Credit risk on financial investments

Credit risk refers to possible losses arising from a counterparty failing to meet its obligations (default) or from a deterioration in its
creditworthiness (downgrade or migration), respectively, in relation to debt instruments the Group invests in or to a counterparty of a derivative contract. Furthermore, the risk resulting from a generalized increase in the level of spreads in the market is considered,
due to events such as a credit crunch or a liquidity crisis, having an impact on the economic solvency of the Group.

Within the Group Risk Guidelines, investment in adequate credit quality securities (investment grade) is preferred and the
diversification (or dispersion) of risk is encouraged.

The Group uses a data warehouse to collect and consolidate the financial investments, which guarantees a homogeneous, time
effective and high quality analysis of the financial risks.

For the internal rating assessment of an issue or issuer, ratings of the main agencies ratings are used. In the case of different rating judgments, the second best value available is used. Securities without a rating are given an internal one based on exhaustive economic and financial analysis.

The portfolio of fixed income investments of the Group is prudently built.

The distribution by rating class shows that the absolute majority of the investments is of high rating standing.

In order to mitigate the counterparty risk, related to market risk hedging strategies, the following measures have been put in place:
the counterparty selection, the use of quoted instruments and the integration of ISDA Master Agreements with the Credit Support
Annex (CSA). CSA requires the counterparty to post collateral when the derivative position is beyond an agreed threshold.
Note that the same considerations on market risk regard also the financial instruments backing life insurance policies, therefore,
default, downgrades or changes in spread could affect the financial liabilities values with a consequent mitigation effect.

Group’s exposures to investments in government bonds - detailed by country of risk and rating - are reported at fair value in the following tables:

Breakdown of investments in government bonds by country of risk
   31.12.2013 
(€ million) Total fair value Impact (%) of which home-country Impact (%)
Government bonds 140,339      
Italy 57,719
41.1
55,337 92.4
France 28,594
20.4
21,711
75.9
Germany 10,032
7.1
7,554
75.3
Central and Eastern Europe 8,174
5.8
4,050
49.5
Rest of Europe 23,862
17.0
9,357
39.2
Spain 7,306
5.2
4,339
59.4
Austria 4,727
3.4 2,127
45.0
Belgium 7,678
5.5 2,093
27.3
Others 4,151
3.0 798
19.2
Rest of world 2,622
1.9 501 19.1
Supranational 9,335
6.7 na na
Dettaglio per rating delle obbligazioni governative
  31.12.2013
31.12.2012 
(€ million) Total fair value  Impact
(%)
Total fair value Impact
(%)
Government bonds 140,339   138,760  
AAA 18,844
13.4 18,863
13.6
AA 48,196
34.3
43,505
31.4
A 3,756
2.7 3,760
2.7
BBB 66,398
47.3
69,592
50.2
Non investment grade 2,726 1.9
2,884
2.1
Not Rated 419
0.3
156
0.1

The government bonds portfolio amounted to € 140,339 million at the end of the period, with the 68.7% of the portfolio represented
by Italian, French and German debt instruments. The exposure to individual sovereign bonds is mainly allocated to their respective
countries of operation.

With reference to ratings, the AA class included the French debt instruments following their downgrade by both S&P’s (AA+, 13
January 2012) and Moody’s (Aa1, 19 November 2012). The BBB rating class included mainly the Italian debt instruments following
their downgrade by both S&P’s (13 January 2012) and Moody’s (Baa2, 13 July 2012).

Group’s exposures to investments in corporate bonds - detailed by sector and rating- are reported at fair value in the following
tables:

Breakdown of direct investments in corporate bonds by sector
  31.12.2013
(€ million)
Total fair value Impact (%)
Corporate bonds
113,541  
Financial 34,989
30.8
Covered Bonds 34,644
30.5
Asset-backed 1,869
1.6
Utilities 12,288
10.8
Industrial 10,067
8.9
Consumer 5,485
4.8
Telecommunication services
5,739
5.1
Energy
3,993
3.5
Other 4,468
3.9
Breakdown of direct investments in corporate bonds by rating
  31.12.2013 
31.12.2012
(€ million) Total fair value Impact (%) Total fair value Impact (%)
Corporate bonds 113,541   110,108  
AAA 29,627
26.1
32,179
29.2
AA 9,205
8.1
8,672
7.9
A 33,728
29.7
33,933
30.8
BBB 32,309
28.5
28,474
25.9
Non investment grade 6,425
5.7
4,878
4.4
Not Rated 2,246
2.0
1,972
1.8

The investments in corporate bonds totalled € 113,541 million at the end of the period. The portfolio was composed for 38% by non-financial corporate bonds, for 31% by financial corporate bonds and for 31% by covered bonds.

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