Premiums development and new business
Gross written premiums
Written premiums in the life segment, including premiums related to investment contracts, amounted to 49,813 miillion, growing by 11.2% on equivalent terms compared to the previous year. This trend is encouraged by the significant growth in linked contracts (+ 43% on equivalent terms), in line with the strategy to focus on low capital-absorption products. The other business lines showed a positive trend; saving lines increased by 4% on equivalent terms and, to a lesser extent, the protection policies (+ 2.5% on equivalent terms).
Net cash inflows amounted to € 12,747 million, a significant increase with respect to 31 December 2013 (+ 49.7%), due to the above mentioned positive trend in premiums. A slight increase in capital outflows.
New business annual premium equivalent (APE) increased significantly over the previous year (+ 14.2% at constant exchange rates and share attributable to the Group) and totaled € 5,163 million. The new business production is mainly driven by the growth in single premiums (+ 27.2% on equivalent terms) in Italy, Ireland and France, while the annual premiums, maintaining a predominant weight on APE (56.2%), registered a moderate increase (+ 5.9% on equivalent terms). With reference to the lines of business, there is a significant progression of the unit-linked business (+ 41.8% on equivalent terms, due to the strong growth of the product "multiramo" (multi-line) in Italy and production in Ireland) and the business of saving lines (+ 11.1% on equivalent terms). The protection line decreased slightly (-3.7% on equivalent terms).
The profitability of new business (margin on APE) stood at was 24.0%, increasing compared to 2013 (21.0%), due to the further reduction of the level of collateral offered by savings products. The value of new business (NVB) was 33.7% on equivalent terms and amounted to € 1,239 million.
Gross written premiums in Italy rose from € 13,312 million at 31 December 2013 to € 17,393 million. This trend (+ 30.7%) is due to the growth of +35% in individual premiums, driven by the increase in single premiums (+ 60,5%), and by the competitive returns compared to alternative products and also to the success of new hybrid products. The latter are distributed through both the traditional channel whose individual premiums grew by 7.2%, and through promoters, the collection of which recorded an increase of +149.4%. The banking channel also contributes to the development with an increase of +174.2%, essentially tripling its volumes. Positive performances were recorded in all companies, especially Genertellife
New business annual premium equivalent increased (+35.1% on equivalent terms), due to the significant growth in both annual premiums (+ 20.0% on equivalent terms), which represent the predominant part of the APE (57.2%), and single premiums (+ 62.4% on equivalent terms).
The profitability (margin on APE) increased from 18.2% in 2013 to 25.7% in 2014, due to the greater weight of the most profitable unit linked business and the recovery of savings and pension lines, due to the further decline in guarantees offered. As a result of higher volumes and improved profitability the value of new business increased by 91.1% on equivalent terms and amounted to € 641 million.
An improvement in net cash inflows benefiting from the aforementioned performance of premiums. A slightly increase in cash outflows.
Gross written premiums in France increased from € 7,671 million at 31 December 2013 to € 8,438 million. This growth (10.0%) was attributable to prevailing market conditions, which benefited from the fall in interest rates. With reference to the lines of business, there is a significant growth of savings policies (+ 12.6%), confirming the re-launch of this business. Even the collection of linked products showed strong growth (+ 17.3%) benefiting from the demand of customers looking for attractive returns and reflecting the actions taken by the Group to improve the portfolio mix towards products with lower capital absorption.
The increase in APE (+ 9.0% on equivalent terms) is mainly due to the excellent development of single premiums (+ 17.8% on equivalent terms) which largely offset the slight decrease in annual premiums (-3.4 %).
The profitability (margin on APE) decreased from 12.7% in 2013 to 10.9% in 2014, mainly as a result of a review of the conservative operating assumptions used to assess the business risk. The value of new business amounted to € 89 million (-6.8% on equivalent terms).
Net cash inflows became positive as a result of the selective underwriting policy and pro-active management of the existing portfolio.
Gross written premiums in Germany decreased (-8.8%), from € 14,989 million at 31 December 2013 to € 13,675 million. This trend is mainly due to the planned reduction of single premiums (-25.9% with respect to the previous year). The current environment of low interest rates, as well as the uncertainties, still existing, concerning the development of the capital market, explain the current declining trend in single premiums, making Germany the second contributor within the Group.
New business in terms of APE presents a sharp decline (-12.6% on equivalent terms) due to the drop in both the life segment (- 12.2% on equivalent terms) the protection lines (-23.5% in terms basis). Single premiums show a significant reduction (27.7% on equivalent terms), while annual premiums showed a slight decline (-1.6%).
The increased weight of the more profitable new business with an annual premium (weight on APE from 57.8% in 2013 to 65.0% in 2014) contributes to the development of the profitability of which amounted to 30.7%. The value of new business is slightly higher and amounts to € 265 million (+ 1.6% on equivalent terms).
A decrease of 32% in net cash inflows resulting from the measures taken to reduce the new production of single business premiums. The capital outflows are stable.
Central and Eastern Europe
Gross written premiums in Central and Eastern Europe countries increased from € 1,568 million at 31 December 2013 to € 1,487 million, (-1.1% on equivalent terms). Specifically, compared with a positive performance from protection policies (+ 4.5%) and linked policies (+ 2.8% on equivalent terms), a decrease in the savings and pension policies was observed (-4.9% on equivalent terms) mainly in the Czech Republic.
The reduction in new business in terms of APE (-13.2% on a comparable basis) is mainly due to the observed decrease in the production of unit linked policies (-21.8% on equivalent terms).
The decline in profitability (margin on APE) from 38.5% in 2013 to 32.8% of 2014 is explained both by the exclusion of pension funds from the scope of evaluation and from higher interest rates observed in the first part of the year used as a discount factor.
The combined effect of lower sales volumes and declining profitability caused the value of new business to contract by 18.6% on equivalent terms, amounting to € 49 million.
A decline in net cash inflows with respect to 31 December 2013 (-19.2%) was due to higher cash outflows from pension funds and from rising capital outflows.
An increasing trend was observed for in gross written premiums from the EMEA regional structure (+ 21.1% on equivalent terms), which rose from € 5,703 million at 31 December 2013 to € 6,919 million. The trend is determined by the positive performance of the linked and savings lines of business and to a lesser extent, also by the protection lines.
In particular, there is a reduction in gross written premiums in Spain which amounted to € 984 million (€ 1,006 million at 31 December 2013); this decrease (-2.1%) is attributed to the decrease of the savings line, single premiums, mainly due to the interruption of sales of group pension policies (SPE) in mid 2013. The positive evolution of the individual protection line is mainly due to the contribution of Cajamar but is offset by the negative trend in the group protection line.
Gross written premiums in Austria amounted to € 1,294 million (€ 1,156 million at 31 December 2013); the growth of 11.9% is due to the positive contribution of all the lines. Savings policies increased (+ 17.3%), mainly due to the trend of single premiums benefiting from a new legal situation in the private sector (tax reduction on the minimum contract term from 15 to 10 years for people over the age of 50), as well as from various large contracts with major business customers. Protection policies also increased (+ 9.7%) and unit-linked policies (+ 0.9%).
Increasing gross written premiums in Switzerland (+ 4.7% on equivalent terms); regular premiums decreased slightly by 1.8%, while single premiums more than doubled. Regarding the business lines, the increase can be mainly attributed to savings lines (+ 48.1%).
A positive contribution was experienced (€ 2,085 million) in Ireland, which showed a strong positive trend on linked policies, the cash inflows of which almost doubled compared to last year.
New business in terms of APE increased (+ 9.7% on equivalent terms), following the increase observed in single premiums (+ 46.9% on equivalent terms) only partly offset by a decrease in annual premiums (-12.2% on equivalent terms). In terms of geographical area, the business showed positive progress in Ireland (+ 63.1% on equivalent terms), Austria (+ 8.1% on equivalent terms) and Belgium (+ 8.3% on equivalent terms), while declining in Spain (-8.4% on equivalent terms), and Switzerland (-7.7% on equivalent terms).
Profitability decreased slightly from 26.1% in 2013 to 25.9% in 2014. The value of new business amounted to € 177 million, increasing by 11.2%.
Net cash inflows in EMEA grew significantly due to the growth in premiums over a slight decrease in maturing contracts, observed mainly in Ireland. In Austria, net inflows have increased significantly (+ 68%) due to lower surrenders and the growth of single premium savings policies. The negative amount of net inflows in Spain is due to the type of life portfolio, mainly oriented to annuity products and short-term investments involving regular cash flows that are not always covered by an appropriate volume of revenue, since the trend of premiums written is more volatile.
Gross written premiums in Latin America recorded a growth (26.6% on equivalent terms) amounting to € 254 milllion (€ 260 million at 31 December 2013).
This development is attributable to both the collection of protection policies (+ 29% on equivalent terms) and to a lesser extent, savings policies (+ 4.1% on equivalent terms).
Net cash inflows in Latin America are increasing.
Excellent performance of the gross written premiums in Asia, which increased from € 902 million at 31 December 2013 € 1,049 million (+19.1% on equivalent terms), due to the positive performance of all the countries in the area.
China, which alone has more than 70% of the total life production of the region, is growing due to a recently launched savings product sold through the bancassurance channel. Indonesia, after difficulties experienced in the last few months due to political instability, also shows positive growth particularly in unit-linked policies, both in regular and single premiums. Positive development in the Philippines, both in the linked and savings products, mainly due to the performance of the bancassurance channel, which benefits from a number of initiatives to support and strengthen the sales force.
Decreasing Net cash inflows in Asia due primarily to the performances in China.
With reference to Asia and Latin America, the new production in terms of APE is growing (+ 16.0% on equivalent terms) with increases observed in Asia (+ 15.5% on equivalent terms) and in Latin America (+ 21.4% on equivalent terms).
The contraction in terms of profitability, from 19.0% in 2013 to 11.8% in 2014, is explained in large part from the exit from the perimeter of the United States and Mexico during the first part of 2013. The value of new business is growing (+ 49.0% on equivalent terms) and amounted to € 19 million.
Growth in gross written premiums of the International Operations increased from € 537 million at 31 December 2013 to € 598 million (+11.4% on equivalent terms), this development is attributable to the favorable business of Generali Employee Benefits and the activity of the Holding.
Finally, net cash inflows increased, favored by the above mentioned positive trend in premiums offsetting the decline in capital outflows.