NBV

The table below shows the development of NBV from 2012 to 2013, together with the usual main profitability indicators.

New Business Value 2013 and 2012 (€ mln)
  2013 2012 Change
APE4,470
4,508
-1.0%
Annual premiums2,708
2,745
-1.9%
Single premiums17,611
17,628
0.4%
PVNBP40,900
42,572
-2.5%
NBV 937
863
14.2%
Profitability on APE 21.0%
19.2%
+1.8 pts
Profitability on PVNBP 2.3%
2.0%
+ 0.3 pts
% changes are on a comparable basis

On a comparable basis APE reduces by 1.0% with annual premiums showing a moderate decline (-1.9%), but still representing the predominant part (60.6%) of total APE production (60.9% in 2012). Single premiums slightly increase (+0.4%), driven by the relevant productions in Italy (+19.1%) and Germany (+19.4%).

Saving business declines (-4.1%) as a combined effect of the contractions registered in France ( 37.0%, due to the extraordinary 2012 production which was benefiting from a surrender recovery operation), Central and Eastern Europe (-64.4%, on account of the drop in pension funds production), and Europe Middle East and Africa (-15.4%) mitigated in part by the strong progression registered in Italy (+12.9%), and the positive development in Germany (+5.2%, confirming the production levels observed in the last part of 2012).

Protection business develops by +3.6%, as a consequence of the strong increase in France (+21.9%) offset only in part by the decline registered in Germany (-3.6%).

Unit linked business increases by 8.4%, thanks to the good developments reported in France (+22.5%), Central and Eastern Europe (+11.7%) and Europe Middle East and Africa (+6.2%, mainly on account of the good performance in Ireland).

Despite the less favourable reference rates used to value new business in 2013 (on average lower than in 2012), the new business profitability (margin on APE) progresses by 1.8 percentage points, from 19.2% in 2012 to 21.0% in 2013. The margin’s increase would be even higher (+2.7 percentage points), neutralizing from both 2012 and 2013 the perimeter variations (essentially, the sale of the profitable business in the US and Mexico).

The profitability progression is mainly explained by the excellent development of the protection business, which benefits from the lower interest rates, by the increased weight on APE of unit linked business (from 14.8% in 2012 to 16.9% in 2013) and by the saving business margin recovery, which benefits from the better features embedded in new 2013 production and, in particular, from the further decrease of the average guarantees offered to policyholders (from 1.38% in 2012 to 1.23% in 2013).

Thanks to the higher profitability, the 2013 NBV increases by 14.2% on a comparable basis and amounts to 937mln.

The following table reports the NBV and NBM movement from 2012 to 2013.

Movement of New Business Value (€ mln) and NBM (%)
  NBV NBM
New business value 2012 86319.2%
Change in perimeter -37-0.9%
Exchange rate fluctuation -40.0%
Products mix/volume -44-0.8%
Profitability 1593.5%
New business value 201393721.0%

The following table shows the breakdown of NBV into its components, also highlighting the weight of both the allowance for cost of capital and non hedegable risks (which in aggregate reduce the profitability on APE by 5.6 percentage points).

Breakdown of New Business Value 2013 and 2012 (€ mln)
  2013 2012
PVFP before Time Value of FG&O 1,5191,637
Time Value of FG&O -330-481
PVFP after Time Value of FG&O 1,189 1,156
Cost of capital -112-117
Cost of NHR -140 -175
New Business Value 937 863

Finally, the table below shows the development from 2012 to 2013 of the main additional new business profitability indicators, obtained using “real-world” best estimate financial assumptions.

New Business Value 2013 and 2012 (€ mln)
  2013 2012
1st year NB strain
-1,521-1,624
o/w industrial strain
-860-945
o/w capital strain
-661-678
1st year NB on PVNBP
-3.7%-3.8%
o/w industrial strain -2.1%-2.2%
o/w capital strain -1.6%-1.6%
IRR11.9%12.3%
Payback period (yrs)7.77.6

The 2013 new business strain (i.e. the investment made by the shareholder into the new business in the first year) amounts to -1,521mln, corresponding to the sum of the negative contribution to profit in the year of sale (-860mln) and the capital absorbed by the new business (-661mln). In terms of ratio over the present value of new business premiums (PVNBP), from 2012 to 2013 the first year strain improves from -3.8% in 2012 to -3.7% in 2013, thanks to the lower industrial strain.

The slight worsening of the internal rate of return (from 12.3% to 11.9%) and of the payback period (from 7.6 years to 7.7 years) is mainly explained by the lower best estimate financial assumptions used in 2013 to project future profits, especially in Italy and France.

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