FY2020 Results approved
STRONG GROWTH IN OPERATING RESULT (€412M +36.6%) - IMPROVED SOLVENCY RATIO (187%)
TOTAL PREMIUM INCOME OF €5.7BN (-18.6%): IN DIRECT BUSINESS, NON-LIFE PREMIUMS ARE IN LINE (-2.5%), LIFE PREMIUMS DECREASE (-26.1%)
IMPROVEMENT IN COMBINED RATIO (86.8%, -7.5 p.p.)
MARKED INCREASE IN ADJUSTED PROFIT TO €192M (+85.9%)
GROUP NET PROFIT OF €36M DUE TO WRITE-DOWNS (GOODWILL -€138M)
IN LINE WITH THE REGULATOR’S GUIDANCE, THE BOARD PROPOSED THE ALLOCATION OF EARNINGS
Verona, 25 March 2021. The Board of Directors of Cattolica Assicurazioni, met yesterday in Verona, chaired by Paolo Bedoni, to approve the results at 31 December 2020.
Paolo Bedoni, Chairman of the Cattolica Assicurazioni Group, stated: “With satisfaction, the Board of Directors approved Cattolica's very positive financial statements, achieved in a year characterized by extraordinary events and marked by the pandemic that has put the whole of society and economy in difficulty. The Board of Directors expressed particular appreciation to the management for the results achieved and for the solidity that Cattolica guarantees to its members, shareholders, employees, agents and to all its stakeholders. On the eve of the transformation into a joint stock company and of the renewal of the Board of Directors, Cattolica confirms as a healthy and profitable company, which in this difficult year has been able to live up to its social role, responding to its mission oriented to the protection of people and of business, also through the support, as a Group and as a Catholic Foundation, for those who have suffered the most”.
Carlo Ferraresi, General Manager of the Cattolica Assicurazioni Group, commented: “The 2020 results confirm the solidity of Cattolica Assicurazioni, a company sound in equity which, considering the unexpected and exceptional events linked to the global pandemic, was able to beat the guidance and achieve an unprecedented operating result of 412 million. The financial stability of the Group is certified by the Solvency II ratio, improving to 187%. The partnership agreement with Assicurazioni Generali has entered, in recent months, its full operational phase in some business areas, while in others the agreements will be implemented at full capacity during the year and will bring added value to our Group. Strengthened by the technical capacity of our management and certain of the contribution of a solid partner, we are ready to face the imminent transformation into a joint-stock company and the challenges of the new Rolling Plan for 2021-2023, confident of our ability to compete on the market in a profitable way and to create value for all shareholders”.
The economic data and assets and liabilities at 31 December 2020 of Lombarda Vita, the sale of which will take place in April 2021 subject to the relevant authorisations, have been reclassified under the relevant "disposal" items pursuant to IFRS 5. For a better reading of operating performance, the numbers included in this press release include the economic data of Lombarda Vita, fully consolidated until 30 September 2020.
Total premium income from direct and indirect Non-Life and Life business1 decreased by 18.6% to €5,653 million, mainly due to the lockdown. Direct NonLife business decreased by 2.5% due to Motor. Life premium income decreased by 26.1%. Total FY2020 premiums without Lombarda Vita amounted to € 4,705m with a change of -15.7% compared to FY2019 without Lombarda Vita (€ 5,579m).
The combined ratio improved markedly, reaching 86.8% (-7.5 p.p.) despite the provision made to take account of the voucher for Motor customers, which constitutes 0.7% of earned premiums2. The operating result3 increased sharply by 36.6% to €412 million, taking operating RoE4 to 11%. The FY2020 operating result without Lombarda Vita amounts to € 352m, with a change of + 60.1% compared to FY2019 without Lombarda Vita (€ 220m).
Adjusted profit5 for FY2020 was €192 million, up 85.9% compared with FY2019 despite various write-downs of investment property (-€19 million), equity investments (-€5 million) and AFS shares and funds (-€12 million). Group net profit6 of €36 million (€75 million in FY2019) was down compared with the previous year (-51.5%), mainly due to impairment on goodwill (-€138 million). Lombarda Vita's contribution to the IAS Group profit is € 31 million.
Premium income from direct business decreased by 2.5% to €2,104 million. The premium income of the Non-Motor segment contributed €1,071 million to the result, in line with the previous year (+0.5%). The premiums of the Motor segment came to €1,033 million, down by 5.4%, mainly due to the decrease during lockdown and the effect of initiatives for policyholders, including vouchers. The Motor TPL policy portfolio contracted by around 113,000 units in 2020, mainly in the first four months of the year.
The combined ratio7 went from 94.3% to 86.8% (-7.5 p.p.), mainly due to the sharp decrease in frequency related to less vehicle traffic and despite the provisions made to cover the voucher for Motor customers (corresponding to 0.7 p.p. seen in the other technical items) and weather events, which had an effect of 6.4 p.p., well above the historical average but in line with the previous year. The claims ratio for retained business decreased to 54.9% (-8.2 p.p.) while the expense ratio stood at 29.1%, down 0.6 p.p., mainly due to lower costs. It should be noted that the claims ratio includes the amount of Covid-19-related claims.
In the Life segment, premium income from direct business decreased by 26.1% to €3,527 million, also due to the sharp drop during lockdown. New with-profit Life policies with a minimum guaranteed rate of zero drove a further gradual decline in the Group's average guaranteed minimum reserves to 0.49% (0.58% in FY2019), continuing the reduction envisaged in the strategic guidelines set out in the Business Plan. In addition, the new traditional policies written are characterised by low capital absorption overall due to their limited risk profile.
Financial management and financial position
Investment income8 was €440 million (€529 million in FY19), with a decrease in the ordinary Non-Life component (-9.4%).
Investments amounted to €24,456 million. The gross technical provisions of the Non-Life classes amounted to €3,496 million (€3,704 million in FY19) and the provisions of the Life classes, including financial liabilities from investment contracts, amounted to €19,123 million (€28,003 million in FY19) mainly due to the exit of Lombarda Vita.
The figures at 31 December 2020 indicate continuing capital solidity, with consolidated shareholders' equity of €2,613 million, up compared with 2019.
The Group’s Solvency II ratio at 31 December 2020 was 187%. The ratio is calculated according to the Standard Formula using the Group Specific Parameters (GSPs) authorised by the supervisory authority. The ratio made a marked recovery compared with the previous quarter (161%), partly due to the capital increase subscribed by Generali last October (€300 million) and despite the repurchase of shares after the exercise of the right of withdrawal (€113 million). This indicator is calculated still including Lombarda Vita in the Solvency Capital Requirement but excluding from the own funds the amount of the subordinated loan of €80 million subscribed by UBI, which will likely be repaid during 2021.
At 31 December 2020, the agency network consisted of 1,360 agencies and there were 5,960 bank branches distributing the Group's products.
The Parent Company
The Parent Company’s gross premiums written for direct business reached €2,255 million (-4.2%; €2,353 million in FY19), comprising €1,701 million for NonLife direct business (-1.9%; €1,733 million in FY19) and €554 million for Life direct business (-10.6%; €620 million in FY19). On the basis of Italian GAAP, net profit amounted to €4 million.
In line with the recommendations of EIOPA and IVASS and having not yet completed the capital transactions requested by the regulator, the Board of Directors of Cattolica has proposed the allocation of earnings.
Partnership with Generali
With regard to the partnership with the Generali Group, activities continue in line with the provisions of the agreements. In detail:
- Asset Management. The asset management changeover envisaged was completed within the agreed time frame and the activity has been fully operational since January.
- Reinsurance. The management of the reinsurance treaties expiring at the end of 2020 was activated in compliance with the agreed quotas and times. In the coming months, an analysis is planned for the management of some specific business lines not included in the treaties at the end of 2020.
- IoT. The new motor connected product has already been activated on about 60 agencies of the Cattolica network with excellent results in terms of sales and service levels; the program is in line with the schedule, and the roll-out on the Cattolica network is expected to be completed by March and the pilot for another network of the Group is expected to start. In the coming months, activities are planned for the migration of the existing motor portfolio and for the activation of the analysis of non motor / property solutions.
- Health. Per il cantiere salute, nel mese di marzo è stata attivata la piattaforma di Employee Benefit per i dipendenti del Gruppo Cattolica, mentre la nuova offerta salute verrà resa disponibile alla rete nel mese di aprile; nello stesso mese è previsto anche l'avvio della gestione dei sinistri Infortuni e l'avvio del servizio di Tele-underwriting. The Employee Benefit platform for employees of the Cattolica Group was activated in March, while the new health offer will be made available to the network in April; In the same month, the management of “Accidents and Injury” claims and the start of the Tele-underwriting service are also expected.
The Covid-19 emergency
To address the health and economic crisis caused by the pandemic, business continuity and workforce protection have been ensured through the immediate adoption of smart working for all Group employees. The activities necessary for a safe return to the operational sites were carried out, with a maximum of 25% of staff present at the sites in September, but in early October the Group considered it appropriate to return to full smart working mode due to the resurgence of the infection, while the tools provided in recent months (remote payments, Motor and Life remote sales, Motor vouchers) remain available to cover and protect customers.
With regard to the implications for the Group’s business, the following macrotrends were recorded during the year:
- There was a dramatic drop in new business during the generalised lockdown (from about mid-March to early May), in the Non-Life business and especially in the Life business. When traffic circulation and economic activities resumed (the “recovery” period, between early May and the second week of October) there was a process of returning to normal that was faster in the agency channel and less immediate in the bancassurance channel. In the last eight weeks of the year, when a second lockdown took place, there was another slowdown in the Motor business, although the impact was less than half that of the first Lockdown and there was no disruption to Non-Motor and Life trends.
- Alongside the new business performance, Life surrenders also dropped sharply during the months of lockdown (more than -75%), before rising again in the recovery period, although they were not at pre-lockdown levels (-20%); in the new Lockdown there was another material decline in volume (around -50% compared with the first eight weeks of the year).
- Reported claims decreased in almost all classes except for Miscellaneous Financial Loss, particularly in the Motor classes, where in some weeks during the first lockdown they dropped by approximately 80%. Overall, in 2020 there were approximately 22% fewer claims reported in the Non-Life classes, including a drop of 29% in Motor Vehicle Liability alone;
- No particularly significant claims were detected as a result of the pandemic, either in the Non-Life or Life businesses. The only class affected was Miscellaneous Financial Loss, due to business interruptions and income reimbursement.
Standard Ethics upgrades Cattolica Assicurazioni’s rating from E+ to EE-
On 8 February 2021, Standard Ethics upgraded Cattolica Assicurazioni’s rating from “E+” to “EE-”. In its final report, Standard Ethics states that the path taken in recent years by Cattolica Assicurazioni in the area of ESG (Environmental, Social and Governance) issues has been adequately focused on environmental and social aspects and has also concerned non-financial reporting, the management of financial assets and commercial aspects.
Guidance for the early months of 2021
On 28 January, the Board of Directors of Cattolica approved the 2021-2023 rolling plan, which provides for an operating result of between €265 million and €290 million in 2021, with total premium income of around €5.2 billion, comprising Non-Life premiums of around €2.1 billion and Life premiums of around €3.1 billion. The operating result is expected to decrease compared with 2020, partly due to the scheduled exit of Lombarda Vita from the scope of consolidation, although this will have a positive effect on the non-operating component, with a capital gain of close to €100 million. At the current time, no new significant factors have emerged that could result in a change in this guidance, which is therefore confirmed. However, the risks related to the Covid-19 pandemic, which could materialize during the year, such as those related to the volatility of the financial markets, as happened in the first half of 2020, or possible Life and Non Life claims, should be taken into account.
Pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, Corporate Financial Reporting Manager Atanasio Pantarrotas declares that the accounting information contained in this press release matches the company documents, books and financial records.
Please be advised that the separate financial statements, the consolidated financial statements, the consolidated non-financial statement at 31 December 2020 and the Report on Corporate Governance and Ownership Structure can be obtained by the general public from the Company’s registered office, on its website at www.cattolica.it and from the “eMarket STORAGE” storage facility authorised by Consob, which is managed by Spafid Connect S.p.A. and can be accessed from the www.emarketstorage.com website in the manner and within the time limits set out in the applicable laws and regulations.
The results at 31 December 2020 will be presented to the financial community at 09:30 hours today, 25 March 2021, in a conference call (with Italian, English and original audio). The numbers to be called are: + 39 02 805 88 11 from Italy, + 44 1 212818003 from the United Kingdom and +1 718 7058794 from the United States. Journalists may follow the event by calling +39 02 805 88 27 (listen-only mode). The results presentation will be available in the Investor Relations section of the homepage of the website at www.cattolica.it.
The reclassified schedules as at 31 December 2020 of the consolidated statement of financial position and the consolidated income statement and of the Parent Company are appended. Please be advised that the relevant documents have not yet been certified by the independent auditors. The same applies to the Solvency II data pursuant to IVASS Regulation no. 42 of 2 August 2018. In the statement of financial position and income schedules, which are attached to this press release, the figures for Lombarda Vita have been reclassified under the relevant “disposal” items pursuant to IFRS 5.
1 This figure includes the insurance premiums and investment contracts of the Life classes as defined in IFRS 4.
2 The Cattolica Group decided to give its customers the option of using one twelfth of the Motor Vehicle Liability premium for the renewal or purchase of new Non-Life cover.
3 See the Glossary
4 Operating RoE is calculated as the operating result, less the cost of employees, taxes and minority interests, over the Group's average shareholders’ equity (excluding the AFS reserve).
5 Defined as the measure of Group profit minus the amortisation of the VOBA (value of business acquired, net of the related tax effects and for the Group's share) and goodwill impairment, which are relevant to the Group's profit but do not affect the Solvency position.
6 Net of the minority-interest share.
7 Combined ratio for retained business: 1-(Technical balance/net premiums), inclusive of the other technical items.
8 Financial assets, excluding investments whose risk is borne by the policyholders, before tax.
Operating result: the operating result does not include the more volatile components (realised gains, write-downs and other one-off items). In detail, the Non-Life operating result is defined as the sum of the technical balance, net of reinsurance, ordinary financial revenues and other nontechnical net charges (depreciation, amortisation, impairment of insurance receivables, etc.). The operating result does not include realised and unrealised gains and losses, impairment of other assets, the cost of financial debt (subordinated debt), amortisation of the value of business acquired (VOBA), voluntary redundancy incentives, staff severance indemnity and other oneoff items. The Life operating result is defined in a similar way, with the difference that all financial income contributing to the return of securities pertaining to separate accounts and those classified as class D is considered part of the operating result.