GENERALI GROUP CONSOLIDATED RESULTS AT 31 DECEMBER 2020(1)

Generali achieves record operating result and confirms very strong capital position

• Operating result reached € 5.2 billion (+0.3%), supported by the positive contributions of P&C, Asset Management and Holding and Other Business Segment
• Total gross written premiums reached € 70.7 billion (+0.5%), with resilient and profitable P&C premiums and high quality Life net inflows at € 12.1 billion. Best-in- class Combined Ratio at 89.1% (-3.5 p.p.) and excellent Life New Business Margin at 3.94%
• Net profit was € 1,744 million (-34.7%), impacted by one-offs and impairments on investments mainly in the first half of the year. Excluding the expenses of the Extraordinary International Fund for Covid-19 and the liability management transaction, adjusted net profit² amounted to € 2,076 million (-12.7%)
• Excellent capital position was confirmed with the Solvency Ratio at 224%, benefiting from record capital generation standing at € 4 billion
• Proposed dividend per share of € 1.47, split into two tranches of € 1.01 and € 0.46, respectively

Generali Group CEO Philippe Donnet commented: “Today we are presenting excellent results, obtained in an unprecedented context due to the crisis generated by the pandemic. It confirms the greater resilience of Generali compared to our peers in the sector, both from a technical point of view and its capital position. For the second consecutive year, we have achieved the Group’s best ever operating result and, also thanks to the further growth of the dividend, we continue to create value for all of our stakeholders. We have entered the final year of our strategic plan and are well positioned to achieve all of the objectives of ‘Generali 2021’. We have defined and implemented a new organizational structure to ensure, not only the success of this plan, but to also prepare for the next strategic cycle. The Group has accelerated its business transformation to guarantee that we have a distribution model that increasingly blends both physical and digital and, thanks to the innovative spirit of our employees and agents, ensures that we are now closer to our customers than ever before. Finally, I am very proud that in the critical moment of the crisis, Generali took immediate action with our Extraordinary International Fund and other high impact initiatives to support the communities and territories in which we operate.”

Milan – At a meeting chaired by Gabriele Galateri di Genola, the Assicurazioni Generali Board of Directors approved the consolidated financial statements and the Parent Company’s draft financial statements for the year 2020.

The Group’s operating result was, for the second consecutive year, its best-ever performance, reaching € 5,208 million (€ 5,192 million FY2019). The impact of Covid-19 on the operating result was estimated at € - 123 million³.

The growth of the operating result from the P&C and Asset Management segments, also thanks to the contribution of recent acquisitions, and the Holding and other activities more than compensated for the lower contribution of the Life segment, which was mainly due to the continued acceleration of provisions for guarantees to policyholders in Switzerland.

The Life and P&C segments confirmed excellent technical profitability, demonstrated by the New Business Margin at 3.94% (+0.06 p.p.) and the improvement of the Combined Ratio to 89.1% (-3.5 p.p.).

The significant increase of the operating result in the Asset Management segment was underpinned by the development of the multi-boutique platform and higher performance fees generated by the strong investment performance.

The Group non-operating result amounted to € -1,848 million (€ -1,581 million FY2019). It was impacted by impairments on available for sale financial assets resulting from the negative performance of the financial markets, particularly in the first half of the year, as well as a € 93 million impairment on goodwill related to the Life business in Switzerland. It was also impacted by one-off effects such as the € 100 million cost for the Extraordinary International Fund⁴ for Covid-19, the € 94 million expense from the liability management transaction and, in France, the extraordinary obligatory contribution to the healthcare system, requested to the insurance sector, for € 64 million. The lower incidence of interest expense on financial debt was positive, thanks to the debt optimisation strategy, which continued in 2020.

Net profit was € 1,744 million (€ 2,670 million FY2019), impacted by € 332 million deriving from the aforementioned liability management transaction, from the contribution of the Extraordinary International Fund for Covid-19 and from disposals, as well as € 287 million of impairments on investments mainly in the first half of the year. The adjusted net profit5 amounted to € 1,926 million (-12.1%). Excluding also the expenses of the Covid-19 fund⁶ and the liability management transaction⁷, the adjusted net profit amounted to € 2,076 million (-12.7%).

Gross written premiums of the Group amounted to € 70,704 million, a slight increase compared to last year (+0.5%), thanks to the contribution of the Life segment. Premiums in the P&C segment remained stable on equivalent terms. In line with the objectives of the ‘Generali 2021’ strategy, social and environmental products counted for € 16.9 billion of total premiums (+11.2%). Life net inflows were confirmed at excellent levels, equal to € 12.1 billion (-10.5%) and concentrated in unit-linked and protection for 93% of the Group’s total. Life Technical Reserves increased to € 385 billion (+4.2%).

The Group had Total Assets Under Management equal to € 664 billion (+5.4%).

The Group shareholders’ equity amounted to € 30,029 million (+5.9%). The change is mainly due to the result of the period attributable to the Group, the distribution of the dividend and the change in other profits or losses recognised to shareholders’ equity (change in AFS reserves).

The RoE stood at 7.7% (-4.7 p.p.).

The Group confirmed an excellent capital position, with the Solvency Ratio stable at 224%. The strong recovery compared to 9M2020 was mainly due to the positive impact deriving from the extension of the internal model for operational risks, the upswing in financial markets and the very positive contribution of normalised capital generation. The latter applies to the whole of 2020 and reached a record level of € 4 billion.

Net Holding cash flows grew to a record level of approximately € 3.7 billion, benefitting from solid remittances from subsidiaries, the successful implementation of capital management initiatives, lower incidence of interest expenses and a number of favourable tax impacts.

The dividend per share that will be proposed at the next Shareholders’ Meeting is € 1.47, split into two tranches of € 1.01 and € 0.46, respectively. The first tranche, payable as from 26 May 2021, represents the ordinary pay-out from 2020 earnings: shares will trade ex-dividend as from 24 May 2021, while shareholders will be entitled to receive the dividend on 25 May 2021.

The second tranche, instead, related to the second part of the 2019 retained dividend, will be payable as from 20 October 2021 and the shares will be traded ex-dividend as from 18 October 2021, while shareholders will be entitled to receive the dividend on 19 October 2021: such second tranche will be payable subject to the verification by the Board of Directors of the absence of impeding supervisory provisions or recommendations in force at that time.

The dividend proposal represents a total maximum pay-out of € 2,315 million.

• High quality Life net inflows equal to € 12,114 million (-10.5%), 93% of which were concentrated in unit- linked and protection
• New Business Margin was confirmed at an excellent level at 3.94% (+0.06 p.p.) and new business value (NBV) increased to € 1,856 million (+4.9%)
• The operating result amounted to € 2,627 million (-16.1%)

Life net inflows equal to € 12,114 million (-10.5%) were confirmed at excellent levels and are concentrated in unit-linked and protection for 93% of the Group’s total. Life technical reserves were up to € 385 billion (+4.2%).

Gross written premiums increased to € 48,557 million (+0.8%). With reference to the business lines, the unit- linked segment continued its positive trend throughout 2020 (+21.7%). Protection also recorded an increase in premiums (+1.6%), reflecting widespread growth in the main countries where the Group operates. Excluding the written premiums of a collective Life pension fund in Italy⁸, of approximately € 1.5 billion, the total premiums of the Group would have recorded a decrease of 2.4%.

New business in terms of PVNBP (Present value of new business premiums) amounted to € 47,091 million (+3.3%). Despite the financial context in 2020 characterised by very low interest rates, that were below 2019 levels, the New Business Margin was confirmed at an excellent level, reaching 3.94% (+0.06 p.p.) thanks to the rebalancing of the business mix towards the most profitable lines of business and the ongoing recalibration of financial guarantees for savings products.
The new business value (NBV) was € 1,856 million (€ 1,777 million FY2019), up 4.9%.

The operating result of the Life segment amounted to € 2,627 million (€ 3,129 million FY2019). The good performance of the technical margin, net of insurance expenses, was more than offset by the decrease in the net investment result, due to the negative impact of the financial markets and, to a more significant extent, by the continued acceleration of provisions for guarantees to policyholders in Switzerland, reflecting more conservative long-term financial assumptions. The result was affected for a total of € -307 million due to the Covid-19 pandemic (impairments on investments related to the performance of the financial markets and, to a lesser extent, higher claims on health coverage, in particular in France).

• Premiums were stable at € 22,147 million (+0.1%)
• The Combined Ratio was 89.1% (-3.5 p.p.) and confirmed as the best and the least volatile among peers
• Strong growth in the operating result, equal to € 2,456 million (+19.4%)

Premiums in the P&C segment were stable on equivalent terms at € 22,147 million. The positive trend, which was widespread in the countries where the Group operates, offset the significant contraction of Europ Assistance (-30.2%), which was affected, above all, by the impact of Covid-19 on the travel insurance sector. On a business lines level, the motor line grew by 0.7%, thanks to a particularly positive fourth quarter. The annual development was mainly attributable to the performance in ACEER (+4.2%), France (+1.8%) and Argentina (+27.6%). The non-motor line (+0.2%) reflected widespread growth in various countries, in particular, Italy (+3.3%) and France (+2.3%).

The operating result of the P&C segment increased significantly, amounting to € 2,456 million (+19.4%), benefiting from the improvement of technical profitability and the positive contribution of the new acquisition, Seguradoras Unidas, in Portugal. The decline in the investment result was due to lower current income, which reflected the current condition of market interest rates and lower dividends from equities. The impact of Covid- 19 on the operating result of the segment was positive and estimated at € 120 million.

The Combined Ratio was 89.1% (-3.5 p.p.) and confirmed as the best and least volatile among peers, thanks to the improvement in the current year attritional loss ratio following also the effects of the lockdown in the main countries of operation of the Group. The impact from natural catastrophe claims was equal to 1.5% (2% FY2019); the impact of large man-made claims increased slightly. The expense ratio also improved, particularly the administration cost ratio.

• The operating result of the segment amounted to € 546 million (+28.5%), underpinned by the development of the multi-boutique platform and higher performance fees generated by the strong investment performance
• The net result of the segment reached € 386 million (+38%)

The operating result of the Asset Management segment rose to € 546 million (+28.5%). This performance was largely thanks to increased operating revenues, following the increase in assets under management, the generation of performance fees and to disciplined cost management, as the cost/income ratio decreased to 45%. In particular, performance fees reached € 122 million (€ 11 million FY2019), with an impact net of operating expenses of approximately € 80 million on the operating result.

The net profit of the Asset Management segment increased to € 386 million (+38%).

Third-party Assets Under Management amounted to € 104 billion at the end of 2020 (€ 106 billion FY2019), due to negative net inflows of approximatively € 4 billion, partially offset by the market effect on assets under management.

Total Assets Under Management reached € 561 billion as of 31 December 2020 (+5.7%).

• The segment's operating result was € 130 million
• The positive contribution of Banca Generali and private equity was confirmed

The operating result of the Holding and other businesses segment stood was € 130 million (€ 8 million FY2019). In particular, the operating result of the financial and other activities segment grew to € 658 million (€ 538 million FY2019). The increase of 22.5% was driven by the growth of Banca Generali, which increased to € 353 million (€ 327 million FY2019). The contribution from private equity was also positive.

Net operating Holding expenses remained stable at € -528 million (€ -529 million FY2019).

• Excellent capital position, with the Solvency Ratio stable at 224%
• Record capital generation stood at € 4 billion
• Record net holding cash flows at € 3.7 billion

The Solvency Ratio maintained the same level as the previous year at 224%.
The strong recovery compared to 9M2020 (203%) was mainly due to the positive impact deriving from the extension of the internal model for operational risks, the upswing in financial markets (due to the recovery of equity markets and the narrowing of spreads on sovereign bonds), and the very positive contribution of normalised capital generation (mainly linked to the P&C segment). The latter applies to the whole of 2020 and reached the record level of € 4 billion.
On an annual basis, these factors, together with de-risking actions and the liability management transaction, offset the impact of lower interest rates, M&A transactions and the dividend provision, as well as regulatory changes of at the beginning of the year, linked to EIOPA’s modification of the Ultimate Forward Rate and the treatment of the IRP business in France.
Net Holding cash flows grew to a record level of approximately € 3.7 billion, benefitting from solid remittances from subsidiaries, the successful implementation of capital management initiatives, lower incidence of interest expenses and a number of favourable tax impacts.

Sustainability is an enabler of ‘Generali 2021’, driving the transformation of the business and the strategy in the long term.

The Group made € 6 billion of new green and sustainable investments, in the period 2018-2020, exceeding the strategic target of € 4.5 billion by 2021 a year in advance. In 2020, Generali also collected over € 16.9 billion in premiums from social and environmental products, an increase of 11.2% compared to 2019.

Regarding green innovation in financial management, the Group has successfully placed its second green bond for € 600 million and has defined a model for the structuring of Green Insurance Linked Securities.

Generali has reduced its insurance exposure to activities in thermal coal and in oil & gas production, which in 2020 stood at less than 0.1% of P&C premiums. In 2020, Generali has also exceeded its objective⁹ to reduce total greenhouse gas emissions, falling -36%.

Generali was confirmed in the Dow Jones Sustainability World and Europe indices and the MSCI ESG Leaders index.

Despite a scenario that remains highly uncertain, the improving prospects for the distribution and efficacy of vaccines have helped to strengthen investors' prospects for the global economy in 2021.
The insurance sector is likely to benefit from the expected economic recovery in 2021: the demand for Life insurance products, while recovering, will remain lower as households continue to be cautious in terms of both investment and consumption. P&C premiums are expected to return to growth, at higher rates than those prior to the pandemic.

In this context, the Group confirms that it will continue with the strategy of rebalancing the Life portfolio to further strengthen profitability and with a logic of more efficient capital allocation. In P&C, Generali’s objective is to maintain the upswing trend of premium income, combined with outstanding profitability in the mature insurance markets in which the Group is present, and at the same time, strengthen its position in high growth potential markets by expanding its presence and offer.
In the course of 2021, with reference to the Asset Management segment, the Group will continue to identify investment opportunities through the expansion of the multi-boutique platform in order to increase its offering in terms of real assets, high conviction and multi-asset strategies for customers and partners.

Leveraging on all these initiatives and in light of the results achieved at the end of 2020, the Group confirms the objective of a 2018-2021 compound annual growth in earnings per share between 6% and 8%. RoE for 2021 is expected to be greater than 11.5%. Generali confirms the 2019-2021 cumulative dividend payment of € 4.5-5 billion, subject to the regulatory context.

The Board of Directors also approved a capital increase of € 5,017,194 to implement the “Long-Term Incentive Plan 2018-2020,” having ascertained the occurrence of the conditions on which it was based. The execution of the resolution of the Board is subject to the authorisation of the related amendments to the articles of association by IVASS.

Significant events that occurred following the end of the period are available in the 2020 Annual Integrated Report and Consolidated Financial Statements.
The Report also contains the description of the alternative performance indicators and the Glossary.

The Group CEO, Philippe Donnet and the Group CFO, Cristiano Borean, will participate to the Q&A session conference call for the financial results of the Generali Group as of 31 December 2020, which will be held on 11 March 2021, at 12.00 pm. CET.

To follow the conference call, in a listen only mode, please dial +39 02 802 09 27.

The Manager in charge of preparing the company’s financial reports, Cristiano Borean, declares, pursuant to paragraph 2, article 154 bis of the Consolidated Law on Finance, that the accounting information in this press release corresponds to the document results, books and accounting entries.

GROUP’S BALANCE SHEET AND INCOME STATEMENT¹⁰

PARENT COMPANY’S BALANCE SHEET AND INCOME STATEMENT¹¹

BALANCE SHEET
(in thousands euro)

PROFIT AND LOSS ACCOUNT
(in thousands euro)

¹Changes in premiums, Life net inflows and PVNBP (present value of new business premiums) are presented in equivalent terms (at constant exchange rates and scope of consolidation). Changes in the operating result, own investments and Life technical provisions exclude assets disposed of during the comparison period.
²The adjusted net profit is defined as the net result without the impact of gains and losses related to disposals (equal to € -183 million FY2020 for the expense resulting from the settlement agreement for the BSI disposal; € 479 million FY2019) and totalled € 1,926 million (-12.1%). The adjusted net EPS was € 1.23.
³Please refer to the ‘Disclosure on the quantitative impacts of Covid-19 on the Group’ section in the Annual Integrated Report and Consolidated Financial Statements 2020 for more information on the methodology used to determine quantitative impacts.
⁴In addition, further local initiatives were added in the main countries of operation for a total of € 68 million.
⁵The adjusted net profit is defined as the net result without the impact of gains and losses related to disposals.
⁶This amount, after taxes, was € 77 million.
⁷This amount, after taxes, was € 73 million.
⁸In June 2020, Generali won the mandate for the management of two investment segments of Cometa, the National Supplementary Pension Fund for workers in the engineering industry, the installation of industrial plants and similar sectors and for employees in the goldsmith and silversmith sector.
⁹Objective to reduce greenhouse gas emissions by 20% linked to the direct activities of the Group, in the period 2013-2020.
¹⁰With regard to the financial statements envisaged by law, note that the statutory audit on the data has not been completed. The Group will publish the final version of the Annual Integrated Report and Consolidated Financial Statements 2020 in accordance with prevailing law, also including the Board of Statutory Auditors’ Report and Independent Auditor’s Reports.
¹¹With regard to the financial statements envisaged by law, note that the statutory audit on the data has not been completed. The Group will publish the final version of the Proposal of Management Report and Financial Statements of Parent Company 2020 in accordance with prevailing law.