Assicurazioni Generali S.p.a. · MIL:G
Assicurazioni Generali — Investor Day (December 2022)
54 slides from Assicurazioni Generali's investor day presentation, Dec 13, 2022
Slide 1: Investor Update, Milan, December 13, 2022
£% | INVESTOR UPDATE ery as GENERALI MILAN, DECEMBER 137, 2022
Slide 2: Agenda
2 AGENDA Time Topic Speaker 10:00 IFRS 17 & IFRS 9 induction Cristiano Borean 11:00 Update on Cattolica integration Marco Sesana 11:30 Q&A 12:30 End of Investor Update
Slide 3: IFRS 17 & IFRS 9 Induction
IFRS 17 & IFRS 9 INDUCTION CRISTIANO BOREAN GROUP CHIEF FINANCIAL OFFICER
Slide 4: Agenda IFRS 17 & IFRS 9
4 AGENDA IFRS 17 & IFRS 9 01 Introduction 02 Key accounting and valuation choices 05 Focus on P&C 03 Impact on Group equity 06 Impact on main KPIs 04 Focus on Life 07 Final remarks 08 Appendix & Glossary
Slide 5: Introduction
5 INTRODUCTION
Slide 6: Key Messages
6 KEY MESSAGES No impact on Cash and Capital Generation, Net Holding Cash Flow, Dividends and Solvency Shareholders’ Equity broadly stable at transition, unlocking value not reflected under IFRS 4 CSM expected to be around € 33 billion, reflecting the profitability of the in-force business Improved
Slide 7: IFRS 17/9 Journey
7 IFRS 17/9 JOURNEY FY 2022 1H23 2022 1Q23 RESULTS RESULTS FIGURES RESULTS IFRS 4 By the end 14 March 2023 of April 2023 25 May 2023 10 August 2023 OPENING FIRST LIGHT FULL BALANCE 2022 COMPARATIVE DISCLOSURE DISCLOSURE FIGURES
Slide 8: Key Accounting and Valuation Choices
8 KEY ACCOUNTING AND VALUATION CHOICES
Slide 9: Balance Sheet Comparison: IFRS 4, IFRS 17/9 and S2
9 BALANCE SHEET COMPARISON: IFRS 4, IFRS 17/9 AND S2 • Different presentation of future profits component leads to a different equity level • Under IFRS 17/9 most of the investments are reported at Fair Value (FV) to ensure consistency with insurance liabilities valuation, avoiding the accounting di
Slide 10: Main Accounting and Valuation Choices
10 MAIN ACCOUNTING AND VALUATION CHOICES Options adopted Rationale • Fixed income largely classified at Fair Value through other Comprehensive Income (FVOCI) • Reducing earnings sensitivities Investments • Equities not backing Variable Fee Approach (VFA) at FVOCI w/o recycling • Real Estate backing
Slide 11: General Account Investments under IFRS 9
11 GENERAL ACCOUNT INVESTMENTS UNDER IFRS 9 € billion 424 432 7% • Bulk of investments1 still classified as FVOCI 14% (e.g. debt securities, equities at FVOCI without 4% recycling in non-VFA business) 23% • 85% of the investments accounted at Fair Value Through Profit and Loss (FVTPL) are related to
Slide 12: Simplified Accounting of Real Estate and Private Equity
12 SIMPLIFIED ACCOUNTING OF REAL ESTATE AND PRIVATE EQUITY Real Estate Private Equity Cost Measurement model 17% 83% 100% Fair value1 • ~ € 8 billion of value increase from mark to market • No impact Balance sheet impacts valuation mainly backing VFA business at transition • ~ € 3 billion of off bal
Slide 13: IFRS 17 Measurement Models
13 IFRS 17 MEASUREMENT MODELS Life: 96% VFA model application1 VFA model 4% 1% 1% • Primarily applied to traditional savings business run by EU-based entities & Unit Linked business 20% • Exemption from applying annual cohort for VFA mutualized business General Measurement (GM) model 96% 99% 78% • A
Slide 14: Transition Approach
14 TRANSITION APPROACH Life Life CSM geographical split • Retrospective Approach applied to almost 95%1 of Life business • Residual application of Fair Value Approach for selected run-off portfolios 38% Italy • Expected CSM at transition around € 32 billion, primarily on the main EU Others 17% marke
Slide 15: Discounting
15 DISCOUNTING Methodology overview YE21 Zero Coupon Spot Rates Bottom-up approach consistent with S2, where appropriate 3.0% • GMM and P&C business: full alignment to S2 parameters. 2.5% Changes in discount rates reported in OCI 2.0% • VFA: alignment to S2 methodology with specific enhancements to
Slide 16: Risk Adjustment
16 RISK ADJUSTMENT The Risk Adjustment (RA) reflects the uncertainty of cash flows’ amount and timing from non-financial risk. Recognized in P&L according to the release of risk • Percentile approach adopted, leveraging on S2 calibration • 75th percentile selected as general fixed percentile derived
Slide 17: Impact on Group Equity
17 IMPACT ON GROUP EQUITY
Slide 18: Resilient Shareholders' Equity
18 RESILIENT SHAREHOLDERS’ EQUITY € billion 29 Key remarks (3) The stability of Shareholders’ Equity is the effect of our prudent approach in P&C reserving and acquisition cost 10 accounting in IFRS 4 as well as fair valuation of real estate allocated to life (3) (33) Main drivers are: • Life segmen
Slide 19: Bridge with S2 Own Funds
19 BRIDGE WITH S2 OWN FUNDS € billion 3 33 (2) 3 51 48 (9) 32 (9) IFRS 17/9 Intangibles CSM MtM of Assets & MtM of Net DT MVBS XAL XAL S2 Own Equity1 Non-Technical Technical & other Adjustment Funds Liabilities Liabilities Moving from IFRS 17/9 Shareholders equity to S2 Own Funds, the following reco
Slide 20: Focus on Financial Leverage
20 FOCUS ON FINANCIAL LEVERAGE IFRS 4 IFRS 17 26% 16% FY21, amounts in € billion Indicative amounts in € billion 56 Net CSM1 32 11 11 Financial debt Shareholders' Equity 1 Financial debt Comprehensive Equity 2 Financial debt / (Shareholders’ Equity + Financial debt) Financial debt / (Comprehensive E
Slide 21: Focus on Life
21 FOCUS ON LIFE
Slide 22: Key Messages on Life
22 KEY MESSAGES ON LIFE IFRS 17 will provide a more economic and predictable view of Life operating result Broad application of VFA implies smoother earnings profile Clear visibility on new business contribution to balance sheet and profit emergence Earnings signature will change due to new accounti
Slide 23: How VFA Works
23 HOW VFA WORKS Scope Mandatory model for long-term participating contracts (e.g. traditional saving, unit linked, hybrids) Impact on: Sources of variation P&L CSM Actual experience on expenses and insurance claims (e.g. death additional benefit) ✓ Actual experience on non-distinct investment compo
Slide 24: CSM Roll Forward & Release
24 • New business refers to CSM of business issued CSM ROLL FORWARD & RELEASE over the reporting period. This is the primary driver of CSM increase Expected systematic variance attributable to the reporting period • Operating variances include impact of non- financial risks on current1 and future ca
Slide 25: Life Operating Result
25 LIFE OPERATING RESULT Key remarks Release of CSM • Operating insurance service result primarily Release of Risk Adjustment driven by release of CSM, including financial margin of VFA business Loss Component • Experience Variance including actual experience vs expected insurance claims and expense
Slide 26: Life New Business Value (NBV)
26 LIFE NEW BUSINESS VALUE (NBV) New KPI New KPI to be disclosed to be disclosed • IFRS 17 NB CSM refers to the CSM of the business issued over the • IFRS 17 NBV is the new Life KPI that will represent the value of new reporting period and reported in the CSM roll forward. It also includes business
Slide 27: Focus on P&C
27 FOCUS ON P&C
Slide 28: Key Messages on P&C
28 KEY MESSAGES ON P&C Primarily based on the simplified approach (PAA), with only limited changes vs IFRS 4 Liability for incurred claims fully aligned with Solvency 2 best estimate liabilities Operating result more sensitive to interest rates due to discounting P&C combined ratio methodology will
Slide 29: IFRS 17 LIC: Reconciliation with IFRS 4 / S2
29 IFRS 17 LIC: RECONCILIATION WITH IFRS 4 / S2 • IFRS 17 Liability for Incurred Claims (PVFCF) fully aligned with Solvency 2 best estimate liabilities • Difference between IFRS 4 and IFRS 17 mostly reflecting reserve adequacy and discounting € billion 27 1 25 0 23 (3) (2) IFRS 4 Reserve Adequacy Ri
Slide 30: P&C Operating Result
30 P&C OPERATING RESULT Key remarks Insurance contract revenues • GWP no longer reported in P&L, but still remain a top-line KPI Total incurred claims • Insurance contract revenues not significantly differing from Insurance Expenses Earned Premiums Loss component • Total incurred claims including: •
Slide 31: P&C COR IFRS 17
31 P&C COR IFRS 17 𝑵𝒆𝒕 𝑰𝒏𝒔𝒖𝒓𝒂𝒏𝒄𝒆 𝑬𝒙𝒑𝒆𝒏𝒔𝒆𝒔 𝒍𝒐𝒔𝒔𝒆𝒔 + 𝑵𝒆𝒕 𝑰𝒏𝒔𝒖𝒓𝒂𝒏𝒄𝒆 𝑬𝒙𝒑𝒆𝒏𝒔𝒆𝒔(𝒄𝒐𝒔𝒕𝒔) Key remarks 𝑵𝒆𝒕 𝑪𝑶𝑹 𝑰𝑭𝑹𝑺 𝟒 = 𝑵𝒆𝒕 𝑬𝒂𝒓𝒏𝒆𝒅 𝑷𝒓𝒆𝒎𝒊𝒖𝒎𝒔 IFRS 17 COR Compared Impact on drivers to IFRS 4 Operating result IFRS 4 • Gross Insurance…
Slide 32: P&C Operating Investment Result
32 P&C OPERATING INVESTMENT RESULT Key remarks • Operating Investment Income in line with current definition • The new Insurance Finance Expenses under IFRS 17 reflects unwinding of insurance liabilities at rates locked-in at inception • Finance expenses counterbalance, over a period corresponding t
Slide 33: Impact on Main KPIs
33 IMPACT ON MAIN KPIs
Slide 34: Reported Net Result vs Adjusted Net Result
34 REPORTED NET RESULT VS ADJUSTED NET RESULT Key remarks Operating Result Non-Operating Result • Non-operating Investment result including realized gains and losses, as well as market movements reported through P&L Non-operating investment result of non-participating and Shareholders’ funds Non-ope
Slide 35: Impact of IFRS 17/9 on 2024 Targets & Financial KPIs
35 IMPACT OF IFRS 17/9 ON 2024 TARGETS & FINANCIAL KPIs 2024 TARGETS Impact Comments Adjusted EPS CAGR 21 – 24 6-8% range confirmed Cumulative Net Holding Cash Flow 22 - 24 Confirmed Cumulative Dividend 22 - 24 Confirmed OTHER FINANCIAL KPIs Impact Comments Solvency 2 Ratio Not affected Financial le
Slide 36: Final Remarks
36 FINAL REMARKS
Slide 37: Final Remarks
37 FINAL REMARKS No impact on Cash and Capital Generation, Net Holding Cash Flow, Dividends and Solvency Shareholders’ Equity broadly stable at transition, unlocking value not reflected under IFRS 4 CSM expected to be around € 33 billion, reflecting the profitability of the in-force business Improve
Slide 38: Appendix & Glossary
38 APPENDIX & GLOSSARY
Slide 39: General Account Investments Not under VFA
39 GENERAL ACCOUNT INVESTMENTS NOT UNDER VFA 1 Life other than VFA P&C 16% 12% Total Total 65% 2% 66% 3% 31 billion 40 billion 15% 22% Cost FVtPL - Bonds FVtPL - Other FVOCI 1. Financial investments in scope of IFRS 9 (excluding unit linked/investment contracts), investment properties, cash & ca
Slide 40: Impacts from Rising Interest Rates
40 IMPACTS FROM RISING INTEREST RATES LIFE P&C Balance Sheet VFA Non VFA Fixed income investments Decrease Decrease Decrease Fulfilment Cash Flows Decrease Decrease Decrease Expected to Increase CSM Not Affected Not Affected depending on ALM Increase/Decrease Increase/Decrease Shareholder's Equity N
Slide 41: IFRS 17/9 Glossary
41 IFRS 17/9 GLOSSARY Insurance liability representing the future (unearned) profits of the groups of insurance contracts Contractual Service Margin CSM to be recognized over the coverage period Expected Credit Loss ECL Probability-weighted estimate of all cash shortfalls over the lifetime of financ
Slide 42: Acronyms
42 ACRONYMS AFS Available for Sale Reserve ALM Asset and Liability Management SAA Strategic Asset Allocation BEL Best Estimate Liabilities COR Combined Ratio CY Current Year DAC Deferred Acquisition Costs DPL Deferred Policyholder Liabilities DT Deferred Taxes EPS Earnings Per Share MtM Mark to Mark
Slide 43: Cattolica Integration Update
CATTOLICA INTEGRATION UPDATE MARCO SESANA GROUP GENERAL MANAGER
Slide 44: Compelling Rationales Underpinning the Transaction
44 COMPELLING RATIONALES UNDERPINNING THE TRANSACTION • Diversified P&C portfolio1 of € 2.2 billion GWP with a significant share of Accident and Health (⁓ € 300 million) and Property (⁓ € 420 million), adding distinctive capabilities in specific verticals (e.g. agriculture, religious segment / no-pr
Slide 45: Deal Overview and Execution
45 DEAL OVERVIEW EXECUTION Phase 1: strategic partnership Phase 2: acquisition and full integration 24/06/2020 29/10/2021 12/08/2022 2H 2023 2025 DEAL Strategic Public tender offer Minorities acquisition Cattolica to merge Full potential partnership (24.4%1) success (84.5%) and delisting into Genera
Slide 46: From €80 Million to €120-130 Million One Year Ahead of Schedule
46 EFFECTIVE AND ACCELERATED INTEGRATION DRIVES SYNERGIES UPGRADE FROM € 80 MILLION TO € 120-130 MILLION ONE YEAR AHEAD OF SCHEDULE Q3/22 Plan Q3/22 Actual 2025 - Run rate Levers Core activities (€ Million) (€ Million) (€ Million) • Consolidation of IT platforms/systems and the related processes 67%
Slide 47: Consolidated Product Platform Delivering a Powerful Simplification
47 CONSOLIDATED PRODUCT PLATFORM DELIVERING A POWERFUL SIMPLIFICATION CATTOLICA PRODUCT MIGRATION TO GENERALI PLATFORM 2022 2023 Q3 Q4 H1 H2 Lines of business Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Key benefits • Unified and simplified product portfolio at country le
Slide 48: Cattolica Integration Has Set a New Speed Record
48 CATTOLICA INTEGRATION HAS SET A NEW SPEED RECORD FOR THE ROLL-OUT OF THE AGENCIES' SYSTEMS AND PROCESSES Description of the transaction Elapsed time (from purchase to roll-out of new systems; months) • CATTOLICA ACQUISITION BY GENERALI 8 From November 2022 to July 2023 • Merger of 2 large Europea
Slide 49: Accelerated Integration Program to Deliver €83-90 Million
49 ACCELERATED INTEGRATION PROGRAM TO DELIVER € 83-90 MILLION NET SYNERGIES FROM CATTOLICA CORE ASSETS BY 2025 Cattolica contribution to Group 2021-2025 net income; € million 26-30 171-178 29-32 145-148 € -16 Million 28 CTAs in 2024 88 63 129-132 110 (47) FY 2021 JV’s Cattolica Core Cattolica Core I
Slide 50: Fully on Track to Unlock Cattolica's Potential
50 FULLY ON TRACK TO UNLOCK CATTOLICA’S POTENTIAL Stronger synergies confirming Generali as the best owner for the asset Integration on track and benefits realization accelerated EPS accretive in the context of Lifetime Partner 24 Plan Higher cash contribution to sustain Lifetime Partner 24 ambition
Slide 51: Q&A Session
— Q&A SESSION NVESTOR UPDATE E R UPDATE N N R41
Slide 52: Disclaimer
52 DISCLAIMER This presentation includes among other information also statements Assessments, expectations, figures and statements related to IFRS of future expectations and other forward-looking statements. 17 / 9 standards, including the preliminary figures at transition, are part of the mentioned
Slide 53: Contacts
53 CONTACTS Assicurazioni Generali Piazza Duca degli Abruzzi 2 34132 Trieste, Italy Fax: +39 040 671338 e-mail: ir@generali.com generali.com Fabio Cleva Stefano Burrino Emanuele Marciante Group Head of Investor Investor Relations Credit & Rating Agency Relations & Rating Agency Relations fabio.cleva
Slide 54: Generali
GENERALI
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