In an insurance market that continues to be characterised by a high level of competition, additional decline in interest rates and significant volatility of the spread on Italian bonds, in the absence extraordinary events, we forecast that the Group's operating result and net profit in 2019 will improve compared to the previous financial year.
Some context figures for 2019
- Interest rates: The macroeconomic context shows a progressive deterioration following the protectionist escalation linked to the tariff war between the USA and China and to the United Kingdom’s long exit process from Europe, joined by the global slowdown of the economy and drop in inflation. The reduction of the US growth drove the FED to pave the way for possible progressive interest rate cuts. Investors’ expectations on the intensity and speed of this slowdown softened recently when the latest figures relating to the end of June showed that the employment market was still very solid. The ECB also announced the extension to mid-2020 of zero interest rates and launched new programmes in support of the banking system through new long-term refinancing operations. Measures are also being studied to alleviate the pernicious effects of negative interest rates on the profitability of the eurozone bank system.
- Financial markets: For the bond markets, the first half of 2019 was characterised by a general upturn of the main financial asset classes, including government and corporate bonds, both investment grade and high yield. The performance was seen in all geographical areas, from emerging countries to the euro area, both core and peripheral, in some cases to such an extent that it offset the liabilities recorded in the previous year. Firstly, this was in great part due to the changed attitude of the world’s main central banks, which, after showing signs of exacerbation at the end of 2018, reversed their policies. The stock markets recorded very positive performances in the first half of the year in all geographical area, with the MSCI World Index, showing a strong upturn, a very opposite trend compared to that recorded in the second half of 2018, despite the growing uncertainty relating to the political and economic events that characterised this period of the year.
- Insurance markets: In 2019 (source: ANIA - Italian Insurance 2018-2019 of July 2019), the total premiums written (non-life and life) of the Italian direct portfolio only of companies with registered offices in Italy would draw near to € 140 billion, a 2.6% increase compared to 2018. The insurance business would thus continue its moderately expansive phase, in line with the growth of the previous year (+3.2% in 2018). The positive development in premiums of both the non-life class (+3.2%) and life sector (+2.5%) would also contribute to the 2019 result. Overall premiums as a percentage of GDP would rise slightly, from 7.7% in 2018 to 7.8% in 2019. In particular, the TPL motor class saw a marginal increase in premiums collection (+0.1%) already in 2018 as a result of growth in the number of insured vehicles (+0.9%) that was slightly higher than the drop recorded by the average premium charged in the same year (-0.8%); it is now estimated that the same trend, with similar values, could occur in 2019 and that for the second year in a row, the overall premiums collection of this class would remain unchanged. The weight of the TPL motor sector premiums on total non-life premiums written would continue to drop (39%, it was 40% in 2018 and 41% in 2017). The current year’s growth of premiums in other non-life classes than TPL motor would continue (on average over 5% for a volume of nearly 21 billion), though with Italy still remaining under-insured in this sector. The drive would come from the continuous technological innovation that impacts the creation of products that are increasingly more palatable and usable. Specifically, the increase would be linked to the greater propensity of individuals and families to purchase voluntary insurance cover, in particular in the health sector (accidents and health) and property sector (other damage to assets and fire), and to the growing demand for corporate insurance cover (again in the health sector) and professional insurance cover (for example, in the general TPL sector). In 2019, the life sector would see the trend previously observed in 2018 confirmed: the premiums would maintain growth rates around 2.5% for a volume of nearly 105 billion.
In Non-Life, the Group will continue the portfolio balancing strategy in favour of Non-Motor business, as envisaged by the Business Plan, maintaining the centrality of the agency network while developing digital tools and channels. The Group is strongly inclined to strengthen the role of Bancassurance in the Life business, while in Non-Life it intends to pursue the objective to make it one of the sector’s main growth drivers. With regard to Asset Allocation, the actions to decrease the portfolio’s exposure to Italian government bonds should go on, while the Group’s investment policy will continue with a view to consolidating current profitability.