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Investor day 2013

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January 14, 2013

January 14, 2013

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  • 1. Agenda11:30 Reshaping Generali: discipline, simplicity and focus Mario Greco, Group Chief Executive Officer12:15 Balance sheet, cash and cost discipline Alberto Minali, Group Chief Financial Officer13:00 Lunch break14:15 Towards industrial excellence Sergio Balbinot, Group Chief Insurance Officer15:00 Q&A Session16:15 Closing remarks Mario Greco, Group Chief Executive Officer
  • 2. Reshaping Generali:Discipline, simplicity and focusMario GrecoGroup Chief Executive Officer
  • 3. My mandate 4 One simple mission: to significantly improve shareholder returns 250 Generali total shareholder returns(1), relative to peers 200 150 100 50 (2) Generali Average peers 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(1) Total return index (data as at 10/01/2013)(2) Allianz, AXA, Zurich Assicurazioni Generali Group Investor Day
  • 4. 166 days in the job: key findings 5 Strengths Identified priorities § Highly regarded brand § Strong core franchise 1§ Enhance management team and ü leadership in key mature European markets governance structure ü distinctive presence in high growth CEE and China 2§ Remove uncertainty on GPH § Strong agency network and well positioned direct distribution platform 3§ Refocus on core business § Growing P&C business with sound underlying operating profitability 4§ Strengthen capital and balance sheet § Robust life operating profitability despite 5§ Introduce tighter control of the cost base challenging financial environmentAssicurazioni Generali Group Investor Day
  • 5. 166 days in the job: what has been done 6 Appointment of a cohesive and effective management team and implementation of a rigorous corporate governance framework1.a § 10 representatives: CEO, CFO, Chief Insurance Officer, CIO, CRO, COO, Creation of international Head of Global Business Lines and country heads for Italy, France and Group Management Germany Committee (GMC) § In charge of sharing and discussing the main topics of the Group1.b § Enhancement of the management structure. Internal talent complemented by external hires (Alberto Minali as new Group CFO, Nikhil Srinivasan as new Group CIO and Carsten Schildknecht as new Group COO) Management structure § Redefinition of the CFO, CIO and CRO roles review § Definition of new functions: Chief Insurance Officer, COO, Global Business Lines, Strategy & Business development, integrated Legal / Compliance / Corporate Affairs functions1.c § Introduction of three new management committees: product, capital management / ALM, finance Rigorous decision process § Identification of six key processes: capital management, annual planning, implemented performance management, ALM, product development and M&A § Reinforcing these committees and processes with strict documentation procedures (proposer, approval rationale, approver)Assicurazioni Generali Group Investor Day
  • 6. 166 days in the job: what has been done 7 Areas for development Actions already taken2 The GPH transaction removes uncertainty § Fixed price, with clear timing § Significant reduction in contractual complexity § Two-tranche payment giving funding flexibility Remove Clear strategic benefits uncertainty on GPH § CEE is an area of strategic focus – significantly higher growth expected than in Western Europe § GPH well positioned in the market § Full management control from first tranche allows us to better integrate into Generali and extract more valueAssicurazioni Generali Group Investor Day
  • 7. Focus on GPH: strategic rationale (1/2) 8 CEE has a robust growth outlook, and historically solid profitability GDP growth Insurance penetration GWP growth Profitability CAGR 11-’17, %, real terms GWP/ GDP, 2011, % CAGR 11-‘17, % PAT/GWP, avg 07-11,% x3 x2 x2.5 1/3 8.8% 8.3% 2.6% 5.8% 3.2% 3.3% 3.2% 0.9% Western CEE Western CEE Western CEE Western CEE Europe Europe Europe EuropeNote: Western Europe includes Austria, Belgium, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Switzerland, UKNote: For Croatia and Czech Rep. PAT/GWP relates to 2007-10, Montenegro based on major players dataNote: CEE includes 10 countries in Central Europe and South-Eastern Europe: Czech Republic, Hungary, Poland, Slovakia, Slovenia, Serbia, Romania, Bulgaria, Croatia and MontenegroSource: Regulators / Supervisors and Insurance associations of the respective countries, internal analysis, EIU Assicurazioni Generali Group Investor Day
  • 8. Focus on GPH: strategic rationale (2/2) 9 Poland Hungary Slovakia P&C 234 4% 8 P&C 304 22% 2 P&C 107 11% 3 Life 216 3% 11 Life 144 9% 4 Life 84 7% 4 Pensions 2,712 5% 6 Pensions 39 1.5% 17 Pensions 667 15% 3 Czech Rep. Slovenia § GPH(1) covers the whole CEE region, is active in 10 countries with P&C 1,076 37% 1 P&C 67 5% 6 aggregate market share of ~6%(2) Life 559 30% 1 Life 20 4% 7 Pensions 2,432 25% 1 § Strong competitive position, with leading market shares in most countries Pensions 21 1% and room for substantial improvement in others § Deep product capabilities across both life and P&C businesses § Strong growth momentum and operating margins seen across the Romania businesses Croatia P&C 99 7% 5 § Well capitalised balance sheet P&C 27 3% 9 Life 22 6% 4 § Extensive distribution capabilities and strong brand recognition Life 17 5% 9 Pensions 133 10% 3 Pensions - - - § Best in class combined ratio Bulgaria Serbia Montenegro P&C 30 4% 10 P&C 82 18% 3 P&C 7.3 13% 3 Life 5 4% 10 Life 24 25% 1 Life - - - Pensions - - - Pensions 32 27% 2 Pensions - - - Legend P&C GWP EURm Life GWP EURm Market share Ranking Pensions AuM EURm(1) Pro-forma for carve-out of CIS business(2) Based on aggregate GWP in markets where GPH operates Assicurazioni Generali Group Investor Day
  • 9. 166 days in the job: what has been done 10 Areas for development Actions already taken3 § Approved plan to restructure Italian operations Refocus on core § Renegotiated and completed sale of Migdal business § Launched disposal of selected non core businesses4 § Euro 1.25 bn LT2 issuance successfully completed in December 2012 Strengthen capital and balance sheet § Launched a detailed review of balance sheet items5 § Simplify group structures and remove duplication Tighter control of the § Centralised reinsurance policy cost base § Group-wide expense program to enhance operational efficiencyAssicurazioni Generali Group Investor Day
  • 10. Generali: our vision for 2015 11 Reshaped approach to maximise value creation1 Focused on core insurance business, with greater contribution from P&C2 Stronger capital position and disciplined balance sheet management3 Superior customer acquisition and retention, with focus on retail and affluent space4 Consistent technical excellence and tight control of costs The mission is to deliver top quartile shareholder returns and profitabilityAssicurazioni Generali Group Investor Day
  • 11. Key execution guidelines 12 Key actions Execution plan 1 Focus on core business § Insurance focus § Optimise geographic reach § Run-off / disposal of non core businesses § Shift mix in the direction of P&C 2 Restore capital strength § Introduce risk adjusted profitability and cash creation targets for each line of business § Business/geographical rebalancing to reduce capital absorption § Balance sheet optimisation § Target >160% Solvency 1 ratio, “AA” philosophy 3 Change approach to § Better client segmentation and product innovation to drive a more targeted approach to clients clients and improve retention § Achieve a true multi-channel distribution model, with increased contribution from bancassurance and direct channels § Tap unexploited demand from affluent clients in life, and corporate clients in P&C 4 Consistent technical § Business restructuring and simplification (incl. Italy) excellence and tight control of costs § Improvement/centralisation of IT and non IT procurement costs § Embed technical best practice, led from centre § Euro 0.6 bn cost reduction by 2015 Target > 13% operating return on equity(1)(1) Operating profit after interest expense and tax / average shareholders equity excl. AFS reserves. Over the cycle target. Assicurazioni Generali Group Investor Day
  • 12. 1 Focus on core business (1/2) 13 We start from a strong franchise…Leadership in § Generalis home market; leading and diversified presenceWestern Europe § Scope to generate higher value creation than in the past by reviewing product design, technical skills, approach to clients, and cost base § Strong cash generation to be deployed to expand Generalis presence in countries with strong growth profileOne of the § Strong position in an attractive market: #3 insurance group in the regionlargest players § Highly profitable business, with best-in-class combined ratioin CEEUnique § Strong presence in the most important Asian marketspositioning in § Consistently #1 player among foreign joint-venture insurers in China; partnership with CNPCChina § Leveraging on multi-channel distribution (agencies, bancassurance, CNPC)Assicurazioni Generali Group Investor Day
  • 13. 1 Focus on core business (2/2) 14 …but there is scope to reshape the geographical presence under value creative conditions § Footprint assessed on two § Based on the market assessment we have identified: key criteria: ü Mature countries where we further focus on maximising ü Market attractiveness return, e.g. Italy, France, Germany, Switzerland, Austria, (macro indicators, Spain and Czech Republic insurance market size, insurance penetration, ü High growth countries where Generali has promising country political / regulatory opportunities and where we will invest to enhance situation) competitive position and profitability (CEE and China ü Generali’s position (scale, among others) profitability, return ü Non core markets where we will run-off (or on capital) opportunistically sell) non-strategic operations (US reinsurance and BSI, among others)Assicurazioni Generali Group Investor Day
  • 14. 2 Restore capital strength 15 Rebuilding a solid capital position is a key priority for GeneraliOur objectives: § Restore capital ratios ü Target > 160% Solvency 1 ü Long term “AA” philosophy to managing our solvency position § Manage our debt levels ü Leverage and interest coverage ratios consistent with our “AA” philosophy § Disciplined investment strategy § Greater attention to cash ü In excess of Euro 2 bn run-rate cash flow targeted by 2015Assicurazioni Generali Group Investor Day
  • 15. 3 Change approach to clients (1/2) 16 § Develop more sophisticated client database and enhance exchange of data across units and channels § Build on our expertise in Direct § Enhance client segmentation as a key driver to refine our product Focus on the client to strategy improve retention and acquisition ü innovative tailored products for each segment of business ü identification of best distribution channel for each client segment § Invest in product innovation, especially in Life § Implement a specific product / distribution strategy to target affluent clients Tap unexploited market § Enhance the penetration of the Corporate and Commercial client segments segments § Expand our Accident & Health business with particular focus on emerging marketsAssicurazioni Generali Group Investor Day
  • 16. 3 Change approach to clients (2/2) 17 Enhance the multi-channel profile of our distribution Life distribution (%) 13 3 + § Multi-channel approach to reflect changing 12 client needs and expectations 16 52 + 59 20 + § Continue to build on our direct expertise 25 - Generali Market Direction § Leverage on bancassurance to: Agents Brokers Bancassurance Direct & other ü increase share of life capital-light P&C distribution (%) products in Western Europe, Asia and LatAm 7 5 1 8 21 18 + ü further boost P&C + = 71 69 § Enhance the use of broker channel to - enhance penetration of Corporate and Generali Market Direction Commercial clients segment Agents Brokers Bancassurance Direct & otherSource: internal analysisAssicurazioni Generali Group Investor Day
  • 17. 4 Consistent technical excellence and tight control of costs (1/2) 18 Italian restructuringIndustrial case Pre restructuring Post restructuring Brand 10 brands 3 brands § Creation of a strong new player in the Italian market ü Full consolidation of businesses / brands with similar characteristics in terms of target Sole integrated 6 distinct customers, products and distribution models distribution network Distribution indipendent (Generali, Ina-Assitalia, Toro, Fata Assicurazioni) with shared mandate distribution networks and brand ü Three insurance brands with a distinctive market positioning and proposition Overlapping of Simplification and 1. Generali: focus on retail and middle Products product offer within rationalisation of the market business, Life and P&C; the Group product portfolio dedicated Commercial & Corporate business unit 2. Alleanza: Italian families strongly loyal IT and operations to Alleanza brand; Life and P&C; Operations only partially Integrated platform distinctive distribution network centralised 3. Genertel: Life and P&C through Indicative timetable alternative channels (phone, web, § 2013 Legal entity reorganisation (split between holding bancassurance) and operating company, creation of § Enhanced efficiency Assicurazioni Generali Italia) ü Full integration of the operating models and § 2014 Integration of operational structures, product ranges streamlining of overlapping services and information systems § 2015 Commercial integrationAssicurazioni Generali Group Investor Day
  • 18. 4 Consistent technical excellence and tight control of costs (2/2) 19 We will implement Euro 600 m of cost saving initiatives by FY2015A § Synergies to be extracted from the rationalisation of the Italian and other Simplify structure operationsB IT efficiency § Centralisation of data centre, IT procurement and telecommunication costsC Other procurement § Enhanced negotiation power via centralised procurement savingsAssicurazioni Generali Group Investor Day
  • 19. Key take-aways 20 1 Be disciplined, focused and more simple in executing our strategy 2 Improve client experience across our business 3 Introduce consistent technical excellence 4 Strengthen our balance sheet and capital position and enhance cash flow and value generationAssicurazioni Generali Group Investor Day
  • 20. Balance sheet, cash and costdisciplineAlberto MinaliGroup Chief Financial Officer
  • 21. Key messages 22 Consistent financial discipline and oversight across activities A new approach to finance in Generali, in order to introduce financial rigour and consistency in all the main group decisions: 1 Strengthen capital and manage leverage ratios to improve competitive position, ambition for “AA” level of capital strength 2 Enhance long term sustainable profitability with strict return criteria for business and capital deployment decisions, ex-ante product approval process, expense optimisation 3 Invest our assets in a disciplined and conservative way 4 Improve cash-flows from our business - crucial for healthy, sustainable dividends Returning Generali to a value creation storyAssicurazioni Generali Group Investor Day
  • 22. CFO organisation structure 23 Group CFO Investor Mergers Treasury & Debt Tax Affairs Relations & Acquisitions Management (Italy & International)§ Equity analysts & investors § Deals valuation § Cash flow mgmt § Tax planning§ Debt analysts & investors § M&A process § Credit lines mgmt § Tax consulting§ Rating agency relations coordination § Debt mgmt Capital & Value Group Strategic Group Integrated Management Planning and Control Reporting § Rating agency capital models § Planning and Control (3-year § Integrated financial reporting § Capital management industrial plan, annual planning, § Corporate Center ICT Support § Actuarial reserving (P&C) performance measurement) § Embedded value § Risk-adj. performance analysis & § ALM monitoring external benchmarking § Insurance liability mgmt § Investments monitoring (incl. stable shareholdings) § Cost controlling, internal benchmarking and new efficiency program monitoring New responsibilities / areas of focus Assicurazioni Generali Group Investor Day
  • 23. 1 Strengthen capital: solvency ratios 24 Enhancing capital ratios is a key priority for Generali Comments Economic § Generali steers its business on an -2%pts. solvency (%) 188 economic view, but carefully monitors the (99.5% confidence 159 157 Solvency 1 position of the Group level) § Our long term ambition is to run with capital ratios consistent with an “AA” credit rating § Economic solvency allows limited 2011 9M 12 Avg. peers(1) comparability with peers, given Solvency 1 229 different methodologies and models +23%pts (%) § S1 ratio of Generali currently in line with 140 117 historical levels, but impacted by volatile market conditions in the last 18 months § Both measures are below the average level 2011 9M 12 Avg. Peers(2) of our peers (though comparability again difficult) We target at least 160% Solvency 1, with philosophy of “AA” strength on other measures(1) AXA (99.5% confidence level, Jun-12), Allianz (99.5% confidence level, Sep-12), ZFS (99.0% TVaR, Jun-12)(2) Allianz, AXA, Zurich Assicurazioni Generali Group Investor Day
  • 24. 1 Strengthen capital: the journey to reach our S1 capital target 25Solvency 1 ratio: indicative walk to 2015 160% 140% 140% 9M 2012 LT2 Issuance Impact of GPH Retained capital Growth in capital Capital Potential transaction requirements optimisation disposals (incl US measures Re/BSI)§ The chart does not anticipate mark to market impacts post Q3, which if they remain, will be positive§ We have significant flexibility around disposals (chart = indicative only)§ Working assumption of 40% pay out ratio Assicurazioni Generali Group Investor Day
  • 25. 1 Strengthen capital: economic solvency development 26Economic solvency: indicative walk to 2015 140% 153% 9M 2012 LT2 Issuance Impact of GPH Retained Growth in capital Capital Potential transaction economic capital requirements optimisation disposals (incl US measures Re/BSI)§ The chart does not anticipate mark to market impacts post Q3, which if they remain, will be positive§ More significant impact of retained capital due to VIF accretion§ More than 2x covered (against 99.5% VaR requirement) on these assumptions by 2015 Assicurazioni Generali Group Investor Day
  • 26. 1 Strengthen capital: example capital management actions / levers 27 (4/5)1 Financial operations § Portfolio de-risking § Optimise debt structure § VIF monetisation Products Business / capital § Optimise product offering, by reducing guaranteed products optimisation measures § Enhance diversification ü Business mix shift towards P&C ü Diversify earnings streams in Life Risk management § Enhance use of reinsurance § Hedging Improve technical § Focus on technical margins and risk capital consumption2 performance § Manage policyholders’ profit participation3 Cost reduction § Cost efficiency programme targeting savings of Euro 600 m4 Exit from non core § Exit from US Re, BSI. Other disposals to be considered businessesAssicurazioni Generali Group Investor Day
  • 27. 1 Strengthen capital: rating agency views 28 Key priorities § Short term, achieve resolution of various credit watches / reviews § Longer term, enhance our capital structure (quantity and quality) to be consistent with AA / equivalent rating § Continue to develop Enterprise Risk Management framework Focus on Italian restructuring § We will engineer the Group restructuring in order to prevent negative impact from a ratings perspective § Limited weight of the holding insurance operations on the total holding cash flow § Restructuring will be done in such a way as to not prejudice holding company cash flow positionAssicurazioni Generali Group Investor Day
  • 28. 1 Carefully manage debt levels (1/2) 29 Generalis leverage position vs. peersLeverage ratio (2011) Interest coverage (x) (²) ~7 7,1 § Generalis leverage ratio is high compared to peers on a book 40% value basis, though more in line with peers based on rating 31% 30% agency metrics (e.g. Moody’s) 28% 3,8 § The interest coverage ratio is lower than we would like § We aim to improve leverage ratios, and increase interest 1 2 cover to ~7x § We will manage debt ratios to Generali Avg. Peers(1) 2011 2015 Avg. (1) be consistent with our “AA” Target Peers capitalisation ambition 1 Leverage ratio: Financial debt / [ Financial debt + Book value (gross of minorities) ] 2 Adjusted Leverage ratio: Moodys Adjusted Financial Leverage(1) AXA, Allianz, ZFS, 2011(2) Calculated as EBIT/interest expenses on financial debt Assicurazioni Generali Group Investor Day
  • 29. 1 Carefully manage debt levels (2/2) 30Debt structure (2011, %) Subordinated + debt 59 64 § Generali has more senior debt ? relative to peers - Senior debt ü Reduce the weight of senior debt 41 36 § We will seek to diversify sources of (1) Generali Avg. Peers Direction funding ü Look at retail in addition toDistribution of bonds by maturity/call date (%) institutional ü Look at US$ / SG$ markets in addition to €/£ Generali § Disposal proceeds might also be 43 Avg. peers(1) used partially to repay debt 32 33 21 22 23 15 13 2013-14 2015-16 2017-18 2019+(1) Allianz, AXA, ZurichAssicurazioni Generali Group Investor Day
  • 30. 2 Enhance profitability 31 Operating RoE target > 13% over the cycleProfitability ambitions Key Levers § We will manage the business to achieve § Emphasis on P&C operating RoE (1) of at least 13% over the cycle ü Strong and resilient earnings ü Further focus on technical excellence § Translates into operating profit of more than Euro 5 bn ü Shift of group business mix to P&C § Strict profit focus in LifeOperating profit (Euro bn) ü We will give up premium volume for 6 profitability if necessary 5 ü Ex-ante product approval and post-approval monitoring 4 § Cost control 3 ü Exercise constant vigilance on costs 2 ü Euro 600 m of savings indentified by 2015 1 0 2010 2011 2012F 2015(1) Operating profit after interest expense and tax / average shareholders equity excl. AFS reserves. Over the cycle target. Assicurazioni Generali Group Investor Day
  • 31. 2 Enhance profitability: cost control 32 Identified actions to reduce expenses* by Euro 600 m in 2015 Main drivers Structure § Simplification of processes simplification § Removal of duplication Non-IT § Merger of entities procurement § Optimisation of sales networks IT efficiency § Centralised procurement of IT hardware, software IT § More efficient / centralised data efficiency warehousing solutions Structure § Telecommunication costs simplification Non-IT § Creation of centralised Group procurement procurement function * Administrative expenses and non commission related acquisition costsAssicurazioni Generali Group Investor Day
  • 32. 3 A tough market backdrop for insurers… 33 European equities German bund, 10 years (MSCI EMU Index TR, 2007=100) 5 120 100 Generali’s current yield on 4 investments 80 3 60 (%) 2 (%) 40 5,0 1 20 4,5 0 0 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 4,0 Spreads over 10 year bund Market volatility(²) 3,5 (Bps) Italy (%) 90 600 3,0 France 80 500 70 Euro Corporate 2,5 (1) Bonds ¹ 60 400 50 300 2,0 40 2007 2008 2009 2010 2011 2012F 200 30 20 100 10 0 0 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 Source: Bloomberg as at 03.01.2013(1) Based on FTSE Euro Corporate Bonds 7 to 10 years average yield(2) VIX Index Assicurazioni Generali Group Investor Day
  • 33. 3 …requires a disciplined approach to investments 34 Our investment approach Strict discipline is key § New Group investment policy guidelines to be implemented § Risk budgets at portfolio level § Risk capital constraints at entity level § Active ALM (with new Group monitoring function) § Very high hurdle rates for complex / illiquid assetsAssicurazioni Generali Group Investor Day
  • 34. 3 What we have implemented so far 35Investment structure (9M 2012) Comments Euro 269 bn Euro 36 bn § Concluded asset de-risking 2,4% 1,6% 5,6% 8,8% ü Group cross-border exposure to peripheral 3,6% European Sovereign debt reduced 4,6% 14,6% 8,8% ü Excess cash to be invested in coming 7,6% months 8,7% 34,0% § Comprehensive portfolio review 29,7% ü Detailed review of all alternative asset investments 40,9% ü Detailed review of top 60 equity positions 29,0% ü Detailed review of real estate portfolio Life P&C ü Review of other balance sheet positions Government bonds Corporate bonds Other fixed income Equity Real estate Cash & cash equivalent ü Process ongoing - we will conclude with the Other full year results in March Assicurazioni Generali Group Investor Day
  • 35. 4 Improve cash flow from own business 36 Free cash flow before dividend (Euro bn) Comments § Enhanced expected cash flow generation driven by: ü Earnings mix shift towards P&C, more cash generative >2.0 ü Careful management of profit sharing 1,3 ü Incorporation of payback 1,0 periods within new Life ex-ante 0,9 product approval process ü Centralised purchasing of reinsurance 2009 2010 2011 From 2015 § Increased focus on remittance ü Setting up centralised treasury functionAssicurazioni Generali Group Investor Day
  • 36. Focus on GPH transaction: key terms 37 n 25% participation in GPH (the “First Tranche”) transferred to Generali on 28-Mar-2013 n 24% participation in GPH (the “Second Tranche”) transferred to Generali on or about end of 2014 n First Tranche transferred at a price of Euro 1,286 m; use of proceeds by PPF ü Payment of ~51% of the principal (Euro 2,099 m) ü Netting of ~51% of the principal under the Euro 400 m bonds issued by PPF and subscribedAcquisition of to by Generali (the “Bonds”)49% in GPH n Second Tranche transferred at a price of Euro 1,235 m; use of proceeds by PPF ü Payment of all outstanding claims under the Facility and ü Netted against all outstanding claims under the Bonds n Generali will gain full managerial control of GPH following the transfer of the First Tranche n Required regulatory and antitrust authorisations n Acquisition of 51% economic participation and 100% voting participation in PPF Beta (which controlsSwap between a 38.5% stake in Ingosstrakh) Ingosstrakh n Transfer of LP interests in PPF Partners 1 Fund and 27.5% stake in PPF Partners to vehicles Stake and indirectly connected to the PPF Group shareholders and PPF InvestmentsPPF Partners Assicurazioni Generali Group Investor Day
  • 37. Indicative impact on capital of the transaction (before bond issue) 38 ACTIONS TIMING SOLVENCY I ECONOMIC SOLVENCY GPH – acquisition of tranche 1 March 2013 - 7 %pts - 3 %pts. GPH – acquisition of tranche 2 End 2014 - 7 %pts - 3 %pts. Overall impact - 14 %pts -6 %pts.The above figures exclude the subordinated debt issue in December (approx. 7%pts positive impact on both measures).Expected impacts based on balance sheet as at 9M 2012 Assicurazioni Generali Group Investor Day
  • 38. Key take-aways 39 Strengthen capital and leverage ratios: > 160% Solvency 1 target, with 1 long term “AA” philosophy 2 Enhance profitability: >13% Operating RoE over the cycle 3 Disciplined and conservative approach to investments 4 Focus on cash flow generation: > Euro 2 bn cash flow from 2015Assicurazioni Generali Group Investor Day
  • 39. Towards industrial excellenceSergio BalbinotGroup Chief Insurance Officer
  • 40. Chief Insurance Officer: mission and guiding principles 41 Steers and controls the industrial performance of the Group The guiding principles 1 Outstanding technical performance Technical and operational excellence is an unchanged ambition 2 Operational excellence § The past: Governance and internal structures hampered 3 Reinsurance optimisation implementation § The future: One Chief Insurance 4 Distribution excellence and Officer dedicated and empowered to customer value drive changeAssicurazioni Generali Group Investor Day
  • 41. Chief Insurance Officer: new organisation structure 42 Chief Insurance Officer Chief Technical Reinsurance, Officer Claims & Processes Bus.Perf. Global P&C P&C Sales & Treaty Treaty Cat Facultative Claims Global Life Op. Exc. Mgmt Units Retail Corporate Innovation reinsurance retrocession Modelling Reins. Mgmt• Industrial • Product • Product • Pricing and • Distribution • UW of infra- • Cession to • Cat • Fac. reins. • Best • Competence challenge to guidelines guidelines UW centre of group P&C reinsurance modelling guidelines practice center on BUs • Product • Pricing and guidelines competence treaty market • Cat reins • Monitoring sharing on operational• Industrial approval UW • UW excess • Client value reinsurance • Security pricing of fac. reins claims excellence appraisal • Ptf analysis guidelines business managem. • Market selection • Exceptions • Promotion • Monitoring of and • Ptf analysis • Ptf analysis centre of pricing • Contract approval &monitoring large execution • Best pract. competence benchmark of claims efficiency sharing • Best pract. • Best pract. administr. plan • Distribution • Reporting processes programs of • Ad hoc BU sharing sharing op. costs• Local mkt innovation • Claims competitive support • Ad hoc BU • Ad-hoc guidelines • Ad hoc BU analysis • Life reins. support support support • Method. &• Board • Health tools represent. Group EU & Int’l Research & Dev. Affairs • Institutional relations with EU Institutions, • Macro-economic research Insurance Europe and int’l industry associations • Forecast. bench-marking • Steering of local inst. relations on common group analysis topics • Ad-hoc studies • Information on local activities and lobbying agenda Assicurazioni Generali Group Investor Day
  • 42. Strategic priorities 43Strategic priorities How to achieve them § Structured performance review § Product excellence § Strengthening capabilities in all core areas of the business (technical, distribution) in order Raising the ü Group Guidelines (Life, P&C UW limits) to achieve the highest level of bar of Building competitiveness in each market ü Group ex-ante life product approval process technical capability ambition § Group Reinsurance § Foster value-adding and business-driven exchange of knowledge and best practices ü 100% Group treaty reinsurance acceptances throughout the Group ü Optimizing fac. reinsurance management Increasing § Maximise the value extracted from the customer customer base (retention, cross/up-selling) value § Target new customer segments § Strengthen the role of corporate centre ü in a quarterly business performance review Performance management ü and addressing issue/gaps of technical performance at local level Enhancing § Channel management commercial § The quarterly discussions are based on a effectiveness § Direct channel and bancassurance opportunities common set of technical metricsAssicurazioni Generali Group Investor Day
  • 43. The way towards industrial excellence 44The way towardsThe roadmap industrial excellence § Increase life value and reduce capital absorption ü Rebalancing business mix Life ü Limit capital deployed on guarantees ü Disciplined approach for profit sharing and credit rates § Rebalance the mix towards P&C ü Enlarge Corporate & Commercial segment P&C Business ü Develop Accident & Health offer performance § Enlarged scope for technical programs Customer § Enhance Customer value (present and potential) as driving metric § New direct initiatives (mainly in emerging markets) leveraging on European direct channel expertise Distribution § Exploit Bancassurance potential in emerging markets § Tied Agents Excellence Ex ante life § Starting from 2013, new centralised ex-ante life product approval product approval Product excellence § New product development guidelines Stricter P&C UW policy ü Minimum set of tariff drivers ü Corporate UW authorities § Fully centralised treaty reinsurance Reinsurance Reinsurance § Optimisation of facultative reinsurance managementAssicurazioni Generali Group Investor Day
  • 44. Life trends: low interest rate environment with high volatility 45 German bund, 10 years Impacts on life market ▪ Current macro economic environment and low interest 5 4 rates impacting life business, both on volumes and on 3 (%) value 2 ▪ Increased competition from banks 1 0 2007 2008 2009 2010 2011 2012 2013 ▪ Less available personal wealth Spreads over 10 year bund (Bps) ▪ But Life business still holds significant potential for Italy 600 France future value accretive growth 500 Euro Corporate Bonds ¹ 400 ü withdrawal of state pension systems 300 ü underdeveloped protection business 200 100 0 ▪ Need for a “through the cycle” approach 2007 2008 2009 2010 2011 2012 2013 Source: Bloomberg as at 03.01.2013Assicurazioni Generali Group Investor Day
  • 45. Life: evolution of our portfolio (1/2) 46Increasing life reserves … … fuelled by positive net inflows(Euro bn) Single premiums Regular premiums (Euro bn) 293 295 16.1 16.1 268 246 134 135 106 120 7.0 5.8 141 148 159 160 1.1 2008 2009 2010 2011 2008 2009 2010 2011 9M12Life reserves by country & type of premium (FY 2011) Life reserves by country & product (FY 2011)(Euro bn) (Euro bn) Unit Protection Saving Single Regular 5.8 6% 10.2 0.6 21% 54% 46% Group 15.9 13.1 Group 41.0 74% 2.7 9.9 60.5 66.3 76.2 20.1 16.4 60.4 2.0 41.6 50.7 1.6 0.7 2.9 0.1 15.7 19.6 12.6 2.6 21.7 7.3 4.0 5.9 2.3 Italy Germany France CEE RoE RoW Italy Germany France CEE RoE RoWNote: all figures net of minorities, except net inflows which are grossAssicurazioni Generali Group Investor Day
  • 46. Life: evolution of our portfolio (2/2) 47Reserve guarantee development (%) HighlightsThe way towards industrial excellence 3.20 3.00 ▪ Over the last 8 years 2.80 portfolio average guarantee 2.60 has reduced by about 90 bps ▪ The share of “at maturity” 2.40 2.20 guarantee has reached 11% 2.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 ▪ Reserves of products with Yearly basis At maturity zero guarantee increased by more than 40% over the lastLife reserves by type of guarantee (FY 2011) 4 years ▪ Roughly 50% are low capital 11% intensive products 20% 47% 2% Low capital intensive ▪ Healthy buffer from interest At maturity 14% products rate return to average w/o guarantee minimum guaranteed Matched 53% Yearly basis=0 Yearly basis>0Assicurazioni Generali Group Investor Day
  • 47. Life: evolution of new business (1/2) 48APE development: stable regular premiums (Euro bn) 9M 2012 APE by country & product (Euro bn) (Euro bn) 16% 15% Group 69% 5.3 5.2 4.8 4.8 1.1 3% 2% 2.2 2.3 Single 1.8 1.7 3.4 3.2 0.7 9% 1.3 0.6 1.3 18% 95% 21% 0.4 29% 0.1 Regular 3.0 3.0 3.1 3.1 42% 45% 2.0 73% 1.9 22% 17% 0.2 50% 32% 3% 40% 55% 42% 2008 2009 2010 2011 9M11 9M12 Italy Germany France CEE RoE RoW Unit-linked Protection SavingsNote: 9M figures are pro-forma for the disposal of Migdal. Figures may not add due to roundingAssicurazioni Generali Group Investor Day
  • 48. Life: evolution of new business (2/2) 49 Increasing share of low capital intensive productsAPE by type of guarantee At maturity Matched Yearly basis>0 w/o guarantee Yearly basis=0 11% 19% 56.8% 21% 22% 67.3% 21% 67.7% Low capital 30% intensive 30% 19% 29% 26% products 3% 2% 12% 2% 3% 3% 15% 25% 14% 17% 43% 35% 34% 33% 32% 2008 2009 2010 2011 9M12 Average 1.56% 1.56% 1.58% 1.62% 1.37% Guarantee Yearly basis 1.50% 1.37% 1.39% 1.45% 1.12% At maturity 1.90% 2.04% 2.01% 2.00% 2.06% Assicurazioni Generali Group Investor Day
  • 49. Life: our strategic priorities going forward 50Profitability enhancement Key levers Key metrics Key metrics § Rebalance product mix § Riskiness/capital§ Emphasis on both technical sources of profit absorption § Optimise product design and safeguarding financial margin in low interest § Profitability environment § Reduce guarantees and optimise crediting rates § Capital remuneration§ Business managed to foster long-term economic § Reduce expenses § 1st-year P&L impact value creation through § Focus distribution on more stringent metrics § Payback period value creationAssicurazioni Generali Group Investor Day
  • 50. Life: new product approval example 51Guiding principle Assessment of life product by country (1) Generali Group Relative to group average Country 1 Better Country 2 Country 3 Worse Country 4 Country 5 Country 6 All new products approved by the Corporate Centre and the full range of products open for sale revised twice a year monitoring their profitability against the economic scenario Discipline in terms of capital, cash and returns(1) Country lines are relative to the group average indicatedAssicurazioni Generali Group Investor Day
  • 51. P&C: market trends 52GDP evolution in Eurozone (%) Trends on P&C market 5 § The Eurozone GDP performance had a negative impact 0 on the market ü Commercial Lines technical performance has -5 2006 2007 2008 2009 2010 2011 deteriorated as companies are more price sensitive (seek to reduce costs)New passenger car registration in W.E. (m) ü Personal Lines - especially on individual protection 15 - are under pressure due to reduced demand 14 02000 2002 2004 2006 2008 2010 2012 § Falling vehicle registrations have also put the Motor Line under pressure due to increased competitionSource: ACEAWorld NatCat overall losses (USD bn) § The property segment has been negatively affected by 400 events: recession - that generates fraudulent claims 200 spikes - and an increase in NatCat Losses - that generates higher loss ratio and higher cost 0 2004 2005 2006 2007 2008 2009 2010 2011 of reinsuranceSource: Munich ReAssicurazioni Generali Group Investor Day
  • 52. P&C: portfolio evolution 53 Not only growth but also focus on portfolio profitabilityGWP development Gross direct premiums by country (9M 2012)(Euro bn) (Euro bn) Motor 22.8 4.9 59% 41% Group 60% Non Motor 22.0 21.6 22.1 16.9 17.4 3.4 49% 3.0 2.7 28% 38% 40% 1.8 40% 1.1 51% 72% 62% 60% 60% 60% 40% 2008 2009 2010 2011 9M11 9M12 Italy France Germany CEE RoE RoWCombined ratio development Combined ratio by country (9M 2012)(%) (%) 96.4% 98.3% 98.8% 96.5% 96.6% 96.6% 97.6% 98.5% 94.9% 90.4% 96.3% 97.7% 27.2% 27.2% 27.5% 27.6% 27.2% 27.2% 20.2% 26.7% 28.5% 28.4% 38.5% 37.8% 69.2% 71.1% 71.3% 69.0% 69.4% 69.5% 77.4% 71.8% 66.5% 67.8% 52.6% 59.3% 2008 2009 2010 2011 9M11 9M12 Italy France Germany CEE RoE RoW Expense ratio Loss ratio Assicurazioni Generali Group Investor Day
  • 53. P&C: challenging operating environment for Motor 54Pressure on Average premium … …largely compensated by Risk premium decrease (Euro) TPL Retail, Average premium development TPL Retail, Risk premium development Italy Italy Germany Germany 120 500 300 120 110 470 110 270 100 100 440 240 90 90 410 210 80 80 380 180 70 70 350 150 60 60 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 France(1) Czech Rep. France Czech Rep. 400 200 120 120 390 180 110 110 160 100 100 380 140 90 90 370 80 80 120 360 100 70 70 350 80 60 60 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 Average portfolio premium Average new business premium Claims frequency, key driver of the risk premium improvement, due to external and internal factors in most of the countries: § improved road-safety conditions § Clear signs of portfolio average premium growth in some key § improved quality of insured vehicles countries, consequence of a more benign competitive § more strict traffic control environment § economic crisis and fuel cost increase § Still competitive pressure on portfolio average premium in Average cost of claim under control thanks to improved claims countries with high technical margins settlement process: § Commercial constraints to a more aggressive implementation of § mitigation of material damage claim inflation (e.g. Bodyshop price increases at renewals in some jurisdictions agreements) (1) TPL and other combined § reduced litigation for bodily injury claims Risk premium = Claims frequency x Average cost of claimAssicurazioni Generali Group Investor Day
  • 54. P&C: our priorities going forward 55Create Value Improve current profitability Capture new opportunities § Pricing: greater sophistication in pricing (more discrimination of individual risk profiles) to spin a virtuous cycle of § Expand our presence§ Increase weight portfolio cleaning and better of P&C in our in A&H, particularly in risk selection/attractiveness emerging markets portfolio over time § Grow presence in § Claims management: Commercial &§ Foster technical stronger “leakage” reduction excellence to Corporate segment, and better service to fairly serving medium sized improve retain customers performance companies at § Reinsurance: centralisation of international level, choice on risk retention (treaty leveraging our global cessions) and less use of presence facultative to increase retention on profitable contractsAssicurazioni Generali Group Investor Day
  • 55. P&C: we will focus on technical expertise 56 Strong Group commitment to technical expertise § Extended scope by geography and LoB Technical initiatives based on new § Stringent application designing principles § Direct link with budget Pricing - key levers Claims management - key levers § Driver selection § Body shop management § Fleet pricing § Bodily injury management § Innovation § Fraud management § Capital absorption optimisation § Wreck and remain management § Customer relationship management § Partner cooperation management § Life time value § Proactivity and customer care § Portfolio managementAssicurazioni Generali Group Investor Day
  • 56. Reinsurance centralisation: leveraging risk & capital management (1/2) 57 Full centralisation and optimisation of treaty reinsurance, from 2013Moving from local … … to Group protectionCountry view Group reinsurance view Group reinsurance Retention Market reinsuranceThe rationale The benefits Reinsurance in P&C is a key tool in the strategic Geographical spread and diversification allow the management of Risk capital implementation of Group reinsurance model aiming Risk transferred via reinsurance allows: at more efficient capital management § Significant capital saving § Allowing a reduced need of capacity at Group level § Reduced volatility of bottom line in a given period § Increasing the Group risk retention § Increasing the purchasing power of the buyer Assicurazioni Generali Group Investor Day
  • 57. Reinsurance centralisation: leveraging risk & capital management (2/2) 58New reinsurance structure … … maximising group efficiency § Internal reinsurance provided at market § Maximum efficiency and terms and conditions, in compliance diversification benefit with requirements of local regulators and fiscal authorities § Centralised management of Group risk appetite § Performance of Group subsidiaries unaffected by internal reinsurance § Control of Group reinsurance expenditure § Exceptions adopted for joint ventures or markets with regulatory constraints § Optimisation of cycle management for reinsurance § Facultative reinsurance process further strengthened in the coming years § Improvement of counterparts credit risk managementAssicurazioni Generali Group Investor Day
  • 58. Aiming at client-centricity and channel excellence 59 Client value maximisation Key levers § Strengthen retention § Mapping Group best practices in customer value management § Increase cross & up-selling § Identification of the drivers for extracting customer potential and Leverage on our most § Optimise customer codification of guidelines for action valuable asset satisfaction § Development of country specific action plans § Customer value § Monitoring of the performance in customer value management measurement Channel excellence Key levers TRADITIONAL NETWORKS § Modern sales processes, tools and front-end applications § Innovative value-based compensation schemes § Consolidate leadership, increase efficiency & § Sales force lifecycle management effectiveness of traditional § Efficient resource allocation through sales force performance- networks based segmentation Effective § Seamless integration with other channels DIRECT & MULTI-ACCESS multi-channel § Reduced time to market management § Leverage direct presence § Digital enabled services and develop multi-access § Best-in-class performance levels § Strong integration with bank operating model BANCASSURANCE § Innovative product offering § Develop Bancassurance § Customer base exploitation opportunities § Current & new partnerships full potential exploitationAssicurazioni Generali Group Investor Day
  • 59. Key take-aways 60 Strong commitment on industrial excellence Raising the bar of Life and P&C technical ambition Increasing customer value Enhancing commercial effectivenessAssicurazioni Generali Group Investor Day
  • 60. Final remarksMario GrecoGroup Chief Executive Officer
  • 61. Generali: our vision for 2015 62 Reshaped approach to maximise value creation1 Focused on core insurance business, with greater contribution from P&C2 Stronger capital position and disciplined balance sheet management3 Superior customer acquisition and retention, with focus on retail and affluent space4 Consistent technical excellence and tight control of costs The mission is to deliver top quartile shareholder returns and profitabilityAssicurazioni Generali Group Investor Day
  • 62. New Generali Corporate App 63The Corporate App is aimed at providing our key stakeholders on the move with theupdated core package of institutional and financial news, both off line and on line.It complements generali.com by offering a quick and agile reference to the latest info,such as press releases, reports, webcasts, share charts, key events calendar, maps.Compatible with Apple’s iPhones / iPads and Android’s smartphones and tablets, it canbe downloaded free from the App Store and the Play Store respectively.Assicurazioni Generali Group Investor Day
  • 63. What’s next 64 March 14, 2013 - FY 2012 Results April 30, 2013 - General Shareholders’ Meeting May 10, 2013 - 1Q 2013 Results August 2, 2013 - 1H 2013 Results November 8, 2013 - 9M 2013 Results November 27, 2013 - Investor DayAssicurazioni Generali Group Investor Day
  • 64. Investor Relations Team 65 Spencer Horgan (Tel.: +39-040-671402) Head of Investor Relations Email: spencer_horgan@generali.com Stefano Burrino (Tel.: +39-040-671202) Email: stefano_burrino@generali.com Emanuele Marciante (Tel.: +39-040-671347) Assicurazioni Generali Email: emanuele_marciante@generali.com P.za Duca degli Abruzzi 2 Veronica Cherini (Tel.: +39-040-671488) 34132 Trieste, Italy Email: veronica_cherini@generali.com Fax: +39 040 671338 Rodolfo Svara (Tel.: +39-040-671823) e-mail: generali_ir@generali.com Email: rodolfo_svara@generali.com www.generali.com Martina Vono (Tel.: +39-040-671402) IR Events Email: martina_vono@generali.comAssicurazioni Generali Group Investor Day
  • 65. Disclaimer 66 Certain of the statements contained herein are statements of future expectations and other forward-looking statements. These expectations are based on managements current views and assumptions and involve known and unknown risks and uncertainties. The user of such information should recognise that actual results, performance or events may differ materially from such expectations because they relate to future events and circumstances which are beyond our control including, among other things, general economic and sector conditions. Neither Assicurazioni Generali S.p.A. nor any of its affiliates, directors, officers employees or agents owe any duty of care towards any user of the information provided herein nor any obligation to update any forward-looking information contained in this document. The manager charged with preparing the company’s financial reports, Alberto Minali, declares, pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Financial Intermediation, that the accounting information contained in this presentation corresponds to document results, books and accounts records.Assicurazioni Generali Group Investor Day