Operating result

Operating result

Operating result

The operating result of the life segment amounted to € 2,978 million, an increase of 15.2% from € 2,585 million at the end 2013. The increase is primarily due to the favorable financial margin and the simultaneous containment of costs.

This improvement is also confirmed by comparing the fourth quarter of 2014 to the corresponding quarter of the previous year (+ 26.6% on a comparable basis).

Finally, the operating profitability on investments8 of the life segment amounted to 0.81% (0.78% at December 31, 2013).

8 For further information of the calculation methodology for this indicator, please refer to the Glossary in the Appendix to the Management Report.

Operating result: Technical margin

(€ million)31.12.201431.12.2013FOURTH QUARTER 2014FOURTH QUARTER 2013
Technical margin 5,532 5,697 1,547 1,517
Net earned premiums 44,699 40,826 13,102 11,226
Fee and commission from financial service activities 224 200 61 55
Net insurance claims adjusted for financial interests and bonuses credited to policyholders -39,547 -35,405 -11,686 -9,769
Other insurance items 156 77 71 4

The technical margin9, amounted to € 5,532 million, slightly decreasing; in particular, the contraction of the loadings and profitability of protection lines were only partially offset by growth in fees related to the sale of linked products. In addition, the technical margin, especially in Germany, reflected the decline of the amount of the acquisition costs shared with policyholders. This margin does not include insurance operating expenses, which are reported in Total operating expenses.

9 For further information of the calculation methodology for this indicator, please refer to the Methodological note on alternative performance indicators in the Annex to the Management Report.

Operating result: Net Investment result

(€ million)31.12.201431.12.2013FOURTH QUARTER 2014FOURTH QUARTER 2013
Net investment result 2,240 1,734 564 297
Operating income from investments 16,594 15,912 3,821 4,740
Operating income from investments 12,305 11,523 2,908 2,826
  Current income from investments 11,024 10,629 2,841 2,647
  Net operating realized gains on investments 2,443 2,086 460 467
  Net operating impairment losses on investments -310 -391 -126 -74
  Other operating net financial expenses -852 -801 -267 -214
Net income from financial instruments at fair value through profit or loss 4,289 4,388 913 1,914
  Net income from financial instruments related to unit and indexlinked policies 3,300 4,101 724 1,823
  Net other income from financial instruments at fair value through profit or loss 989 288 189 91
Policyholders' interests on operating income from own investments -14,354 -14,177 -3,257 -4,443

The net investment result amounted to € 2,240 million, increasing (+ 29.2%) compared to € 1,734 million at 31 December 2013.

This trend was determined by the increase in net realized gains on both equities and on government bonds in the bond segment. In addition, due to the investment strategy implemented by the Group, there was higher current income from investments in equities and bonds despite the environment of low interest rates; however, such a scenario led to higher provisions for interest rate risk compared to the previous year.

In detail:

  • current income from investments – which includes the current income from investments at fair value through profit or loss - amounted to € 11,024 million (€ 10,629 million at 31 December 2013), while the related current return, calculated based on the book value of investments, decreased to 3.6%. In detail, the current income from fixed income securities increased from € 9,251 million at 31 December 2013 to € 9,588 million due to the actions taken by the Group to support current returns and the reduction of cash held in the life segment portfolios. In addition, the current income of the equity segment also recorded an increase, from € 388 million at 31 December 2013 to € 449 million. Finally, the current income from investment properties amounted to € 672 million, essentially stable.
  • net operating realized gains on investments amounted to € 2,443 million (€ 2,086 million at December 31, 2013) due to higher realized gains particularly on the equity portfolios of the Group, compared to the same period last year;
  • net operating impairment losses on investments decreased from € -391 million at 31 December 2013 to € -310 million; The trend is largely due to the impairment of the investment in Telco, accounted for in 2013, partially offset by higher impairments on equities recorded in 2014;
  • other operating net financial expenses, which include interest expense relating to operating debt and investment management expenses, amounted to € -852 million (€ -801 million at December 31, 2013);
  • net income from financial instruments related to unit- and index-linked contracts increased from € 4,101 million at 31 December 2013 to € 3,300 million. This trend reflects the change in the value of investments related to the lower performance of the financial markets over the corresponding period of the previous year;
  • net income from financial instruments at fair value through profit or loss amounted to € 989 million (€ 288 million at December 31, 2013. The significant change is attributable to the performance of various derivative contracts used for various types of insurance products, to hedge the risks related to changes in interest rates.

The policyholders’ interest on income from investments increased from € -14,177 million at 31 December 2013 to € -14,354 million, resulting in a slight increase compared to the previous period, due to the increase in operating income from investments.

Operating result: Total operating expenses

(€ million)31.12.201431.12.2013FOURTH QUARTER 2014FOURTH QUARTER 2013
Total operating expenses -4,795 -4,846 -1,384 -1,239
Acquisition and administration costs related to insurance business -4,759 -4,773 -1,365 -1,225
Net other operating expenses -35 -73 -20 -14

Total operating expenses improved from € -4,846 million at 31 December 2013 to € -4,795 million.

In particular, management fees related to insurance amounted to € -4,759 million, a decrease of 0.3% with respect to December 31, 2013. Acquisition costs, which amounted to € 3,820 million, decreasing by 1.1%, contributed to this trend due to the performance observed mainly in Germany.

Administrative expenses amounted to € -940 million, increasing by 3.0% due to the trend observed in particular in Italy and France, in contrast with other areas in which the Group operates.

The acquisition and administrative costs ratio amonted to 9.7%, a decrease with respect to 31 December 2013 (10.8%) due to the contraction of 0.9 pps observed in the acquisition costs component concentrated mainly in France and Germany.

The ratio of total administration costs related to insurance business to the average insurance provision remained essentially stable at 0.28%.

The decrease in other operating components was attributable to higher provisions for risk with respect to the prior period.