Real estate investments
Over the last few years, the Group finalised several significant real estate transactions , in line with the recent trend, mostly through closed-end real estate investment funds. These include the acquisition of a 263 rooms hotel in Rome (near Vaticano), managed by European hotel chain NH. Moreover, Cattolica and Coopselios (the second domestic player in the nursing homemarket) launched “Fondo Innovazione Salute”, exclusively dedicated to nursing homes, with a target gross asset value of 155 million Euros. The Deal envisages Cattolica as anchor investor (with approximately 80% of equity) and the soleinsurance player, whereas Coopselios as main operating player, contributor and minority shareholder. This partnership creates interesting conditions for a wider industrial collaboration between the two groups, including the joint establishment of services and products related to elderly care.
Today, Cattolica Group has over one billion Euros of real assets, over half of which are invested with the purpose of periodical distribution of dividends for both life and non-life (P&C) business. The annual dividend yield generated by real estate is stable and higher than 5%, generated with low level ofleverage. The AuM is diversified by location and by asset class, with a forward-looking presence in some uncommon asset classes (e.g. hospitality and healthcare).
Since 2012, Cattolica has been investing in renewable energies, through a captive and reserved real estate fund dedicated to solar plants, whose size has already exceeded 110 million Euros.
Cattolica’s agricultural estate near Treviso has already largely exceeded 2,000 hectares and currently, in addition to grow many different crops, the Group started a process of upgrading of its buildings and infrastructures, creating connections and adding value to the sorrounding area.
The investment activity for the financial year 2017 was set against a market context characterized by a phase of contained volatility and yields that showed a moderate upward trend, mainly influenced by further expansive monetary policies by the main central banks, with the exception of the Federal Reserve Bank and a series of crucial political events.
The management was characterized by the maintenance of a proper level of liquidity; there were no significative switch among the various investment sectors, whereas the rotations within the same sector were made considering the targets and the duration of each portfolios declared by the Asset & Liability Management, and the yield maximization considering an equal risk profile. During the year the geographical diversification of the government component within the Eurozone countries was kept in place, in order to reduce the exposure of domestic sovereign bonds and mitigate the impact of spread widening in the event of an increase in volatility. These trades were made during a phase of rate hikes. Within the bond sector, interesting subscription opportunities were exploited, both in primary and secondary markets, with bank bonds and securities issued by industrial issuers. It was noted that subordinated debts issued by primary standing bank issuers with fixed coupon during the first years and subsequently indexed to the currency ratio stand out. Capital gains were also obtained by taking advantage of the volatility of the reference financial markets, trading both the variable and the fixed rate component.
Exposure to the equity component was kept stable in order to contain the average volatility of the portfolio and to optimize capital absorption. The rotation activity between issuers and sectors was aimed at creating value within the portfolio and maintaining a good degree of diversification. The positions in the portfolio are mostly attributable to issuers able to recognize stable and sustainable dividends to shareholders in the medium term, as well as being characterized by solid performances from an economic and financial standpoint. The portfolio is denominated almost exclusively in Euros, with marginal exposures in dollars and pound sterling. Issuers are mainly located in Europe and to a lesser extent in the United States. However, many issuers have highly diversified areas of operation in geographical terms, in order to reduce recession risks as much as possible.
Moreover, the subscription of alternative investments continued, especially those with strategies focused on activities and infrastructure projects, such as the creation of de-correlation in relation to government bond rates and improving the profitability and volatility profiles of the portfolios.
The investment activity of financial assets adopts one of the selection criteria of the principles related to the Company's core values: Transparency, fairness, ethics. The framework for the "Group’s Investment Policy," was approved in March 2017 by the Board of Directors and is binding on the entire Group of companies, and it excludes the use of direct investments in companies or institutions that are non-compliant with Cattolica's values. In particular, investments in companies that trade in arms, drugs, tobacco and exploit child labour or use pollutant industrial or hazardous plants is not permitted.
The Cattolica Group of companies show an increasing interest in financial investments in the environmental sector, through participation in specialized funds and the subscription of bonds to support specific projects. By way of example, the Group's investment portfolio includes wind farms and photovoltaic parks (including a real estate fund dedicated to solar plants, totally owned by companies of the Group), investments in the water sector, the reclamation of polluted areas and the ecology sector in general.