPER Banca SpA ("BPER"), having positively concluded the PEO, of a business unit consisting of bank branches and the assets, liabilities and legal relationships connected to them,

jointly notified the market that UnipolSai Assicurazioni had entered into an agreement with Intesa for the subsequent acquisition, either directly or through a subsidiary, of business units linked to one or more current investee insurance companies of UBI Banca (BancAssurance Popolari SpA, Lombarda Vita SpA and Aviva Vita SpA), consisting of Life insurance policies taken out by customers in the Banking Business and the relative assets, liabilities and legal relationships (the "Insurance Businesses").

UnipolSai Assicurazioni and Intesa will proceed with the definition of the Insurance Businesses and their subsequent transfer as soon as it is possible to have access to the data and information of BancAssurance Popolari, Lombarda Vita and Aviva Vita, also pursuant to regulations in force, subject to the fulfilment of specific conditions, including the completion of the transactions pursuant to points (i) and (ii) above and the assumption of control of Lombarda Vita and Aviva Vita by UBI Banca. The Insurance Business of BancAssurance Popolari, already wholly owned by UBI Banca, may in any event be transferred even independent of the transfer of the other Insurance Businesses.

The consideration for the transfer of the Insurance Businesses will be determined on the basis of the same valuation criteria as those adopted for the determination of the price paid by UBI Banca for the possible acquisition of control of Lombarda Vita and Aviva Vita as well as, as concerns the Insurance Business of BancAssurance Popolari, by making reference to its asset value. Furthermore, with respect to the resolutions passed by the BPER Board of Directors regarding the acquisition of the Banking Business and the resulting share capital increase of the Bank for a maximum of €1bn in order to provide it with the resources necessary to perform the transaction and maintain capital ratios in line with those recorded at 31 December 2019, Unipol Gruppo and UnipolSai Assicurazioni, positively evaluating such acquisition for the BPER Group, notified the competent bodies of the Bank of their favourable orientation and their willingness to subscribe their applicable shares of the share capital increase.

On 26 February 2020, the sole member company UNICA LAB S.r.l. a socio unico (100% UnipolSai Assicurazioni S.p.A.) was registered with the Register of Companies, in order to leverage the skills developed over the years by Unica by offering training courses and services to customers outside the Group.

22 | Integrated Report 2019 | Unipol Group

RISKS, OPPORTUNITIES AND STRATEGY

Macroeconomic background and market performance

Macroeconomic background

In 2019, global growth came to around 2.5% (3.2% in 2018). The main economic areas experienced a slowdown in GDP growth, in particular in the second half, due to the reduction in trade triggered by US trade policies and continuing elements of uncertainty, such as Brexit and geopolitical risks in the Middle East.

Global economic growth

+2.5%

The Euro Area achieved GDP growth of 1.1% (+1.8% in 2018). The drop in growth can be attributed to multiple factors, such as slowing international trade, uncertainty with respect to Brexit developments and the slowdown in the manufacturing sector (which particularly impacted Germany and Italy). The unemployment rate continued to decline, reaching 7.4% in December 2019.

+1.1%

Given the economic slowdown and inflation significantly

+6.1%

lower than the 2% target (1.3% in December), the ECB

+1.0%

modified the tone of its monetary policy and adopted

+2.3%

additional expansionary stimulus measures. In particular, as

of September the following measures were adopted: launch

of a new quantitative easing bond buying plan amounting to

€20bn per month, plus the full reinvestment of the capital

from maturing bonds, cut in the deposit rate to -0.5%, while

at the same time introducing a tiering system to mitigate the

effect of negative rates on bank profitability, the adoption of

a new plan of auctions for financing to the banking system

(TLTRO III).

The United States grew at a rate of 2.3% (2.9% in 2018), primarily thanks to private consumption. Against a moderate slowdown in economic activity and a job market that is remaining robust (unemployment rate of 3.5% in December) and despite the December inflation rate of 2.3%, the Federal Reserve cut the Fed Funds rate, suspending the reduction in the amount of bonds held starting from the end of August and introducing a short-term bond buying programme with a view to bringing the level of bank reserves back to around $1,500bn and maintaining them at that level.

In 2019, the Italian economy slowed further compared to the previous year, with a GDP growth rate of 0.2% on an annual basis (+0.7% in 2018), resulting from a number of factors: the reduced contribution of net exports due to the above-mentioned slowdown in international trade, the modest trend in investments and the slowdown in private consumption. Nonetheless, the job market remained solid, with an unemployment rate of 9.8% at year-end, down compared to 2018. The inflation rate in December was 0.6% (1.2% in 2018).

Emerging markets were also impacted by the global slowdown, as well as substantial stability in the price of commodities. In 2019, growth of roughly 4% was observed, against 4.7% in 2018.

China continues to slow, with GDP growth in 2019 coming in at 6.1% on an annual basis, its lowest point since 1992 (6.5% in 2018). The slowdown is in large part attributable to the slowdown in international trade and the trade war with the United States, which hit the manufacturing sector hard, causing a significant slip in production. The difficulties in that sector led to a drop in private demand, and in particular investments, only partially offset by the positive contribution of investments of public companies. In December, the inflation rate stood at 4.2%.

Japan should achieve weak growth, estimated at around 1.0%, thanks to the contribution of unconventional, highly expansionary monetary policies and domestic demand, which offset a considerable decline in exports. Inflation remains modest (0.8% in December), although within a context of close to full employment (unemployment at 2.2% in December).

Unipol Group | Integrated Report 2019 | 23

Financial markets

The monetary expansion manoeuvres announced by the ECB in September 2019, implemented starting last November, drove all European interest rate curves down. The 3-month Euribor rate closed 2019 down by 7 basis points versus the same figures at the end of 2018, while the 10-year Swap rate declined in the same period by 82 basis points. The German government yield curve showed modest volatility on maturities up to 3 years and a reduction in long-term rates in 2019. The 10-year Bund amounted to -0.17% at the end of 2019, down by 45 basis points compared to the values at the end of 2018. The 10-year spread between Italian and German rates was 157 basis points at the end of 2019, down by 95 bps compared to the end of 2018.

The euro/dollar exchange rate came to 1.12 at 31 December 2019.

In the course of 2019, the Federal Reserve suspended the normalisation of its monetary policy, cutting the Fed Funds rate three times and injecting liquidity into the US interbank markets. Emerging market indexes also benefitted from these more expansionary monetary policies.

Insurance Sector

In 2019, due to the expected evolution of the last part of the year, taking into consideration the final data relating to the third quarter, Italian insurance premiums should reach €142.5bn (+5.4% compared to 2018).

In particular, total premiums of the Italian direct portfolio in the Non-Life business are expected to rise by 3.3% compared to 2018. In the MV sector, consisting of MV TPL, Marine Vessels TPL and Land Vehicle Hulls, premiums are expected to rise slightly compared to 2018 (+1.0%), According to ANIA data for December 2019, the average premium in the MV TPL business fell by around 1% in 2019, from €352 to €349. The ISTAT index for MV TPL prices, the value of which reflects the price lists and not those actually applied by companies, instead recorded a 0.3% decline in 2019. The positive trend in the Non-MVNon-Life business is confirmed, with premiums up by 5.5% compared to 2018. Particularly positive trends were recorded in the Healthcare segment (+8.3%), driven by positive performance in the Health (+12.3%) business, and in the Property segment (+4.5%), which benefitted from the expected growth rate of +6.1% in the Pecuniary Losses business. Likewise, growth is also expected in premiums of other Non-Life classes (+5.3%) thanks to the increase in the Assistance business (+9.8%), while the General TPL business likely achieved more limited growth (+2.3%). The negative trend in the MV segment agency channel is expected to continue, with a decline of 0.4% and an overall impact of 82.7% on total premiums, against an increase in the share of the Direct channel (+0.2%) and Brokers (+0.3%) and substantial stability in the banking channel, accounting for 3.1% of premiums. For the Non-MV classes, a decline is

Eurostoxx 50:

s&P 500:

+25%

+29%

Ftse Mib:

Nikkei:

+28%

19.8%

DAX

MSCI EM

23%

+15.4%

+3.3%

+0.0% MV

TPL

Land

+5.9% Vehicle

Hulls

+5.5%

expected in the agency channel (-0.5%) and in Brokers (-0.2%), against growth in the banking channel (+0.6%) and direct sales (+0.1%).

Class III

-6.0%

Class I

+9.5%

In the Life sector, the trend already observed in 2018 is recurred in 2019 as well, with rates of increase close to 4%, deriving primarily from sustained growth in premiums relating to class I revaluable policies (+9.5%), against a further significant downturn in the sale of class III policies (-6%). In 2019, growth continued in class IV (+36.2%) and class VI (+33.9%), while class V close 2019 with a reduction of 32.9% in premiums.

The share of the agency channel in the Life business was up by 11.1% in 2019, accounting for 14.5% of total premiums, thus suspending the negative trend recorded in previous years. The Banks and Consultants channels were down, by a total of 5.8% compared to 2018, making up 74.3% of total premiums.

24 | Integrated Report 2019 | Unipol Group

+4.0

+36.2%

Total

Life

+33.9%

business

Class IV

premiums

Class VI

Real Estate market

According to the Real Estate Market Observatory of the Tax Authorities, in 2019 the sale of homes in the residential segment continued to post a positive growth trend (+5.5%), although it was slowing compared to 2018: Milan was confirmed as one of the most active markets in Italy (+7.8%).

Real estate agent expectations are still weak, and data relating to the first half of 2019 regarding the 13 major cities show a downturn in home prices by 0.3% (except in Milan and Florence, where prices rose significantly).

In 2019, sales in the non-residential sector were up by 4.7% over 2018, driven by the tertiary-residential sector (+6.1%), while the production sector declined (0.8%). The expansion in the commercial tertiary sector reflected growth in sales of offices (+7.1%) as well as of stores (+5.9%), which benefitted from the particularly positive performance of hotels (+26.7%).

The prices of offices and stores continued to fall in 2019 as well, and has now lasted for 12

+5.5%

years. Prices of offices declined by 0.9%, while those of stores were down by 0.6%. Rents

are also down, but at slightly lower rates than prices (-0.5% for offices and -0.4% for

Residential

stores, respectively). In 2019, the cap rates remained stable at 5.1% for offices and 7.3%

Segment

for stores.

Transactions

Social and environmental scenario

Four years since the adoption of the 2030 Agenda, the national and regional indicators calculated by ASviS, the Italian Alliance for Sustainable Development, show the contradictions and critical aspects already highlighted in past years, first and foremost the absence of a clear and shared implementation strategy, which has not enabled Italy to make significant process like other countries have, thus accumulating a considerable delay. In the 2010-2017 period, there were signs of improvement in nine areas in Italy, but the situation deteriorated in another six, while for the other two it remained the same, generally far from the goals set for our country.

With respect to the three objectives towards which the Unipol Group has the most potential to contribute in Italy (see the paragraph dedicated to 2019-2021 strategies), please note the improvement of Goal 3 (Ensure healthy lives and promote well-being for all at all ages) which, over the time period considered, recorded a positive trend overall, despite the increase in the last two years in the serious injury rate due to road injuries series.

Goal 8 (Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all), the indicator of which is highly influenced by the economic cycle, showed a slow recovery compared to previous years.

In the case of Goal 11 (Making cities and human settlements inclusive, safe, lasting and sustainable), while there was an improvement over the last three years, the comparison with 2010 remains negative. The recent positive trend is especially due to the improvement of indicators relating to recycling and exposure of the human population to atmospheric pollution from particulates (PM10 and PM2.5).

Aside from these, it is worth mentioning Goal 13 (Take urgent action to combat climate change and its impacts), which follows economic cycle trends, so it improved until 2014 and then deteriorated over the next three years, corresponding to the economic recovery, showing that we have not yet managed to decouple economic growth from environmental impacts.

Goal 3

Goal 8

Goal 11

Goal 13

Unipol Group | Integrated Report 2019 | 25

Main regulatory developments

In 2019, the reference regulatory framework for the sectors in which the Group carries on business saw a number of developments and innovations.

Relevant regulations for the insurance sector

In June 2019, following a consultation process that started in the previous year, the Solvency II Delegated Acts (Reg. (EU) 2015/35) were subject to several amendments, including:

  • Long-terminvestments - reduction of capital requirements for long-term investments in equity;
  • look-throughapproach - possibility of a more extensive use of simplification relating to the application of the look-through approach in relation to collective investment undertakings and "packaged" investments like mutual funds;
  • credit risk - coordination with standards in force in the banking sector as regards the classification of own funds, exposure to central counterparties (CCP) and the handling of exposures to regional administrations and local authorities;
  • calculation of SCR - concession of simplifications in the calculation of SCR for several Life, Non-Life and health sub-modules, so as to guarantee adequate proportionality between the computational load and the real risks incurred by the insurer; and
  • Deferred Tax Assets - introduction of additional principles for the calculation of the capacity to absorb deferred tax losses

(LAC DT) in the standard formula in order to guarantee greater uniformity of application.

The Regulation entered into force on 8 July 2019, while the points relating to Deferred Tax Assets and the amendments of the method for calculating the risks of the Non-Life and health businesses came into force on 1 January 2020.

Furthermore, in this same area, the Solvency II Directive was subject to targeted amendments - aiming to improve several provisions that had encountered application difficulties - as well as an overall review process, the legislative procedure of which is still in the initial phase.

In relation to the first aspect, Directive (EU) 2019/2177 of 18 December 2019 is particularly significant, as it introduces corrections to the functioning of the country component of the volatility adjustment.

Specifically, the rules call for a reduction in the intervention threshold (from 100 to 85 basis points in terms of the country spread and the currency spread with respect to the yields of baskets of financial assets) and the national volatility adjustment component such so as to make the effective application of that correction component more frequent, while in the past it was limited to cases of strong financial market turbulence.

Also with regard to the solvency regulations, on 11 February 2019 the European Commission officially started the process of reviewing the Solvency II Directive, asking EIOPA for an overall assessment of the legislative framework of Solvency II, without prejudice to the basic principles of the Directive, such as the model for calculating capital requirements based on the calibration of risks and the market- consistent valuation of assets and liabilities.

EIOPA responded to the European Commission's request by promoting two consultations relating to the reports and disclosure to the public. The first consultation was open from 12 July 2019 to 18 October 2019, while the second consultation was part of the Opinion of 15 October 2019 concluding on 15 January 2020 on the review of Solvency II.

The European Commission will take EIOPA's advice into account in the legislative proposal to amend Solvency II, which will be presented by 31 December 2020.

On the domestic front, regarding MV TPL, Italian Decree Law 124 of 26 October 2019 converted with Law 157 of 19 December 2019 (the "2020 Tax Decree") amended paragraph 4-bis of Art. 134 of the Private Insurance Code, introducing the single family premium. The objective of that measure is to reduce the average premium paid by families, giving all members of the nuclear family the lowest merit category present within that family, irrespective of the type of vehicle owned. The measure entered into force on 16 February 2020.

With reference to primary legislation, please also note Italian Legislative Decree 49 of 10 May 2019 issued in implementation of Directive (EU) 2017/828 as regards the encouragement of long-term shareholder engagement (Shareholder Rights II), which introduced significant amendments to the Consolidated Law on Finance (TUF), including:

  • attribution to issuers of the right to ask intermediaries and central depositories to identify the shareholders holding more than 0.5% of the share capital with voting rights;
  • new transparency obligations for pension funds and insurance companies, now defined as institutional investors, when they invest in shares of companies listed in Italian or EU regulated markets (for insurance companies it is also necessary to report their investment strategies in the Solvency and Financial Conditions Report);

26 | Integrated Report 2019 | Unipol Group

  • complete voting on the Report on the remuneration policy and compensation paid by the shareholders' meeting, with both sections of the Report now being subject to shareholder vote; and
  • more detailed regulations on transactions with related parties (with the resulting amendment of Art. 2391-bis of the Italian Civil Code), in part referred to CONSOB regulations.

In terms of secondary regulations, of particular importance are the consultations on Consob and IVASS regulations on insurance distribution, which will complete the adoption of the Insurance Distribution Directive (IDD) within the Italian legal system. The most significant new elements regard: obligatory consulting for complex products; the admissibility of incentive systems only if intended to boost service quality (as set forth in the MiFID II); the prohibition against sales outside the target market, except for Life products with considerable financial content (IBIPs), for which there is an exception, subject to meeting specific conditions.

Relevant regulations for the pension sector

With regard to pensions, the most significant new element at European level is the entry into force, on 14 July 2019, of Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP), which will become applicable 12 months after the publication in the Official Journal of the European Union of the delegated acts set forth by the Regulation. The PEPP intends to offer consumers a new pan- European option for pension savings, complementary to existing government, professional or personal pension schemes. EIOPA is currently developing proposals to the European Commission on the regulatory technical standards (RTS), the implementing technical standards (ITS) and technical opinions. These proposals will be followed by the adoption by the European Commission of the delegated and implementing acts set forth in the Regulation.

Lastly, also with regard to pensions, on the domestic front, Italian Legislative Decree 147 of 13 December 2018, which entered into force on 1 February 2019, transposed in Italy Directive (EU) 2016/2341 ("IORP II") on the activities and supervision of institutions for occupational retirement provision, making significant amendments to the basic rules relating to supplementary pensions set forth by Italian Legislative Decree 252/2005 and granting the applicable regulatory power to COVIP. On the basis of the above-mentioned delegation, as of 2019 COVIP has promised some public consultations to adjust the reference regulations of the various types of Pension Funds to the new IORP II principles, introducing significant changes especially as regards transparency with respect to members, governance rules, the authorisation system and the penalty system. On conclusion of that regulatory adjustment process, still under way, important organisational revisions are expected for the various forms of supplementary pension schemes.

Tax regulations

The most significant new tax laws for the Group were introduced with the above-mentioned 2020 Tax Decree and with Italian Law no. 160 of 27 December 2019("2020 Budget Law").

The 2020 Tax Decree set forth, inter alia, the following provisions:

  • the redefinition of rules regarding long-term individual savings plans (PIR) through the cancellation of the obligation of investment in funds for venture capital set forth in the 2019 Budget Law and the re-proposition of restrictions similar to those in force until 31 December 2018, also allowing for the adjustment of the underlying instruments (internal funds and/or UCIs) and making their marketing possible again;
  • the tightening of the criminal tax offences pursuant to Italian Legislative Decree 74/2000 and the amendment of rules on the administrative liability of entities pursuant to Italian Legislative Decree 231/2001 through the introduction, within the group of offences presupposing the entity's liability, of several tax crimes concerning fraud/with particular severity.

The 2020 Budget Law contains the following provisions:

  • the reintroduction effective as of the tax period subsequent to that under way on 31 December 2018 of the ACE (Aiuto alla crescita economica - Aid to Economic Growth) relief, with the establishment of a return on capital coefficient equal to 1.3%: the ACE relief therefore applies without interruption from 2018, with both the specific rules of the 2019 Budget Law and the Growth Decree remaining unimplemented;
  • the postponement, for insurance companies and credit and financial institutions, of the deductibility contemplated in the 2019 period of the non-deducted portion of write-downs and impairment losses on receivables, and of amortisation of the goodwill and of other intangible assets that have entailed the recognition of deferred tax assets in the financial statements, as well as

Unipol Group | Integrated Report 2019 | 27

the postponement of the deductibility of the share relating to 2019 of the negative components recognised due to the application of IFRS 9;

  • the remodulation of the deductibility of IMU paid on the company's property for business use, with the following rates: 50% for the 2019 period; 60% for the 2020 to 2021 period; 100% from the 2022 tax period;
  • reopening of the terms for the revaluation of the corporate assets and for the realignment of the civil and fiscal values.

Other regulations

Another priority topic in the agenda of European policy-makers is that of sustainability. In the course of 2019, the European Commission presented a number of legislative proposals linked to sustainability, in implementation of its "Action plan on financing sustainable growth" presented in March 2018: these include in particular the entry into force of Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector. The Regulation establishes harmonised rules for financial market participants and financial advisors to promote transparent disclosures on the policies they adopt on sustainability risk, both in internal corporate governance processes and in risk management processes and in the phase of product engineering, reducing informational asymmetries with investors so they are able to choose investment products that take into account environmental, social or governance ("ESG") factors.

Also in the European realm, lastly, Regulation (EU) 2019/2144 of 27 November 2019 was approved, on type-approval requirements for motor vehicles and their trailers, and systems, components and separate technical units intended for such vehicles, as regards their general safety and the protection of vehicle occupants. The Regulation requires all newly registered vehicles to be equipped with a series of advanced safety systems such as intelligent speed assistance, an advanced driver distraction warning and in particular an "event data recorder" (or EDR). The EDR will save only data relating to accidents and will make them available to the public authorities, which will need to use them to improve overall road safety. The data saved by the EDRs will be anonymous and it will not be possible to use them to identify the vehicle or its owner. The new type-approval requirements and the new safety systems are expected to contribute - in the intention of EU lawmakers - to reducing the frequency and average cost of claims, but the impact will not be immediate, as the new rules will apply only beginning from 6 July 2022, and will gradually take effect in line with the turnover rate in vehicles currently on the road.

28 | Integrated Report 2019 | Unipol Group

Future orientation in the use of capital

The Unipol Group has created the Reputational & Emerging Risk Observatory to guarantee structured listening to signs of change in the external environment, building a 360 degree view of emerging trends, to mitigate the related risks and identify new opportunities early to strengthen loyal relations with stakeholders and the sustainability of the business model. An updated edition of the Observatory supported the definition of the 2019-2021 Strategic Plan with contextual elements and the anticipation of trends.

HYBRID

CONSUMER

WELL BEING

INSTABILITY AND POLARISATION

HUMAN

SOCIETY 2.0

SHARING

ECONOMY

NEW SKILLS

INTANGIBLES

SOCIAL

RISKS

  • Increase in lack of customer loyalty
  • Competition from new players and new channels
  • Increase in chronic and mental illnesses
  • Inaccessibility of healthcare and welfare for the most vulnerable segments of the population
  • Risk linked to transparent and responsible use of data
  • Under-insurance
  • Rising fraud
  • Competitive pressure on prices
  • Increase in insurance risk due to a reduced prevention
  • Unsustainability of the demographic pyramid and the family structure
  • Low appeal for new generations
  • Reduction in the insurance base due to asset sharing
  • Changeover in customer type (from B2C to B2B)
  • Unbrokeraging
  • Lack of a timely response to emerging trends
  • Disappearance of the vertical division between sectors
  • Skills mismatch
  • Reduction of security needs linked to the traditional scope of tangible assets
  • Growth in ESG risks
  • Increase in reputational risk

OPPORTUNITIES

  • Integrated multi-channel and multi- access strategy
  • Continuous relationships with customers and improved customer experience
  • Provision of 360° service
  • Complementarity to the Government for the management of the Welfare system
  • Predictive diagnostics service
  • Improvement in risk profiling and encouragement of healthier lifestyles thanks to technology
  • Offering low-cost coverage and instalment payments to guarantee accessibility to the most vulnerable segments
  • Offer personalisation
  • Using insurance as a planning tool throughout the life cycle
  • Insurance favouring a climate of trust between parties
  • New forms of insurance for new consumption models
  • Evolution of organisational models for agility and integrated thinking
  • Partnerships and inter-sector cooperation
  • Evolution in the role of insurance from protection to empowerment
  • Development of products and services for intangible assets

MAIN RESPONSES

  • Industrialisation of multi-channel approach
  • Process digitalisation
  • Strengthening of distinctive, value- added services
  • Bancassurance and partnership development
  • Evolution in the logic

of the integrated Welfare ecosystem (new complementary integrated welfare offering for the public, Dyadea medical centres, support for people who are not self-sufficient, flexible benefits)

  • Zero-rateinstalments
  • Tools for protecting standards of living
  • Contribution to the development of the insurance and risk management culture
  • Telematics as a lever for personalisation
  • Sales force specialisation
  • Dynamic pricing
  • Policies with km-based rates, taking a pay-per-use approach
  • Service models based on the concept of access thanks to the implementation of telematics
  • Long-termrental
  • UNICA
  • Leithà
  • Evolution "Beyond insurance"
  • Entry of new skills
  • Reputational leadership in the financial sector and inclusion of reputation in the MBO system
  • Integration of ESG factors within the ERM framework and Group policies
  • Cyber risk and reputational risk policy

Unipol Group | Integrated Report 2019 | 29

TECHNOLOGICAL

RISKS

  • Loss of oversight over data and customer relationships
  • Difficulty of attracting and retaining resources specialised in Big Data management
  • Cyber risk and privacy risk
  • Reduction of the vehicle fleet for the evolution of mobility from auto-centric to "Mobility-as-a-Service"
  • Evolution of the insurance contract due to the evolution of the concept of liability
  • Disappearance of some jobs and the birth of new ones
  • Need for retraining of human resources

OPPORTUNITIES

  • Evolution from "Payer" to "Partner and Preventer"
  • Optimisation of claims management and combatting fraud
  • Personalised, predictive and dynamic pricing
  • Development of new products and services oriented towards new mobility (multimodal mobility, assisted driving up to automatic driving)
  • Active role in the improvement of road safety
  • Continuous personalisation of products and services
  • Process simplification and optimisation

MAIN RESPONSES

  • Leadership in telematics for mobility
  • AlfaEvolution to oversee data, know-how and service model
  • Telematics as a lever for service and claims management optimisation in other areas as well
  • Mobility Ecosystem: point of reference, not only in insurance, for private mobility requirements (long-term rental, payment services in mobility, new devices)
  • Robotics projects and machine learning
  • Sensitisation on related ethics and responsibility issues
  • Orientation of skills towards higher value-added activities

DARK SIDE OF TECHNOLOGY

AUGMENTED MAN CYBORG

  • Cyber risk and privacy risk
  • Social impact in terms of the
    illnesses, addiction, distractions and disinformation
  • Cyber risk and privacy risk
  • Complexity in the assessment of new risks
  • Distinctive positioning as a "trustworthy" player
  • Customer experience
  • Training
  • Strengthening of underwriting and claims management processes
  • Instruments to raise awareness on the risks of distracted driving
  • Responsible use of data
  • Monitoring of phenomenon destined to become significant beyond the Plan horizon

CLIMATE CHANGE

ENVIRONMENTAL

RISKS

  • Physical risks (acute and chronic)
  • Transition risks (reputational, market, policy and legal)

OPPORTUNITIES

  • Contribution to the creation of a mixed public/private system
  • Development of products and services for adaptation to and mitigation of climate change
  • Campaigns of commitment in favour of the climate and environmentally responsible business policies

MAIN RESPONSES

  • DERRIS Project
  • Development of predictive models for climate risk
  • Weather alert and prevention services
  • Recourse to innovative reinsurance instruments
  • Integration of environmental factors within business policies

POLITICAL

RISKS

Geopolitical instability

Need for new skills for global view

NEW

and management of complexities

Risk of pandemics and new diseases

FRONTIERS

due to globalization

OPPORTUNITIES

  • Growth and diversification of risks
  • Aggregation processes and strategic partnerships

MAIN RESPONSES

  • UnipolRe, the Group's Reinsurance company as a vehicle company for growth in foreign markets

30 | Integrated Report 2019 | Unipol Group

"Mission Evolve": the 2019-2021 strategies

In May 2019, the Unipol Group presented the 2019-2021 Strategic Plan "Mission Evolve - Always one step ahead".

The Strategic Plan has the objective of strengthening the leadership of Unipol in the reference three-year period, establishing the basis for confirming its leadership position also beyond the Plan's scope.

Unipol is a leader in the Italian insurance sector, with 16 million customers and a market share of 25% in MV TPL and 23% in the Health business1. Over time, the Group has developed and implemented strategies that have made it possible to create value and build its distinctive assets, such as:

  • the widespread nature and professionalism of the top distribution network in Italy, with more than 8,000 points of sale and 30,000 people on its sales force, which relies on a Company/Agent Supplementary Agreement based on a unique partnership approach in the insurance sector: "Patto UnipolSai 2.0";
  • the quality and speed of the settlement model with absolutely excellent customer compensation timing;
  • the use of telematics and data as a distinctive element of customer service in terms of the offering, the efficiency of settlement processes and the evolution of pricing models.

The strategic framework defined with the "Mission Evolve" Plan calls for an evolution from an insurance leader to a leader of mobility, welfare and property ecosystems.

2019

Data

Evolution of

2021

from insurance leader

to a leader of ecosystems

technical excellence

Relationship

Evolution of

MOBILITY

MV

with the

distribution

ECOSYSTEM

Network

excellence

ASSETS

STRATEGIC

HEALTH

AREAS

WELFARE

AND LIFE

Beyond

ECOSYSTEM

Telematics

insurance

People and

HOME

Technology

PROPERTY

AND

Settlement

Shared value and

ECOSYSTEM

SMEs

model

sustainable development

By leveraging on its distinctive assets, the Strategic Plan is structured based on five strategic areas:

  1. "Evolution of technical excellence", to guarantee business profitability by continuously seeking out increasingly advanced levels of excellence, exploiting technical and technological leadership in the areas of pricing, risk selection and settlement capacity.
  2. "Evolution of distribution excellence", by leveraging the UnipolSai brand as a service leader, increasing the frequency and effectiveness of contact with Customers, maximising the commercial effectiveness of the top Italian insurance network with new professional figures, the integrated support of remote channels and Bancassurance and Partnership development.
  3. "Beyond insurance", with the aim of becoming the point of reference, not only in insurance, for private mobility, welfare and property needs, offering Customers an ecosystem of skills and assets integrated at Group level.
  4. "People and Technology", with investments to boost the speed of the evolution of the operating model oriented towards simplification and efficiency.
  5. "Shared value and sustainable development", to create shared value for the Group and for its stakeholders and contribute to reaching the SDGs by reducing underinsurance and developing products and services that increase the security, resilience and sustainability of people, companies, cities and territories.

1Market shares referring to the year 2018.

Unipol Group | Integrated Report 2019 | 31

The Mobility ecosystem involves the launch of new mobility solutions thanks, amongst other factors, to long-term rental, the online platform for used vehicles and payments in mobility, as well as further evolutions in the technological centre of excellence for Telematics in the MV area. The objectives for 2021 are to reach 5m UniBoxes installed, 60,000 long-term rental contracts and more than 250,000 customers using the UnipolSai app for digital payments in mobility.

The Welfare ecosystem includes the offer of new solutions thanks to the flexible benefits platform (with the objective of 3,000 participating companies by the end of 2021), the Internet of Things ("IoT") and telemedicine, as well as solutions to optimise the private healthcare spending of Italian families (with the distribution in the course of the Plan of 300,000 SiSalute cards for the intermediation of healthcare services).

Lastly, the Property ecosystem involves the evolution of the integration between insurance, home automation and service by taking an open architecture approach, as well as further evolutions in synergistic areas for the Group (such as real estate) and the development of utilities. The Group aims to reach 5m real estate units on which to develop technological solutions by the end of 2021.

The 2019-2021 Plan includes within its strategic objectives the creation of shared value and the contribution to sustainable development, beginning from the conviction that the opportunities and well-being of the customers and people who interact with Unipol are necessary conditions for the capacity to develop in the market and the Group's sustainable success.

This integration results from the approach adopted in the phase of defining the Strategic Plan, when every action amongst those established was analysed by the relative manager according to two aspects: its potential to create shared value and its potential to contribute to reaching one or more SDGs. In this manner, the culture of sustainability has strengthened amongst the business functions and a contribution has been made to basing strategic decisions on sustainability and shared value.

Some of the most significant actions in this sense include:

  • the development of predictive climate risk models for companies, to boost the resilience of the various sectors and support adaptation to climate change;
  • the development of market offers that promote sustainable development models through the innovative use of the IoT, with a particular focus on urban areas, to improve the sustainability of cities;
  • the definition of accessible solutions for the integration of public welfare, extending protection to broader segments of the population and supporting prevention, in order to expand and qualify the welfare offering.

In the strategic planning phase, the Group identified the priority SDGs which it has undertaken to contribute towards: Goal 3 "Good health and well-being", Goal 8 "Decent work and economic growth" and Goal 11 "Sustainable cities and communities".

For more details, please refer to the page dedicated to the 2019-2021 Strategic Plan on the website of the Unipol Group

The Unipol Group's climate strategy

In 2015, in its position paper entitled "Unipol for the climate", the Unipol Group proposed a model for the prevention and management of catastrophic weather events based on a public/private collaboration, which adopts insurance mutuality mechanisms to handle the growing risks deriving from climate change and handle the significant compensation required.

In the Sustainability Policy, approved by the Board of Directors, the company commits to protecting the environment and combatting climate change.

As regards strategic planning, aspects relating to mitigation (in particular CO2 emissions per employee) were integrated in the last three strategic plans, while aspects relating to adaptation and resilience (like the overall incidence of the premiums of products with a social and environmental impact) were included in the last two.

The 2019-2021 Strategic Plan contains objectives linked to the mitigation of and adaptation to climate change in relation to:

  • investment activities: the objective of integrating ESG factors within company strategies resulted in the Group formalising its commitment to the decarbonisation of new investments2. The Strategic Plan also calls for an increase in the amount of thematic investments for SDGs, including those linked to the mitigation of and adaptation to climate change.
  • Commitment set forth in the Investment Policy (through dedicated Guidelines for managing investment activities with reference to responsible investments, or the "SRI Investment Policy"), see the details in the "The monitoring of social, environmental and governance risks" section.

32 | Integrated Report 2019 | Unipol Group

  • insurance products and services: the company strategy aims to develop products and services to increase customer adaptation capacity and resilience. Innovative solutions have already been developed for the market to deal with the impacts of climate change and to manage the aftermath of natural catastrophe events. The new Three-Year Plan also calls for the development of innovative risk mitigation techniques and an increase in the penetration of products with environmental value in the overall insurance portfolio. Also for underwriting activities, the Group plans to decarbonise the customer portfolio.3

Lastly, the real estate strategy over the Plan period calls for a continuous improvement in energy efficiency both in the construction of new buildings and renovations and in the management of existing buildings. The energy management system certified in accordance with the ISO50001 standard certification process, in place for the main 19 buildings for business use, will be extended to all buildings for business use by the end of the Strategic Plan.

  • Commitment contained in the Underwriting Policies for the Non-Life Business and for the Life Business, see details in the "The monitoring of social, environmental and governance risks" section.

Unipol Group | Integrated Report 2019 | 33

Stakeholder engagement tools and processes

In 2019, the Group carried out significant direct listening and engagement actions with stakeholders. Meetings and dialogue with stakeholders are structural elements of the Group's 'modus operandi', in order to understand and respond to needs effectively, improve its service capacity, and guarantee accessibility and transparency in its actions.

LISTENING/ENGAGEMENT

Stakeholders

Channels

Issues

EMPLOYEES

Focus Group

Construction of the materiality matrix

Focus Group and Surveys

Work-related stress

Shareholders' meetings and trade union meetings

Regulatory, economic and support conditions

Surveys

Corporate welfare

Surveys

Flexible working

Intranet Community Platform

Training, Services and Utility

Annual survey based on the Rep Trak® model

Reputation

SHAREHOLDERS

Shareholders' meeting

Performance and trends

Periodic reporting

Performance and trends

Website and social media

Performance and trends

CUSTOMERS

Individual interviews and Surveys

Construction of the materiality matrix

Focus Group with trade associations

Definition of product characteristics

Periodic Customer Satisfaction Index surveys

Listening and customer satisfaction levels

Net Promoter Score

Customer experience assessment

Website and social media

Products and services mix

Annual survey based on the Rep Trak® model

Reputation

AGENTS

Meetings with the Agent Group chairmen

Strategic objectives and improvement of decision-making

Operations work groups

processes

Technical Committees

Product development

Agent Groups

Business initiatives

Focus Group

Construction of the materiality matrix

Results and Objectives

Business Roadshow

Action Plan

Business reliability

Network satisfaction monitoring survey

Satisfaction and loyalty

Annual survey based on the Rep Trak® model

Reputation

SUPPLIERS AND

Individual interviews

Construction of the materiality matrix

BUSINESS PARTNERS

Partnerships

Research and Innovation

Suppliers portal

Management, Selection, Periodic Assessment and

Monitoring

COMMUNITY

Individual interviews with NGOs

Construction of the materiality matrix

Interviews with interest protection associations

Construction of the materiality matrix

Partnerships with universities

Recruitment, Research and Innovation

Annual survey based on the Rep Trak® model

Reputation

Surveys with Local Member Organisations

Construction of the materiality matrix

FINANCIAL COMMUNITY

Meetings with Investors

Strategy and Performance

Questionnaires to SRI rating agencies

Sustainability Strategy and Performance

Meetings with sector associations

Sector issues

Annual survey based on the Rep Trak® model

Reputation

INSTITUTIONS

"ORA- Open Road Alliance" Project

Participatory project on sustainable mobility

"Welfare, Italia" project

Advocacy on White Economy opportunities

Issue-specific meetings with the legislator and

Legislation and Regulations

regulators

Annual survey based on the Rep Trak® model

Reputation

Key:

Inclusion

Listening

34 | Integrated Report 2019 | Unipol Group

Over the year, the 2019-2021 Strategic Plan was presented not only to the financial community, but also to other key Group stakeholders.

All Group employees were engaged through four presentation events (in Milan, Rome, Turin and Bologna) intended to share the objectives and justifications of the Three-Year Plan. A further step in the process, also in Bologna, was dedicated to Agents.

The roadshow was enhanced with 7 local meetings dedicated to the Unipol Regional Councils (CRU) consisting of representatives of the Member Organisations, which are the main organisations of employees (the confederated unions CGIL, CISL and UIL), contracted workers and the associated small and medium enterprises (CNA, Confesercenti, CIA) and cooperative companies (Legacoop), with a view to strengthening the structured relationship with those players and reflecting on the possible development of joint projects in key Strategic Plan areas.

Material topics

Growing demand for company transparency (including regulatory obligations as well as recommendations that significantly influence stakeholder assessments of companies) is met by a focus on the aspect of materiality. The company is asked to identify relevant corporate governance, social and environmental topics to understand how it acts and what main impacts it has on the context.

This identification is the result of a structured process, the materiality analysis, which in the view of the Unipol Group is strictly linked to and influenced by the strategic planning process. Along with the development of the 2019-2021 Strategic Plan, a new analysis was therefore performed, which underlies non-financial reporting for the three-year Plan period.

The process was started by structuring a tree of sustainability topics important for the sector and for the company, built based on the evidence emerging from the Reputational & Emerging Risk Observatory.

The assessment of material topics for the company, which identified priorities in relation to the internal dimension, was performed considering the business model, the strategy and the main risks, as well as the impacts of the company's activities. For this analysis, documentary sources were used, such as the Strategic Plan and the study carried out by The European House - Ambrosetti on the non- financial impacts created by the Group, and the Managers of the Key Functions and the Top Management were consulted; the results were validated by the Chief Executive Officer and Group CEO.

As regards the relevance for stakeholders, the order of priority of the topics was defined through a set of activities aiming to take into consideration:

  • the interests and expectations of the parties concerned; to this end, in 2019 the Group carried out a detailed listening process which involved corporate and retail customers, employees and agents, the representatives of the organisations constituting the Unipol Regional Councils, suppliers and opinion leaders;
  • main sector issues, public policies and regulatory stimuli; to this end, a number of contributions from the European Commission, EIOPA and other authoritative sector and cross-sector bodies were analysed and evaluated.

Lastly, the materiality matrix was approved by the Board of Directors.

The topics subject to analysis, represented below in relation to the five strategic areas of the 2019-2021 Plan, were deemed significant internally and, to an even greater extent, on the basis of discussions with the external environment; they will therefore all be handled with a different weight in relation to their significance with respect to the two dimensions. A particular focus was dedicated to topics positioned in the upper right quadrant of the matrix, which represent fundamental work areas through which the Group intends to contribute to reaching the three Sustainable Development Goals identified by the Strategic Plan.

Particularly with reference to the material topic "Actions for adaptation to and mitigation of climate change", to define the areas of impact on which to report, the Group took as points of reference both the TCFD Recommendations and the European Commission's climate reporting guidelines, which lay out the informational expectations of stakeholders with regard to the insurance sector; therefore, both financially significant aspects as well as environmentally and socially significant aspects ("dual materiality") were included in summary form in the Annual Integrated Report. In defining the priority content, additional requests for context (expressed for example in the CDP questionnaire and SRI analyst surveys) were also taken into account, and specific analyses were performed with opinion leaders specialised in this area.

Unipol Group | Integrated Report 2019 | 35

CONNECTION BETWEEN MATERIAL TOPICS, MACRO TRENDS AND SDGs

SOCIAL

During the

Business Plan

Sharing Economy

horizon

Hybrid consumer

Beyond the

Business Plan

Instability and polarisation

horizon

Human Society 2.0

Well being

New skills

Intangibles

TECHNOLOGICAL

Internet of Everything

COMPETITIVE

ENVIRONMENT

New Mobility

Artificial Intelligence and Robotics

Dark Side of Technology

Augmented man - Cyborg

ENVIRONMENTAL

Climate Change

POLITICAL

New frontiers

Materiality matrix

High

Customer centricity

Risk and control culture

Fair and responsible

business competition

Fairness in the sale of

products and services

Solutions that promote sustainable and responsible conduct

Development of human capital

Product and service innovation

Data protection and leveraging

Actions for adaptation to and mitigation of climate change

Most relevant topics (for

Development of partnerships with public and private players

Contribution to sustainable

Farsightedness in responsible capital and

development in the various

remuneration management

spheres of influence

the company and for

Financial inclusion and

stakeholders) connected

to the SDGs

financial education

Relations with the agency

Evolution of technical

stakeholders

Diversity management

excellence

Evolution of

for

distribution excellence

Beyond insurance

Materiality

People and Technology

Shared value and

Materiality for the Group

sustainable development

36 | Integrated Report 2019 | Unipol

Sharing of a common corporate culture

High

Mission and Vision

Corporate Values

PRODUCT

CONSTRUCTION

Performance

Governance to support changes in the Business Model

Input Values

Financial capital

Agencies

Bancassurance branches

Settlement centres

Management offices

Business know-how

Technological know-how

Investments in innovation

Algorithms and analysis models

Selection processes and network management

Service innovation

Employees

Unica-Unipol Corporate Academy

Customers

Integrated Network Partners and

suppliers

Ownership structure

Natural capital

Consumption

38 | Integrated Report 2019 | Unipol Group

UNDERWRITING

AND POLICY

DEVELOPMENT AND

MANAGEMENT

MANAGEMENT OF

DISTRIBUTION

CHANNELS

INWARDS

REINSURANCE

CSR POLICY

REAL ESTATE

CLAIM

MANAGEMENT

FINANCE

OUTWARDS

REINSURANCE

Shared Value

LIFE

SETTLEMENT

Tourism Agriculture Medical

Asset

Claim Management

management

Non-Life & Life

Output values

Financial capital

Capital strength

Prudent financial management

Productive capital

Satisfaction of security and well-being requirements

Support in the transition towards more efficient, safe and sustainable mobility

6.8m

people protected

with welfare

insurance coverage

More than 40bn km travelled by vehicles with "pay per use" policies

Efficient network

Integrated multichannel model

Extensive presence in reaching new targets

Intellectual capital

Product innovation

Service innovation

Ecosystem development

Human capital

Growth in skills

Entrepreneurship

Employee well-being

Social and Relational Capital

Customer satisfaction

Benefits from the integrated network Assistance service speed

Natural capital

Emissions

Contribution to the growth of the country, supporting SME development and increasing insurance knowledge

Support to the realisation of the 2030 Agenda and contribution to combatting the climate emergency

Strengthening of reputation

€747m

for SME

protection policies

€385m

thematic and

impact

investments

69.7 (+0.7 pp)

Reputational

index with public

opinion in Italy

Unipol Group | Integrated Report 2019 | 39

Capital performance

Financial Capital

As an insurance Group, Unipol's capital management strategy focuses on structurally sustaining financial returns in the medium and long term by means of policies that allow for the maintenance of an adequate level of solvency.

In 2019, the Unipol Group reached a Solvency II ratio (calculated on the basis of the Partial Internal Model) of 1.82 (1.63 in 2018).

In quantitative terms, the Group's Risk Appetite is determined on the basis of the following elements: capital at risk, capital adequacy and Liquidity/ALM ratios.

Quality objectives are also defined in reference to compliance, strategic, emerging and reputational risks and in relation to business continuity as part of operational risk.

By means of prudent management again in 2019, the Unipol Group continued to diversify its investment asset allocation and maintain a stable level of liquidity sufficient to meet the operational requirements of the Group companies.

Since 2012, the Group has developed a systematic approach to orienting the investment of its financial assets according to sustainability and responsibility criteria, performing ex post quarterly monitoring of risks relating to sustainability4; below are the results of the monitoring for the year 2019.

Assets subject to sustainability monitoring and percentage of investments satisfying sustainability monitoring criteria

€51.3bn

84.8%

98.7%

Amount of class C, D

€50.6bn

Percentage of assets

equity and debt

Percentage of assets

Amount of assets

instruments, Assets

subject to sustainability

deemed sustainable

deemed sustainable

subject to

monitoring out of total

following monitoring

following monitoring

environmental and

assets under management

social monitoring

(direct and indirect)

ESG CRITERIA FOR PORTFOLIO MONITORING

Black list companies

Area of observation for countries

Unconventional

Human

rights Environmental

Corruption

Gambling

Environmental

and

Fight against

weapons

violations

protection

workers' rights

corruption

The Group has followed the Principles for Responsible Investment (UN PRI) of the United Nations since 2017, and in 2019 it made a further step towards financially supporting sustainable development, approving in December the "Socially Responsible Investing Policy" (SRI Policy), presented in detail in the "The monitoring of social, environmental and governance risks" section.5

  • This monitoring is performed with the support of the external consultant ECPI, a company specialised in the assignment of ESG ratings and building sustainability indexes.
    5 The Guidelines establish additional exclusion criteria not included in the monitoring performed for the year 2019 as they entered into force at year-end.

40 | Integrated Report 2019 | Unipol Group

Equity in the distribution of the value created

The distribution to stakeholders of the value generated is calculated according to the GRI 201 Standard of the Global Reporting Initiative, applied so as to capture the characteristics typical of the insurance business.

The "Direct economic value generated" is calculated from the sales revenues, obtained from the Group Consolidated Income Statement. The value generated was distributed primarily to insurance customers in the form of claim payments (€9,975m).

Economic value generated and distributed

Value generated

Economic value

Value distributed to

806

distributed

other stakeholders

35

€mln

€mln

2,983

19.8%

24.4%

€mln

17,086

14,412

7.4%

4,437

€mln

€mln

7.0%

€mln

13,262

9,975

3.8%

37.4%

€mln

€mln

Net premiums

Commission

Payments to policyholders

Suppliers

Shareholders

earned

income

Agents

Financial income

Gains on sale of

Value distributed to other stakeholders

Government

assets

Providers of

Employees

loans

Community 0.2%

Productive Capital

The distribution network

The Group covers the Italian territory through an extensive 33 compared to 2018) and points of sale that are part of the

network of agencies and sub-agencies, in addition to 589 brokerage firms (- bancassurance partnership.

Local distribution network

132

746

1,115

1,506

1,105

5,547

2,610

5,585

774

Agencies

Sub-agencies

601

Bancassurance

2,664

branches

-5.2% vs 2018

-0.5% vs 2018

+1% vs 2018

1,063

457

1,873

1,205

501

8.826

North West

North East

Centre

South and Islands

Abroad

Unipol Group | Integrated Report 2019 | 41

In 2019, 381 reorganisation initiatives were carried out, 170 of which were groupings with transfer of portfolio or operations aimed at promoting the growth of the size of the involved agencies.

The reorganisation of the agencies pursues an objective of repositioning them in the market, through growth in size and the evolution towards a more managerial, solid and organised model. The average size of the agencies rose by 7% in 2019. 18% of agencies are in municipalities with less than 15 thousand inhabitants.

The Group's presence throughout the country is also guaranteed by the presence of UnipolSai and Siat settlement units.

Outside Italy, the Group operates in Serbia through a multi-channel network made up of both internal and external structures. The 132 points of sale (-6 with respect to 2018) rely on roughly 960 external partners and employees to provide services mainly in the northern part of the country, supported by direct sales channels through the Internet.

Breakdown of premiums by channel

Change p.p. 2018-19

1.4

16.2

Agency Network

pp

Management/

+3 pp

21.2

Broker

+2 pp

Bancassurance

61.1

Network

-1 pp

Other

In the course of 2019, the centrality of the agency network was confirmed by the considerable investments made in network evolution in terms of simplification and digitalisation, to ensure innovation and improvement in the operating model, and in activities supporting development in line with business plan objectives.

Real estate portfolio

In the real estate sector, the Unipol Group is one of the top players in Italy in terms of the extent of its assets. The Group's properties can be broken down into two macro-categories:

  • property "used by third parties", buildings owned by the Group but not used by Group companies. These assets are leased primarily to third parties based on approximately 950 lease agreements;
  • "instrumental" property, assets used mainly to carry out the business of the Group Companies.

Real estate assets by intended use

11

4

4

Condominium

9

or Industrial units

Offices

Medical Facilities

9

Hotels

51

Commercial

5

Residential

Real estate funds

Land

and Equity

20

42 | Integrated Report 2019 | Unipol Group

In 2019, significant renovation works were carried out in the Milan and Turin markets, including the renovation of the Principi di Piemonte Hotel in Turin and the Milano Verticale Hotel in Milan, both managed by UNA Group.

Geographical breakdown of the real estate assets

53%

NorthWest

19%

NorthEast

35%

23%

Centre

South and Islands

4%

1%

Abroad

Intellectual Capital

The Group's intellectual capital includes a significant portion of the distinctive assets which Unipol leverages to implement its strategies (settlement model, use of telematics and data). This capital is continuously enhanced thanks to investments in innovation, which again in 2019 regarded a range of areas and initiatives, represented in the figure below.

Unipol Group | Integrated Report 2019 | 43

Innovation projects by ecosystem

OBJECTIVE

EXPANDING SERVICES FOR CUSTOMERS AND AGENTS

EXPANDING THE

OFFERING

AUTOMATING

PROCESSES

IMPROVING UNDERSTANDING OF CUSTOMER NEEDS AND RELATIONSHIPS

PREVENTING AND

PROTECTING WITH

THE SUPPORT OF

TECHNOLOGY

STRENGTHENING TECHNICAL EXCELLENCE WITH THE SUPPORT OF TECHNOLOGY

PROJECTS

PHASE

ECOSYSTEM

Innovative NLT in the agency

Telematic device for motorway toll payments

App Services for payments in mobility

Multichannel sales

Gift Card

Welfare Services in the Agency - Innovative "caring" models for customers

Utility Services in the Agency

Robotic Process Automation

Acquisition and automatic analysis of images to support settlements

Social Intelligence

App for dynamic customer feedback

Platform for managing and monitoring customer relationships

Platform for retrieving incomplete quotes

Platform for managing and monitoring customer communication campaigns

Evolution of UniSalute digital touch points

New assistance services and dangerous driving style alerts

Development of vehicle telematic box hardware with proprietary technolog

Proprietary anti-abandonment device for children's car seats

App for trying out new methods for measuring driving behaviour

Kit to monitor the health of the elderly

Anti-aggression bracelet

Evolution of the home automation and service kit

Support for the analysis of weather risk

Big Data Analytics for tariff sophistication

Automatic analysis of documents supporting claim management

Settlement - Telematic accident reconstruction

Support for outwards reinsurance in the General Classes

Key:

INCUBATION EXPERIMENTATION MARKETING

44 | Integrated Report 2019 | Unipol Group

Investments in data and telematics have generated concrete returns in the business, such as: the improvement of the capacity to identify fraud, through the automatic and "predictive" flagging of suspicious claims; a reduction in the cost of claims; the expansion of knowledge of real customer needs, the creation of new services and products offered to customers in a range of segments. These effects are presented below, as regards the settlement area, as well as in the subsequent sections.

In 2019, the "electronic settlements" process, which uses information provided by the black box for MV claims in an innovative manner to support consistency checks between statements provided and how the event actually took place. The new Real Time 2.0 process was also launched, which envisages the opening of a claim from the moment of a crash detected in black box data.

The effectiveness guaranteed by the use of telematic data in the settlement phase is more significant in areas which historically have higher claims frequency, in particular with injuries, as well as higher incidences of fraud, where the black box was used for a better assessment of the expected risk and is, as a result, more widespread.

The presence of the device is particularly evident especially in the South, where the claims supported in the preliminary investigation stage by the presence of the black box account for 70% of the total, compared to 50% at the national level.

The use of telematic information makes it possible to speed up settlements for insured customers and reduce the average cost of the claims (which declined by -1.6% in 2019 especially thanks to the decrease in the average cost for claims in Central and Southern Italy).

Several of the Group's internal structures and companies make a particularly impactful contribution to innovation processes, including:

  • the Innovation Division, which has the company mission of identifying and proposing new operating solutions, startups and/or emerging technologies to the various business areas and Group companies, by performing continuous research and monitoring, also in collaboration with the main international players in the sector. The Division also supports the business areas/companies in defining and implementing business cases for the validation of the opportunities identified;
  • the Telematics and Insurance Services Division which, through its constant commitment to scouting (including internationally), identifies new insurance and other business ideas, to pinpoint interesting services for the Company which are useful to support customers in their daily lives, with a particular focus on event prevention; the experimentation and, if applicable, industrialisation phases are activated with the involvement of other innovation players in the Group;
  • the IT Services Division, which ensures digital innovation for the creation of new technological and process solutions to support new business models, by identifying and trying out IT technologies, architectures and solutions, defining Group guidelines and coordinating the evolution and management of IT solutions for the Group companies and the Agency network;
  • Alfaevolution Technology, which provides, manages and analyses the data in the black boxes linked to MV TPL Policies, the telematic kits connected to property insurance policies, the telematic devices associated with pet protection insurance policies; it also develops and manages the new mobile payment services.
  • Leithà, a factory that develops applications and components of data-intensive applications in agile mode with the goal of protecting, leveraging and enhancing the Group's informational assets, to support the development of new products and processes and the evolution of the business.

The Group also frequently involved and leveraged the contribution of innovative start-ups, universities and research networks in the innovation processes.

In 2019, investments in ICT amounted to €79.3m, and were aimed primarily at enabling the creation and rapid integration of new IT components and ecosystems (around 30%) and the expansion of interaction with new channels and new devices of customers, agents and partners, to favour growth opportunities in the mobility, welfare and property ecosystems (more than 20%).

During the year, 78.1 Terabytes of telematic data were managed.

Unipol Group | Integrated Report 2019 | 45

Human Capital

Employees by sector

201 227

50

522

Insurance

Real estate

12,337

Tourism

-13.4%

Healthcare

vs. 2018

Other

11,337

The number of Unipol Group employees at 31 December 2019 declined significantly (-2,243 people) compared to the previous year due to the transfer of Unipol Banca and Finitalia to BPER Banca; the decrease was offset only in part by the acquisition of Car Server and Gieffe Flotte as well as the establishment of the Dyadea Medical Centres.

On a like-for-like basis, there was a decline of 39 resources, equal to roughly 0.3% of the workforce.

3%

Women represent roughly 54% of the workforce, whilst there are 623 women in managerial positions (+3.8% compared to the previous year on a like-for-like basis), representing 26.8% of the population in those roles.

Around 18% of the workforce (2,184 workers) worked part-time, an increase of two percentage points compared to 2018; 86% were women (28% of the total female population).

Roughly 1% of the workforce is apprentices, interns and temporary workers.

Number of employees by geographical area

6,643

5,694

2,276

2,210

2,534

1,628

695

784

273

490

865

582

4,486

4,162

1,479

763

1,447

12,337

Total

NorthWest

NorthEast

Centre

South and Islands

Abroad

Number

27

174

596

1,528

4,967

3,558

945

254

108

180

201

2,124

8,525

1,199

288

Officers and

Senior

Administrative

Call Centre

Blue-collar

Executive

middle

staff

personnel

workers

managers

46 | Integrated Report 2019 | Unipol Group

The overall employee turnover rate, on a like-for-like basis compared to the workforce at 31 December 2019, was 21.8% (14.3% net of the UNA Group hospitality sector), with the incoming turnover rate (12.3%) around 3 percentage points higher than the outgoing turnover rate (9.5%), confirming the Group's capacity to create net employment: over the year, 1,514 employees were hired, while 1,174 left the Group. Temporary employment in the hospitality sector significantly influences turnover data due to the seasonal nature of the business, as does the 34.8% recognised for the foreign company DDOR.

Recourse to internal mobility involving a change in role concerned 568 employees in 2019.

Turnover by gender and age brackets

(Recruitments)

(Terminations)

57

244

Women

198

573

186

Man

771

442

Up to 30 years

1,514

Age brackets

1,174

193

Age

272

Aged 31 - 40

329

601

brackets

Aged 41-50

743

279

Aged 51-60

48

Up to 60 years

Number

Up to

Up to 30

Aged

Aged

Aged

60

years

31 - 40

41-50

41-50

years

700

2,704

4,048

3,989

896

Employees with a permanent contract make up 95.8% of the staff (of which 46.5% men and 53.5% women), confirming the focus on the protection of stable employment, while recourse to staff leasing agreements remains marginal, involving 67 employees. Employees with a fixed-term contract make up 4.2% of the staff (of which 38.7% men and 61.3% women). For employees working abroad, 82% had a permanent contract (of which 41.4% men and 58.6% women).

In the course of 2019, 144 employees covered by the Insurance and Commerce contracts were made permanent.

The average age of personnel on staff at 31 December 2019 is 47 years, representing a slight increase compared to 46.3 years in 2018, while the average seniority is confirmed at just over 16 years, the same as last year. People over 60 represent 7% of the company population6.

University graduates constitute 42.8% of the workforce (+3.2% compared to 2018) and secondary school graduates 46.7% (-2.7% compared to 2018).

Overall at 31 December 2019, there were 570 people with disabilities or belonging to the protected categories.

Unipol follows the "Charter for equal opportunities and equality at work" and, as part of a process of continuous improvement and transparency, has defined precise guidelines in its personnel management policies to create a modern, respectful working environment that promotes opportunities for everyone.

  • The breakdown of employees by category and by age brackets shows that the majority falls in the 51-60 age range, comprising: 60% senior executives, 47% officers and middle managers, 32% administrative staff and 30% call centre personnel, while accounting for only 5% of blue collar workers. Vice versa, in the 31-40 age range, 2% are senior executives, 9% officers and middle managers, 34% administrative staff, 27% call centre personnel and 29% blue collar workers.

Unipol Group | Integrated Report 2019 | 47

UNICA, the Unipol Group's Corporate Academy, is focused on professional training for all of the Group's structures present in Italy; on 2 July 2019, the Academy obtained the ISO 9001:2015 Quality Certification.

In 2019 a total of €12.1m was invested in training for employees and agents (-13.8% compared to 2018 on a like-for-like basis): direct investments came to €5.3m, while indirect investments7 amounted to €6.8m. In the Group, more than 1m training hours were completed, of which 82% by the agency network and 18% by employees, with 45% by women employees (14.1 hours on average) and 55% by men employees (20.4 hours on average)8.

The hours of training are down slightly compared to the previous year, also in relation to the launch of the new Business Plan, entailing the deferment of training initiatives pending the activation of the actions set forth in the Plan. The most significant initiatives in 2018 included the Managerial Curriculum in Employee Management and Development (Master and Advanced), the concluding phase of which involved in the classroom in 2019 roughly half of the people compared to those participating in the previous year; lastly, in 2018, there was a peak in participation in the compulsory e-learning courses (Safety, OMM, Anti-Money Laundering, GDPR, Cyber Security), also due to the deployment of awareness-raising initiatives.

During the year 87% of the potential recipients were involved in training activities organised by Unica, up compared to the previous year. In particular, 9,937 employees and 28,702 secondary network agents and co-operators were reached.

For employees, 61% of total hours were classroom training, while for intermediaries on-line distance courses ("FAD") continue to represent the predominant training mode.

A total of 1,152 courses were created and held.

Training provided to employees by role and average hours by role

57,224

(26.7 hours on average)

3,845

Officers and

(19.7 hours on average)

middle managers

Total hours provided: 214,014 (17.4 hours on average per employee)*

The scope does not include the company CarServer, acquired by UnipolSai in the second half of 2019.

129,305

14,839

8,803

(14.8 hours on average)

(11.9 hours on

hours

average)

average)

Administrative staff

Call Centre

Blue-

personnel

collar

workers

/Other

The new training activities activated in 2019 for employees aim to contribute to developing new professional skills to support the achievement of Strategic Plan objectives, as takes place in courses for Change Managers and Sales, Welfare and Life Tutors, which are new roles in the Sales and Welfare and Life Divisions, intended in particular to support the Agencies in their development processes, as well as developing widespread digital and emotional intelligence capabilities, like the Change Management course which over the three- year period will involve all colleagues who are changing role with a view to supporting them during this phase of transition.

The investment in younger colleagues continued with the launch of the second edition of the Unipol Insurance Master Program, which involves 20 recent graduates (selected from amongst 982 candidates) in an inter-functional training course that integrates classroom training with in the field experience, and the second edition of the Unipol Innovation Laboratory, as part of the Next Generation project, in which 47 young employees worked on their ability to develop innovative business proposals.

The company collective labour agreements entered into within the Group provide robust welfare programmes for all employees, including healthcare for family members, coverage for accidents, even outside of work, and supplementary pension protection.

To cover the workers of all sectors in which the Group operates, there are 16 Pension Funds, in which 83% of employees are enrolled, and 16 Assistance Funds, of which 84% of employees are members.

These contractual instruments are accompanied by structured "second-level" corporate welfare policies, which translate into the design and promotion of services aimed at satisfying the most important needs of the various phases and conditions of life of all colleagues, targeted at improving their quality of life and facilitating more effective synergy between work and the responsibilities of family life. In 2019, the Group launched an innovative process of evaluating the impact of corporate welfare, to map and measure the effects of the

  • Understood as the opportunity cost of employees, which to participate in training activities do not perform their usual work activities
    8 The training data do not include the CarServer company, acquired by UnipolSai in the second half of 2019.

48 | Integrated Report 2019 | Unipol Group

initiatives not only for employees and their households, but also for the company and for society as a whole, and verify that the outcomes meet the objectives Unipol has set for itself in this area9.

The Health and Safety Management System adopted by the Unipol Group to define the methods for managing aspects relating to worker health and safety in the workplace and the Group's real estate assets is inspired by the BS OHSAS 18001:2007 standard.

To support occupational health and safety, aside from routine activities such as workplace inspections, health monitoring and activities linked to properly following reference laws (around 5,400 visits made), voluntary health monitoring activity (around 2,500 participants) and work-related stress assessments continued in accordance with the INAIL 2017 Guidelines.

In 2019, on a like-for-like basis, the total number of accidents at work fell by 5% compared to 2018, due to the decrease in accidents in transit. As a result of the accidents recorded, more than 4,500 work days were lost.

Accidents 10

Accident frequency by sector11

Total number of accidents

182

of which % suffered by men

35%

Insurance

2.1

of which % suffered by women

65%

Real estate

9.6

of which % in the workplace

31%

Tourism

8.3

Healthcare

7.5

of which % in transit

69%

Other

0

Non-presence in the workplace due to reasons other than holidays, referring to all of the Group's Italian insurance companies, stood at roughly 9.2% of working days at 31 December 2019, stable with respect to 2018.

Basic training paths on safety were completed by 9,317 employees and 152 executives of the insurance sector companies operating in Italy. Refresher courses are also available for employees on the basis of frequencies established by regulations.

For the companies operating in Serbia, safety training involved 1,373 participants and focused on first aid and fire prevention.

In the diversified companies, 642 employees and 29 executives12 were trained on the various aspects of worker health and safety.

On Mobility Management, the Home-to-Work Travel Plan (Piano Spostamento Casa Lavoro - PSCL) continued to be applied and has been extended to 9 different cities including around 40 offices.

The model of industrial relations which the Group, in concert with the trade unions, has consistently promoted, is inspired by discussion between the social parties as a method for identifying the most suitable solutions and instruments to handle topics like organisational flexibility and solutions for implementing the "People and Technology" area of the Strategic Plan.

In 2019, as part of the activities for implementing the Plan, a union agreement containing three points was signed:

  • voluntary pre-retirement arrangements for employees meeting pension requirements by the end of 2023, with more than 800 pre- enrolments;
  • leveraging of personnel by activating training programmes for professional mobility;
  • hiring of 300 new professionals with permanent contracts, contributing to the development of the company's competitive capacity.

Over the year, negotiations were launched and developed for the renewal of the supplementary labour contract ("CIA") for the insurance sector, which will continue in the course of 2020.

Overall, for all Group companies, 125 meetings were held in the course of the year and 18 union agreements were signed. A total of 189,857 hours of union leave were used, 62 union meetings were held (dealing primarily with topics linked to the approval of the union platform for the renewal of the insurance sector CIA) and there were 116 hours of strikes in solidarity with national issues taking place outside the company, not specifically regarding the insurance sector.

  • Results of evaluation of impact of Corporate welfare are reported in detail in UnipolSai Group Sustainability Report 10 The scope does not include the company CarServer, acquired by UnipolSai in the second half of 2019.
    11 Frequency rate=(number of events only workplace/ number of hours worked by all employees) x 1,000,000. Accidents in transit are excluded as no accident in transit took place when the transport was organised by a Group company.
    12 In the definition of executive training on safety, for UNA Group the deputy managers of the hotels are also included.

Unipol Group | Integrated Report 2019 | 49

Social and Relational Capital

Customers

In 2019, the Group provided its services to 16.1m insurance customers, both individual policyholders and those insured by collective policies, up by 5% on a like-for-like basis.

Local customers/policyholders

(Amounts in thousands)

Total

16,145

North

North

West

East

4,395

274

3,230

209

Individuals

Legal entities

15,213

932

South

Centre

and

Islands

3,357

194

3,639

210

Abroad

Other

Italy**

358

24

234

21

** Not classified geographically

The focus on customers begins with the start of the commercial relationship and continues throughout, including the monitoring of customer satisfaction.

Definition of new products and services

In compliance with the IDD regulation, the Group has adopted Policies regarding product governance and control for the Non-Life Business and for the Life Business, which define the controls to be adopted in the product design phase, up to and including its marketing, also envisaging monitoring over time throughout its entire life cycle. New products and services, as well as changes to existing products and services, are subject to a preventive audit of compliance with applicable regulations, which takes into account their consistency with the expectations of the customers for whom they are designed.

An understanding of insurance requirements is a key element of this process. In the definition of new products and services, the Unipol Group initiates listening actions with a broad public (for example through surveys) as well as more targeted and limited groups (with focus groups and interviews); this second method was adopted in 2019 to design the new product for agriculture, that intended for renewable energy generators and the product dedicated to the Third Sector. This approach makes it possible to gather important suggestions to develop adequate responses to the needs of various targets, particularly effective with regard to social and environmental needs, the satisfaction of which generates shared value.

Customer Protection and Responsible Sales

The Group Companies are committed to drafting offering documents according to the dictates of reference regulations, focusing particular attention on simple language, transparent information and the alignment of conditions within the various documents referring to the same product/service; the same attention to protecting the customer is adopted in developing advertising messages.

50 | Integrated Report 2019 | Unipol Group

UnipolSai has also adopted instruments available to the intermediary, such as the "Consulenza Persone (Personal Advisory) Tool" to provide better support to customers in their insurance decisions, beginning with their personal, professional, income and risk profile characteristics.

The Life Product Certification, whereby the Group has guaranteed its customers respect for the values of transparency, fairness and product value since 2013, was confirmed on all products in the Investment Line, Savings Line and Pension Line in 2019. The certification calls for a compliance audit and quality certification of respect by UnipolSai of product regulations according to the values of transparency (complete, understandable and traceable information), fairness (clear and balanced cost) and product value (protection of capital and selected investments) by the certification body Bureau Veritas, regarding the processes of product development, investment and management of the post-sales relationship with customers.

Internalisation of the service model

Over the years, the Unipol Group has built, and continues to enhance, a network of partners that enter into direct relationships with customers and accompany them by not only providing compensation for, but also resolving, the damages suffered by vehicles, individuals or property.

This internalised service model guarantees significant financial savings, aside from the service level ensured by the Group's skill in selecting its partners.

The policies underwritten with additional services amounted to 45.5% in the case of Auto Presto&Bene (AP&B) and 40.6% for My Glass, 13.9% for the network of craftsmen, 14.9% for interest-free loans (in 2018 it was 13.2%).

The impacts of direct repairs and channelling

2,652

208

more than

22

62k

Repair shops belonging

Glass-fitting centres in the

Medical facilities in the

Companies belonging to the

to the Auto Presto &

network of

MyGlass network

UniSalute network in Italy

Bene network

experts/craftsmen in the

and abroad

Piped Water Direct Repair

project and Other Damage to

Property

34.5%

81.7%

47.5%

8.9%

incidence of claims

incidence of claims

incidence of claims

incidence of claims

channelled*

channelled

channelled

channelled

*the figure includes only the MV TPL business

Customers that acquire policies with additional services are more loyal (for example, the overall retention rate in the MV TPL segment is 87%, which rises to nearly 90% for those with policies including services provided by MyGlass and AP&B). Retention is strengthened even further when customers have the opportunity to try out those services, with even higher loyalty rates.

Satisfaction monitoring

Unipol Group | Integrated Report 2019 | 51

The Customer Satisfaction analysis performed by UnipolSai in 2019 registered positive performance both compared to the previous year (+3.1 p.p.) and compared to the market standard (+0.5 p.p.). The result is determined primarily by relationship and service elements that positively characterise the Group's network. In 2019, the "NPS" (Net Promoter Score) customer satisfaction indicator was, like the traditional company market figure, down slightly (10.5 vs 11.3), but it is in any event very good: nearly one-third of customers is a promotor of the Company.

Customer satisfaction surveys in Italy

MV NPS

Overall MV CSI

OVERALL RETAIL CSI

10.5

11.8

94.2

93.7

70.1

69.1

UnipolSai

Market standard

UnipolSai

Market standard

Market standard

UnipolSai

Net Promoter Score

Customer Satisfaction Index

Customer Satisfaction Index

Loyalty Index in Company-Customer

MV sector

Retail sector

relations

The agency network satisfaction and retention index of UnipolSai improved by 7% compared to the previous year, with an agent evaluation of 3.39 on a scale of 0-5 with a market benchmark sitting at 3.26.

Complaints management

In the course of 2019, IVASS complaints directed only to UnipolSai Assicurazioni totalled 13,450, down by 6% compared to the previous year. There were 0.401 complaints for every 1,000 UnipolSai contracts, basically unchanged compared to 2018 (0.429), while the incidence of complaints on claims (year 2019) dropped from 0.8% to 0.7%.

Breakdown of claims by phase and area (total for Italian companies)

947

3,0326,529

Total

Accepted

Rejected

18,321Settled

Under investigation

7,813

76%

Other

0%

4% 13%

Commercial

2%

Claims

Inform.

Systems

52 | Integrated Report 2019 | Unipol Group

Suppliers

At 31 December 2019, the Group traded with roughly 4,800 companies, for total expense of €1,081m, of which 98% disbursed in Italy (excluding the foreign suppliers of the subsidiary Ddor Novi Sad).

To satisfy its various purchasing requirements, the Group acquires goods and services from large international groups, SMEs and innovative start-ups and social enterprises (cooperatives, associations, foundations and other organisations offering socially useful goods or services). Amongst the main cost items causing the increase in expenses compared to the previous year, miscellaneous services, real estate management and IT support services were particularly significant.

On these expense profiles, the supply chain is not especially complex, as no raw materials are purchased and no physical goods need to be delivered to customers.

Relationships with suppliers are governed by the Code of Ethics, and the Charter of Values, the OMM, the Code of Conduct and internal policies inspired by ethics, fairness and transparency.

The details of this approach are presented in the "The monitoring of social, environmental and governance risks" section.

Value disbursed to suppliers by area €m*

4%

384

North West

35%

292

North East

24%

Centre

371

32%

South and Islands

11

2%

Abroad 23

3%

Total 1,081

*The graph does not include either the company CarServer, acquired by UnipolSai in the second half of 2019, or the company Ddor Novi Sad whose total expense came to €13.5m

Breakdown of suppliers

2%

4%

25%

Marketing, Advertising and Sponsorship

Real estate asset management

1,081

Other diversified categories

Miscellaneous

Information technology

€mln

40%

Other

(Printing and Stationery 0.7%; Transport

Equipment, fixtures and fittings and signs

Services 0.2%; Utilities and Operation

10%

0.9%)

Consultancy and Services

1%

16%

The figure does not include the company Ddor Novi Sad.

Community

For Unipol, the commitment to supporting and collaborating with the territories and communities in which the Group operates means, as set forth in the Charter of Values and governed by dedicated policies, contributing to the development and creation of cultural, arts and environmental protection, social benefit and scientific research, sport and entertainment support projects.

In 2019, the contribution to the community came to a total of €9.8m, up slightly (+2.7%) over the previous year on a like-for-like basis.

Unipol Group | Integrated Report 2019 | 53

Aside from making non-repayable capital account contributions, Unipol works to create shared value and partnerships with local players in multiple initiatives to support its real estate. The most significant is that carried out with ItaliaNostra for improvements at the Bagni di Petriolo thermal springs, a project in which the first of three planned phases has been completed, involving a total investment of €1.7m, of which €1.1m in 2019.

Once again in 2019 the Group offered organisational support to and actively participated in the third edition of the Sustainable Development Festival organised by ASviS, the largest Italian initiative for sensitising and gaining support from residents, the younger generations, businesses, associations and institutions on sustainability issues and on the UN 2030 Agenda. For the 2019 edition, a total of 1,060 events were organised (compared to 702 in 2018), that energised every area of Italy.

Contributions to the community*

BY TYPE

BY AREA

(Amounts in €k)

(Amounts in €k)

1.208

1.349

1.540

Culture and arts

329

Environment

9.785

Charitable donations

9.785

Sponsorships

Sport

3.

Entertainment

8.577

Scientific research and social

benefits

  • Excludes the contribution to the Unipolis Foundation. A report on the activities of Unipolis Foundation is published in the Mission Report, available on the website www.fondazioneunipolis.org.

Natural Capital

In line with the commitments assumed with regard to environmental responsibility and combatting climate change, the Group's environmental performance is constantly improving.

As regards the environmental impacts of the buildings, the three-year real estate plan strategy is based on three axes:

  • Projects (investments): all activities relating to new buildings or significant renovations of existing properties (properties for business use and properties for use by third parties) are characterised by the use of technologies designed to maximise energy savings, also relying on renewable energy (examples of this are two projects under development in Milan, the multi-storey building under construction in piazza Gae Aulenti and the completion of a headquarters building on via De Castillia);
  • Facility Management / maintenance of existing buildings: the Group's total real assets amount to nearly €4bn. The objective is to constantly improve energy efficiency through plant maintenance and upgrades (as regards properties for business use as well as those for third party use);
  • the implementation and continuous consolidation of an energy management system certified in accordance with the ISO50001 standard certification process. At the end of 2019, all of UnipolSai's real estate assets were certified according to ISO 50001.

For the measurement of climate-changing emissions, the calculation methodology adopted is that laid out in Directive EU/85 of 2003 relating to the emission trading scheme, and the international classification proposed by the GHG Protocol standard - and picked up on in the GRI Standards (Global Reporting Initiative) - in Scope 1, Scope 2 and Scope 3. This approach promotes greater transparency and comparability of environmental data, including in comparison with other Companies13.

13 The source of the conversion factors, emission factor and of the global warming potential (GWP) is the guideline on the bank application of GRI Standards regarding environmental matters (Version of December 2018), drawn up by ABI (Italian Banking Association). With specific reference to emissions from purchased electricity (Scope 2), of companies operating in Serbia, the emission factor corresponding to the Serbian energy mix was used. The emission factors applied derived from the dedicated tool, the "Tool from purchased electricity" (Version 4.8, World Resources Institute (WRI), 2017),

54 | Integrated Report 2019 | Unipol Group

Performance monitoring is performed according to the location-based approach for indirect emissions (Scope 2): on a like-for-like basis compared to 2018, there was an overall reduction in CO2 emissions of 4.4% in 2019, reaching a value of 48,648 t CO2 equivalent (3.94 t CO2 per employee), accurately recorded for all the properties for business use.

Since 2015, electricity supply contracts signed envisage that 100% of power supplied in Italy is from renewable sources.

The reporting of indirect emissions (Scope 3) include those generated by employee travel and transfers (equal to 4,313 tonnes CO2 eq, marking a decrease of 10% over 2018) and those generated by the transfers of customers with telematics devices (equal to 7,478,795 tonnes CO2 eq).

The process of certification and surveillance according to the ISO 50001 standard by the independent body which periodically evaluates the management and operating procedures concerned the commitment to cut electricity and thermal consumption every year. The data relating to the scope of the ISO Certification, which includes the headquarters, properties for third party use and properties for settlement activities ("CLG" or Group Settlement Centres), show a total annual reduction in consumption of 4.0% for 2019.

Consumption was also impacted by actions to improve the efficiency of IT structures, one of the main sources of energy consumption after the heating and cooling systems. The server virtualisation process, which has now been completed, has made it possible to reduce the consumption of electricity to power and cool IT equipment by roughly 26,435 MWh/Year, corresponding to around 8,526 tonnes of CO2 avoided.

As regards additional environmental impacts, the use of the water resource is primarily linked to hygienic uses; in limited cases it is also used for technological purposes in air conditioning systems. For hygienic uses, the water comes from the mains system or other water service management companies.

The total consumption in 2019 amounted to roughly 1.2 million m3: water consumption was determined based on actual use for the diversified companies (around 600k m3 can be attributed to the hotels) and for the large operating site buildings, including the foreign offices of the Serbian company DDOR Novi Sad, with the use of an estimation process for the other insurance offices.

Direct emissions (Scope 1)

9,980 t CO2 eq

Gas

Diesel

LPG

4,556,808 m³

216,887 Lt

195,188 Lt

156,207 GJ

7,812 GJ

5,042 GJ

Emissions from purchase of energy (Scope 2)

38,668 t CO2 eq

District heating

Electricity

District air conditioning

93,995 mWh

28,491 mWh

338,384 GJ

Total emissions* (from property)

48,648 t CO2 eq

  • The scope of interest compared to the 2018 reporting period was expanded, with the inclusion of the operating sites of the Medical business, while consumption and emissions were not reported for the Banking business offices, as the sale of Unipol Banca to BPER Banca was completed on 31 July 2019, or for the operating sites of the company CarServer, acquired by UnipolSai in the second half of 2019. Therefore, for 2019, the consumption of electricity, gas and other energy sources for all other buildings over which Unipol has direct control is accurately determined, from the operating sites, to the diversified companies, such as Tenute del Cerro and Marina di Loano, and also the properties in which the UNA Group carries out its activities and the offices in Serbia.

Unipol, through document dematerialisation and internal recycling policies, is committed to reducing paper consumption: all of the paper acquired meets the requirements of the ECOLABEL environmental certification, quality certification ISO 9001:2008, FSC (Forest Stewardship Council) and ECF (Elemental Chlorine Free). In addition, in April 2019, the "recycled paper" project was introduced across all Group Companies, including in the sales network, leading to the gradual replacement of pure cellulose white paper with recycled paper purchased from the only European company in the sector with a "Cradle to Cradle®" certification on sustainability.

For waste management, the Group is following the directives of the various Municipalities for the collection and disposal of waste, as a result adjusting processes and procedures and proceeding where possible with its recovery or regeneration; in the course of 2019, for the Group offices, the recovery of waste paper by companies specialised in recycling and/or municipalised companies continued, and in 2020 services are expected to be optimised with the use of IT platforms to organise waste collection.

provided by GHG Protocol. Lastly, with reference to Scope 1 emissions deriving from consumption by the company fleet, the 2018 DEFRA (UK Department for Environment, Food & Rural Affairs) coefficients were used.

Unipol Group | Integrated Report 2019 | 55

With respect to the collection of toner, the procedure in place for the Group offices has been extended to all agencies. Waste considered hazardous (neon tubes, batteries, etc.) are disposed of separately in the appropriate manner, in accordance with regulations in force, through specialised firms and in line with the rules on compulsory record keeping.

Management of environmental impacts

Area

DIRECT IMPACTS

Policy

Action

Energy

Water

Consumption of materials

Building consumption monitoring and reduction

Optimisation of employee mobility

Definition of consumption reduction actions

Consumption monitoring and reduction

Dematerialisation

Purchase of low-impact materials

Completion of the monitoring scope for insurance business premises

ISO 50001 and Energy Audits to identify efficiency improvement action

Commuting Plan for the reduction of impacts from transport (traffic flows study, promotion of public transport, train, bike sharing, carpooling, infomobility)

Monitoring expansion

Infrastructure works to reduce consumption

Dissemination of internal environmental awareness

Promotion of separate waste collection

Adoption of technological opportunities to reduce paper consumption (digitalisation, digital signature)

Strengthening and extension of ecological criteria in procurement tenders

Area

INDIRECT IMPACTS

Policy

Action

Environmental impacts of policyholders and investments

Environmental impact of suppliers

Promotion of products and services that reduce customers' environmental impact

Engagement and reduction of suppliers' environmental impact

Support and promotion of green economy through specific products, direct investments and lines of credit

Experimentation of best practices and know-how

Start-up of the ESG risk control system throughout the entire supply chain

56 | Integrated Report 2019 | Unipol Group

Shared value: the impacts generated by the Unipol Group

NFS

Satisfaction of security and social well-being requirements

Against the increasing social and healthcare assistance and pension needs of the population, the Unipol Group aims to consolidate its leadership in the healthcare segment and its important role in the pension segment by developing an increasingly integrated offer of Welfare and Life products and enhancing it with services, with a particular focus on those oriented towards prevention.

To confirm its role as a central player in the process of integrating public and private welfare, in 2019 Unipol reached 11.3% of Italian citizens with its welfare (Health and Life) coverage (up by more than one percentage point compared to 201814).

From the perspective of healthcare solutions, the Group is committed to boosting accessibility to services by trying out innovative customer management and care models as well as through IoT and telemedicine, and by developing the network of affiliated medical facilities.

As regards non-insurance products and services, trials are under way to improve the quality of life of customers, reflected in a focus on personalised diets and exercise, as well as higher awareness of prevention, treatment and symptom evaluation.

To facilitate access to prevention and treatment, the Group has placed further attention on SiSalute Cards, which can be used for medical visits and exams and to access physical therapy services at discounted rates at affiliated medical facilities, and thus represent an instrument to protect the health of individuals, making it possible to rapidly access high-quality healthcare facilities at below-market rates. At 31 December 2019, SiSalute had sold over 35k Cards.

The Unipol Group has retained its leading position in the supplementary pension sector.

At 31 December 2019, with the subsidiary UnipolSai Assicurazioni, it managed 25 mandates for Occupational Pension Funds (two more than at the end of 2018), of which 19 for accounts "with guaranteed capital and/or minimum return", for a total of €4,777m (of which €4,093m with guarantee).

At 31 December 2019, the assets of the Open Pension Funds managed by UnipolSai and BIM (UnipolSai Previdenza FPA, Fondo Pensione Aperto BIM Vita) reached a total of €908m (+6.6% compared to 2018) with 42,277 members.

The "Bilanciato Etico" segment, one of the seven segments of the UnipolSai Previdenza Open Pension Fund, invests its €71.7m in assets in a diversified portfolio of primarily bonds and, marginally, equity instruments in the Eurozone which are fully managed according to ESG criteria.

Training continued to be provided to the 773 (end of 2019) Family Welfare Specialists, specialised in providing consulting to families regarding Individual Life and General Class Individuals line (Accidents, Health) products and services; a new organisational structure consisting of Welfare Consultants was also created, to support the network in the development of Welfare Plans dedicated to entrepreneurs, their companies and their employees.

The Group also meets security needs with new property protection services. In 2019, it sold 11,200 policies with telematic devices to protect homes from the risk of theft or detect smoke, flooding and gas leaks.

Support in the transition towards more efficient, safe and sustainable mobility

Unipol's contribution to safer mobility takes shape first and foremost in the services connected to telematics applied to Vehicles. The more than 4m customers with black boxes installed represent 44% of the total MV portfolio; aside from more rapid and effective claim management, they benefit from automatically sent assistance, as well as emergency responders when required, thanks to geolocation and automatic data acquisition, which makes it possible to rapidly identify the potential severity of accidents to send the most appropriate responders.

The installation of black boxes is also connected to an incentive to reduce vehicle use and rely on other means of transport with less of an impact on the environment to meet mobility requirements. Indeed, the "KM&Servizi" product includes a "mileage" based rate option, in which the premium is calculated on a series of parameters, one of which is the kilometres driven.

14 The figure reported in the 2018 Integrated Report is 10.7% coverage of the Italian population. In 2019, an IT system development made it possible to improve the quality of the data used to make this calculation, completely eliminating estimations in favour of the use of only precise data and thus avoiding any possibility of double counting between policyholders in the welfare area and in the pension area. The precise figure relating to 2018 was then reconstructed and this calculation methodology will be used from now on.

Unipol Group | Integrated Report 2019 | 57

In 2019, the Group expanded its mobility and connected services offerings to strengthen its capacity to respond to the overall and diversified needs of those who travel by car.

The acquisition of Car Server, the sixth Italian operator in long-term rental (as well as one of the businesses that is most active in electric mobility) provides a further drive to the innovative long-term rental service proposed by the UnipolSai Agencies, aiming to offer private individuals the possibility to transition from ownership to use of a vehicle while maintaining their merit category and taking advantage of a number of services.

The UnipolSai App has been integrated with the possibility to pay for parking in major Italian cities, as well as fines and road taxes. This application provides notices about weather alerts that may cause damage to individuals and property.

In the initiatives already carried out and those soon to be implemented, the Group primarily adopts a partnership approach with public and private parties alike, in order to boost the opportunities made available to customers and the value shared with stakeholders.

Linear has developed the BestDrivers project to raise driver awareness of driving risks and promote a safe approach. An App, which can be downloaded free of charge, evaluates the driver's style behind the wheel by considering factors like distraction, aggressive driving and excessive speed. Within the application, users are able to monitor their trips and reports regarding their driving behaviour; a bonus system provides incentives to safe drivers. The App, available since spring 2019, has been downloaded by over 50,000 drivers.

Contribution to the growth of the country, supporting SME development and increasing insurance knowledge

The Group's corporate customers are for the most part SMEs, in keeping with the fabric of Italian business. To meet the needs of these companies, the Group is increasingly integrating its offer with services and conditions which, on one hand, promote and support prevention, understood as an approach which facilitates the continuation of conditions of insurability of the individual players and overall sustainability for the Company, and on the other hand facilitate the recovery of economic activity in the case of a claim compromising it, recognising this as a key element for the competitiveness of the players involved. The areas of intervention on which the new products, new guarantees and new services are focused very often relate to the risks that have recently become priorities in the concerns of businesses and the system overall, and which are growing in frequency, such as risks connected to climate change and cyber risk.

With respect to the first topic, some of the solutions developed or strengthened in 2019 include:

  • the new product for agricultural and agri-tourism companies, which provides insurance coverage for climate events which are now striking the crops of policyholders even in geographical areas that were not subject to these concerns in the past, and includes a "special organic indemnity" which recognises a supervaluation of 20% of the compensation for organic products;
  • the "Energia Sole" insurance product for companies that generate energy from renewable sources, a solution aiming to enable and support the companies that contribute most to the transition towards a low carbon-emission economy. It simultaneously covers all renewable sources and may be a solution for energy communities;
  • the "Pronta Ripresa" guarantee, which makes companies affiliated with the Company that are specialised in Disaster Recovery and Business Continuity available to policyholders, thus reducing indirect economic damages.

In terms of prevention, UnipolSai has developed a predictive model capable of warning customers in advance regarding the risk of strong hail, strong wind, rain and snow by sending alert messages through the UnipolSai App or SMSs, and has made available for use on tablets or smartphones the CRAM Tool, an instrument for the self-assessment of climate risks designed to help Italian SMEs deal with extreme weather events, used at the end of 2019 by more than 6,000 users.

In relation to the risk of cyber attacks, the Group has developed increasingly broad and detailed guarantees, which are able to significantly mitigate their consequences through concrete interventions and indemnities for a broad range of cases. These include, for example, indemnity for expenses incurred to resolve software malfunctions and restore damaged files in the case of cyber attacks, indemnity for the removal from the internet of information which is harmful to one's reputation or for the undue use of data in the case of file intrusions, and also (like in the case of the product for generators of photovoltaic energy) indemnity for damages to plants, even if deriving from cyber damages.

For Third Sector Entities, fundamental players in maintaining the social fabric, there is a new dedicated product designed for associations and organisations, which is broken down into five macro areas, or uniform groups of activities aggregated based on the economic and social purposes they pursue: volunteerism, amateur sport, social relationships and culture, childhood and other temporary duration events. At the end of 2019, the UnipolSai "Terzo Settore" policy had earned premiums of €2.7m.

58 | Integrated Report 2019 | Unipol Group

The Group is continuing to invest in training and in the recruitment within the UnipolSai Agencies of individuals specialised in providing consulting to businesses and professionals, or Business Specialists; at the end of 2019, there were 649 of these professionals, of which 154 hired in 2019.

Support to the realisation of the 2030 Agenda and contribution to combatting the climate emergency

Beyond the contribution provided to goals 3, 8 and 11, as described above, Unipol contributes to the fulfilment of the 2030 Agenda overall through its activities and decisions in the insurance realm and in investments, as well as with the positions that it takes as a large Group in our society; amongst the SDGs, particular attention is placed on those aiming to combat climate change, perceived both internally and externally as a priority and an urgent issue.

Products and services with social and environmental value

The Group contributes to reaching the Sustainable Development Goals by identifying distinctive insurance solutions that integrate economic growth and socio-environmental value.

In 2019, the premiums from the sale of these policies amounted to €2,416m, representing 25.5% of direct premiums15 (up by 2.9 percentage points compared to the previous year).

To be classified as a "sustainable solution", a product or service must be capable of responding to social requirements by improving people's lives, having a positive environmental impact or responding to climate concerns.

The impact of products and services with social and environmental value

Response to the needs of underinsured people/businesses

SOCIAL

INNOVATION

Integrated pension and social/healthcare assistance

Protection of income for households and businesses

Direct repair services

on direct

Responses deriving from socio-demographic changes

Solutions against the loss of buying power, in the case of unemployment or unstable working situations

premiums

Mitigation of climate change

ENVIRONMENT

Adaptation to climate change

Support for renewable energies, environmental goods and services and green infrastructure

Solutions that encourage or reward respect for the environment

Protection or incentives for the management of weather risks

To ensure greater granularity, this representation does not include premiums relating to telematic devices. The impacts of black boxes, as also highlighted in the previous chapters, regard both social aspects (in terms of security and combatting fraud) and environmental ones (promotion of sustainable behaviours through mileage based rates).

15 For more significance, the percentage is calculated on the total of direct premiums for Non-Life products and on premiums relating to the corresponding product families for Life products.

Unipol Group | Integrated Report 2019 | 59

The impacts of climate change on the insurance business

Climate change is generating increasing effects on the core insurance business. After 2018, which was impacted by damages caused by the "Vaia" storm in North-Eastern Italy, the year 2019 was also characterised by the significant results of adverse weather events on the Non-Life claims frequency, which was however absorbed for the most part by reinsurance cover. On 31 December 2019, the combined ratio, net of reinsurance, was 94.2% (as in 2018). This includes 4.1% linked to atmospheric events (3.9% in the previous year), particularly hail events in summer 2019 which struck urban areas with a strong UnipolSai insurance penetration. To combat the risk of an increase in technical risk due to the increasing frequency and severity of claims, as a result of climate change, in 2019 the Group committed:

  • to launch a specific Project ("Atmospheric Events") intended to equip the Group with tools (capital and pricing models, additional alert and prevention systems, new reinsurance cover) capable of supporting the development of products and the underwriting process in a market characterised by increasing demand;
  • to adjust the reinsurance strategy to take into account emerging risks, also through the development of an innovative reinsurance tool (Atmos Re I) dedicated to the "annual aggregate" cover of natural disasters that are average in extent, for which an automatic algorithm was developed for the temporary aggregation of events enabling investors as well as reinsurers to follow their trends in real time.

Insurance skills to support system resilience

In 2019, UnipolSai continued to be committed to the LIFE DERRIS project, a public-private partnership with which Unipol has activated a consolidated process for the engagement of SMEs (UnipolSai customers and others), the public administration (Municipalities and Regions) and representative organisations (Chambers of Commerce and trade associations) on the risks linked to climate change and possible prevention and risk management interventions for companies. This project is intended to boost the awareness of all players regarding risks that are still highly underestimated and provide specific climate change risk management skills by organising training meetings, designing webtraining videos and developing a climate risk self-assessment web tool that is available free of charge. In 2019, 4 training meetings were organised (in Almese, Avigliana, Bassiano and Milan). Aside from the users of the CRAM Tool mentioned above, more than 270,000 people were informed about this topic through a UnipolSai campaign on the LinkedIn platform in December 2019.

The climate impact of the investment portfolio

The Unipol Group is fully committed to providing its contribution to achieving the goals of the 2015 Paris Agreement16 and is gradually structuring tools that support the diagnosis of its climate impacts and the definition of objectives for improvement within an evolving context. In this sense, investment activities are a fundamental area for oversight and intervention for a financial sector company, both with a view to reducing the impacts of its portfolio and to support the economic system in the transition towards a low-carbon emission economy.

This is why, although there is still no shared methodology at global level for calculating climate risk and assessing opportunities for financial portfolios, in 2019 the Unipol Group initiated a process of measuring the Carbon Footprint and the future alignment with the objectives of the Paris Agreement (Climate alignment) of its financial portfolio, in order to manage and monitor the alignment of its investment model with global climate change mitigation targets. The measurement was performed with the support of Carbon4 Finance17.

Amongst the multiple metrics subject to analysis, the main ones are addressed in this Report18:

  • Intensity of induced emissions (Scope 1, Scope 2 and Scope 3), measured for Corporate Shares and Bonds in tCO2e/M€ enterprise value and for Government Bonds in tCO2e/M€ GDP;
  • Climate Alignment, or the contribution of the activities of issuing companies and countries to global warming, expressed in temperature, so as to highlight the portfolio's forward-looking alignment with international climate objectives

Projecting the CO2 emissions of the Group's total portfolio at 2030, on the basis of the national contribution determined for each country and given the current asset allocation and selection of issuers, the Climate Alignment is 2.1°C, due to the prevalence in the Unipol portfolio of government bonds and, amongst these, of bonds issued by European countries. The point of reference to be observed to define the path of development in this area is the 2015 Paris Climate Agreement, which has the long-term goal of limiting the increase in the global average temperature to well below the threshold of 2 °C above pre-industrial levels, and of continuing efforts to limit that increase to 1.5

  1. The Paris Agreement is an agreement between the member states of the United Nations Framework Convention on Climate Change (UNFCCC); the long-term objective is to limit the increase in the average global temperature to well below the threshold of 2 °C over pre-industrial levels, and to continue efforts to limit that increase to 1.5 °C, since this would substantially cut the risks and effects of climate change.
  2. Carbon4 Finance belongs to the Carbon 4 group, a leading independent consulting firm specialised in low carbon strategies and adaptation to climate change. Carbon4 Finance is the spin-off company focusing on providing climate data solutions to investors and credit institutions.
  3. Details on the methodologies used and detailed results are provided in the 2019 Sustainability Report of the UnipolSai Group and on the website www.unipol.it

60 | Integrated Report 2019 | Unipol Group

°C19. A particular point of attention regards the potential contribution to warming of the corporate bond portfolio which, in line with the commitments undertaken in the new policy governing investment processes, will be subject to monitoring and interventions so as to reduce the impact currently predicted.

Climate impacts of the investment portfolio

Climate Alignment in °C

3.5°

3.1°C

3.0°

2.5°

2.0°

1.9°C

2.1° C

Paris Cop 21

Intensity of induced emissions

1.5°

Corporate Bonds

159.18 tCO2/ M€ invested

1.0°

Government Bonds

85.39 tCO2/M€ in debt acquired

0.5°

Total Portfolio

92.93 tCO2/M€ amount invested

Corporate Bonds

Government Bonds

Total Portfolio

As regards the composition of the portfolio, the Group has calculated how much of its investments relates to "carbon-related"assets.

"Carbon-related" assets in the

Amount (in €m)

% of Total porfolio**

% of Corporate portfolio**

Corporate portfolio *

TOTAL

996

1.8%

7.4%

of which SHARES

105.8

0.2%

0.8%

of which CORPORATE BONDS

890.2

1.6%

6.6%

*"Carbon-related" assets refer (according to the definition provided by the TCFD Recommendation) to those linked to the Energy and Utilities sectors (according to the Global Industry Classification Standard - GICS sector classification), excluding Water Utilities and Independent Energy Producers (PPI) and Renewable Energy Producers.

**The percentage refers to the portfolio of listed securities of the Unipol Group at 30 September 2019.

The growing awareness determined by this measurement process supports the implementation of the Group's climate strategy on investments, the most important elements of which are represented below within a systematic overview.

19 To have a point of reference with respect to the current global situation, the Intergovernmental Panel on Climate Change (IPCC) has estimated that, if emissions continue to rise at current rates, the temperature increase could reach 4°C above pre-industrial levels in 2100 (RCP 8.5); if instead only limited containment actions are implemented, with the increase in emissions until 2080 and then their reduction (RCP 6.0), the increase could exceed 3°C.

Unipol Group | Integrated Report 2019 | 61

Integration

Investment

Limits to exposure

Active Shareholder base

Support

Disclosure

Integration of ESG factors,

Target

increase

from

Exclusion

from

new

Participation

in

collective

Support and active

Disclosures

relating to

including

environmental

326m to

600m (+84%)

investments

of

engagement initiatives such as

participation in

TCFD and CDP.

ones, in the assessment of

between 2019 and 2021,

companies

linked

to

Climate Action 100+ (as of

initiatives promoting a

Inclusion in the disclosure to

investments for all asset

of thematic investments,

mining and coal-fired

2017) to engage the companies

low carbon economy:

members

and

potential

classes

as

of

2012.

of which roughly

70%

power

generation.

that

generate

the

most

i - CDP Investors

members of supplementary

Since

2019,

the

"SRI

contributes

to

(see "The monitoring of

greenhouse gas emissions, and

ii - Talanoa call For Action

pension plans of the climate

Investment

Policy"

(see

combatting

the climate

social, environmental and

assessment

in

the

coming

iii - UN PRI

impacts

of

products

the "The

monitoring

of

emergency

(see

next

governance

risks"

years

of

extending the

iv - Global Compact

starting from 2020.

social, environmental and

paragraph).

section).

commitment to other forms of

v - Italian Sustainable

governance risks" section)

pressure towards a low-

Finance Forum.

with

an

improvement

in

emission economy.

control

over

risks

and

Active

engagement

through

opportunities

linked

to

side letters with Real Asset

climate change.

and Private Equity Funds.

Investment decisions for SDGs and combatting climate change

The management of the Group's financial portfolio creates shared value through the Responsible Asset Management lever.

In this area, aside from defining and implementing the internal policy supporting the SRI approach (see details in the Governance Chapter, "The monitoring of social, environmental and governance risks"), Unipol has a structure dedicated to making and managing alternative investments, which include private equity, real assets and hedge funds, selected through dedicated due diligence aiming to identify activities that are significant for SRI purposes. The process requires not only traditional financial analyses, but also the analysis of socio- environmental and governance criteria and the mapping of sustainability risks that may have a reputational impact. Investments with these characteristics grew overall by 18.1% in 2019, and those for combatting climate change by 22.8%; in this area, the Strategic Plan calls for reaching €600m invested in support of the 2030 Agenda in 2021.

In the table below, the investments are classified on the basis of their positive impact on the different SDGs.

Thematic and Impact Investments

Issue

Value € mln

SDGs

Issue

Value € mln

SDGs

Residential care and social assistance

19.0

Renewable energy, eco-efficiency

274.2

Sustainable Consumption and Production

5.4

Sustainable mobility

33.4

Sociale Housing

3.2

Digital networks and Infrastructures

23.0

Training and culture

2.4

2.2

Sustainable forest management

22.5

Water

TOTAL € 385.3 mln

Strengthening of reputation

The trust built over time by the Unipol Group is considered a fundamental asset to continue to successfully evolve within an insurance business in which trust constitutes the foundation of development possibilities.

Unipol started its Reputation Management programme in 2014, progressively structuring internal controls until formalising (in early January 2020) an integrated governance model which clearly identifies the processes to be implemented and the parties involved, with a view to even further increasing the efficiency of the management of the Group's reputation and reputational risk.

Specifically, two dedicated bodies were established:

62 | Integrated Report 2019 | Unipol Group

  • The Reputation Network, consisting of managers of the corporate areas overseeing Group relationships with all internal and external stakeholders, which has the task of guaranteeing the proactive management of reputation and reputational risk, contributing to developing the reputational culture within the Group, and reputational index accountability, included within the company's incentive system (see "Remuneration system and incentives" section);
  • the Operational Reputation Management Team, consisting of Media Relations and the Emerging and Reputational Risk

function, which coordinates the Unipol Group's Reputation Management activities (also as regards the impact of ESG factors on reputation, see "The monitoring of social, environmental and governance risks" section).

The proactive management of reputational risk hinges on the prompt reporting of any signs of risk linked to the company's values and core business, which can find space in the media, including social media, or within day-to-day operations.

As a result of this structured approach, the reputational index of the Unipol Group with public opinion in Italy, measured according to the Reputation Institute's RepTrak® analysis model, grew in 2019 to 69.720 (+0.7 points over 2018) on a 100-point scale. This value falls within a "moderate" reputational segment.

The points of strength of the Unipol reputation, in the perception of citizens, are its products and services, which are considered reliable; the prompt management of claims and the high level of customer assistance; the search for and development of technological solutions; capital strength and strong outlooks for growth.

Reputational indexes have also risen significantly with employees (reaching 81.4), agents (89.4) and customers (77.2).

For a detailed analysis illustrating the strategic and proactive approach to emerging and reputational risks, please refer to the "Reputational & Emerging Risk Observatory" and "Reputation Management" sections on the unipol.it website..

Positioning in ESG ratings

The increase in reliability and trust can also be measured through the non-financial assessments of the ESG rating agencies that evaluate the actions of Unipol Gruppo and UnipolSai Assicurazioni from the perspective of sustainability performance, or on the basis of the ESG practices deployed by the Companies. The scores obtained from the main ESG rating agencies constitute an external, independent recognition of the quality and transparency of the information provided.

These scores are reflected in the presence of Group Company securities in more than 20 SRI indexes belonging to the following series:

COMPANY

UNIPOLSAI ASSICURAZIONI SpA

UNIPOL GRUPPO SpA

STOXX

STOXX

Solactive ISS

Standard Ethics

SERIES OF SRI INDEXES IN

FTSE4Good

ECPI

WHICH THE

SECURITY IS PRESENT

Standard Ethics

ECPI

S&P

In 2019, UnipolSai received an EE+ rating21 (up compared to the previous EE) from Standard Ethics, an independent provider of sustainability ratings requested by the company.

The Group is also present in the portfolios of the main Pension Funds, which represent international best practices in terms of sustainability in investment choices; these include for example the Norwegian sovereign fund Government Pension Fund Global, the French FRR - Fonds de Reserve pour le Retraites, the Californian government pension fund CalPERS (which have both Unipol Gruppo and UnipolSai Assicurazioni securities in the portfolio) and CPP - Canada Pension Fund (which invests in UnipolSai Assicurazioni.

  1. The index is the average of the monthly surveys performed throughout the year
  2. On a scale of 9 steps running from F to EEE, with the latter representing the best rating.

Unipol Group | Integrated Report 2019 | 63

GOVERNANCE

Corporate Governance

No significant changes to the Company's main shareholders occurred in 2019.

The list of direct Shareholders with more than 3% of the ordinary share capital at 31 December 2019 is as follows: Coop Alleanza 3.0 Soc. Coop.;

Holmo S.p.A.;

Nova Coop Soc. Coop.; Cooperare S.p.A.;

Coop Liguria Soc. Coop. di Consumo.

17.822

Market

52.125

Shareholders' Agreement

Share capital

Additional

shares

held

30.053

by third

parties

not

covered

by

the

Shareholders'

Agreement

SHAREHOLDERS' MEETING

The Shareholders' Meeting is the body that expresses the will of the company via its resolutions; the resolutions it passes in compliance with the law and the By-Laws, including the numbers abstaining or against. The Board of Directors considers the Shareholders' Meeting, even in the presence of a broad diversification of the methods for communication with Shareholders, a significant moment for fruitful dialogue between the Directors and Shareholders, also in compliance with regulations on price sensitive information.

BOARD OF DIRECTORS

CHAIRMAN

Legally represents the Company and exercises the powers laid out in the By-Laws.

CHIEF EXECUTIVE OFFICER/ GROUP CEO

Responsible for the operating guidance of the Company and the Group, in line with the general programmatic and strategic policies defined by the Board of Directors.

Board of Statutory Auditors

Exercises supervision over observance of the law and the By- Laws, respect for the principles of proper management.

Independent auditors

PricewaterhouseCoopers S.p.A., the external auditor responsible for the legally-required audit of the accounts.

Chairman's Committee

Carries out an advisory and support role in identifying development policies and the guidelines of the Company's and the Group's strategic and operating plans.

Appointments and Corporate Governance Committee

Carries out a propositional and advisory role in the identification of the optimal composition of the Board of Directors and in the definition of the Company's corporate governance system.

Control and Risk Committee

Provides a judgment to the Board of Directors on the definition of the guidelines of the Internal Control and Risk Management System, to ensure that the main risks facing the Company and the Group (including ESG risks and, first and foremost, those linked to the climate), are correctly identified, and adequately measured, managed and monitored.

Related Party Transactions Committee

Carries out an advisory, discussion and propositional role with respect to transactions with related parties, in compliance with the provisions of current regulations.

Remuneration Committee

Carries out an investigative, propositional and advisory role regarding remuneration.

Sustainability Committee

Appointed to establish sustainability guidelines and the operational coordination necessary for fully achieving the sustainability goals. Supports the administrative body in defining the model for identifying, assessing and managing the main ESG risks, including in particular those linked to the climate.

Ethics Committee

Carries out advisory, propositional and decision-making functions relating to the content and purposes of the Group's Code of Ethics, for which it is the main manager, along with the Ethics Officer, for its promotion, proper interpretation and implementation.

For detailed information on the duties and responsibilities of the Sustainability Committee, please refer to the Report on Corporate Governance and Ownership Structures, available in the "Governance" section of the Unipol Group's website.

64 | Integrated Report 2019 | Unipol Group

BOARD OF DIRECTORS

The Board of Directors is vested with the broadest powers for the ordinary and extraordinary management of the Company. Therefore, it is able to carry out all deeds, including disposals, that it deems appropriate to achieve the corporate purpose, excluding only those that the law expressly places under the responsibility of the Shareholders' Meeting.

MEMBERS OF THE BOARD OF DIRECTORS APPOINTED BY THE SHAREHOLDERS' MEETING OF 18 April 2019 (*)

(a)

Chairman

Vice Chairman

AD / Group CEO / DG

Stefanini Pierluigi

Dalle Rive Ernesto

Cimbri Carlo

Balducci

Datteri

De Luise

Desiderio

Gianmaria

Roberta

Patrizia

Massimo

(a)

Ferrè

Gualtieri

Morara

Mundo

Pacchioni

Daniele

Giuseppina

Pier Luigi

Antonietta

Milo

(a)

(a)

Pasquariello

Trovò

Turrini

Zambelli

Zini

Maria Antonietta

Annamaria

Adriano

Rossana

Carlo

Executive

Non-executive

Independent, per Code and

Independent solely per Consolidated Law on Finance

Consolidated Law on Finance (1)

  1. Indicates whether the Director has been classified by the Board of Directors as independent in accordance with the criteria laid out by the Corporate Governance Code and at the same time meets the independence requirements established by Art. 148, paragraph 3 of the Consolidated Law on Finance.
    (a) Director excluded, with reference to 2019, from the group of independent directors given that, taking into account the "Fit&Proper Policy" and the current shareholding structure of Unipol, all company directors that are: i) members of the Management Committee of the shareholders' agreement that connects certain Unipol shareholders or ii) key representatives of the Company's major shareholder, are herein not considered as independent.
  1. At the date on which this Report was drafted, the administrative body consisted of 18 Directors, following the premature demise of Director Francesco Berardini.

BoD - Breakdown by gender (b)

9

BoD - Breakdown by age (b)

5

Women

Aged ≤ 50

32

37

Men

Aged 51-60

Aged ≥ 60

63

63

64

Skills (b)

Number of meetings and attendance rate (c)

100%

95%

9

9

84%

79%

74%

74%

68%

6

6

3

3

4

3

21%

Strategic

Insurance and/or

Sector

Accounting

Internal

Company

Planning

banking and/or

economic/ legislation and

disclosure,

management

financial and/or

financial regulations and

and/or

risk

and

real estate

corporate

actuarial management

remuneration

business

governance

reporting

systems

  1. Referring to the Board of Directors in office as of 18 April 2019.
  2. Referring to all of 2019.

Sustainability

and ESG

factors

Board of

Chairman's

Appointments Remuneration

Related Party

Sustainability

Ethics

Directors

Committee

Corporate Committee

Risk

Transactions

Committee

Committe

Governance

Committee

Committee

e

Committee

94%

89%

100%

78%

100%

92%

92%

100%

For detailed information, please refer to the Report on Corporate Governance and Ownership Structures, available in the "Governance" section of the Unipol Group's website.

Unipol Group | Integrated Report 2019 | 65

Internal Control and Risk Management System

NFS

The internal control and risk management system (the "System") is a key element in the overall corporate governance system. It consists of a set of rules, procedures and organisational structures aimed to ensure constant oversight for the identification, governance and control of risks connected to the activities performed and allow for the sound and prudent management of the Group22.

The following scheme shows, in simplified form, the Group's Risk and Control Governance Model.

The Risk and Control Governance Model

Governance

Legal responsibility of Directors (law compliance) Sustainability, Ethics principles

Responsibility for the Internal Control and Risk Management System Supervision of OMM implementation

Implementation and monitoring of the Internal Control and Risk Management System

Verification of efficiency and effectiveness of the Internal Control and Risk Management System

Monitoring and control of quantifiable risks

(Solvency II - Basel 2 - Basel 3)

Risk

Management of compliance risk

Management

Verification of the reliability and adequacy of the

calculation of technical provisions - Solvency II

Shareholders

BoD

Board of Statutory Auditors

Control and Risk Committee

Other Board Committees

Supervisory Board

Director responsible for the

internal control and risk

management system / Top

Management

Audit

ComplianceActuarial function

Control of accounting data and financial communication Management of money laundering risk Management of privacy risk

Acquisition of information from business lines and the Group, and logical reorganisation for governance requirements

Operating controls on individual transactions

Manager in charge of financial reporting, Anti-Money Laundering and

Data Protection Officer

Business Lines

Service Lines

Level of control

For a detailed description of the Internal Control and Risk Management System, please refer to the "Annual Report on Corporate Governance and Ownership Structures for 2019", available in the "Governance" section of the Unipol Group's website.

22 The guidelines for the definition of the Unipol Group's internal control and risk management system are set forth in the Group Directives on the corporate governance system defined by the Unipol Board of Directors, which are periodically updated.

66 | Integrated Report 2019 | Unipol Group

Through the Internal Control and Risk Management System and through the adoption of corporate policies and guidelines, the Group measures and manages the risks to which it is exposed, also as a result of its own strategic decisions, taking into account the various business areas and the different applicable regulations.

In particular, the "Risk Management Policy" indicates the risk management strategies and objectives of the Group and the companies in scope. In addition, the risk management process is defined with reference to the identification, assessment, control and mitigation of risks, as are the roles and responsibilities of the company's bodies and structures involved in the process.

The identification, evaluation and monitoring of the risks are carried out on ongoing basis to take into account the changes occurred both in the nature and size of the business and in the market context, and whether new risks arise or the existing ones change.

The entire organisation is called upon to actively contribute to the effectiveness of the Internal Control and Risk Management System. The Company Bodies and top management of the Group companies promote the dissemination of a culture of control which, at all levels, makes staff aware of their role, also in reference to the control activities, and encourages the involvement of all company departments in pursuing the business objectives and creating value.

The monitoring of social, environmental and governance risks ("ESG risks")

The control of ESG risks is ensured at general level by the Group's corporate governance system described above, with a first level of organisational and operational oversight mechanisms adopted to implement the internal regulatory system, in addition to the second- level controls performed by Compliance and Anti-Money Laundering, Risk Management and the Actuarial Function, and the third-level controls performed by Audit, each for its own area of responsibility.

Specifically, in the course of 2019 the work performed to identify and control ESG risks reached an additional level of maturity and detail with respect to previous years.

Indeed, with the 2019-2021 Strategic Plan, the Group has undertaken to take further steps forward in the integration of environmental, social and governance factors within company strategies and processes, in terms of the development of opportunities as well as risk management. With reference to the commitments made in the Plan with regard to the management of ESG risks, they have been included, in the first place, in the Risk management system adopted by the Group.

As part of its most recent update in June 2019, the Risk Management Policy was integrated with the inclusion of such risks in the taxonomy of those shared by the entire Group and with the identification of the seven most important ESG risk areas: climate change, the increase in social polarisation, socio-demographic change, the technological evolution of society, the violation of human and workers' rights, environmental damage and negative impacts on the environment and conduct in violation of business integrity.

In addition, in the Risk management policy, the Group expects to integrate ESG risk control within the management of the individual risk categories, in such a way as to ensure management at all stages of the value creation process and mitigate the emergence of any associated reputational risks.

In light of this, ESG risks and the relative control methods have been integrated within the Specific risk management policies which govern the performance of the Group's activities in fundamental areas (see table below). Underlying this integration model is the classification of risks in the various economic sectors, performed on the basis of a proprietary methodology founded on the analysis and application of a large variety of sources; this classification contains general indications on the exposure of each economic sector to the various categories of ESG risk and, in this manner, supports the assessment of risk connected to relationships with the various parties operating in the relative sectors.

Unipol Group | Integrated Report 2019 | 67

Underwriting policies - Non-Life

With reference to the sectors that present potential high exposure to ESG risks, the

Business and Life Business

Underwriting policy - Non-Life Business includes two possible approaches:

exclusion from the parties and/or risks that the Group insures, when the

sectors to which potential customers belong have ESG risks that are not

compatible with the Unipol Group's approach to sustainability and risk

management objectives. This takes place, for example, for companies that

derive a predominant or significant part of their revenues from coal mining

activities and for those that adopt unconventional mining practices;

the initiation of an assessment process that results in a decision on whether

to move forward with the commercial relationship with the potential

customer, once the ESG risks connected to the methods for managing

activities within a series of sensitive sectors are considered.

The Underwriting Policy - Life Business identifies, in relation to investment products,

specific limitations in relation to sectors whose risk of generating negative impacts

on ESG factors (and the resulting reputational risk) make them incompatible with the

approach to sustainability and the risk management objectives of the Unipol Group.

The sectors excluded are the same as those set forth in the Underwriting policy - Non-

Life Business.

Investment policy

The Investment policy formalises the need to take elements linked to ESG aspects

into consideration in selecting companies in which to invest, and establishes

exclusions as regards the companies and countries in which it is possible to make

investments.

The Policy then defines a specific approach for the management of risks connected to

climate change (in particular transition risks), calling for the Group:

to support the transition towards a low carbon emission economy through

responsible investments, evaluating investments in various asset classes

with a view to contributing to the reduction of CO2 emissions;

to perform selective exclusions, in particular excluding a priori from new

investments those in Companies linked to mining / the generation of

electricity from thermal coal.

Outsourcing and supplier selection

The Outsourcing and supplier selection policy requires fair and responsible

policy

stakeholder management requirements to be evaluated within supplier selection

criteria.

Suppliers must make a commitment to respect the Supplier Code of Conduct for

responsible procurement (or the "Code"), adopted at the end of 2018 and inspired by

the principles of the United Nations Global Compact and ISO2040023.

The Code outlines what Unipol expects from its suppliers on the protection of human

and workers' rights, protection of the environment and the fight against corruption

and envisages - amongst other aspects - the right of Unipol to check the supplier's

processes and structures to verify their compliance, as well as apply penalty

mechanisms if they continue not to comply with the Code.

Suppliers, with the exception of Public Administrations and independent contractors,

whether or not they are members of professional associations, are asked to sign the

Code when they sign or renew their contracts. At the end of 2019, contracts including

the Supplier Code of Conduct covered 40% of total purchase expenses.

For details on the Policies referred to above, please refer to the "Sustainability" section of the Unipol Group's website.

For the application of the Policies, an assessment process specifically regarding the monitoring of ESG risks has been defined, which, for the management of critical or doubtful cases, involves multiple players within the company (the Sustainability Function, the Operational Reputation Management Team) and envisages the possibility of calling the ESG Task Force (the "Task Force"). The latter, established in

23 ISO standard which provides orientations to organisations, irrespective of their business or size, on the integration of sustainability within their purchases

68 | Integrated Report 2019 | Unipol Group

2019, began operating in the early months of 2020, and consists of key functions24 for understanding ESG impacts within business decisions. The Task Force will have the duty, in particularly relevant cases due to their potential impact or the size of the potential agreement/investment, to understand and evaluate the concrete implications of ESG factors in underwriting and investment activities and to define decisions consistent with the company's vision with respect to the cases presented.

In parallel and in line with the integration of ESG risks in the Group's Policies, the ESG Risks Interfunctional Working Group25 has defined new, detailed mapping of these risks and the relative oversight mechanisms (the "map", see table below), updated and streamlined to guarantee integration with the overall system, which includes risks linked to environmental, social and governance factors, broken down into seven risk areas.

To facilitate reading, the risks suffered and the risks generated are highlighted differently on the map.

The risks suffered consist of events that represent a risk for the Group, which has no levers to influence their occurrence, but can only act to oversee them, preventing or mitigating their consequences, or to transform them into opportunities; the risks generated instead represent events the triggering causes of which are directly connected to Group operations, with respect to which the Group has levers to prevent their occurrence or mitigate their consequences should they occur.

On the basis of a significance assessment, the map indicates the risks connected to the Group's core business.

  1. Non-Lifeand Claims Technical Division, Welfare and Life Division, Finance Department, Chief Risk Officer, Chief Innovation Officer, Sustainability.
  2. Body consisting of the Audit, Compliance and Anti-Money Laundering, Risk Management and Sustainability Functions, whose objective is to identify the potential social, environmental and governance risks to which the Group is exposed, map the controls targeted at managing these risks and suggest possible improvement actions.

Unipol Group | Integrated Report 2019 | 69

Risk areas

connected to ESG

Risk

Topics in the materiality matrix

Main regulatory and strategic controls in place

factors

Climate change -

Increase in technical risk and credit risk due to the

Actions for adaptation to and mitigation

Sustainability policy

Physical risks

increase in the frequency and severity of claims

of climate change

Risk management policy

linked to the consequences of climate change

Solutions that incentivise socially

Reinsurance and other risk mitigation techniques policy

(acute and chronic physical risks)

responsible and sustainable behaviours

Operational risk management policy

Time horizon: medium term26

Business continuity policy

• Guidelines for the management of credit risk assumption

activities

Non-insurability of risks linked to climate due to

Actions for adaptation to and mitigation

Underwriting Policy - Non-Life Business and Life Business

low resilience of society

of climate change

Provisions Policy - Non-Life Business and Life Business

Time horizon: medium term5

2019-2021 Strategic Plan, "Evolution of technical excellence"

Damages to property and assets of the Group and

Actions for adaptation to and mitigation

and "Shared value and sustainable development" areas

Business continuity risk for Group sites and

of climate change

agencies / relating to the interruption of the

supply chain (operational risk)

Time horizon: medium term5

Climate change -

Decrease in the value of the investment portfolio

Actions for adaptation to and mitigation

Sustainability policy

Transition risks

relating to companies not meeting expectations

of climate change

Risk management policy

with regard to the path of transition towards a

Investment policy

low CO2 emission economy (financial risk)

• Underwriting Policy - Non-Life Business and Life Business

Time horizon: medium term5

• Integrated Reputation Management System

2019-2021 Strategic Plan, "Shared value and sustainable

Negative impact on the Group's reputation due to

Contribution to sustainable development

development" area

the underwriting of insurance contracts and

in the various spheres of influence

investment in companies whose process of

(investments, customers, suppliers)

transition towards a low CO2 emission economy is

deemed

insufficient

by

stakeholders

(reputational risk)

Time horizon: short term5

Technological

Increased vulnerability of IT systems to outside

Data protection and leveraging

Sustainability policy

evolution of

attacks

Risk management policy

society

Information security policy

Decline in employment in specific roles and skills

Development of human capital

Operational risk management policy

mismatches

Relations with the agency network

Business continuity policy

• Organisational, Management and Control Model

• Charter for equal opportunities and equality at work

2019-2021 Strategic Plan, "People and Technology" area

Socio-

Impacts of the ageing population on the

Financial inclusion and financial education

Sustainability policy

demographic

sustainability of the risk assumed in the welfare

Product and service innovation

Risk management policy

change

and pension areas

Solutions that incentivise socially

Underwriting Policy - Non-Life Business and Life Business

responsible and sustainable behaviours

Provisions Policy - Non-Life Business and Life Business

2019-2021 Strategic Plan, "Beyond Insurance" (particularly

Increase in social

Reduction of insurability for the most vulnerable

Financial inclusion and financial education

the Welfare Ecosystem) and "Shared value and sustainable

polarisation

segments of our society

Product and service innovation

development" areas

Key:

Risks suffered

Risks generated

Aaaaa

Regulatory controls

Bbbbb

Strategic controls

26 As regards the time horizon of the risks linked to climate change:

  • Short-termcorresponds to the time span of the business plan and therefore of operational and financial planning;
  • Medium-termcorresponds to the time span of the Unipol Group's Emerging & Reputational Risks Observatory, that of identifying external risks and opportunities that could have an impact on the business model and on the business strategy;
  • Long-termcorresponds to the period until 2050, which is one of the main tipping points outlined in the special report of the IPCC (2018) and in the most recent strategy of the European Commission ("A clean planet for all", 2018).

70 | Integrated Report 2019 | Unipol Group

Risk areas

connected to ESG

Risk

Material topic

Regulatory and strategic controls in place

factors

Human and

Discriminatory statements or conduct in

Fairness in the sale of products and

Charter of Values and Code of Ethics (signed by agents)

workers' rights

communications and in offerings

services

Charter for equal opportunities and equality at work

violations

Enhancement of diversity (gender,

Sustainability policy

generational,

disability)

Risk management policy

customer centricity

Underwriting Policy - Non-Life Business and Life Business

Investment policy

Improper or disrespectful use of data

Data protection and leveraging

• Outsourcing and supplier selection and Code policies

• Policy and further internal regulation on the protection of

Incorrect actions on labour law risks

Development of human capital

personal data

Sharing of a common corporate culture

• Policy on the management of conflicts of interest - insurance

segment

Incorrect actions on occupational

health

and

Sharing of a common corporate culture

• Policy on insurance and reinsurance distribution

safety

Policy on the management of conflicts of interest -

Discriminatory statements or

conduct

in

Enhancement

of diversity

(gender,

personnel management

generational, disability)

insurance segment

• Policy regarding product governance and control - Non-Life

Violation of human or workers' rights, or on other

Fair

and

transparent

business

and Life Businesses

sensitive social and governance topics, by the

competition

• Operational risk management policy

Group, the agency network or the supply chain

Contribution to sustainable development

Policy on authorisations and powers

in the various spheres of influence

Health and safety management system manual

(investments, customers, suppliers)

• Organisational, Management and Control Model

Relations with the agency network

• Code of Good Practice

Incorrect actions on respect for human or

Contribution to sustainable development

Sector and supplementary agreements

workers' rights, or on other sensitive social and

in the various spheres of influence

Procedures for managing the company website and web

governance topics, at companies insured or

(investments, customers, suppliers)

services

investee companies

Procedures relating to the performance of clinical activities

• Clinical risk management procedures

Low control over safety in clinics and medical

Risk and control culture

centres

Environmental

Incorrect actions on environmental topics that

Fair

and

transparent

business

Charter of Values and Code of Ethics (signed by agents)

damage and

are relevant for the Group

competition

Sustainability policy

negative impact on

Risk management policy

the environment

Underwriting Policy - Non-Life Business and Life Business

Investment policy

• Outsourcing and supplier selection and Code policies

• Operational risk management policy

• Sector and supplementary agreements

• Organisation, Management and Control Model

Conduct in

Social degradation in the area of Group-owned

Fair

and

transparent

business

Charter of Values and Code of Ethics (signed by agents)

violation of

real estate

competition

Sustainability policy

business integrity

Risk management policy

Policy on the management of conflicts of interest -

Lack of transparency, clarity and integrity in

Fair

and

transparent

business

relationships with customers and other

competition

insurance segment

stakeholders

Fairness in the sale of products and

Policy on insurance and reinsurance distribution

services

Money laundering and terrorist financing risk management

Development of partnerships with public

policy

and private players

Directives on the Group's Corporate Governance System

Key Function Policies

Policy regarding product governance and control oversight

Non-compliance with rules in force (corruption,

Fair

and

transparent

business

money laundering, tax, free competition, privacy,

competition

mechanisms - Non-Life and Life

labour law)

Risk and control culture

Policy on the protection of personal data

Farsightedness in responsible capital and

Operational risk management policy

remuneration management

Organisational, Management and Control Model

Ineffective response to regulatory changes

Fair

and

transparent

business

Policy on authorisations and powers

competition

Procedures and operating guides governing transactions

Risk and control culture

with related parties, intercompany counterparties and

associated parties

Real estate guidelines

• Guidelines and further internal regulation on the

management and communication of privileged information

Unipol Group | Integrated Report 2019 | 71

Protection of personal data

The Unipol Group holds a significant amount of personal information of its customers, relating to various aspects of their lives, and such data is destined to increase as a result of the growing spread of new connected devices; their protection is a fundamental commitment to protect the rights and freedoms of the natural persons to which such data refer.

To this end, within the Unipol Group a detailed system has been defined consisting of policies, procedures and technological infrastructure which, inter alia, establishes security, technical and organisational techniques to guarantee the protection of personal data from the risks threatening them, such as those of data loss, theft, destruction or alteration, abusive access or unauthorised disclosure, and to ensure the prompt restoration of data availability and access in the case of incidents.

The Policy on the protection of personal data defines the general guidelines of the Unipol Group on the protection of natural persons with regard to the processing of personal data, specifying the organisational model (organisation and roles, people, culture and responsibilities), the operating model (processes, rules and documentation) and the architectural model (technologies and tools) structured for that purpose.

Through this system, the Group implements Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the "GDPR"), which introduced significant new elements in the protection of personal data, calling for, inter alia, the verification of activities according to risk assessment parameters and the effectiveness of the measures adopted in this regard.

In the course of 2019, Unipol, with the support of the Group's Data Protection Officer ("DPO") - who performs the activities under his responsibility for the Parent and for its subsidiaries with registered office in Italy - evaluated the effectiveness and efficiency of the oversight mechanisms, processes and organisational system implemented following the amendments introduced by the GDPR, in order to guarantee that it personal data management complies with regulations in force and is transparent with respect to data subjects. This also took place through audit activities intended to evaluate, with specific analyses, the compliance of processes and procedures with regulatory provisions, paying particular attention to the preliminary assessments performed in the case of processing entailing high risk for the rights and freedoms of data subjects.

In the course of 2019, several limited episodes (24) of data breaches27 as defined by the GDPR took place in the Group companies. All of the cases were promptly managed and resolved by the competent data controller companies. In just two cases it was necessary to promptly notify the Data Protection Authority: in one, based on a preliminary investigation initiated and in consideration of all information transmitted, the Authority reported that the event described was not a personal data privacy violation and, therefore, it closed the investigation, while it did not follow up on the other case. The remaining cases were not reported, as they had no risks for the data subjects.

In 2019, 6 complaints were received regarding the protection of personal data, all from private parties, which were promptly answered.

E-learning training courses were provided on privacy, and in particular on the topic of the new European Regulation (GDPR), in addition to specific classroom courses; at the end of 2019, more than 90% of the employees of the companies operating in Italy were reached, while abroad, for the company operating in Serbia, 27% of employees participated in the course on the local privacy regulations.

To increase widespread awareness on the matter, the provision of e-learning training courses continued for the Group's agency network (the course was started by 60% of agents, and of these 87% had completed it at 31 December 2019) and the sub-agency network (where training coverage reached 59%) as well.

The Information security policy defines the guidelines on cyber security, calling for the adoption of suitable physical, logical and procedural security measures aiming to guarantee appropriate and consistent protection to the information processed in the IT systems throughout the entire life cycle.

To control cyber risk, access control and antimalware and antispam solutions are used on central systems and user and mobile workstations, in addition to data backup/restoration and disaster recovery procedures, prevention and intrusion detection systems. The constant monitoring of systems, access and operations makes it possible to track and promptly manage incidents according to various levels of severity.

27 According to the GDPR, a data breach is a security violation that leads to the accidental or unlawful destruction, loss, alteration or unauthorised disclosure of, or access to, the personal data transmitted, stored or otherwise processed.

72 | Integrated Report 2019 | Unipol Group

The IT infrastructure and web applications are periodically subject to penetration testing/vulnerability assessments. UnipolSai is certified according to the ISO27001 international standard28 for the advanced electronic signature service.

In 2019, to boost awareness on cyber security, both employees (4,415 people trained for a total of more than 15,900 hours of training) and agents (9,551 people for more than 41,600 hours) were involved in dedicated training courses.

The system for monitoring risks connected to the management and use of data is complemented by the Data governance policy, which defines guidelines for the effective governance of data throughout its lifecycle within the Unipol Group. Data Governance is the set of processes, methodologies, roles and technologies which on one hand allows for the formal management of data informational assets, establishing clear responsibility for them, and on the other offers opportunities to employ the intrinsic value of the company's informational assets to support business strategies and objectives.

The Organisation and Management Model pursuant to Italian Legislative Decree 231/2001

Unipol Gruppo's OMM, updated in 2018, is composed of a General Part as well as 12 Special Parts, each dedicated to a category of crime that could theoretically take place within the Company.

CRIMES

3) Administrative crimes and

4) Crimes of receiving stolen goods,

money laundering, self-laundering

1) Offences against Public

offences relating to insider dealing,

2) Corporate offences

and crimes for the purposes of

Administration

market abuse and market

terrorism or subversion of the

manipulation

democratic order

6) Crimes in violation of

7) Organised crime and transnational

5) Cyber-crimes

occupational health and safety

8) Environmental offences

offences

regulations

10) Offences of employment of third

11) Incitement to not give

12) Unlawful intermediation and job

9) Copyright offences

country citizens without a regular

statements or provide false

exploitation

permit

statements to judicial authorities

In the Special Parts of the OMM, the specific principles of conduct and principles of control for preventing the commission of each type of crime previously indicated are laid out in detail.

The OMMs of the Unipol Group companies call for the same oversight mechanisms and control tools.

The Model is disseminated to employees through the company intranet; subsequent updates of the Model are disclosed to all employees through a company communication sent via email.

Following the approval of the Whistleblowing Procedure, the Group activated an IT platform through which personnel (employees and those who operate on the basis of a relationship, even in a form other than employment, which determines their inclusion within the company organisation) may report relevant unlawful conduct pursuant to Decree 231/01, deeds or facts which could constitute violations of the OMM, as well as violations of other precisely defined regulations29, with methods that guarantee the full confidentiality of the reporting party's identity and, in general, the content of the report30.

The duty of supervising the functioning and observance of the OMM and handling its updating is entrusted to the Supervisory Board (SB) consisting of three members of the Control and Risk Committee, independent non-executive directors, and a further two members represented by members of the company's Top Management responsible for the Compliance Function and the Auditing Function.

For further details on the OMM, please refer to the "Governance" section of the Unipol Group's website

  1. The ISO/IEC 27001 standard is an international standard that defines the requirements to set up and manage the information security management system, and includes aspects relating to logical, physical and organisational security.
  2. Reference is made to (i) Regulation (EU) no. 596/2014 relating to market abuse ("MAR"), (ii) Italian Legislative Decree no. 231 of 21 November 2007 on preventing the use of the financial system for money laundering and terrorist financing, (iii) Italian Legislative Decree no. 209 of 7 September 2005 ("Private Insurance Code"), (iv) Italian Legislative Decree no. 58 of 24 February 1998 ("Consolidated Law on Finance").
  3. The IT platform adopted by the Group makes it possible to (i) manage reports in pseudonymised form and (ii) keep track of the relative information in encrypted form. Access to the latter is limited to identified members of the company structures responsible for receiving, reviewing and evaluating whistleblowing reports.

Unipol Group | Integrated Report 2019 | 73

Anti-corruption

The processes of the Group and the companies that are part of it are subject in the course of the year to assessments by the control functions and Model 231 Monitoring to identify the relevant areas at risk for the purposes of Italian Legislative Decree 231/2001. The analysis is performed on all processes mapped and results in a matrix, which is constantly updated and cross-references individual processes with the risk of the crimes to which they are exposed; during this process, a specific assessment is performed on the risk of corruption.

With respect to the 105 processes analysed in relation to the Parent, 12 were evaluated in 2019 as sensitive to the risk of corruption (11% of the total); for UnipolSai Assicurazioni, there were 143 processes mapped and analysed, with 44 subject to the assessment of sensitivity to the risk of corruption (31%).

The oversight and control mechanisms put into place to combat corruption are defined in the OMM in Special Part 1, with reference to crimes in relations with the Public Administration, and in Special Part 2 with reference to the crime of corruption between private parties laid out in the Civil Code.

As regards the companies operating in Serbia, provisions have been included in their By-Laws and Code of Ethics that envisage a duty to avoid conflicts of interest. For UnipolRe, operating in Ireland, so as to more effectively combat corruption the signatory powers approved by the Board of Directors envisage two signatures for any transaction.

In 2019, based on available information, Unipol Gruppo and the Unipol Group companies did not incur costs for any penalties pursuant to Legislative Decree 231/2001 deriving from charges for crimes of corruption.

In 2019, the Group made significant investments in training to strengthen awareness about the risk of corruption, updating and providing new courses on the matter for the companies Unipol Gruppo, UnipolSai, UniSalute, ARCA, Villa Donatello, UNA Group, Linear, SIAT, Marina di Loano and Tenute del Cerro.

Percentage of employees specifically trained on anti-corruption policies and procedures in Italy*

94%

83%

96%

93%

98%

79%

Officers and

Call Centre

TOTAL

Senior

Administrative

Blue-collar

middle

staff

personnel

Executives

mgmt

workers/Othe

*The data do not include the company CarServer, acquired by UnipolSai in the second half of 2019.

To ensure effective implementation of the OMM, agents were asked to acknowledge it, which was done in 50% of cases.

The contracts that the Group enters into with suppliers include a clause in which the suppliers undertake to respect the OMM, under penalty of termination of the contract.

Viewing the OMM is certified for suppliers enrolled in the Suppliers Register, which accounted for 38% of the total in 2019.

Anti-fraud

Combatting fraud is fundamental for the insurance business, not only in the interest of the Company, but also and especially to protect customers with good conduct.

The UnipolSai Anti-fraud Function carries out its activity of preventing, intercepting and combating fraudulent conduct perpetrated to the detriment of the Company as well as the other Group Companies without their own dedicated independent structure; the activity concerns combatting fraud in the underwriting as well as settlement processes.

74 | Integrated Report 2019 | Unipol Group

In 2019 a new Anti-fraud engine was adopted, which introduced innovative technological solutions in data management, artificial intelligence and predictive learning, making the process even more efficient and allowing for the automatic identification of suspicious claims and an analysis of relationships between the various parties involved in the claims.

During the year, integrating the work carried out by the Group's Legal and Anti-fraud departments, the Special Areas of the Claims Department analysed around 30k reports of suspect claims in the settlement phase. According to the results of the investigations, the claims managed by the Special Areas are reported to the Anti-fraud Department for possible criminal action, closed with no further action, concluded with a reduced settlement or settled in full if proving genuine.

Anti-fraud: Cases reported, verifications, complaints

47

2,045

72

cases reported

Underwriting/generic anti-fraud

503

Underwriting/generic complaints

10,983

Settlement complaints

Settlement anti-fraud

Complaints

of which open files

submitted

2,107 (19%)

8,938

431

492

Protection of fair competition

Through its Code of Ethics, the Unipol Group commits to operating in favour of a market in which free competition is guaranteed, abstaining from practices that may potentially be anti-competitive.

Unipol puts that commitment into practice by structuring internal processes and procedures that guarantee the necessary oversight mechanism and controls, and with monitoring activities and the internal dissemination of new regulations that are relevant for the activities performed by the Group companies, aiming to verify compliance with standards as well as identify possible areas for new business activities. This is joined by a constant commitment to advocacy in light of proposed laws and public consultation initiatives, and on any other deed or document published by the Authorities with possible effects on the Group and its stakeholders.

The regulations analysed on competition include the "Provisions on class-action lawsuits" (Law no. 31 of 12 April 2019) which, effective as of 19 April 2020, will replace provisions of law in force, currently contained in the Consumer Code, governing the possibility of lodging a collective suit, which until this point has been limited to the protection of consumer interests; adjustment of national regulations to Regulation (EU) 2015/2424 on the European Union trademark (Italian Legislative Decree no. 15 of 20 February 2019); the "Growth Decree" (Italian Decree Law no. 34 of 30 April 2019) containing a series of measures for companies for the re-launch of the national economy; Consob's informational note no. 1 of 28 February 2019 on the initial application of new elements concerning the non-financial statement, set forth in the 2019 budget law.

Sanctions

There were a total of 2,696 IVASS interventions against UnipolSai and the Group's other insurance companies operating in Italy in the course of 2019, down compared to 3,293 in the previous year.

It should be highlighted that, at the date of this document, a new regulation applied by the Supervisory Authority is in force in relation to offences taking place after 1 October 2018, for which the administrative sanction goes from a minimum of €30k to a maximum of 10% of turnover, while offences committed until 30 September 2018 and confirmed subsequently by IVASS are subject to the system in force previously, characterised by a well-defined grid that includes days of delay and the amount of the relative sanctions.

At 31 December 2019, there were 64 IVASS sanctions against the Group's insurance companies, for a total of €381k. In relation to complaints submitted by customers pursuant to IVASS Regulation no. 46/2016, UnipolSai Assicurazioni alone handled, together with its agents, 2,290 complaints (+16% over the same period of 2018); of these 76% were rejected.

In relation to respect for environmental legislation, no fines or non-monetary penalties were imposed for damages caused to the environment as a result of the operations of Group companies and health and safety.

Unipol Group | Integrated Report 2019 | 75

Capital requirements

Capital management

Capital management policy

The capital management strategies and objectives of the Unipol Group are outlined in the "Capital management and dividend distribution policy", which describes the reference context and the process for managing capital and distributing dividends also in terms of the roles and responsibilities of the players involved. The document also identifies the principles of capital management and the distribution of dividends or other elements of own funds, in line with the capital return objectives and the risk appetite defined by the Board of Directors.

The general aims pursued by the "Capital management and dividend distribution policy" are:

  • ex ante definition of the return objectives on allocated capital, consistent with the profitability targets and in line with the risk appetite;
  • maintaining a sound and efficient capital structure, considering growth targets and risk appetite;
  • outlining the capital management process for the definition of procedures to ensure, inter alia, that:
    • the elements of own funds, both at the time of issue and subsequently, satisfy the requirements of the applicable capital regime and are correctly classified;
    • the terms and conditions for each element of own funds are clear and unequivocal;
  • ex ante definition of a sustainable flow of dividends, in line with the profit generated, free cash flow and risk appetite, identifying and documenting any situations in which the postponement or cancellation of distributions from an element of own funds could arise;
  • outlining the dividend distribution process for the definition of procedures to ensure sound and efficient capital management, considering that the growth and profitability targets are in line with the risk appetite;
  • defining the roles, responsibilities and reporting in relation to capital management and the distribution of dividends or other elements of own funds.

The capital management and dividend distribution process is divided into five steps, in close relation with other corporate processes:

  • final measurement of available capital and the capital required;
  • preparation of the mid-term capital management plan;
  • monitoring and reporting;
  • management action on capital, including any contingency measures;
  • distribution of dividends or other elements of own funds.

Insurance Sector

Activities by the competent corporate organisations of the Group were carried out in 2019 in compliance with Solvency II regulations and the supervisory provisions issued by IVASS.

As regards the calculation of the capital requirement, it is worth noting that, by means of measure 0113852/18 of 24 April 2018 and following the application for authorisation submitted by Unipol Gruppo SpA, IVASS authorised the use of a partial internal model for calculating the Group solvency capital requirement, effective from assessments relating to the annual requirement at 31 December 2017. The companies UnipolSai and Arca Vita SpA received authorisation to use the partial internal model for calculating the solvency capital requirement, effective from valuations regarding the annual requirement at 31 December 2016.

76 | Integrated Report 2019 | Unipol Group

Remuneration system and incentives

NFS

Every year, based on guideliness issued by the Parent on Group Remuneration Policies, the Unipol Group Companies

adopt Remuneration Policies approved by the Boards of Directors of the Companies and by the respective Shareholders' Meetings, to guarantee fair remuneration, adequate to the role, responsibilities, degree of professionalism and individual skillset, in compliance with legal and regulatory provisions and consistent with sustainable performance requirements.

The essential principles for determining remuneration are a sound and prudent risk management policy, internal fairness, meritocracy and benchmarking with the reference markets.

Annual non-executive Director compensation is fixed; they also receive attendance fees for participation in each board meeting and shareholders' meeting as well as reimbursements for expenses incurred to carry out their official duties. However, they receive no variable remuneration component.

Manager remuneration includes fixed and variable components. The parameters for the assignment of the variable remuneration component defined in relation to the 2019 Remuneration Policies are summarised below.

VARIABLE COMPONENT

Prerequisites for the recognition of any incentive are the continuing presence of positive economic results and the minimisation of risk factors, in addition to the presence of a dividend capability, i.e. the presence of conditions, in terms of economic performance and

minimum solvency requirements of the Unipol Group for the eventual distribution of a dividend to Unipol shareholders.

The Bonus is broken down as 50% in a Short Term Incentive (STI) and 50% in a Long Term Incentive (LTI) (becoming 40% and 60% in the variable remuneration).

Short Term Monetary Incentive

In addition to entry gates linked to Group and individual Company results, each recipient is assigned four short-term objectives on an annual basis. The sum of the weights obtained from combining the objectives determines the Individual Performance Level.

For the Short Term Incentive, 50% is attributed in monetary form and 50% in the form of financial instruments consisting of Unipol ordinary shares and UnipolSai ordinary shares.

Long Term Incentive

For the Long Term Incentive 50% is assigned in monetary form and 50% based on a closed financial instrument-based remuneration plan, which involves the distribution of Unipol ordinary shares and UnipolSai ordinary shares in the three-year period 2023-2025(five-year period 2023-2027 for the Unipol Gruppo Chief Executive Officer and Group CEO and for the Executive Level Managers).

The LTI is paid based on the achievement of Unipol Group profit indicators, the Unipol solvency capital requirement target, growth in the value of the Unipol share over the three year period and performance of the Group's reputational index in the three-year period 2019-2021.

The reputational index trend has a weight of 5% on the amount of the LTI Bonus. The objective to be reached is a Reputational Profile* of the Unipol Group over the applicable three-year period (understood as the average of the monthly measurements) which is higher than that recorded by the Financial-Insurance Sector as a whole during the same period.

  • Value calculated and measured on the basis of the Reputation Institute's RepTrak® model.

For detailed information, please refer to the Remuneration Report, available in the "Governance" section of the Unipol Group's website.

Unipol Group | Integrated Report 2019 | 77

With respect to the wage differentials between men and women please note, as regards fixed remuneration, that there has been an improvement in the gap recorded in previous years, which is more significant for management figures (Managers and Officers/middle management), for which the gap has been reduced by roughly 3 percentage points.

The data recorded in the Group show a pay gap between men and women that is significantly smaller than the average gap of the insurance sector in which, even with high employment of women31, female managers have an average Gross Annual Remuneration roughly 8% lower than that of men, while it is around 17% lower for women who are not managers32.

Remuneration differences by gender and by employment category*

Differences relating to median values of gross annual fixed remuneration of employees

Differences relating to median values of total gross annual remuneration of employees (fixed and variable parts)

-2%

−6%

−8%

+3%

-6%

Senior Executives

Officers

Administrative

Call Centre personnel

Blue-collar workers/Other

and middle managers

staff

*The figures exclude the foreign companies Arca Vita International, DDOR, DDOR Auto, DDOR Re and Unipol Re.

.

  1. This refers to sectors in which the employee population consists of at least 40% women.
  2. Sector remuneration survey

78 | Integrated Report 2019 | Unipol Group

UNIPOL GROUP PERFORMANCE

Exercise by UnipolSai of the put option on Unipol Banca and UnipolReC and agreement about the granting of a loan by UnipolSai

On 7 February 2019, the Board of Directors of UnipolSai Assicurazioni S.p.A. ("UnipolSai") resolved to exercise the put option relating to 27.49% of the share capital of Unipol Banca S.p.A. ("Unipol Banca") and UnipolReC S.p.A. ("UnipolReC"), held by the holding company Unipol Gruppo S.p.A. ("Unipol") by virtue of the option contract signed on 31 December 2013 between Unipol and the former Fondiaria- Sai S.p.A.

On 14 February 2019, UnipolSai notified Unipol of its exercise of the option right; the transfer of the shares was completed on 1 March 2019 against payment by Unipol of a total consideration of €579.1m, calculated on the basis of the option contract. Based on the outcome of the put option, the direct investment held by Unipol in Unipol Banca and in UnipolReC stood at 85.24% of the respective share capital. UnipolSai has maintained ownership of the remaining shares of these companies (14.76% of the respective share capital). UnipolSai also granted to Unipol, within the scope of the afore-mentioned put option, a 5-year loan of €300m, also repayable early, at an interest rate of the 3-month Euribor plus a spread of 260 basis points. For Unipol, the aforementioned loan is targeted at maintaining a high level of financial flexibility with an important available liquidity buffer.

Sale of Unipol Banca to BPER Banca and acquisition of NPL portfolios

On 31 July 2019 - with all conditions precedent set forth in the contract being met and, in particular, with the necessary authorisations having been received from the competent Supervisory Authorities - the extraordinary transaction relating to the Group's banking sector, in execution of the agreements entered into on 7 February 2019 between Unipol and UnipolSai, on one hand, and BPER Banca SpA ("BPER"), along with the subsidiary Banco di Sardegna SpA ("Banco di Sardegna") on the other hand, was completed within a single context.

In particular:

  • Unipol and UnipolSai sold their holdings to BPER representing the entire share capital of Unipol Banca (which in turn controls Finitalia SpA), respectively 85.24% and 14.76% of the capital, at the total price of €220m, divided pro rata between the two sellers as approximately €187.5m and €32.5m, respectively;
  • UnipolReC in turn acquired two separate non-performing loan portfolios, one owned by BPER and the other by Banco di Sardegna (the "Portfolios"), for a gross carrying amount of around €1.2bn, against a final price of €102m which takes into account the effects of credit management activities from the assessment reference date up to 31 July 2019.

With this transaction, the Unipol Group completed the process of requalification of its strategy in the banking sector, by exiting from the direct business of a medium sized bank, in order to take on the role of major investor of one of the main Italian banking groups.

It also increased the scale of operations of UnipolReC, which became a financial intermediary registered pursuant to Art. 106 of the Consolidated Law on Banking, enhancing its expertise in credit recovery.

On 25 September 2019, following the authorisation granted by the competent Supervisory Authority, BPER Banca SpA filed and entered in the Modena Register of Companies the project for the merger of Unipol Banca SpA into BPER Banca SpA ("BPER Banca"). The deed of merger, signed on 15 November 2019, entered into effect on 25 November 2019, with continuity as part of BPER Banca of all Unipol Banca SpA accounts existing prior to the merger.

Unipol Group | Integrated Report 2019 | 79

Mergers and spin-offs within the Group

In June 2019 the Boards of Directors of UnipolSai and the subsidiaries concerned, insofar

as they were respectively responsible, approved the following mergers and spin-offs (the "Transactions") involving UnipolSai and its wholly-owned subsidiaries:

  • project for the merger by incorporation of Pronto Assistance SpA into UnipolSai;
  • project for the full spin-off of Ambra Property Srl in favour of UnipolSai, UNA SpA Group and Midi Srl;
  • project for the partial spin-off of Casa di Cura Villa Donatello SpA in favour of UnipolSai, as well as the full spin-off of Villa Ragionieri Srl in favour of the Company itself and of Casa di Cura Villa Donatello SpA.

The Transactions are part of a project for streamlining and simplifying the structure of the Unipol Group which aims to:

  • simplify and further boost the efficiency of the industrial management and administrative, capital and financial organisation of the companies within the Group, eliminating duplications of structures and skills, today placed in companies or company complexes for which the prerequisites for autonomous management and/or income generating capacity have progressively stopped being met;
  • concentrate into UnipolSai, or under its direct control, assets or corporate structures functional to the pursuit of the strategic objectives set forth in the 2019-2021 Business Plan.

By communication dated 16 October 2019, pursuant to Art. 201 et seq., Italian Legislative Decree no. 209 of 7 September 2005 and Art. 23 et seq. of ISVAP Regulation no. 14/2008, IVASS granted authorisation to UnipolSai Assicurazioni for the merger by incorporation of Pronto Assistance SpA into UnipolSai Assicurazioni and for the spin-offs, with partial transfer of the company complex to UnipolSai Assicurazioni, of Ambra Property, Villa Ragionieri and Casa di Cura Villa Donatello.

On 21 January 2020, after concluding the required corporate procedures, the deed of merger and the deeds relating to the spin-offs were signed. Following their registration in the respective Registers of Companies, these transactions became legally effective from 1 February 2020. They became effective for accounting and tax purposes as of 1 January 2020 as regards the merger and total spin-offs of Ambra Property and Villa Ragionieri, and as of 1 February 2020 as regards the partial spin-off of Villa Donatello.

Again in June 2019, the Board of Directors of the subsidiaries UniSalute and UniSalute Servizi approved, within their areas of competence, the proportional partial spin-off of UniSalute Servizi, with transfer to a NewCo of the business consisting in the provision of specialist medical-healthcare services. The proportional partial spin-off was completed on 1 October 2019, with the simultaneous setup of "Centri Medici Dyadea". On 20 December 2019, UnipolSai acquired 100% of the share capital of Centri Medici Dyadea from UniSalute at the price of €5.1m.

Following the spin-off, UniSalute Servizi focuses its activities on the marketing, promotion and management of social and healthcare assistance services, whilst Centri Medici Dyadea is a network of clinics that guarantees quality healthcare in the area of Bologna.

Acquisition of Car Server

On 1 August 2019, UnipolSai finalised the acquisition of 100% of the share capital of Car Server SpA ("Car Server" at the price of €96m. Car Server is one of the leading operators on the Italian market for long-term company fleet rental and business mobility management in general. With this transaction, the Group has laid the groundwork for implementation of the 2019-2021 Strategic Plan as regards the mobility ecosystem.

Trade Union agreement regarding Personnel

As part of the implementation of the 2019-2021 Business Plan, on 18 July 2019 a trade union agreement was signed regarding voluntary pre-retirement arrangements for employees meeting pension requirements by the end of 2023.

The agreement of 18 July 2019 envisaged early retirement for a maximum of 760 individuals, but as over 800 subscribed to the option, on 20 November 2019 a further trade union agreement was signed that will allow all employees subscribing to access the arrangements envisaged in the previous agreement. For further information, please refer to the section "Other Information".

Repayment of subordinated liabilities

On 24 July 2019, in application of the contractual repayment plan, UnipolSai arranged repayment of the first of five annual instalments in equal amounts of €80m of the Restricted Tier 1 subordinated loan disbursed on 24 July 2003 by Mediobanca - Banca di Credito Finanziario SpA for a total nominal amount of €400m, maturing on 24 July 2023.

80 | Integrated Report 2019 | Unipol Group

"Always one step ahead": the leadership and innovation of UnipolSai Assicurazioni at the heart of the multimedia advertising campaign

In 2019, UnipolSai Assicurazioni was back on air with the new multimedia advertising campaign "Always one step ahead".

Through creativity that effectively combines corporate and product elements, at the same time the campaign emphasises the leadership, expertise and reliability of UnipolSai and its innovative vocation that is consolidated by the offer of insurance solutions combined with state-of-the-art technology services.

With an authoritative and reassuring mood and sophisticated cinematographic processing, the campaign advertises two products dedicated to the world of cars:

  • the Unibox digital device for cars, the satellite device linked to the KM&Servizi MV policy, which offers a series of functions such as call-out when needed of tow trucks and emergency assistance, and which allows the premium to be modelled according to driving style;
  • the innovative UnipolSai App, which offers direct management of car details via smartphone or tablet: from the km travelled to routes, and the most sophisticated high-value added services, all readily to hand, such as the option of tow truck call-out and real- time monitoring of its route.

A major advertising project for which Alessandro Gassmann was chosen as the key protagonist and with strong scheduling of 30-second and 15-second TV advertisements on all the main national networks, in addition to a presence on digital channels, radio and press with creative integration over the various media.

Unipol Group | Integrated Report 2019 | 81

Operating performance

In 2019 the Unipol Group achieved a consolidated net profit of €1,087m, including the non-recurring effects of net income on first-time consolidation applying the equity method of the BPER Group (for €421m) and the extraordinary expense associated with the signing of Trade Union agreements for the Solidarity Fund and other leaving incentives for approximately €66m, net of tax effects (€95.5m gross of taxes).

Note that in 2018, the Group reported a profit of €628m, including the non-recurring effects of the capital gain of €309m from disposal of the investment in Popolare Vita and the negative effects of the decision to sell the investment held in Unipol Banca for €338m. Excluding the effects of the aforementioned non-recurring components from the two periods under review, and restating the consolidated profits on a like-for-like basis, i.e. for 2018 excluding the contribution to the result of Popolare Vita, Unipol Banca and their subsidiaries, the consolidated net profit for 2019 would be €732m, up significantly (+19.5%) on the €613m recorded in the previous year.

At 31 December 2019, direct insurance premiums, gross of reinsurance, totalled €14,014m, a considerable increase on 2018 on a like- for-like basis (€12,245m, +14.4%), particularly in the Life business (+36.2%).

Direct Non-Life premiums in 2019 amounted to €8,167m (€7,953m at 31/12/2018, +2.7%). The MV business amounted to €4,178m (-0.1%) while in the Non-MV business, the premiums reached €3,989m, up by 5.8%, thanks mostly to significant growth in the Health business (+11.2%).

The increase in Non-Life turnover concerned both UnipolSai, which recorded 1.3% growth with premiums for €6,990m, as well as, more notably, the Group's other major companies: UniSalute's premiums amounted to €448m (+9.3%); Linear, the other main company of the Group operating in the MV segment, totalled €184m in premiums (+2.4%); SIAT, which focuses on the Marine Vessels segment, recorded premiums for €137m (+7.7%). The Non-Life bancassurance segment had very good performance, with Arca Assicurazioni achieving premiums of €136m (+13.1%) and Incontra Assicurazioni recording premiums of €185m (+35.8%) thanks especially to the placement of new Health products by the Unicredit network.

In terms of the Non-Life loss ratio trend, in the MV TPL segment the technical performance continued to be characterised by compression in the average premium due to market competition, counteracted by positive performances as concerns the frequency as well as the average cost of claims, due in particular to the benefits of digital (40% of vehicles insured by UnipolSai are fitted with the black box) and the cost savings permitted by the network of authorised repair shops, managed by the subsidiary Auto Presto&Bene, to which a growing number of claims are routed.

After a 2018 affected by damage caused by storm "Vaia", 2019 was also characterised by a significant loss ratio due to weather-related events of considerable impact not only on the Fire and Other damage to property business, but also on Land Vehicle Hulls as a result of hail storms that hit numerous towns and cities in Italy. The economic effects of the loss ratio from weather-related events were in part reabsorbed by reinsurance, and consequently the combined ratio of the Group, net of reinsurance, stood at 94.2% (93.7% direct business combined ratio), in line with the 94.2% at 31 December 2018 (94.4% direct business combined ratio). The loss ratio, including the balance of the other technical items, stood at 66.3% (66.8% at 31/12/2018) and the expense ratio at 27.9% of premiums earned (27.4% at 31/12/2018), also reflecting a product mix more centred on products other than MV TPL with higher commission rates (the expense ratio of direct business to premiums written stood at 27.7%; 27.2% at 31/12/2018).

The pre-tax result for the Non-Life segment was €901m, up compared to €730m at 31 December 2018, positively affected by the growth in volumes and a stronger contribution from investment properties. The results for the two periods, normalised and on a like-for-like basis, were €810m for 31 December 2019 compared to €727m at 31 December 2018.

In the Life segment, on a like-for-like basis the Unipol Group posted a significant growth in turnover thanks to the attractiveness of the performance offered by insurance products linked to segregated funds and to deposits, for around €640m, associated with the addition of two new closed pension funds. Direct premiums amounted to €5,847m at 31 December 2019 (+33.0% compared to 31/12/2018, +36.2% on a like-for-like basis).

UnipolSai posted €4,080m in direct premiums (+30.4%) while in the bancassurance channel, in particular, Arca Vita confirmed its strong growth and, jointly with the subsidiary Arca Vita International, recorded direct premiums for €1,676m, up 55.6% compared to 31 December 2018.

New business in terms of APE, net of non-controlling interests, amounted to €493m (€397m at 31/12/2018 on a like-for-like basis, +24.2%), of which €401m contributed by traditional companies and €91m by bancassurance companies.

The normalised pre-tax profit for the Life segment was €236m, down compared to the €299m recorded on a like-for-like basis in 2018, to which a particularly strong financial income had contributed.

82 | Integrated Report 2019 | Unipol Group

As regards the management of financial investments, 2019 was still characterised by geo-political tensions and, in Italy, by political instability which in August led to a new Government being formed. In September the ECB again dropped the cost of borrowing by 10 basis points and launched a package of measures that included the relaunch, until further notice, of securities purchases on the market. All of this led in the second part of the year to keeping the interest rates and spreads on Italian government bonds low and an upward trend in the share markets. In this context, the gross profitability of the Group's insurance financial investments portfolio remained at significant levels with returns on invested assets equal to 3.65% (3.79% in 2018), of which 3.29% relating to the coupons and dividends component.

Real estate management continued to focus on the renovation of a number of properties, particularly the high-end areas of Milan, in order to seek out opportunities to increase value or generate income, as well as structures intended for business use. Note the signing in December of a preliminary agreement for the sale of the building known as Torre Velasca (MI) at a total sale price of €160m (notarisation is planned by the end of 2020).

The other sectors where the Group operates showed positive performances, particularly the hotel sector, which allowed the UNA Group to close the year with a profit of €4m.

The pre-tax profit for the Real Estate, Holding and Other Businesses sectors was €160m (-€84m net of the non-recurring effects of first- time consolidation of the BPER Group), an improvement compared to the loss of €166m at 31 December 2018. This improvement reflected the significant realisation values on Unipol Gruppo financial investments and better results from the Group's diversified and real estate companies. Note in particular the positive performance of UnipolReC, which recorded a significant net profit of around €12m.

At 31 December 2019, consolidated shareholders' equity amounted to €8,305m (€6,327m at 31/12/2018). The main factors increasing shareholders' equity were linked to the profit for the period, corroborated by the effects of first-time consolidation of the BPER Group, and the considerable growth in the reserve on AFS securities, due in particular to the decrease in interest rates. Shareholders' equity attributable to the owners of the Parent amounted to €6,687m (€5,032m at 31/12/2018).

As regards the ratio of own funds to capital required, the Group's solvency ratio at 31 December 2019, calculated in application of the Partial Internal Model, was 182%, up compared to 163% of 31 December 2018, also in relation to the positive performance of the financial markets during the year.

Unipol Group | Integrated Report 2019 | 83

Condensed Consolidated Operating Income Statement broken down by business segment

Non-Life business

Life business

Insurance Sector

Amounts in €m

Dec-19

Dec-18

% var.

Dec-19

Dec-18

% var.

Dec-19

Dec-18

% var.

Net premiums

7,822

7,593

3.0

5,440

3,876

40.4

13,262

11,469

15.6

Net commission income

(2)

(1)

n.s.

16

18

(11.5)

13

17

(20.4)

Financial income/expense (**)

651

441

47.7

1,198

1,639

(26.9)

1,849

2,080

(11.1)

Net interest income

312

356

1,065

1,116

1,377

1,471

Other income and charges

339

58

94

56

433

114

Realised gains and losses

1

113

69

476

70

588

Unrealised gains and losses

(1)

(85)

(30)

(8)

(31)

(94)

Net charges relating to claims

(5,070)

(4,965)

2.1

(6,097)

(4,602)

32.5

(11,167)

(9,568)

16.7

Operating expenses

(2,254)

(2,146)

5.0

(244)

(241)

1.2

(2,498)

(2,388)

4.6

Commissions and other acquisition costs

(1,751)

(1,687)

3.8

(113)

(109)

3.6

(1,864)

(1,797)

3.8

Other expenses

(503)

(459)

9.6

(131)

(132)

(0.8)

(634)

(591)

7.2

Other income/charges

(246)

(192)

(28.3)

(87)

(68)

(28.6)

(333)

(259)

(28.4)

Pre-tax profit (loss)

901

730

23.5

226

621

(63.7)

1,127

1,351

(16.6)

Income taxes

(164)

(194)

(15.4)

(59)

(87)

(32.3)

(223)

(281)

(20.6)

Profit (loss) from discontinued operations

Consolidated profit (loss)

737

536

37.5

166

534

(68.8)

904

1,070

(15.5)

Profit (loss) attributable to the Group

422

125

401

711

823

Profit (loss) attributable to non-controlling

114

41

132

193

247

interests

  1. The real estate sector only includes Group real estate companies
  1. The real estate sector only includes Group real estate companies
  1. excluding net gains and losses on financial instruments at fair value through profit or loss for which investment risk is borne by customers (index- and unit linked) and arising from pension fund management

The factors that marked the economic performance of the Group included the following:

  • direct insurance premiums, gross of reinsurance, totalled €14,014m (€12,349m at 31/12/2018, +13.5%; +14.4% on a like-for-like basis). Non-Life direct premiums amounted to €8,167m (€7,953m at 31/12/2018, +2.7%) and Life direct premiums amounted to €5,847m (€4,396m at 31/12/2018, +33%, +36.2% on a like-for-like basis), of which €393m related to investment products in the Life business (€508m at 31/12/2018);
  • net premiums earned, net of reinsurance, amounted to €13,262m (€11,469m at 31/12/2018, +15.6%; on a like-for-like basis +16.7%), of which €7,822m in the Non-Life business (€7,593m at 31/12/2018, +3%;) and €5,440m in the Life business (€3,876m at 31/12/2018, +40.4%; on a like-for-like basis +44.2%);
  • net charges relating to claims, net of reinsurance, were €11,167m (€9,568m at 31/12/2018, +16.7%; +18.2% on a like-for-like basis), of which €5,070m in the Non-Life business (€4,965m at 31/12/2018, +2.1%) and €6,097m in the Life business (€4,602m at 31/12/2018, +32.5%; +36.1% on a like-for-like basis), including €183m of net income on financial assets and liabilities at fair value (net charges of €105m at 31/12/2018);
  • operating expenses amounted to €2,692m (€2,514m at 31/12/2018). In the Non-Life business, operating expenses amounted to €2,254m (€2,146m at 31/12/2018), €244m in the Life business (€241m at 31/12/2018), €191m in the Holding and Other Businesses sector (€132m at 31/12/2018) and €22m in the Real Estate sector (€22m at 31/12/2018);
  • the combined ratio, net of reinsurance, of the Non-Life business was 94.2% (94.2% at 31/12/2018);

84 | Integrated Report 2019 | Unipol Group

Banking Sector

Holding and Other

Real Estate Sector (*)

Intersegment

Total Consolidated

businesses Sector

elimination

Dec-19

Dec-18

% var.

Dec-19

Dec-18

% var.

Dec-19

Dec-18

% var.

Dec-19

Dec-18

Dec-19

Dec-18

% var.

13,262

11,469

15.6

8

7

4.2

(35.0)

(8)

(8)

13

16

(19.8)

(10.0)

301

(54)

n.s.

(33)

(40)

17.0

(13)

(17)

2,104

1,969

6.8

(49)

(78)

(36.7)

(5)

(6)

(21.9)

1,323

1,387

(4.7)

(10.0)

276

(9)

(3340.8)

14

15

(10.3)

(13)

(17)

709

103

586.1

101

31

228.9

1

(81.1)

171

620

(72.4)

(27)

2

(1384.9)

(42)

(50)

(15.3)

(100)

(142)

(29.8)

(11,167)

(9,568)

16.7

(191)

(132)

44.3

(22)

(22)

0.1

20

28

(2,692)

(2,514)

7.1

23.5

1

(1,864)

(1,796)

3.8

(191)

(132)

44.3

(22)

(22)

0.1

19

28

(828)

(718)

15.3

92

74

23.7

6

1

n.s.

1

(3)

(234)

(187)

(24.7)

(10.0)

209

(104)

n.s.

(49)

(61)

20.3

1,287

1,185

8.6

18

18

(3.8)

5

10

(53.4)

(201)

(252)

(20.5)

(305)

(100.0)

(305)

(100.0)

(305)

n.s.

227

(86)

n.s.

(44)

(51)

13.4

1,087

628

73.0

(296)

227

(86)

(35)

(40)

903

401

124.8

(9)

(9)

(11)

184

227

(18.8)

  • net gains on investments and financial income from financial assets and liabilities (excluding net gains on financial assets and liabilities at fair value relating to Life business) amounted to €2,104m (€1,969m at 31/12/2018);
  • the pre-tax profit (loss) amounted to €1,287m (€1,185m at 31/12/2018);
  • taxes for the period represented a net expense of €201m (expense of €252m at 31/12/2018);
  • net of €184m profit attributable to non-controlling interests, the profit attributable to the owners of the Parent at 31 December 2019 was €903m (profit of €401m at 31/12/2018); the normalised profit attributable to the owners of the Parent was €569m (€440m as the normalised profit and on a like-for-like basis at 31/12/2018).

Unipol Group | Integrated Report 2019 | 85

Insurance Sector performance

Overall, the Group's insurance business closed with a pre-tax profit of €1,127m (€1,351m at 31/12/2018, -16.6%; €1,046m the normalised figure and on a like-for-like basis, +2%), of which €901m related to the Non-Life business (€730m at 31/12/2018, +23.5%), including €176m deriving from the first time consolidation according to the equity method of the investment in BPER Banca, and €226m from the Life business (€621m at 31/12/2018, -63.7%; €299m as the normalised figure and on a like-for-like basis, -20.9%).

At 31 December 2019, Investments and cash and cash equivalents of the Insurance sector totalled €64,685m (€57,965m at 31/12/2018), €16,783m of which was from Non-Life business (€15,613m at 31/12/2018) and €47,902m from Life business (€42,353m at 31/12/2018).

Technical provisions amounted to €57,567m (€53,223m at 31/12/2018), of which €15,067m in the Non-Life business (€15,212m at 31/12/2018) and €42,500m in the Life business (€38,011m at 31/12/2018).

Financial liabilities amounted to €5,852m (€4,955m at 31/12/2018), of which €2,133m in the Non-Life business (€1,581m at 31/12/2018) and €3,719m in the Life business (€3,374m at 31/12/2018).

Total premiums (direct and indirect premiums and investment products) at 31 December 2019 amounted to €14,298m (€12,557m at 31/12/2018), an increase of 13.9% (+14.8% on a like-for-like basis). Non-Life premiums amounted to €8,451m (€8,161m at 31/12/2018, +3.6%) and Life premiums amounted to €5,847m (€4,397m at 31/12/2018, +33%; on a like-for-like basis +36.2%), of which €393m related to investment products (€508m at 31/12/2018).

All Non-Life premiums of the Group insurance companies are classified under insurance premiums, as they meet the requirements of the IFRS 4 standard (presence of significant insurance risk).

As for Life premiums, investment products at 31 December 2019, for €393m, related to Class III (Unit- and Index-Linked policies) and Class VI (pension funds).

Direct premiums amounted to €14,014m (€12,349m at 31/12/2018, +13.5%; on a like-for-like basis +14.4%), of which Non-Life premiums totalled €8,167m (+2.7%) and Life premiums €5,847m (+33%; on a like-for-like basis +36.2%).

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Non-Life direct premiums

8,167

58.3

7,953

64.4

2.7

Life direct premiums

35.6

33.0

5,847

41.7

4,396

Total direct premium income

14,014

100.0

12,349

100.0

13.5

Non-Life and Life indirect premiums totalled €285m at 31 December 2019 (€208m at 31/12/2018), €284m of which referred to premiums from Non-Life business (€208m at 31/12/2018) and €0.4m to the Life business (€0.4m at 31/12/2018).

The increase in the Non-Life business is due to the contribution from UnipolRe, a Group company specialised in the reinsurance business which has further developed its activities with companies outside the Group since the previous year.

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Non-Life indirect premiums

284

99.9

208

99.8

36.9

Life indirect premiums

0.1

0.2

(4.1)

Total indirect premiums

285

100.0

208

100.0

36.9

86 | Integrated Report 2019 | Unipol Group

Group premiums ceded totalled €463m (€422m at 31/12/2018), €448m of which from Non-Life premiums ceded (€408m at 31/12/2018) and €14m from Life premiums ceded (€14m at 31/12/2018). The retention ratios remained essentially unchanged both in the Non-Life and Life businesses.

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Non-Life ceded premiums

448

96.9

408

96.7

9.8

Retention ratio - Non-Life business (%)

94.7%

95.0%

Life ceded premiums

14

3.1

14

3.3

4.4

Retention ratio - Life business (%)

99.7%

99.6%

Total premiums ceded

463

100.0

422

100.0

9.7

Overall retention ratio (%)

96.7%

96.5%

At 31 December 2019 the premiums ceded generated an overall positive result for reinsurers, both in the Non-Life and in the Life businesses.

Unipol Group | Integrated Report 2019 | 87

Non-Life business

Total Non-Life premiums (direct and indirect) at 31 December 2019 were €8,451m (€8,161m at 31/12/2018, +3.6%). Direct business premiums alone amounted to €8,167m (€7,953m at 31/12/2018), up by 2.7%.

8,167

4,178

3,989

€m

€m

€m

-0.1%

+5.8 %

+2.7%

Non-Life business direct premiums

Amounts in €m

31/12/2019

%

31/12/2018

%

%

var.

9.3

Land, sea, lake and river motor vehicles TPL

3,422

41.9

3,479

43.8

(1.7)

(classes 10 and 12)

Land Vehicle Hulls (class 3)

756

9.3

703

8.8

7.6

17.5

Total premiums - Motor Vehicles

4,178

51.2

4,183

52.6

(0.1)

41.9

Accident and Health (classes 1 and 2)

1,431

17.5

1,337

16.8

7.0

14.8

Fire and Other damage to property (classes 8 and 9)

1,211

14.8

1,176

14.8

3.0

General TPL (class 13)

727

8.9

701

8.8

3.7

8.9

Other classes

620

7.6

557

7.0

11.3

7.9

Total premiums - Non-M-V

3,989

48.8

3,770

47.4

5.8

Total Non-Life direct premiums

8,167

100.0

7,953

100.0

2.7

In the MV segment, MV TPL premiums were €3,422m, down by 1.7% on 31 December 2018, still due to compression in the average premium as a result of market competition. An increase of 7.6% was instead reported in the Land Vehicle Hulls class with premiums equal to €756m (€703m at 31/12/2018). The Non-MV segment, with premiums of €3,989m, recorded 5.8% growth.

88 | Integrated Report 2019 | Unipol Group

Non-Life claims

In terms of the Non-Life loss ratio trend, the MV TPL segment recorded a further improvement both in terms of the frequency as well as the average cost of claims, due in particular to the benefits of digital (40% of vehicles insured by UnipolSai are fitted with the black box) and the cost savings permitted by the network of authorised repair shops, managed by the subsidiary Auto Presto&Bene, to which a growing number of claims are routed.

2019 was again characterised by a significant loss ratio due to weather-related events of considerable impact not only on the Fire and Other damage to property business, but also on Land Vehicle Hulls as a result of hail storms that hit numerous towns and cities in Italy. The economic effects of the loss ratio from weather-related events were in part reabsorbed by reinsurance.

The number of claims reported, without considering the MV TPL class, reported a 12.0% increase, due to the Health class (+14.7%) in particular.

Number of claims reported (excluding MV TPL)

31/12/2019

31/12/2018

var.%

Land Vehicle Hulls (class 3)

362,632

321,710

12.7

Accident (class 1)

135,264

130,940

3.3

Health (class 2)

4,273,662

3,727,327

14.7

Fire and Other damage to property (classes 8 and 9)

334,751

328,981

1.8

General TPL (class 13)

93,521

96,452

(3.0)

Other classes

549,428

528,703

3.9

Total

5,749,258

5,134,113

12.0

As regards the MV TPL class, where the CARD agreement is applied33, in 2019 cases relating to "fault" claims (Non-Card, Debtor Card or Natural Card) reported totalled 636,005, down by 0.8% (641,116 in 2018).

Claims that present at least one Debtor Card claims handling were 369,577, down (-0.5%) with respect to the same period of the previous year.

Handler Card claims were 482,502 (including 108,261 Natural Card claims, i.e. claims between policyholders at the same company), down by 1.3% compared to the previous year. The settlement rate in 2019 was 82.3%, down from the same period of last year (82.8%).

The weight of cases to which the Card agreement may be applied (both Handler Card and Debtor Card claims) out of total cases (Non- Card + Handler Card + Debtor Card) in 2019 was equal to 84.3% (84.2% in 2018).

The average cost (amount paid plus amount reserved) for claims reported and handled (including claims reported late) further declined by 0.6% in 2019 (-2.2% in 2018). The average cost of the amount paid out rose by 6.2% (-1.1% in 2018).

33 CARD - Convenzione tra Assicuratori per il Risarcimento Diretto: Agreement between Insurers for Direct Compensation: MV TPL claims may be classified as one of three cases of claims managed: - Non-Card claims: claims governed by the ordinary regime, to which CARD is not applied;

- Debtor Card claims: claims governed by CARD where "our" policyholder is fully or partially liable, which are settled by the counterparty's insurance companies, to which "our" insurance company must pay a flat rate pay-out ("Debtor Flat Rate");

- Handler Card claims: claims governed by CARD where "our" policyholder is fully or partially not liable, which are settled by "our" insurance company, to which the counterparty's insurance companies must pay a flat rate pay-out ("Handler Flat Rate").

However, it must be noted that this classification is a simplified representation because, in reality, each individual claim may contain damages included in each of the three above-indicated cases.

Unipol Group | Integrated Report 2019 | 89

Non-Life business indicators

93.7%

94.4%

66.1% 67.2%

27.7% 27.2%

Loss ratio - direct business

Expense ratio calculated on

Combined ratio -

(including OTI ratio)

Written premiums - direct business

direct business

2019

2018

The net profit (loss) from the claims experience for the main classes is provided in the following table (in €m):

Net breakdown at

Net breakdown at

Non-Life business

31/12/2019

31/12/2018

MV TPL (classes 10 and 12)

170

150

Land Vehicle Hulls (class 3)

10

16

General TPL (class 13)

159

110

Other Classes

245

212

TOTAL

583

487

Settlement performance

Settlement activity involves various parties, with whom partnership agreements have been established in the area, who operate applying the key values of our services

  • FAIRNESS
  • EFFICIENCY
  • QUALITY

Adjusters

1,198

SETTLEMENT Medical

ACTIVITIES experts 558

Legal claims handlers 1,128

90 | Integrated Report 2019 | Unipol Group

New products

2019 saw tariff adjustments mostly relating to the MV TPL and Land Vehicle Hulls segments, in addition to updates to incorporate IVASS instructions on the simplification of insurance contracts.

The Vehicle "Dynamic Pricing" project also continued for the Km&Serviziproduct, which envisages the application of differentiated discounts, also by province, to personalise premiums based on technical results both at new issue and renewal stages. In addition, during 2019 the mass offer on this portfolio was structured in a more complete and comprehensive manner, on a portion of the "High Value" portfolio integrating - at renewal stage - guarantees considered more suited to a customer target selected as potentially requiring more extensive and complete insurance coverage.

An increasing number of drivers are now satisfied users of the black boxes of UnipolSai which, in addition to a discount on the Motor, Theft and Fire policy, provide other high value-added services such as:

  • data collection and processing based on engine-running time of the vehicle, the kilometres travelled and the detection of any crashes or mini-crashes;
  • alarms sent directly to the appointed assistance company in the event of crashes detected of a certain severity;
  • speed limit, car finder, target area;
  • a Voice device, including hands-free usage, that offers access to travel information and electronic bodyguard services as well as the ability to contact the appointed assistance company with immediate GPS location of the vehicle.

With around 100k new devices installed every month, at the end of 2019 UnipolSai reached the milestone of over 4m black boxes installed in vehicles and integrated with the MV TPL policy. This significant result bears witness to the leadership of UnipolSai not only in Italy, but also at European level.

As regards the Non-MV Non-Life price list, note the following action taken in 2019:

  • new UnipolSai Agricoltura&Serviziproduct, targeting agricultural and agri-tourism companies, that has the following strengths:
    • Damage to property insurance, also in All Risks format;
    • coverage for Earthquake and Flood;
    • protection of agricultural revenue, if activities are interrupted following an indemnifiable claim of damage to property, theft, electrical/electronic phenomena and breakdowns, catastrophe events and digital protection;
    • supervaluation of 20% of the indemnity - granted without additional premiums - for claims relating to damage to property, theft and catastrophe events affecting agricultural products certified as organic, recognising the added value of such businesses in terms of sustainability;
    • Digital protection (cyber risks), which provides an assistance service in addition to specific reimbursements in case of "cyber attack";
    • a Quick recovery service which, in the event of a damage to property claim, envisages the rapid intervention of technicians specialised in emergency response and rescue, and in clean-up and restoration of damaged property, with a view to avoiding or limiting the worsening of the damage.
    • a Direct repair service which, if the estimated amount of the damage is not more than €5,000, envisages action by a network of authorised repair specialists which will arrange direct repair of the damage;
  • new UnipolSai Terzo Settoreproduct, designed and created for associations and organisations that pursue the third sector's typical objectives of solidarity and social utility. The product is broken down into five Macro Areas, or uniform groups of activities aggregated based on related social purposes: volunteerism, amateur sport, social relationships and culture, childhood and, lastly, other temporary duration events/demonstrations. The key strengths and innovative qualities of the product include:
    • streamlining of the insurance product mix for the reference target market, through a single standardised multi-risk product;
    • granular offer suited to fully and flexibly satisfy Third Sector insurance requirements;
    • simplification and speeding up, for the agencies, of the preventive and issuing process;
    • coverage dedicated to temporary risks.
  • new Tutela Sismaproduct, marketed by Incontra Assicurazioni from October, which offers insurance coverage against direct damage from a significant event such as an earthquake can cause to the home with the guarantee subject to an existing mortgage on the property. The product insures against material and direct damage to the building caused by:
  • earthquake;
  • fire, explosion and blasts following an earthquake;
  • earthquake of volcanic origin.

Also included are the expense for demolition, clearance and disposal of waste from the damage and expense relating to redesign of the building.

Unipol Group | Integrated Report 2019 | 91

Lastly, for Non-MV business, during the second half of 2019 a review was undertaken of the regulatory and tariff characteristics of certain products for IDD (Insurance Distribution Directive) purposes, without significant changes being made to the text of the legal provisions.

Non-Life premiums of the main Group insurance companies

The direct premiums of UnipolSai, the Group's main company, stood at €6,990m (+1.3%), of which €3,927m in the MV classes (-0.3%) and €3,063m in the Non-MV classes (+3.6%).

UnipolSai Assicurazioni Spa - Non-Life business direct premiums

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Land, sea, lake and river motor vehicles TPL (classes 10 and 12)

3,209

3,272

(1.9)

Land Vehicle Hulls (class 3)

718

668

7.4

Total premiums - Motor Vehicles

3,927

56.2

3,940

57.1

(0.3)

Accident and Health (classes 1 and 2)

806

792

1.8

Fire and Other damage to property (classes 8 and 9)

1,148

1,120

2.5

General TPL (class 13)

710

686

3.6

Other classes

399

361

10.6

Total premiums - Non-M-V

3,063

43.8

2,958

42.9

3.6

Total Non-Life premiums

6,990

100.0

6,898

100.0

1.3

In the MV classes, €3,209m related to premiums in the MV TPL class and Sea, Lake and River Vessels TPL class (€3,272m at 31/12/2018, -1.9%).

In the MV sector, premiums continued to decrease for MV TPL due to lower average premium, most of which offset by the increase in Land Vehicle Hulls premiums.

2019 was also characterised by initiatives aimed at improving the settlement processes for claims related to the MV sector such as, for example, the use of the Black Box which represents an innovative way of providing information within the process of electronic settlements, in particular by verifying consistency between the details claimed and the actual dynamics of the event. The project launched in partnership with Alfaevolution also continued, aiming to improve the effectiveness of the boxes and increase the available dataset. The new Real Time 2.0 pilot process was implemented in 2019, which envisages the opening of a claim from the moment of a crash detected in black box data, at the same time triggering initial contact with the policyholder to open the claim and anticipating the information collection stage. This process was later extended to all the agencies in Lazio, Apulia, Sicily, Campania, Tuscany, Emilia- Romagna, Veneto, Piedmont and Lombardy, plus a number of agencies in Umbria, Marche and Abruzzo, sensitised through dedicated meetings. Also note the continued activity in 2019 to improve the criteria adopted to identify fraud through use of the Anti-fraudEngine, which identifies potentially fraudulent claims so that they may be channelled to the dedicated settlement structure and the use of the CPM (Medical Report Centre), i.e. a service provided to the claimant who has suffered modest injuries and that provides the option of a legal-medical visit directly at the offices of UnipolSai in order to reach an immediate settlement.

92 | Integrated Report 2019 | Unipol Group

MV TPL indicators - UnipolSai

95.6% 95.4%

72.9% 73.7%

22.7% 21.8%

Loss ratio - direct business

Expense ratio calculated on

Combined ratio -

(including OTI ratio)

Written premiums - direct business

direct business

2019 2018

In addition to existing services and those released in past years (personal agency information, personal policy status, identification of the nearest workshop and direct calls to public assistance numbers, section dedicated to "Your claims", claim tracking), in 2019 the UnipolSai App was enhanced with the option of booking a medical check-up at Medical Report Centres (CPMs) and Medical Booking Services (SPMs) and to activate the recovery process for policyholder reports on debtor Card claims.

In the Non-MV business, the growth in premiums is spread across the various segments and classes, confirming the trend recorded during the year. The technical result for the segment was an improvement on the previous year, with major contributions from General TPL and Assistance business. To offer an innovative service to customers, similarly to what has been done for the MV Classes for years, a process of "direct repair intervention" was established for General Classes (Piped Water, Research and Damage Repair, Weather, Plates and Electrical) to repair the damage without the Customer having to pay anything, and with consequent elimination of the excess, where present. Direct Repairs in Electrical claims, launched in 2019, are carried out through specialist companies which offer an estimate of the damage, also through the use of the repurchase values of any assets damaged as indicated by external databases.

UniSalute, the top health insurance company in Italy by number of customers managed, specialised in the Healthcare segment (Health and Assistance), continued to successfully expand activities based on its business model, with premiums (including indirect business) totalling €489.2m (€501.9m at 31/12/2018), down by 2.5%. Among the main agreements that were executed by UniSalute over the period, to be noted are those with Fondo Sanimoda, EBM (Ente Bilaterale Metalmeccanici), Fondo Sanipro, Intesa Sanpaolo and Lidl.

The number of claims reported rose by 15.3%, from 3,340,648 in 2018 to 3,851,034 in the period under review.

2019 also posted a profit of €34.2m (€40.3m at the end of 2018), down by approximately 15.1%.

Linear, a company specialised in direct sales (online and call centre) of MV products, in 2019 generated a profit of €9.8m (€9.4m at 31/12/2018). Total gross premiums, amounting to €184.2m, recorded a 2.4% increase on 2018, particularly in the Land Vehicle Hulls class (+5.7%). The partnership for the sale of Home Assistance insurance with Hera, an Italian multiutility based in Bologna, recorded premiums written for €1.9m in 2019. Contracts in the portfolio at the end of 2019 were close to 628k units (+5.4%), an all-time high for the Company.

SIAT recorded a €0.1m profit in 2019 (€0.7m at 31/12/2018) with total gross premiums (direct and indirect) at €159.8m (€148.5m in 2018). The increase in new business is mainly due to the Hulls segment, which saw a major growth in business relating to sportscraft, particularly medium-large sized craft, and in foreign business, as well as increased insurance coverage relating to boatyards affected by order book trends and the start of new constructions.

Arca Assicurazioni achieved a net profit at 31 December 2019 of €27.8m (-6.9%), recording direct premiums for €136m (+13.1%), with a significant increase in the Non-MV classes (+18.1%) and a more limited growth in the MV segment (+2.3%). The breakdown of the portfolio

Unipol Group | Integrated Report 2019 | 93

among the distribution channels is almost totally focused on the banking channel which, at 31 December 2019, recorded 98.3% of the total Non-Life premiums. Overall, the banking channel recorded a 13.9% increase in premiums compared to the previous year, with premiums written totalling approximately €134m.

Incontra Assicurazioni recorded a €9.7m profit at 31 December 2019 (profit of €6.8m at 31/12/2018), with premiums equal to €185m, up compared to the previous year (€136m in 2018), mainly concentrated in the Health and Pecuniary Losses classes (respectively 56% and 32% of the total gross premiums written). At 31 December 2019, the volume of total investments reached €256m (€194m at 31/12/2018), almost entirely concentrated in available-for-sale financial assets, while gross technical provisions amounted to €325m (€251m at 31/12/2018). The ratio between gross technical provisions and premiums written was approximately 176%.

Pronto Assistance, active in placing assistance services insurance policies in the home, health, MV and business sectors, customisable so as to meet the customer's needs, closed 2019 with a profit of €1.1m (€4.3m recorded in 2018). 2019 posted total premiums amounting to €168.6m (€143.1m at 31/12/2018), with an increase of approximately 17.8% mainly referred to the indirect business taken by Group companies. As mentioned previously, the company was merged into UnipolSai Assicurazioni with effect from 1 February 2020.

DDOR Novi Sad recorded a €7.3m profit (Non-Life and Life businesses) at 31 December 2019 (up from €5.3m at 31/12/2018) following a growth in premiums (Non-Life and Life businesses), from €95.3m at the end of 2018 (of which €80.7m in the Non-Life segment) to €100.9m at 31 December 2019 (of which €85.3m in the Non-Life business). The main macro-economic indicators showed the continuation of economic stability in Serbia, thanks also to the several reforms enacted in the previous years by the local government. Based on preliminary Serbian Chamber of Commerce figures, it is estimated that the company will remain among the sector leaders, with growth in premiums of 5.7% in the Non-Life segment and 6.7% in the Life segment.

94 | Integrated Report 2019 | Unipol Group

Life business

Total Life premiums (direct and indirect) were €5,847m (€4,397m at 31/12/2018, +33%; +36.2% on a like-for-like basis). The direct premiums, which represent almost all of the premiums, are broken down as follows:

Life business direct premiums

6.4

8.2

63.6

21.7

Amounts in €m

31/12/2019

% 31/12/2018

%

%

Total premium income

var

I - Whole and term Life insurance

3,717

63.6

2,812

64.0

32.2

III - Unit-linked/index-linked policies

375

6.4

512

11.6

(26.9)

IV - Health

6

0.1

4

0.1

37.6

V - Capitalisation insurance

481

8.2

406

9.2

18.6

VI - Pension funds

1,268

21.7

663

15.1

91.3

Total Life business direct premium

5,847

100.0

4,396

100.0

33.0

income

- of which Life investment products

393 100.0

508 100.0 (22.6)

At 31 December 2019, the direct premium volume was equal to €5,847m, an increase of 33% with respect to 31 December 2018 (+36.2% on a like-for-like basis). Investment products, totalling €393m (€508m at 31/12/2018), were primarily related to class III.

At 31 December 2019, new business in terms of APE, net of non-controlling interests, amounted to €493m (€397m at 31/12/2018, +24.2%), of which €91m contributed by bancassurance companies (+54.4% on a like-for-like basis) and €401m by traditional companies (+18.9%).

The expense ratio for Life direct business stood at 3.8% (5.2% at 31/12/2018).

Returns on Segregated Funds and guaranteed minimums

3.4%

FY18

1.5%1.9%

3.4%

FY19

1.2%

2.2%

Average return on segregated funds

Average guaranteed minimum

Unipol Group | Integrated Report 2019 | 95

Pension Funds

The Unipol Group retained its leading position in the supplementary pension market, despite a difficult competitive scenario.

At 31 December 2019, with the subsidiary UnipolSai Assicurazioni, it managed a total of 25 mandates for Occupational Pension Funds (19 of them for accounts "with guaranteed capital and/or minimum return"). On the same date resources under management totalled €4,777m (€4,093m with guaranteed capital). At 31 December 2018, a total of 23 occupational pension funds were managed (17 of them for accounts "with guaranteed capital and/or minimum return") and resources came to €3,830m (of which €3,223m with guaranteed capital).

At 31 December 2019, the assets of the Open Pension Funds managed by UnipolSai and BIM (UnipolSai Previdenza FPA, Fondo Pensione Aperto BIM Vita) reached a total of €908m with 42,277 members. At 31 December 2018, the Open Pension Funds managed total assets of €852m and a total of 43,218 members.

New products

In 2019, UnipolSai, continuing with its allocation of new investments in order to optimise flows and returns, updated the offers of the main revaluable products managed as segregated funds.

In particular, since April 2019, the class I Investment product with single premium, UnipolSai Investimento Garantito, has been available on the market. It features the possibility of making additional payments, to remodel surrender penalties, to introduce a new overhead bracket and a new variable management fee according to Active Premium Accumulation (Cumulo Premi Attivi - CPA).

The update and expand the Protection offer, from October 2019 the UnipolSai Vitaproduct was replaced with the new term life insurance UnipolSai Vita Premium. The new product is more competitive and offers greater flexibility due to the updating of demographic bases and expansion of the underwriting limits. In addition, the range of accessory guarantees available was completed by introducing the option to add insurance coverage for serious illnesses.

To complete the offer dedicated to Protection, at the end of November 2019 the new UnipolSai Vita Serenaproduct was launched, specifically dedicated to coverage for cases of disease-related death. This product has a structure similar to that of the product covering death for any reason, but is dedicated to guaranteed capital of a lower amount.

Life premiums of the main Group insurance companies

Direct premiums for UnipolSai were equal to €4,080m (€3,129m at 31/12/2018, +30.4%). Class VI Pension Funds, with premiums totalling €1,264m, rose by 92.2%. Premiums for the class I traditional policies were also up, which with €2,200m (+18.8%) represent 53.9% of total premiums, and those for class V capitalisation policies (+21.4%).

UnipolSai Assicurazioni Spa - Life business direct premiums

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

I

Whole and term life insurance

2,200

53.9

1,852

59.2

18.8

III

Unit-linked/index-linked policies

129

3.2

220

7.0

(41.0)

- of which investment products

129

3.2

219

7.0

(41.1)

IV

Health

6

0.1

4

0.1

37.6

V

Capitalisation insurance

481

11.8

396

12.7

21.4

VI

Pension funds

1,264

31.0

658

21.0

92.2

- of which investment products

26

0.6

27

0.9

(3.6)

Total Life business

4,080

100.0

3,129

100.0

30.4

- of which investment products

155

3.8

246

7.9

(37.0)

The individual policy sector recorded a 16.6% growth compared to 31 December 2018. The increase is positively conditioned by the increase in single Class I premiums, confirming the appeal for the UnipolSai Investimento Garantitoproduct, and the increase in Class V premiums. In 2019, detrimentally affected by a largely unfavourable market, new Class III business was down (-45.0%). Among the Multisegment products, the excellent performance of the Pip UnipolSai Previdenza Futuracontinued.

Again in the individual sector, Class IV premiums continued to increase (+51.8%) which, albeit not significant in absolute terms, shows a growing interest in products that guarantee coverage for risks other than death, such as those with long-term care coverage and coverage against the onset of serious illnesses, an additional cover that can be combined with the term life product.

96 | Integrated Report 2019 | Unipol Group

Premiums on collective policies showed a strong increase compared with the same period of the previous year (+53.9%), due to the growth of Class VI (+96.6%).

In the bancassurance channel, the Arca Group (Arca Vita and Arca Vita International) recorded direct premiums amounting to €1,676m (+55.6%). The volume of total investments amounted to €11,123.8m (€8,921.5m at 31/12/2018). The profit of Arca Vita, net of dividends collected from the subsidiaries, was €31.4m (+4.2%), and that of Arca Vita International was €0.7m (-60.1%).

BIM Vita recorded a profit of €1.8m at the end of 2019, up compared to 31 December 2018 (€1.5m). Gross premiums written amounted to €56.2m (around €52.6m at 31/12/2018). The volume of total investments amounted to €638m (€608.6m at 31/12/2018).

Reinsurance

Unipol Group reinsurance policy

With regard to the risks underwritten in the Non-Life business, the reinsurance strategy proposed the same cover structures in place in 2018, maximising the effectiveness of the most operational of the main non-proportional treaties. The renewal for 2019 took place in continuity with those expiring, with a number of improvements from a risk mitigation perspective.

At Group level, the following cover was negotiated and acquired in 2019:

  • excess of loss treaties for the protection of MV TPL, General TPL, Fire (by risk and by event), Land Vehicle Hulls weather, Theft, Accident and Transport portfolios;
  • stop loss treaty for the Hail class;
  • proportional treaties for Technological risk (C.A.R. - Contractors' All Risks -, Erection all Risks and Decennale Postuma - Ten-year Building Guarantee), Bonds (the retention of which is then protected by a "risk attaching" excess of loss), Aviation, Accident, Hulls and TPL, (the retention of which is protected by a "loss attaching" excess of loss), Assistance, Legal Expenses, "D & O" and "Cyber" TPL.

Furthermore, in 2019 a CAT-bond type Insurance-Linked Securities (ILS) transaction was executed: in particular, UnipolSai signed a reinsurance agreement with "Atmos Re I Dac", an Irish special purpose reinsurance vehicle, which in turn arranged the issue of CAT-bonds, fully subscribed by institutional investors.

The purpose of this instrument is annual protection against anomalies in the frequency of small and medium-sized catastrophe events (Flood, Weather, Excessive Snow).

The risks underwritten in the Life business in 2019 are mainly covered at Group level with two proportional treaties, one for individual risks and one for collective risks in excess of the risk premium. Retention is protected with a non-proportional cover in excess of loss by event that regards the Life and/or Accident classes. There are also two proportional covers for LTC guarantees, one proportional cover for Individual Serious Illnesses and one for Weighted Risks.

To minimise counterparty risk, reinsurance coverage continued to be spread out and placed with the major professional reinsurers that have been given a high credit rating by major rating agencies, in order to provide a comprehensive and competitive service. With regard to the risks of: Assistance, Legal Expenses and part of Transport classes, these were instead ceded to specialised reinsurers and/or specialist Group companies.

Unipol Group | Integrated Report 2019 | 97

Real Estate Sector performance

The main income statement figures for the Real Estate sector are summarised below:

Income Statement - Real Estate Sector

Amounts in €m

31/12/2019

31/12/2018

% var.

Gains on other financial instruments and investment property

26

26

(0.7)

Other revenue

35

37

(7.0)

Total revenue and income

60

63

(4.4)

Losses on other financial instruments and investment property

(59)

(65)

(10.1)

Operating expenses

(22)

(22)

0.1

Other costs

(28)

(36)

(22.6)

Total costs and expenses

(109)

(124)

(12.2)

Pre-tax profit (loss) for the year

(49)

(61)

20.3

The pre-tax result at 31 December 2019 was a loss of €49m (-€61m at 31/12/2018), after having applied property write-downs and depreciation of €59m (€73m at 31/12/2018).

Investments and cash and cash equivalents of the Real Estate sector (including instrumental properties for own use) totalled €1,423m at 31 December 2019 (€1,303m at 31/12/2018), consisting of investment property amounting to €760m (€586m at 31/12/2018) and properties for own use totalling €612m (€603m at 31/12/2018).

Financial liabilities, at 31 December 2019, totalled €232m (€329m at 31/12/2018).

Group real estate business34

During the year, the Group continued to renovate its owned property assets in order to subsequently leverage the refurbished properties with a view to leasing or use for business purposes. The projects are characterised by the use of technologies designed to maximise energy savings, including by relying on renewable energy.

The main projects, partially started in previous years, have been concentrated in the Milan area, and include:

  • continued construction of a new multi-storey headquarters building in Piazza Gae Aulenti (Porta Nuova Garibaldi area). The project entails building an approximately 100 metre tall elliptical office tower. The architect's choice of an elliptical shape allows the tower to blend into an already strongly built-up area. The tower will be built with a view to ensuring the best certification in terms of energy and water saving and the ecological quality of the interior spaces (LEED Platinum certification);
  • conclusion of works for the completion of a headquarters building in via De Castillia (Porta Nuova-Garibaldi area). Composed of two interconnected units, the building is characterised for its modern style and the use of innovative materials capable of reducing local air pollution. The property was inaugurated by an event held in December as part of the Christmas festivities;
  • completion of the interiors of Torre Galfa, Via Fara 41, a 31-storey building in a central location in Milan, which will become a multifunctional building with a hotel in the first 13 storeys and luxury residential apartments for temporary use in the remaining storeys. It must be noted that for the portion of Torre Galfa to be used as hotel and temporary accommodations, leasing agreements have already been signed. The top floor of the Tower will be occupied by a restaurant-bar; the lower level will be occupied by a fitness facility. In September, at the 27th Real Estate Scenarios Forum, Torre Galfa received an award in the "Design excellence in real estate" category. This award is dedicated to companies which, through innovative projects, enhance Italian cities by improving the quality of life;
  • continuation of the renovation works on a building to be used as a hotel in Via De Cristoforis (Hotel UNA Esperienze Milano De Cristoforis). The project provides for the construction of a luxury hotel with more than 170 rooms, restaurant, bistro, cocktail and lounge bar, terrace for events, garden area, fitness services, Spa and a convention centre with flexible meeting spaces. A modern re- engineering of the original design of the facades has considerably improved the building's energy performance, strongly focusing on sustainability and energy savings.

34 The scope of the disclosure on Group real estate business also includes properties owned by the companies in sectors other than the Real Estate sector.

98 | Integrated Report 2019 | Unipol Group

During the second half of the year, Hotel Principi di Piemonte, located on Via Gobetti, Turin, reopened after major renovation works which involved in particular the facades, in order to reduce the environmental impact of the structure as regards energy consumption, and an internal restryling that has made the environments more comfortable, safeguarding the historic features of the building.

Other residential and office property requalification activities were developed in various Italian cities in order to subsequently generate income through leasing.

As regards sales, of note during the year was the sale of a number of properties and land for a significant amount, located respectively in Milan (offices and land in Trenno), Sesto San Giovanni (healthcare facility), Florence (hotel and residential properties), Genoa (various uses), as well as the sales of properties located in Via Ciro Menotti and Via In Arcione in Rome, Via Pantano, Via Monti, Via De Missaglia (the Le Terrazze complex) and Via Castellanza in Milan, and Via Grossi/Vinci/Cellini in Turin.

A preliminary sale agreement was signed in December for the property in Piazza Velasca, Milan ("Torre Velasca"), finalisation of which is expected in the second half of 2020.

Lastly, note the purchases made by certain Group companies in relation to properties for use as headquarters in Milan and Padua, for use as a hotel in Barberino del Mugello (FI), and in Bologna one property for industrial use and one for residential use.

Porta Nuova Project

There were no changes compared to the financial statements of the previous year.

Therefore, it is estimated that the remaining collections, expected in an additional two tranches in July 2023 and April 2025, will guarantee the recovery of the remaining investment, totalling €11.4m at 31 December 2019, plus additional proceeds, the quantification of which is currently uncertain as it relates to the outcome of the guarantees issued to the purchaser.

Evolution of the real estate assets (*)

(Amounts in €m)

+84-127

3,983

€m

FY18

Capitalised Costs

Purchases(a)

Sales

Depreciation

Write-downs

Other(b)

FY19

(a) 118 completed at 31 December 2019 (169 in 2018)

(*) Operating figures

The balance of €3,950m at 31 December 2019 includes properties managed directly by Group companies for €3,624m, properties held for sale for €189m and €137m investments in real estate funds managed by third parties.

Unipol Group | Integrated Report 2019 | 99

Holding and Other Businesses Sector Performance

The main income statement figures of the Holding and Other Businesses sector are shown below:

Income Statement - Holding and Other Businesses Sector

Amounts in €m

31/12/2019

31/12/2018

% var.

Commission income

8

8

7.6

Gains (losses) on financial instruments at fair value through profit or loss

6

n.s.

Gains on investments in subsidiaries, associates and interests in joint ventures

277

n.s.

Gains on other financial instruments and investment property

151

62

143.9

Other revenue

245

219

12.0

Total revenue and income

688

288

138.8

Losses on other financial instruments and investment property

(134)

(115)

16.4

Operating expenses

(191)

(132)

44.3

Other costs

(153)

(145)

6.0

Total costs and expenses

(479)

(392)

22.0

Pre-tax profit (loss) for the year

209

(104)

n.s.

Pre-tax profit at 31 December 2019 amounted to €209m (-€104m at 31/12/2018). It should be noted that the profit at 31 December 2019 includes €244m deriving from the effects of first-time consolidation according to the equity method of the investment held in BPER Banca.

The items Other revenue and Other costs include revenue and costs for secondment of personnel and for services provided to and received from companies of the Group belonging to other sectors, eliminated during the consolidation process.

At 31 December 2019 the investments and cash and cash equivalents of the Holding and Other Businesses sector (including properties for own use for €148m) were €2,442m (€2,604m at 31/12/2018).

Financial liabilities amounted to €2,481m (€2,237m at 31/12/2018) and mainly consist of the following:

  1. for €1,813m by three senior bond loans issued by Unipol with a total nominal value of €1,817m (€1,804m at 31/12/2018, nominal value unchanged);
  1. for €636m by loans payable in place with the subsidiary UnipolSai by Unipol and UnipolReC (€377m at 31/12/2018), subject to netting outside the segment.

In 2019, the companies of the area continued their activities focusing on commercial development, with continuous attention to improving the efficiency of the different operating platforms.

As regards the hotel sector, revenue on a like-for-like basis generated by the subsidiary UNA Group increased by 4.6% since 2018, from approximately €122.1m (adjusted to exclude the structures not in the portfolio in 2019) to about €127.8m, due to improvements in terms of occupancy and average daily rate. The company closed the year with a profit of around €4m compared to a loss of €3.5m in 2018.

Casa di Cura Villa Donatello closed 2019 with revenue of €26.4m, up by around 13.6% compared to 2018 (€23.3m). Revenue trends show a continuation of the positive performance in the core business, for hospitalisation (hospital stays and outpatient surgery) as well as clinic activities (visits and diagnostics). The company recorded a profit of €0.3m, up slightly compared to 2018.

As regards agricultural activities, the sales of bottled wine by the company Tenute del Cerro generated a 12.9% increase compared to the figure at 31 December 2018, from €6.8m to €7.7m. Total revenue showed an approximate 7.5% increase compared to 2018, from €8.7m to €9.4m.

The pre-tax profit that the holding company Unipol recorded at 31 December 2019 was €264m (€55m at 31/12/2018) and includes dividends collected from Group companies, netted in the consolidation process, of €344m (€311m at 31/12/2018), interest expense on bonds issued of €61m (€61m at 31/12/2018), expense of €11m from commitments undertaken in the sale contract to BPER Banca SpA of the entire investment in Unipol Banca and expense for €28m relating to any loyalty bonuses due to Key Managers as defined in the Unipol Group Remuneration Policies.

100 | Integrated Report 2019 | Unipol Group

Asset and financial performance

Investments and cash and cash equivalents

At 31 December 2019, Group Investments and cash and cash equivalents totalled €67,757m, after reclassifying €189m in properties held for sale to the item Non-current assets or assets of a disposal group held for sale pursuant to IFRS 5 (€59,445m at 31/12/2018):

Investments and cash and cash equivalents - Breakdown by business segment

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Insurance sector

64,685

95.5

57,965

97.5

11.6

Holding and other businesses sector

2,442

3.6

2,604

4.4

(6.2)

Real Estate sector

1,423

2.1

1,303

2.2

9.2

Intersegment eliminations

(794)

(1.2)

(2,428)

(4.1)

(67.3)

Total Investments and cash and cash equivalents

67,757

100.0

59,445

100.0

14.0

The breakdown by investment category is as follows:

Amounts in €m

31/12/2019

% comp.

31/12/2018

% comp.

% var.

Property (*)

3,624

5.3

3,634

6.1

(0.3)

Investments in subsidiaries, associates and interests in

1,003

1.5

74

0.1

n.s.

joint ventures

Held-to-maturity investments

455

0.7

460

0.8

(1.1)

Loans and receivables

4,007

5.9

3,921

6.6

2.2

Debt securities

3,471

5.1

3,410

5.7

1.8

Deposits with ceding companies

63

0.1

33

0.1

92.3

Other loans and receivables

472

0.7

478

0.8

(1.3)

Financial assets at at amortised cost

516

0.8

490

0.8

5.3

Loans and receivables from bank customers

516

0.8

490

0.8

5.3

Available-for-sale financial assets

48,620

71.8

43,439

73.1

11.9

Financial assets at fair value through OCI

689

1.0

663

1.1

3.9

Financial assets at fair value through profit or loss

7,836

11.6

6,498

10.9

20.6

of which held for trading

284

0.4

288

0.5

(1.4)

of which at fair value through profit or loss

7,466

11.0

6,206

10.4

20.3

of which mandatorily at fair value

86

0.1

5

0.0

n.s.

Cash and cash equivalents

1,007

1.5

265

0.4

n.s.

Total investments and cash and cash equivalents

67,757

100.0

59,445

100.0

14.0

(*) including properties for own use

Unipol Group | Integrated Report 2019 | 101

Transactions carried out in the year35

Again in 2019, in line with previous years, investment policies adopted the general criteria of prudence and of preserving asset quality over the medium/long term.

In this respect, operations were geared towards reaching profitability targets consistent with the asset return profile and with the trend in liabilities over the long-term, and the maintenance of a high-quality portfolio through a process of selecting issuers on the basis of their diversification and strength, placing particular attention on the liquidity profile.

The bond segment was the main focus of operations, mainly affecting Italian government bonds and non-government bonds, applying a medium/long-term investment approach.

The exposure to government bonds during the year recorded an increase of around €782m. Within the Government segment a policy was adopted for their replacement with the purchase of Italian government bonds following the sale of securities issued by other European countries. In particular, the Parent liquidated entirely the core Government bonds and the securities issued by supranational European entities, with medium-long term maturity, following the purchase of Italian Government bonds; the maturity of the purchased securities are consistent with the maturity of the liabilities of Unipol Gruppo. As regards insurance portfolios, to be noted is the increase in the exposure to Italian government bonds following the sale of Government bonds, primarily Spanish, an activity carried out in the first quarter of the year.

The non-government component of bonds remained unchanged overall, though with some sector-level differentiation: the Life business saw an increase of €495m, whilst the Non-Life business recorded a decline of €493m which mainly involved financial issuers.

Asset portfolio simplification activities continued in 2019. There was a €158m overall reduction in exposure to Level 2 and 3 structured bonds.

31/12/2019

31/12/2018

variation

Carrying

Market

Implied +/-

Carrying

Market

Implied +/-

Carrying

Market

Amounts in €m

amount

value

amount

value

amount

value

Structured securities - Level 1

40

40

42

40

(2)

(2)

Structured securities - Level 2

517

497

(20)

607

540

(68)

(90)

(42)

Structured securities - Level 3

164

138

(25)

232

193

(39)

(68)

(54)

Total structured securities

721

676

(45)

881

773

(108)

(160)

(97)

Share exposure increased during 2019 by around €546m. The higher exposure referred to European securities on the Eurostoxx 50 index or European sector indexes. For the remainder, transactions were broken down based on ETFs (Exchange Traded Funds) representing sector share indexes. Almost all equity instruments belong to the main European share indexes. The put options on the Eurostoxx50 index were also revalued on the equity portfolio, by maturity and value for the year, in order to mitigate volatility and preserve the value of the portfolio.

Exposure to alternative funds, a category that includes Private Equity Funds, Hedge Funds and investments in Real Assets, amounted to €777m, a net decrease of €117m, mostly due to the sale of most of the exposure to Hedge Funds.

35 The scope of the disclosure on financial transactions, in terms of the breakdown of investments, does not include investments the risk of which is borne by the policyholders and customers and, in terms of companies, does not include the foreign companies Ddor and DDor Re and the banking sector companies, the investment values of which are of little significance on the whole within the Group's overall portfolio.

102 | Integrated Report 2019 | Unipol Group

Breakdown of financial investments by type

(excluding financial assets for which investment risk is borne by policyholders/customers and arising from pension fund management)

Group Total

Insurance Sector

1.8

1.3

5.5

Listed debt securities

5.5

7.2

7.3

Unlisted debt securities

UCITS units

Equity instruments

Other financial investments

Included Deposits > 15 days; Cash and cash equivalents;

Derivatives

83.3

84.3

Currency transactions were carried out primarily to hedge the currency risk of outstanding equity and bond positions.

The overall duration was 6.56 years for the Group, up on the 5.93 years recorded at the end of 2018. The Non-Lifeduration in the Group insurance portfolio was 3.86 years (3.09 years at the end of 2018); the Life duration was 7.64 years (7.15 years at the end of 2018). The Holding and Other Businesses duration was 0.30 years, down compared to the end of last year (1.44 years) following settlement of almost the entire government bonds portfolio.

The fixed rate and floating rate components of the bond portfolio amounted respectively to 87.9% and 12.1%. The government component accounted for approximately 71.2% of the bond portfolio whilst the corporate component accounted for the remaining 28.8%, split into 21.7% financial and 7.1% industrial credit.

90.3% of the bond portfolio was invested in securities with ratings above BBB-. 3.4% of the total is positioned in classes AAA to AA-, while 12.9% of securities had an A rating. The exposure to securities in the BBB rating class was 74% and includes Italian government bonds which make up 57.3% of the total bond portfolio.

Unipol Group | Integrated Report 2019 | 103

Net gains on investments and financial income

The breakdown of net gains (losses) on investments and financial income is shown in the table below:

Net investment income

Amounts in €

31/12/2019

31/12/2018

% var.

Gains/losses on investment property

(13)

(38)

67.1

Gains/losses on investments in subsidiaries and associates and interests in joint ventures

545

314

73.7

Net gains on held-to-maturity investments

19

21

(10.9)

Net gains on loans and receivables

97

126

(23.3)

Net gains on financial assets recognised at amortised cost

33

33

1.5

Net gains on available-for-sale financial assets

1,805

1,723

4.8

Net gains on financial assets at fair value through OCI

68

5

n.s.

Net gains on financial assets at fair value through profit or loss (*)

(283)

(49)

n.s.

Balance on cash and cash equivalents

1

1

24.6

Total net gains on financial assets, cash and cash equivalents

2,273

2,135

6.5

Net losses on held-for-trading financial liabilities and at fair value through profit or loss (*)

(1)

Net losses on other financial liabilities

(168)

(166)

1.3

Total net losses on financial liabilities

(169)

(166)

1.8

Total net gains (*)

2,104

1,969

6.8

Net gains on financial assets at fair value (**)

439

(243)

Net losses on financial liabilities at fair value (**)

(256)

138

Total net gains on financial instruments at fair value (**)

183

(105)

Total net gains on investments and net financial income

2,287

1,864

22.7

  1. excluding net gains and losses on financial instruments at fair value through profit or loss for which investment risk is borne by customers (index- and unit-linked) and arising from pension fund management
    (**) net gains and losses on financial instruments at fair value through profit or loss for which investment risk is borne by customers (index- and unit-linked) and arising from pension fund management

Net gains at 31 December 2019 amounted to €2,104m and included net gains for €421m deriving from the effects of first-time consolidation according to the equity method of the interest with significant influence in BPER Banca.

It should be noted that the net gains at 31 December 2018 (€1,969m) included a capital gain of €309m, under the item Gains/losses on investments in subsidiaries, associates and interests in joint ventures resulting from the sale of Popolare Vita.

Impairment losses on financial instruments classified in the Available-for-sale asset category amounted to €21m (€27m at 31/12/2018). The item Gains/losses on investment property included €32m in depreciation and €34m in write-downs (respectively €32m and €59m at 31/12/2018).

104 | Integrated Report 2019 | Unipol Group

Shareholders' equity

At 31 December 2019, Shareholders' equity amounted to €8,305m (€6,327m at 31/12/2018), recording an increase both in shareholders' equity attributable to the owners of the Parent (+€1,655m) and in non-controlling interests (+€323m).

Shareholders' equity attributable to the owners of the Parent amounted to €6,687m (€5,032m at 31/12/2018) and was broken down as follows:

Amounts in €m

31/12/2019

31/12/2018

variation in

amount

Share capital

3,365

3,365

Capital reserves

1,639

1,729

(90)

Income-related and other equity reserves

(127)

(478)

351

(Treasury shares)

(3)

(6)

3

Reserve for foreign currency translation differences

4

4

Gains/losses on available-for-sale financial assets

936

65

871

Gains/losses on financial assets at fair value through OCI

9

(34)

43

Other gains or losses recognised directly in equity

(38)

(14)

(24)

Profit (loss) for the year

903

401

501

Total shareholders' equity attributable to the owners of the Parent

6,687

5,032

1,655

The main changes over the year were as follows:

  • a decrease of €129m due to dividend distribution;
  • an increase of €914m as a result of the increase in the provisions for Gains and losses on available-for-sale financial assets and on financial assets measured at fair value through other comprehensive income;
  • an increase of €903m in profit for 2019.

Shareholders' equity attributable to non-controlling interests was €1,617m (€1,294m at 31/12/2018). The main changes over the year were as follows:

  • a decrease of €92m for payment of dividends to third parties;
  • an increase of €219m as a result of the increase in the provisions for Gains and losses on available-for-sale financial assets and on financial assets measured at fair value through other comprehensive income;
  • an increase of €184m due to profit attributable to non-controlling interests.

Treasury shares

At 31 December 2019, the treasury shares held by Unipol and its subsidiaries totalled 953,413 (2,003,299 at 31/12/2018), of which 336,332 held directly. Changes concerned:

  • 2,312,735 shares assigned to entitled parties in execution of the compensation plans based on financial instruments;
  • 2,351 shares held by Finitalia (ceded on 31 July 2019);
  • 1,265,200 ordinary shares acquired in execution of the compensation plans based on financial instruments.

Unipol Group | Integrated Report 2019 | 105

Reconciliation statement for the Group result for the year and shareholders' equity showing the corresponding figures for the Parent

In accordance with Consob Communication 6064293 of 28 July 2006 the statement reconciling the Group result for the year and shareholders' equity, including the corresponding figures for the Parent, is shown below:

Share capital and

Profit (loss) for

Shareholders'

equity at

reserves

the year

31/12/2019

Amounts in €m

Parent balances in accordance with Italian GAAP

5,383

284

5,667

IAS/IFRS adjustments to the Parent's financial statements

68

2

70

Differences between net carrying amount and shareholders' equity and profit (loss)

192

1,260

1,452

for the year of consolidated investments, of which:

- Translation reserve

(3)

(3)

- Gains or losses on available-for-sale financial assets and at fair value through OCI

2,298

2,298

- Other gains or losses recognised directly in equity

3

3

Consolidation differences

1,117

1,117

Intragroup elimination of dividends

460

(460)

Other adjustments (securities, etc.)

(2)

1

(2)

Consolidated balances - portion attributable to the owners of the Parent

7,218

1,087

8,305

Non-controlling interests

1,433

184

1,617

Consolidated total

5,785

903

6,687

106 | Integrated Report 2019 | Unipol Group

Technical provisions and financial liabilities

At 31 December 2019, technical provisions amounted to €57,567m (€53,223m at 31/12/2018). Financial liabilities amounted to €7,772m (€6,922m at 31/12/2018).

Technical provisions and financial liabilities

Amounts in €m

Amounts in €m

31/12/2019

31/12/2018

% var.

Non-Life technical provisions

15,067

15,212

(1.0)

Life technical provisions

42,500

38,011

11.8

Total technical provisions

57,567

53,223

8.2

Financial liabilities at fair value

2,914

2,539

14.8

Investment contracts - insurance companies

2,662

2,261

17.7

Other

253

278

(9.2)

Financial liabilities at amortised cost

4,858

4,382

10.8

Subordinated liabilities

2,168

2,247

(3.5)

Payables to bank customers

Interbank payables

Other

2,690

2,135

26.0

Total financial liabilities

7,772

6,922

12.3

Total

65,339

60,145

8.6

Breakdown of Non-Life and Life reserves

(Amounts in €bn)

60.2 55.5

37.7 34.0

15.1

15.2

7.5

6.2

Non-Life

Life

Provisions and Financial

Total

Technical Provisions

Technical Provisions

Liabilities from Unit-linked, Index-

Non-Life and Life Technical

and Financial Liabilities

and Pension Fund contracts

Provisions

(excl.

unit-linked,index-linked and Pension

and Liabilities

Unipol Group | Integrated Report 2019 | 107

Unipol Group Debt

For a correct representation of the accounts under examination, information is provided below of financial debt only, which is the total amount of the financial liabilities not strictly associated with normal business operations. Therefore, liabilities constituting operating debt, i.e. liabilities directly or indirectly associated with assets, are excluded.

Group debt structure

31/12/2019

31/12/2018

variation in

Amounts in €m

amount

Subordinated liabilities issued by UnipolSai

2,168

2,247

(80)

Debt securities issued by Unipol

1,813

1,804

9

Other loans

517

165

352

Total debt

4,498

4,216

281

With reference to the Subordinated liabilities, all issued by UnipolSai, the change is mainly due to the repayment made on 24 July 2019, as per the contractually envisaged repayment plan, of the first tranche of €80m on the Restricted Tier 1 loan originally for €400m, disbursed in July 2003 by Mediobanca - Banca di Credito Finanziario SpA to Fondiaria-SAI SpA and maturing 24 July 2023.

The Debt securities issued by Unipol, net of intragroup subscriptions, totalled €1,813m and related to three senior unsecured bonds listed on the Luxembourg Stock Exchange, with a total nominal value of €1,817m.

Other loans, standing at €517m (€165m at 31/12/2018), refer primarily to:

  • the loan obtained for the acquisition of properties and for improvement works by the Closed Real Estate Fund Athens R.E. Fund for a nominal value of €170m disbursed, through the company Loan Agency Service Srl, by a pool of 13 banks including Unipol Banca (merged into BPER Banca in 2019) for a nominal value of €10m;
  • the financial liabilities deriving from the present value of future lease payments due for lease agreements accounted for on the basis of IFRS 16.

108 | Integrated Report 2019 | Unipol Group

OTHER INFORMATION

Transactions with related parties

The "Procedure for related party transactions" (the "Related Parties Procedure"), prepared in accordance with Art. 4 of Consob Regulation no. 17221 of 12 March 2010 and subsequent amendments (the "Consob Regulation"), was most recently updated by Unipol's Board of Directors on 7 November 2019, following opinion in favour by the Related Party Transactions Committee (the "Committee"), with effect from that date.

In turn, the Board of Statutory Auditors of the Company expressed its opinion in favour on the compliance of the Related Parties Procedure with the principles indicated in the Consob Regulation.

The Related Parties Procedure - published on Unipol's web site (www.unipol.it)in the Governance/Related Party Transactions section - defines the rules, methods and principles that ensure the transparency and substantive and procedural fairness of the transactions with related parties executed by Unipol, either directly or through its subsidiaries.

The Procedure is published in the "Corporate Governance/ Related party transactions" section of the Unipol Group's website (www.unipol.it).

With regard to related party transactions, note that on 1 March 2019, Unipol:

  • acquired the investments held in Unipol Banca S.p.A. ("Unipol Banca") and in UnipolReC S.p.A. ("UnipolReC"), equal to 27.49% of the respective share capitals, following a resolution adopted by the Board of Directors of UnipolSai Assicurazioni S.p.A. ("UnipolSai" or the "Company") regarding its exercise of the put option for the same investments, in compliance with a put/call option agreement signed by Unipol and the former Fondiaria-Sai S.p.A. on 31 December 2013;
  • within the scope of the aforementioned put option, signed a loan agreement with the subsidiary UnipolSai, approved by the Board of Directors of the Company on 7 February 2019, which provides for the granting, by the Company, of an unsecured loan amounting to €300m, at an interest rate equal to the 3-month Euribor plus 260 basis points. The signing of the loan agreement falls under the scope of exemptions from the application of procedural rules dictated by the Consob Regulation, pursuant to the Related Parties Procedure, since this was a transaction carried out with a subsidiary.

The exercise of the put option and the granting of the loan have been, in turn, approved by the Board of Directors of UnipolSai on 7 February 2019, with a previous reasoned favourable opinion issued by the Company's Related Party Transactions Committee. For additional information on this matter, see the Information Document concerning Transactions of Major Significance with Related Parties, drawn up by UnipolSai pursuant to Art. 5 of the Consob Regulation and posted on 14 February 2019 on the website www.unipolsai.com, in the Governance/Related Party Transactions section.

Furthermore, on 27 May 2019, Unipol acquired 282,743,682 UnipolSai shares from the subsidiary Unipol Finance S.r.l., at the price of €2.269 each, equal to the price posted at the close of trading on 27 May, for a total of €641.5m ("Purchase of UnipolSai shares"). The Purchase of UnipolSai shares falls under the scope of exemptions from the application of procedural rules dictated by the Consob Regulation, pursuant to the Related Parties Procedure, since it was a transaction carried out with a subsidiary.

Lastly, as part of the reorganisation of the Unipol Group banking sector as reported herein, on 31 July 2019 Unipol arranged the full early repayment to the subsidiary Unipol Banca S.p.A. of the residual debt, originating from early termination of the indemnification agreement, relating to a specific non-performing loan portfolio of the Bank following the spin-off of the latter in 2017, for a total, including accrued interest, of €462,375,000.

As regards the disclosure required by IAS 24 and Consob Communication DEM/6064293/2006, please refer to paragraph 5.6 - Transactions with Related Parties in the Notes to the financial statements.

* * *

In addition, for the sake of complete disclosure, it should be emphasised that the reorganisation of the banking sector of the Unipol Group, illustrated previously under the paragraph "Unipol Group Performance", involved (i) the sale to BPER Banca ("BPER") by Unipol and, to the extent of its responsibility, by UnipolSai of the investments held in Unipol Banca and, indirectly, in Finitalia S.p.A. and (ii) the

Unipol Group | Integrated Report 2019 | 109

purchase by UnipolReC of two separate non-performing loan portfolios, one owned by BPER and one by its subsidiary Banco di Sardegna S.p.A., to which the procedural and decision-making processes, established for transactions of "Major Significance" in internal procedures on related party transactions, were voluntarily applied. The Transaction was therefore submitted for the review to the Unipol Committee, which, on 6 February 2019, issued its reasoned opinion in favour.

UnipolSai and UnipolReC have also, on a voluntary basis and within their areas of competence, submitted the transaction for approval to, respectively, the Related Party Transactions Committee and the Committee for the management of transactions with associated parties, in both cases applying the procedures for transactions of "Minor Significance". The aforementioned Committees issued their opinions in favour on 6 February 2019.

Solvency II solvency position

The values relating to own funds and to the solvency capital requirement, calculated on the basis of the information available as of today, are illustrated below:

In €m

Total

Own funds eligible to cover the Solvency Capital Requirement

7,748.4

Tier 1 - unrestricted

5,727.6

Tier 1 - restricted

1,016.8

Tier 2

986.2

Tier 3

17.8

Solvency Capital Requirement

4,251.2

Ratio between Eligible own funds and Solvency Capital Requirement

1.82

The solvency situation of the Group will be subject to a specific disclosure to the market and to the Supervisory Authority by 19 May 2020, as part of the publication of the Solvency and Financial Condition Report (SFCR) envisaged in Art. 359 of Regulation (EU) 35/2015.

Report on corporate governance and ownership structures pursuant to Art. 123-bis of Legislative Decree 58 of 24 February 1998.

The information required by the Art. 123-bis, Legislative Decree 58 of 24 February 1998 as amended is included in the Annual Report on corporate governance, approved by the Board of Directors and published together with the Management Report.

The annual Corporate Governance report is available in the "Governance/Corporate Governance System" Section on the Company's website (www.unipol.it).

110 | Integrated Report 2019 | Unipol Group

Ethics Report

NFS

General considerations

2019 saw the role of the Charter of Values and Code of Ethics consolidated in the Unipol Group as inescapable points of reference for the growth and success of an innovative, transparent and socially responsible culture common to all employees, agents and partners within the Group and with all stakeholders. The Ethics Department focused its commitment on the obligations regarding its institutional reference role on respect for the Charter of Values and Code of Ethics of the Group for all its stakeholders, as well as on the training project for managers and for internal and external staff. As regards reports received regarding alleged violations of the Code of Ethics, in one case only a minor violation of the Charter of Values and Code of Ethics was found. Therefore, the general consistency between the principles stated in the Code and company operations was confirmed.

Activities carried out and launched in 2019 with reference to the Charter of Values and the Code of Ethics

In 2019, the Ethics Committee met on 7 February, 21 June and 13 December. The main activities carried out related to the following issues:

  1. Reporting and requests

The Code of Ethics allows reports to be sent by anyone by writing to the Ethics Officer via ordinary post or by sending an e-mail to responsabile.etico@unipol.it and may concern criticisms, suggestions, requests for opinions/information and alleged violations of the Code of Ethics. In 2019, 143 reports and requests were received in the dedicated e-mail inbox, compared to 111 in 2018. The significant rise is due to the increase in reports of a "complaint" nature (106) and to various contacts of a generic nature (22), while those attributable specifically to alleged violations of the Charter of Values and Code of Ethics (9) or requests for opinions from the Ethics Officer (6) remained essentially stable. More specifically:

  • reports related to alleged, specific violations of the Code of Ethics: these were dealt with in accordance with the Code and with consolidated practices, bringing to light only one minor violation of the Charter of Values and Code of Ethics, in relation to which the Ethics Officer, after informing the Chairman of the Ethics Committee, notified the conclusions to the relevant department for measures to be adopted as necessary. The other cases submitted in accordance with the Code were examined and assessed by the Ethics Officer who, on ascertaining the absence of violations, arranged their closure, in compliance with Committee Regulations, discussing the most delicate situations with the Chairman;
  • requests for opinions/information: these matters addressed to the Ethics Officer on matters within his/her specific competence were handled (consistency between business-related situations and the value system);
  • reports of a "complaint" nature: reports concerning commercial or settlement inefficiencies, delays and disputes relating to Group companies were handled, as well as those presented by employees regarding internal inefficiencies or other problems. Normally, these did not relate to matters within the strict competence of the function, which is generally limited to informing the reporting entity of having assigned the matter to the Complaints and Specialist Assistance to Customers Department. If the complaint contains general references to the Code of Ethics (not sufficient to constitute a true notification of a violation)

and in cases deemed appropriate, the Ethics Officer cooperates with the Complaints Department in preparing the response. In this domain, no situations were identified in 2019 in which the reference to the Code of Ethics was grounded.

  1. Training

In order to ensure complete dissemination of awareness of the Charter of Values and the Code of Ethics within the Group, for 2019/2020 the Department has planned to implement an online training plan for employees, agents and agency personnel. The plan was launched in partnership with "Unica-Unipol Corporate Academy" and is currently at

advanced definition stage, with the involvement of all structures concerned, with a view to extensive sharing of the chosen learning methods and presentation of the topics covered. A key objective is to encourage internal and external staff to progress from theoretical and passive learning about the Code of Ethics to involved reflection on the

values and principles contained in the Unipol Charter of Values, stimulating their translation into real everyday application.

In 2020, following the launch of the campaign on company Intranets (Futur@ for employees and Ueba for the agencies), the course will be provided in e-learning format. The plan will extend the training on ethics-related issues to the entire corporate population, operating alongside the classroom training that began in 2017 and which to date has involved approximately 1,450 line managers out of a total of around 1,800.

For detailed information, please refer to the full Ethics Report, available in the "Sustainability" section of the Unipol Group's website.

Unipol Group | Integrated Report 2019 | 111

Communication on Progress Global Compact

NFS

Table of contents relating to relevant information for the United Nations Global Compact

The Unipol Group has adopted the principles of the Global Compact, promoting conduct consistent with the international standards on human rights, gender balance, environmental protection, anti-corruption, transparency and fairness in business and in business management, through continuous improvement methods and practices. In order make it easier to track the relevant contents for Communication on Progress, the following table has been prepared, which identifies, for each principle, the links to the GRI Standard, to the chapters of the 2019 Integrated Report (outcome measurements are indicated in the chapter "Shared value: the impacts generated by the Unipol Group") as well as the website www.unipol.it. For detailed information on the United Nations CoP 2019, please refer to the "Sustainability" section of the Unipol Group's website.

Global Compact

Global Compact Principles

GRI STANDARDS

Page reference in the Annual Integrated

Link

Areas

Report

Principle 1:

Pages 14-15: "Unipol Group Vision, Mission and

Businesses should support

Values"

and respect the protection of

Pages 29: "Future orientation in the use of capital"

Principles on

internationally proclaimed

GRI102-09

- "Instability and Polarisation"

Unipol Group Identity

human rights within their

GRI102-30

Pages 40: "The creation of value" - "Capital

GRI102-15

Vision, Mission and Values

Human Rights

respective spheres of

GRI408-01

performance" - "Financial capital"

GRI102-16

Policies

influence.

GRI412-03

Pages 46-49: "The creation of value" - "Capital

GRI102-17

ESG risk management

Principle 2:

GRI-FS11

performance" - "Human capital"

Businesses should make sure

Pages 66-74: "Governance" - "Internal Control and

they are not complicit in

Risk Management System"

human rights abuses,

Pages 111: "Other information" - "Ethics Report"

including indirectly.

Principle 3:

Businesses should uphold the

freedom of association and

the effective recognition of

Pages 14-15: "Unipol Group Vision, Mission and

the right to collective

GRI102-06

GRI204-01

Values"

bargaining.

GRI205-02

Pages 29-30: "Future orientation in the use of

GRI102-07

GRI305-03

capital"

GRI102-08

Principle 4:

GRI102-09

GRI401-01 (b)

Pages 33-34: "Material topics"

Unipol Group Identity

GRI403-02

Pages 46-49: "The creation of value" - "Capital

Vision, Mission and Values

Businesses should uphold the

GRI102-16

GRI403-03

performance" - "Human capital"

Shared Value

Labour principles

elimination of all forms of

GRI102-22

GRI403-09

Pages 53: "The creation of value" - "Capital

ESG risk management

forced and compulsory

GRI102-30

GRI 404-01

performance" - "Social and relational capital"

labour.

GRI102-35

GRI 404-02

Pages 66-74: "Governance" - "Internal Control and

Principle 5:

GRI102-41

GRI405-01

Risk Management System"

Businesses should uphold the

GRI201-03

GRI405-02

Pages 77-78: "Governance" - "Remuneration

effective abolition of child

system and incentives"

labour.

Pages 111: "Other information" - "Ethics Report"

Principle 6:

Businesses should uphold the

elimination of discrimination

in respect of employment and

occupation.