Outlook

Business outlook

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.

 

The 2018 Macro-economic Environment

2018 was characterised by a particularly lively and solid growth in the first six months, followed by a deceleration that was evident in the main economic areas of the globe. 

  • With an annual growth forecast of around +3%, the United States is starting to record one of the longest expansionary cycles in its history, partly due to the support of tax policies implemented by the Trump administration. 
  • The European growth dynamics, following the peak at the beginning of the year, recorded a gradual but inexorable decline, with aggregate GDP in the third quarter falling to +1.6% and a more limited overall forecast for the year compared with the hope given by the figures for the first half of the years.
  • The trend in the main Italian economic indicators did not differ from that described for the rest of the Eurozone, with a figure showing a growth trend for 2018, held back by a practically stagnant third quarter, which was lower overall that the +1.6% achieved in 2017.

Bonds markets

Following a somewhat accentuated rally in the early months of the year based on particularly brilliant macro data, the base rates afterwards recorded a fall due to a number of factors. The disappointing inflation dynamics and the risks associated with rhetoric aimed at protectionism by the United States led to the German rates falling back, being perceived as a safe investment in a phase of growing uncertainty. Undoubtedly contributing to this move was the political impasse following the Italian elections, then resulting in the formation of a government that aggregated the leading populist forces of the country. It was precisely this event that marked the central part of 2018, with a rise in volatility on the spreads of the peripheral countries and another reduction in core rates. The disappointing macroeconomic figures and the growing uncertainty linked to the outcome of the Brexit negotiations compressed the German and American rates towards the end of the year.

Shares markets

Stock markets performed negatively on average at a global level. Following an initial positive phase, profit taking led most of the world's indices into negative territory. Afterwards, the stock market prices moved in a mostly independent manner in connection with peculiar geo-political and economic events. In the final quarter, the stock markets were affected by a general downward revision of growth estimates, especially for developed countries. 

The positive effects on US stock exchanges of Trumpbased tax reforms soon ran out, leaving room for fears over the introduction of tariffs during the year, especially towards China. Between accelerations and backward steps, the trade war between the top two world economic powers kept the market in suspense in the first part of the year, with an aggravation in the last month that brought the American lists to corrections of around 20% compared with the maximums for the year. The rebound of the final days of the years, due to more accommodating positions by the Federal Reserve on the rate hike path, was not enough to revive one of the worst Decembers ever. 

Annual performances, gross of dividends, were as follows: in the United States, the S&P 500 index reported a performance of -4.4% and the Nasdaq of -2.8%; in Europe, the Eurostoxx 50, the Dax and FtseMib reported a downward trend of 11.3%, 18.3% and 13.6%, respectively; in Japan, the Nikkei index decreased by 10.4%. The MSCI index of emerging countries closed at -14.8%, with Shanghai at -22.7% and Hong Kong at -10.6%.  

Foreign exchange markets

Following a phase of initial weakness, in the wake of the previous year's trend, the US dollar regained strength against the leading world currencies in the second quarter of the year. The switch from Yellen to Powell at the chair of the Federal Reserve indeed involved greater determination in the course of raising the interest rates. Despite of the fears for the trade policies President Trump introduced, the US economy also continued to appear strong, reaching its peak in the middle of the year. The monetary policy of the People’s Bank of China, aimed at weakening the local currency, also contributed to the strength of the dollar. The Yen, on the other hand, strengthened against the dollar, especially in the second half of the year: faced with uncertainties regarding the Chinese economy, it particularly benefited from its status of a safe haven. The dollar ended the year at 1.145 against the Euro, while on the same date 109.7 Yen was required to purchase a single dollar. 

Real estate market

The turnover of the real estate market in 2018 amounted to €8.9 billion, an average of the volumes reached between 2015 and 2016, down 22% from 2017 (absolute record year). The decline was affected by the period of political uncertainty that characterised most of last year and generated an increase in the spread, causing a slowdown in loan disbursements, preventing or delaying some real estate transactions.

Italy still suffers from lack of product. The transaction engine continues to be represented by international investors, who do not stop expressing their willingness to operate in our country; however, there is still a shortage of Italian investors.

Retail is confirmed as one of the most interesting sectors, with almost no decline (-6%) compared with 2017. The office is down (-17%) but remains stable in Rome. For 2019, forecasts in Italy are of a stable market, in strong growth in the hotel sector.