Business environment, financial and insurance markets

Business environment

The economic activity in the Euro Area began to grow again in the second half of the year, after the contraction that had characterized the first six months. The growth rate of GDP at the end of 2013 was therefore reduced to -0.4% compared to -0.6% in 2012. The recovery observed in the second half of the year was supported in particular by an improvement in exports, from the expansionary monetary policy of the ECB and easing of austerity policies aimed at reducing the public deficit. The labor market remains weak with the unemployment rate steady at 12.0%.

In Italy, the economy continued to contract (-1.9% decline in GDP). However, economic activity benefited from the significant improvement from exports which, during the third trimester of the year, increased by 0.7%. In addition, a slowdown in the decline in consumption, decreasing by 1.9% in the third quarter compared to the same period last year. The conditions of the labor market have not improved, with the unemployment rate in November rising to 12.7% (11.5% at the end of 2012). In Germany, GDP shows a trend in growth of 0.5% mainly due to an increase in domestic demand. There was also a further improvement in the unemployment rate, already at historical lows, which stood at 5.2% in September.

Recovery was also seen in France (+0.3% growth in GDP), owing in particular to the increase in consumption.

In the United States, economic growth continued (+2% change in the GDP with respect to the same period in the prior year) attributable to the contribution of foreign demand and the recovery of the real-estate market. In addition, the markets benefited from the temporary measures adopted by the government on 17 October, which avoided a default of the Federal State. A decision on raising the debt ceiling is expected for early 2014.

In China, the decline in global demand continued to negatively affect the growth rate, which nonetheless remained very high (+7.7% trend in the GDP at 31 December 2013).

Annual GDP development

Annual GDP development

Financial markets

During 2013, the financial markets were characterized by a general increase in interest rates, which remain at very low
levels, and the positive performance of the equity markets in the Euro Area. The trend was reinforced by the confirmation
of an expansionary monetary policy by the Federal Reserve in September.

Long-term interest rate

Long-term interest rate

Italy spread 10Y GOV - Bund

Italy spread 10Y GOV - Bund

The Bond market was characterized by a positive trend in the value of government bonds of peripheral euro area countries,
due to the reduction in the yield spread between government bonds of “core” countries and Peripheral countries.
The yield on German ten-year government bonds rose from 1.32% at the end of 2012 to 1.74% at 31 December 2013 while
the yield on ten-year Italian BTP compared to German bunds, was equal to 318 bps at the end of 2012, dropped to 219 bps at the end of 2013.

Euro corporate Bond spread

Euro corporate Bond spread

The 10-year Euro swap rate, increased from 1.57% at December 31, 2012 to 2.2% at December 31, 2013.

The spread on corporate bonds narrowed further compared to European investment-grade governmental issuers from 131 bps at the end of 2012 to 94 bps. For issuers with speculative ratings, the spread declined from 507 bps to 329 bps.

2 years rate

2 years rate

The two-year Bund rate performed positively, from -0.01% at 31 December 2012 to 0.17% at 31 December 2013, showing
a slight steepening of the rate curve. Similarly, the two-year euro swap rate increased.

Stock markets

Stock markets

Equity markets have registered a particularly positive trend. In the Eurozone, the Eurostoxx showed a marked increase
(+20.50% with respect to +15.53% in 2012). This trend was mainly due to the performance during the second half of the
year (+19.47% with respect to +0.86% in the fi rst six months). European stock markets have shown a very positive trend, on average consistent with that of the Eurostoxx. Frankfurt’s Dax posted gains of 25.48%, Paris’ Cac of 17.99%, while Milan’s FTSE MIB registered an increase of 16.56%.

Insurance markets1

The three main European insurance markets on which the Generali Group operated showed performances that differed by business segment and geographical area.

The life segment showed positive written premium performances across nearly all of the Group’s main countries of operation.

In Italy, new business grew by 24.3% compared to the same period in 2012, with a strong contribution coming from new business, increasing at +31.2%. In particular, a sharp increase was recorded in the banking channel (+45.3%) and also from the agency channel (26.7%). In contrast to this trend was however from the fi nancial advisors channel (-5.4% in November).

Following the highly negative performance in 2012, France showed an increase in life written premiums (+7% in November) due to the excellent performance of unit-linked products (+26%).

In Germany, the insurance market was driven by singlepremium polices (+27.9%); the positive growth of recurring premiums is still modest (+0.8%). Overall, in Germany, life premiums grew by 7.9%.

In the property&casualty segment, written premiums showed differentiated performances in the main markets where the Group operates. In Italy, written premiums decreased (-3.6% compared to the same period in 2012). With reference to the Motor line, the marked decrease in registrations and the higher level of competition greatly contributed to the signifi cant decline in written premiums (-6.8%). The Non-motor line was impacted by the ongoing weakness of industrial activities and the lower spending capacity of households; written premiums declined by 0.5%, nonetheless showing a slight improvement compared to the fi rst three months of 2013.

In contrast, written premiums in France for the property&casualty segment increased (1.5% in the fi rst eleven months of the year). The Non-motor line grew by 2.3% (estimated growth at year end 2013) due to tariff increases aimed at restoring the technical profi tability, which has dropped signifi cantly in recent years. In contrast, written premiums in the Motor line grew by 1.5%.

In Germany, the property&casualty segment showed a highly positive performance, mainly driven by written premiums in the Motor line, which rose at a rate of over 5%.

1 Unless otherwise specifi ed the changes refer to the fi rst nine months of the year compared to the same period in the prior year.

Assicurazioni Generali S.p.A. - C.F. e P.IVA 00079760328