PWC The Italian Insurance Market

The Italian Insurance
Market
2017 figures + 9M18 overview
Italian insurance market snapshots
The Italian Insurance Market • 2017 figures + 9M18 overview

PwC 1
Section 1 – Italian insurance market snapshots
Italian insurance market

Key Messages
• In 2017, Italian GWP declined by 2.4% to €131bn with life business falling by 3.6%,
partially compensated by non-life increasing by 1.2%. Premiums represented ca. 8% of
FY17 Key-data Italian GDP, representing the 4th highest ratio in Europe
• Technical results decreased by 10.9% from 2017 higher incidence of cost over lower
volumes in life and impact of catastrophic events for non-life
Italian insurance market GWP
€131bn, -2.4% vs. FY16 • After the adoption of Solvency II in 2016, insurers are putting great effort on capital
o/w Life: €99bn (-3.6% vs. FY16) management, reflected by the increase of the market Solvency ratio to 241% in 2017 (221%
Non-life: €32bn (+1.1% vs. FY16) in 2016)
• Fintech (33 insuretech entities in Italy) and healthcare represent major disruptions for the
Largest Italian insurance insurance sector with businesses affected recording double digit growth
companies: • Proper investments in cyber insurance risk management may guarantee to insurers a
o Life: Poste Vita (market share equal significant advantage towards competitors, as the Italian industrial 4.0 framework will
to 17.5%) demand protection from cyber attacks
o Non-life: UnipolSai Assicurazioni • Interim figures lead to a forecast for 2018 of an increase to ca. €134bn GWPs due to
(market share equal to 18.8%) growth in both life, as traditional products will be supported by rising interest rates, and
Largest Italian insurance groups: non-life, driven by demand for innovative products
2013/2017 Technical result of Italian insurers (1)
o Life: Intesa Sanpaolo Group
(market share equal to 19.4%) € million FY13 FY14 FY15 FY16 FY17
o Non-life: Unipol Group (market Gross written premiums 118,787 143,318 146,951 134,209 130,947
share equal to 21.2%) Change in reserves (29,174) (59,579) (52,844) (48,559) (38,932)
Incurred claims (89,188) (85,778) (91,219) (82,936) (91,395)
General expenses (11,971) (12,411) (12,672) (12,614) (12,836)
Investment income 19,611 21,866 17,172 17,705 19,324
Other technical income (charges) (930) (908) (987) (926) (979)
Technical result 7,135 6,508 6,401 6,879 6,129
Reinsurance result (403) (217) (98) (288) 37
Net technical result 6,732 6,291 6,303 6,591 6,166
Source: PwC analysis on ANIA data
(1) Direct and ceded business, excluding business underwritten in freedom of service
PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 2

Italian insurance market trend

2013/2017 Italian insurers GWP (1)
143.3 147.0
134.2 131.0
118.8 32.8 32.0
32.0 32.3
33.7
€ million
Non-Life
114.9 Life
110.5 102.3 98.6
85.1
FY13 FY14 FY15 FY16 FY17
In 2017 Italian GWP decreased by -2.4%, continuing the

2017 Breakdown by distribution channel reduction recorded in 2016 (-8.7%), after years of
uninterrupted growth, with an opposite performance of
23% <1% life and non-life businesses.
79%
61% Life business has declined, falling from the record level of
15%
Life €114.9bn in 2015 to €98.6m in 2017 (-7.4% in 2 years), as a
Non-Life consequence of low market interest rates and new
€99bn €32bn
Non-life capital requirements. Despite the decrease, Italy still
6% represents the third European life market by GWP, after UK
15% and France.
1% Non-life premiums on the other hand increased by +1.2%
Brokers and direct sales to €32.3bn, thanks to the growth in non-motor premiums
Source: PwC analysis on IVASS and ANIA data partially off-set by the decrease in motor business.

Top Italian insurance players Companies
Groups
2017 top 5 ranking of life insurance companies and groups by GWP Market share
19.4%
25,000 20%
17.5% 17.5%
18%
20,000
44% 22,515 15.0% 66% 16%
20,263 20,263
Top 5 companies Top 5 groups 14%
GWP (€ million)
market share 17,405 market share

15,000 12%
Market
share
8.5% 9.6% 10%
10,000 6.9% 6.8% 8%
9,798 11,161
4.3% 4.5% 6%
8,036 7,929
5,000 4%
5,026 5,244
2%
- 0%
Poste Vita Intesa Sanpaolo Generali Intesa Creditras Intesa Sanpaolo Poste Vita Generali Allianz Aviva
Vita Italia Sanpaolo Life Vita Group Group Group Group Group
2017 top 5 ranking of non-life insurance companies and groups by GWP
15,000 30%
12,000
51% 62% 25%
21.2%
18.8% Top 5 companies Top 5 groups
GWP (€ million)
20%
market share market share
9,000 15.7%
Market
share
13.4% 15%
13.3%
7,790
6,000 6,901 9.8%
5,760 10%
4,936 6.0% 5.5%
4.6% 4.1% 4,879
3,000 3,594 5%
1,691 1,491 2,200 2,017
- 0%
Unipol Sai Generali Allianz Società AXA Unipol Generali Allianz Reale Mutua Cattolica
Italia Cattolica Assicurazioni Group Group Group Group Assicurazioni
Group

Investments
2013/2017 breakdown of investments (not related to investment contracts)
In 2017, investments of Italian insurers reached
€624bn, with fixed-income assets representing ca. 76% of
625
564
602
18
76% Bonds total portfolio.
18 60
521 12% Funds
466 19
20
57
57
73
Italian government bonds in particular remain the
62 Equity
19 56 50 10%
primary form of investment (ca. 45% of assets), as they
€ in billions
57 35
26
3% Other combine low capital absorption with a higher return in
comparison to other Euro-area govies. Consequently, share
410 437 465 473 Other prices of listed Italian insurers are affected by spread
364
Equities between Italian and German government bonds’ yields.
Mutual funds Mutual funds have progressively increased their weight
Bonds in the market’s portfolio (12% in 2017 vs. 6% in 2013) due to
the reduction of government bond yields started in
Source: PwC analysis on ANIA and IVASS data
2012 and the need to grant higher returns to policyholders.
2012/2018 main 5 European Government Bonds yield to maturity 2018 Italian insurance stock index and spread BTP - Bund
8% 18,000 3.5%
17,500 3.0%
FTSE All Share Insurance

6% Italy
Yield to maturity
17,000
2.5%
Spain 16,500
5% 2.0%
Spread
UK 16,000
1.5%
3% France 15,500
1.0%
Germany 15,000
2%
14,500 0.5%
0% 14,000 0.0%
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
Source: Bloomberg
FTSE All Share Insurance Spread BTP-Bund

The negative trend in motor premiums continues, but

signs suggest the decrease in volumes could end
2013/2017 Italian market non-life GWP Average motor premium continued in 2017 the six-years-long
decrease, reaching in the last quarter of 2017 €417 for a private
contract (-0.7% vs. 2016). This reduction has been driven by factors
33,690 32,800 32,002 31,953 32,340 related to both tighter competition and a reduction in
information asymmetries, such as:
€ million
Total
• Competition increase due to online aggregators and innovative
18,644 17,567 Motor
players
16,642 16,128 16,003
• Telematics (i.e black boxes, pay as you drive)
• Actions from the Regulator to reduce frauds (i.e. “Archivio
integrato antifrode”)
• Stricter rules on claims compensation of micro-damages
In comparison to previous years however, the variation of GWPs
and average premiums in 2017 has been limited, as margins for
pricing strategies are narrow. Moreover, loss ratio has benefitted in
2017 from a reduction in cost of claims and decreased for the first
time since 2013. Constant average prices and margins could end in
2018 the reduction of motor premiums and represent a new
Motor equilibrium.
(7.7%) (5.8%) (5.3%) (3.1%) (0.8%)
GWP
Focus on MTPL
€ in millions FY13 FY14 FY15 FY16 FY17
Other
GWP (€ millions) 16,230 15,180 14,187 13,494 13,203
LoBs (1.2%) 1.2% 0.8% 3.0% 3.2%
Average price per policy (€) 506 470 439 420 417
GWP
# of policies (millions) 32.1 32.3 32.3 32.1 31.7
Claims frequency (%) 5.7% 5.5% 5.6% 5.7% 5.6%
Loss ratio (%) 68.7% 69.5% 72.1% 76.1% 75.9%
75.1%
Source: PwC analysis on IVASS and ANIA data

Solvency II
2014/2017 Solvency II ratios
250% 255% 250%

241%
233% 233% 230% 232%
221%
210% 208% 212%
179%
163% 161%
134%
2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017 2014(1) 2015(1) 2016 2017
Life Non-life Composite Total market
2017 Composition of Basic Solvency Capital Requirement (BSCR)
13% (21%) The introduction of Solvency II regulatory framework in

18% 3% January 2016 has put the focus of insurers on capital
100%
6%
management, reflected by a general improvement
80% between 2016 and 2017 in the coverage of capital
requirements across different lines of business. Overall, the
Solvency II ratio reached in 2017 ca. 241%, with life and
composite insurers showing higher coverage, in order to
prevent fluctuations in the bond market.
The main source of risk is represented by market risk

Market Counterparty Life Health Non-life Diversification BSCR
(ca. 80% of the Basic Solvency Capital Requirement), in
particular due to the significant exposure of life insures to
Source: PwC analysis on ANIA and IVASS data
(1) 2014 and 2015 figures are derived from the preliminary and Day-one reports spread risk.

Italian life insurance market

PwC 7
Section 2 – Italian life insurance market
Italian life insurance market

Key Messages
• GWP of the Italian life insurance market decreased by 3.6%, reaching €99bn
(€102bn in 2016) and net inflows of €27bn (€39bn in 2016)
FY17 Key-data • 2017 technical result was positive (€2.9bn), reduced by 13.4% from 2016 (€3.4bn) as a
consequence of lower net inflows
Italian life insurance market GWP
• The market still shows a strong predominance of traditional products (64% vs. 72%
€99bn, -3.6% vs. FY16 in 2016). The low interest rate environment and Solvency II still represent strong incentives
Life products distributed mainly for insurance companies to boost unit-linked and hybrid contracts and such
through banking channel (61%) products, after a slowdown in 2016, increased by +25% in 2017
Largest life insurance company: • Life premiums penetration in Italy is 5.7% (premiums/GDP), higher than European
Poste Vita (market share equal to 17.5%) average of 4.4% as a consequence of conservative savings’ approach of Italian
Largest life insurance group: households
Intesa Sanpaolo Group (market share
• The average Solvency II ratio in the life sector increased to 233% (210% in 2016) as
equal to 19.4%) additional emphasis has been put by the market on strengthening the capital position
72 insurance companies operating in
the life business (71 in 2016)
2013/2017 Life business technical result (1)
€ million FY13 FY14 FY15 FY16 FY17
2017 # of players by GWP
Gross written premiums 85,110 110,515 114,950 102,257 98,610
Changes in technical provisions (29,928) (59,967) (53,024) (48,453) (38,427)
29 Lapses (Surrenders/ Maturities/ Claims) (66,788) (64,577) (71,196) (62,931) (71,154)
20 Investment income 18,409 20,588 15,976 16,657 18,166
Other technical income (charges) (325) (381) (388) (328) (369)
12
5 6
Reinsurance result 369 383 312 289 289
€5bn €1bn €100m €50m Net technical result 3,298 2,752 2,659 3,646 3,197
Source: PwC analysis on ANIA data and Insuranceeurope
GWP

Italian life business distribution
2013/2017 Italian market life GWP (€mn) Product mix

In 2017 total life GWP decreased by 3.6%, with a
114.9
performance highly differentiated among lines of
110.5
business.
€ million
102.3 98.6
85.1 27.9 37.0
28.5
35.7
Traditional life business, connected to segregated funds, is
20.1 Investment
contracts still the core of the market (64% of total GWP), but
Traditional
decreased in 2017 by 14.7% and is now at the lowest level
82.6
65.0
78.0 73.7
62.9 contracts since 2012, as a consequence of low market interest rates
and Solvency II capital requirements introduced in January
2016.
On the other hand, sales of investment contracts (i.e. unit-

linked products) are close to the record level of 2015, as
2017 GWP by distribution channel they provide higher opportunities for return to
policyholders and limit the capital absorption of insurers.
1%
Main distribution channels
15% Banks
Agents In line with other EU countries such as France and Spain,
Financial promoters banks represent the most important distribution channel
for life insurance (61% of total premiums), followed by agents
€99bn
Others
23%
(23% of premiums). Both networks focus their product mix
61%
on traditional contacts, whereas financial promoters,
usually part of banking groups, offer a product mix more
focused on investment products.

Breakdown of net inflows
Breakdown of net inflows Net inflows breakdown by LoB

11,749 27,425
16,711
( 1,035 )
Traditional Unit & Pension

- Capitalisations
- Total Net Inflows
4,676 products Funds
14,408
79,515
€ million
(44,055)
(17,902) 27,425
(9,217)
Single Premiums Recurring Premiums Recurring Premiums Surrenders Maturities & Yields Claims Total Net Inflows
1st year
Written premiums Amounts paid
Sales continue to be dominated by single premium business (81% of total business underwritten), confirming the Italian trend of
investing a lump-sum instead of paying premiums annually. This trend also confirms that life insurance policies are sold more for
their saving characteristics than protection.
In line with GWPs, main net inflows are represented by traditional business (€16.7bn) and investment products (€11.7bn), whereas
capitalization continued in 2017 to represent a net outflow of funds.

Investments overview
Asset allocation of life products
2%
The investment strategy of Italian life insurers remains
2%
o/w 56.2% concentrated on fixed-income assets.
18% govies
21%
Class C ‘Class C’ portfolios in particular, related to insurance own
Life market investments 80%
investments and profit sharing products portfolios, have
investments €540bn o/w 20.9% the highest exposure to government bonds (56% of total
govies
4%
assets).
€694bn 62%
Class D
‘Class D’ portfolios related to unit and pension products - though
76%
34% investments limited in their overall size - show a different asset allocation,
Bonds €154bn as they provide a higher risk-return trade-off: Government
1.5%
Equities and mutual funds shares bonds represent only 21% of total assets, whereas equities and
Liquidity, Fixed assets and others corporate bonds represent main investments (75% of the
portfolio).
Italian segregated funds’ composition (€bn) and yield
3.77% 3.56% Focus on segregated funds

3.24% 3.13%
Italian life insurance remains centered on segregated funds
1.99% 2.11%
1.58%
1.89% Equity (in 2017 ca. 72% of investments) linked to traditional policies, as
471
502
Funds & oth. these products offer policyholders the protection of invested
8
431
62
8 75 capital, a minimum guaranteed yield and fiscal benefits.
388 8 Other bonds
33 14 52
112
115 Strict regulation of these funds determines that the investment
88 108 Gvmt. bonds strategy has historically been based on a ‘hold-to-collect’
Avg. Segreg. funds
approach. In 2017 IVASS amended rules applicable to such
253 263 289 304 yield funds in order to promote a more active management and
Italy - BTP 10y
provide policyholders with more stable returns. In particular, new
funds can now accrue a reserve of undistributed earnings from sales
2014 2015 2016 2017
and smooth the distribution of benefits.

Hybrid products
2015/2017 New business by Lob in hybrid products
€22bn €20bn €26bn In a market characterized by low interest rates, dominated by both
saving products offering a minimum guaranteed return and a stricter
solvency regulation:
44% 43%
50% • Insurance companies have been pushed to commercialize
less capital intensive products
Unit & Index
Linked • Policyholders have been demanding more sophisticated
solutions combining features of protected investments and
Traditional
attractive returns
56% 57%
50%
In such a context the introduction of hybrid life policy products
splitting the investment in two parts - one linked to a
FY15 FY16 FY17
segregated fund and the other to a unit fund - has been
extremely successful. In 2017, the new business of hybrid products
2015/2017 Multiline breakdown by hybrid channel amounted to €26bn (26% of total GWP) increasing by 30% year-on-
year.
FY15 11% 72% 17%
FY16 18% 69% 13%
FY17 22% 63% 15%
Agencies & others Banks Financial promoters

Source: ANIA

Italian non-life insurance market

PwC 14
Section 3 – Italian non-life insurance market
Italian non-life insurance market

Key Messages
• Increase of 1.2% in GWP (€32.3bn vs. €32.0bn in 2016) was driven by the growth of
non-motor business (3.2%), partially offset by the reduction -0.8% of motor GWP, still
FY17 Key-data representing the primary business (49% of total non-life)
• In 2017, technical result amounted to €3.2bn, 8.6% lower than 2016, mainly affected by
Italian insurance market GWP higher cost of claims related to catastrophic events affecting combined ratios of property
€32bn, 1.2% vs FY16 business. The underwriting result was 10.0% of total non-life written premiums (slight
Non-life products distributed mainly decrease compared to FY16)
through agents (78.9%) • Non-life business still shows a lower penetration when compared to main EU
Largest non-life insurance company: countries (1.9% in comparison to 3.3% in Germany and France)
UnipolSai Assicurazioni (market share • Domotics and services (such as assistance and health insurance) are driving production
equal to 18.8%)
in non-motor LoBs and driving strategic investments of main insurers
Largest non-life insurance group:
• The average Solvency II ratio in non-life sector was 179%, increased significantly from
Unipol Group (market share equal to
21.2%) 161% in 2016, showing the focus that the market has put on strengthening the capital
position
122 insurance companies operating in
the non-life business (126 in FY16) 2013/2017 Non-life business technical result (1)
€ million FY13 FY14 FY15 FY16 FY17
2017 # of players by GWP Gross written premiums 33,687 32,800 32,002 31,953 32,337
Earned Premium 34,441 33,188 32,182 31,847 31,832
Incurred claims (22,400) (21,201) (20,023) (20,005) (20,241)
Investment income 1,202 1,278 1,196 1,049 1,158
57 Other technical income (charges) (605) (527) (599) (598) (610)
24 Reinsurance result (772) (600) (410) (578) (252)
17 15
9 Net technical result 3,433 3,539 3,644 2,945 2,969
€50m €100m €300m €1bn
Source: PwC analysis on ANIA data and Insuranceeurope
GWP (1) Direct and ceded business, excluding business underwritten in freedom of service

Italian non-life insurance at a glance

2013/2017 Italian market non-life GWP by LoBs (€bn)
33.7 32.8 32.3

32.0 32.0
2.2 2.3 2.4 2.4 2.6
2.8 2.8 2.9 2.9 2.9 Total
4.9 Non-Motor
5.1 5.0 5.2 CAGR 13-17 Other
5.1
5.0 +2.1% General TPL
5.0 5.1 5.4 5.7
Fire & other damages
Accident & Sickness
Motor Motor
18.6 17.6 16.6 16.1 16.0 CAGR 13-17
-3.7%
2017 Breakdown of GWP by distribution channel

In 2017 non-life GWP increased by 1.2%, with a differentiated
performance between Motor and Non-Motor.
0.2%
Motor-related business still represents ca. 49% of the market,
15% Banks but continued to decrease in 2017 by -0.8%, as insurers are
diversifying away from a highly competitive market with reduced
€32bn
Agents
79%
Financial promoters
margins (MTPL combined ratio of 97.1% in 2017).
Brokers and direct sales
On the other hand, sales of non-motor products grew by 3.2% in
6% line with the increase started in 2013. In particular, health
premiums (included primarily under Accident LoB) increased for
the second consecutive year at almost +10%.
In terms of distributive approach, agents remain the primary
Source: PwC analysis on IVASS data channel, although banks are setting as a strategic target for next
years a strong growth in non-life products distributed.
Direct sales premiums are stable

2017 Non-life GWP of main companies distributing primarily via direct sales
Zurich Total
In 2017, relevance of sales € million Genialloyd Verti Genertel Linear Quixa
Connect by LoB
through internet and telephone
channels decreased from 4.7% to MTPL 513.9 211.0 278.5 122.5 101.7 73.8 1,301
4.4% of total non-life GWP (7.9% to Other
88.1 214.5 60.3 12.1 5.4 28.0 408
7.5% if considering motor business Motor
only) Accident &
Sickness
22.7 42.5 20.0 8.7 2.7 3.1 100
Main companies selling primarily Fire & other
4.4 0.5 10.9 0.3 0 0.4 17
through direct channel accounted damages
GWP equal to €1,929m, of which 2.2 0.2 3.8 0.1 0 0.1 6

GTPL
€1,712m (or 88.6%) related to motor
business. Direct companies Other 40.6 10.3 6.3 6.3 3.8 4.0 97
operating in the Italian market are
Total by
usually part of leading insurance company
672.1 479.0 405.4 150.0 113.6 109.5 1,929
groups. Ranking non-life
# 11 # 15 # 19 # 37 # 43 # 47
insurance market
2013/2017 Trend of direct sales over distributed GWP
€1.4bn €1.4bn €1.3bn €1.2bn €1.2bn

€1.6bn €1.6bn €1.5bn €1.4bn €1.4bn
7.7% 7.9% 7.9%

7.5% 7.5%
4.8% 4.8% 4.7% 4.4% 4.3%

Source: PwC analysis
Motor LoBs Total Non-life market
Expense, loss and combined ratios
2013/2017 Combined ratio Loss ratio increased by 0.8% (63.6% vs. 62.8% in 2016),
influenced in particular by Fire and Other Damages LoBs
90.1% 90.1% 89.4% 90.3% 91.2%
where the ratio increased by +10 and +11 percentage points
respectively, as a consequence of higher seismic and
25.0% 26.2% 27.0% 27.4% 27.6%
atmospheric damages.
Expense ratio increased by +0.2 percentage points, primarily
due to the +0.3 increase in acquisition costs in non-motor
65.0% 63.9% 62.4% 62.8% 63.6%
business as a consequence of the expansion in these Lines of
Business. On the other hand, in motor-business acquisition costs
are decreasing in respect to GWP, reducing the ratio by -2
FY13 FY14 FY15 FY16 FY17 percentage points.
Loss ratio Expense ratio
As a consequence of the above, combined ratio increased in 2017
by +0.9 percentage points.
2017 Expense, loss and combined ratios by LoB
97.1% 103.8% 105.0% 97.1%

90.4% 91.3%
83.4% 32.4%
75.6% 18.9% 33.7% 21.2% 75.4% 70.1% 71.4%
22.9% 30.7% 18.9% 64.4% 65.4% 62.1%
58.4% 55.1%
36.4% 33.1% 34.0%
30.5% 12.2% 34.7%
38.7% 37.4%
78.2% 72.6% 75.9% 30.1%
67.5% 60.6%
24.3% 64.5% 70.1%
39.2% 46.2% 42.3% 37.4%
15.0% 33.9% 35.4% 26.7%
25.0% 24.7%
9.3%
Accident Sickness Land Railway Aircraft Ships Goods in Fire and Other Motor Aircraft General TPL Credit Suretyship Financial Legal Assistance
vehicles rolling transit natural damage to vehicle + liability loss expenses
stocks forces property Ships
liability
Source: ANIA Loss ratio Expense ratio

MTPL shows a declining trend

2008/2017 MTPL GWP of Italian insurers Average MTPL tariffs Black box contracts
by Region (2017) diffusion by Region (2017)
CAGR:
-3.1%
17,605 17,760 17,542
17,007 16,964
16,230
15,180
14,187
13,494 13,203
Average premium<€380 Black box agreement rate <10%

€380<Average premium<€430 Black box agreement rate between 15% and 20%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Average premium>€430 Black box agreement rate >20%
Evolution of average MTPL tariffs (2007=100)

“Normal” insurance economic cycle The fall of average MTPL tariffs (-4.7% vs. 2016) is mainly due to:
Progressive diffusion of
(increasing tariffs along
with decreasing Combined Ratio)
telematics products • Rising competition and customers churn rate which
108% 107
resulted in:
106% 106
a) Diffusion of online aggregators (helping comparability
101% 103% 102
101 between different offers)
Combined 98% 97%
ratio (%) 100 96 95
94% b) Introduction of new rules on agency distribution (multi-
92%
90% 90
firm agents)
88%
Average • Technological innovations such as telematics black box
Price 84
(Indexed, 80
products (as of IV quarter 2017, ca. 419 thousand contracts
2008=100) included black box in 2017, c.a. 21% of total) and pay-as-you drive
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • Decrease in the use of motor vehicles due to car sharing
Source: PwC analysis on IVASS, ANIA, Insurance Europe and European Automobile initiatives, pollution and increase of congestion restricted areas
Manufacturers' Association

Elderly insurance, new services to meet increasing

needs of people
Focus by Luigi Barcarolo | Insurance Analytics and Business Architecture | Cattolica Assicurazioni
The offer towards elderly is

integrating worldwide, while in
Demand for services and Seniors demand a positive Italy several players offer
products towards elderly perspective for life, in order to fragmented assistance in
Average age in Italy increases
already represents a market fulfill their goals, by staying various areas and no provider
yearly by 2.5 months; the
of €30bn, including assisted healthy and socially offers an integrated service to
share of over-85 people is
living, home care, nursing active. Higher savings and address needs of elderly and
expected to double from
homes and financial services. spending capacity than their families.
current 6% (as of 2017), to
Such market is expected to average enable them to
13% in 2050.
grow by +35% by 2025. purchase a wide range of
products and services with
the support of their family.
The strategic view of Cattolica Group

Cattolica Group aims in its 2018-2020 Business Plan to invest and increase its market share in prevention and protection to
elderly and their caregivers.
The first step in this direction has been the financial and industrial partnership with Coopselios, the main cooperative nursing
home (‘RSA’) in Italy. The transaction has taken place through the set-up of a Real Estate fund “Fondo Innovazione Salute” and, as a
second step, foresees the integrated offer of services and insurance products to meet the need of assistance, health, care and support to
elderly and their families.

Health insurance confirms growth and future potential

2013/2017 Italian ‘LoB – Sickness’ GWP (€m)
In 2017, Italian health insurance GWP (included mainly
9.6% 9.53%
4.2% under Sickness LoB*) continued to grow (+€222m compared to
(0.8%) 1.2% 2016 or +9.5%), reaching the highest recorded level
-0.2%
(3.0%) -2.4% 2,571
-4.9% -2.6% 2,349 Group policies, such as medical expenses coverage offered to
2,073 2,056 2,143
employees by employers, represent the most common
distribution model (in 2017 ca. 74% of GWP); such model
offers a mutuality benefit for both insurers and policyholders,
spreading the cost of risk to a wider population.
Traditionally the market is fairly concentrated, with 5 main

players making up 79% of GWP in 2017.
2013 2014 2015 2016 2017
LoB 2 GWP(€m) % Growth Non-life (y/y) % Growth Health (y/y) The average loss ratio for the LoB in 2017 was 66.5%,
significantly lower than Motor (73.2%), but higher than the
average in the Non-Motor business (51.9%)
Top 5 ‘LoB – Sickness’ Insurance groups by GWP (€m), 2017
2012/2016 ‘LoB – Sickness’ Loss Ratio
73.1% 73.2%
1 Unipol Group €632m 4 Allianz Group €262m 71.1%
70.1%
68.4% 68.3%
66.9% 66.5%
67.8%
65.5%
Reale Mutua 59.3%
2 Generali Group €575m 5 €139m 57.3%
Group
51.8% 51.9%
49.8%
RBM
3 Assicurazione €430m Other €533m
& Slaute 2013 2014 2015 2016 2017
Health Motor (MTPL & Other motor)
(*) Coverage of healthcare expenses is also provided by parts of ’01-Accidents’ and ’18-Assistance’ businesses Other Non-Motor business
Source: ANIA

Evolution of the Italian healthcare system

Historically low coverage levels Italian and French private medical expenditure in 2017
In 2017 in Italy, 22% of the cost of medical treatments is Italy France
covered by private individuals, as ‘out-of-the-pocket’, while 4% 13%
only 4% of the cost is covered by insurance. In comparison,
in France, a country with a comparable significant share of 22% 6%
public healthcare, insurance covered 13% of expenses
Demographic trends €154bn €262bn

Italian population is subject to an aging process, ongoing since
previous decades. Over-65 year old people were estimated to 74%
81%
account for ca. 22% of the population in 2017. Consequently,
medical expenditure has risen in the last 10 years at a 1.5%
CAGR, up to €154bn in 2017
2007/2017 Italian medical expenditure (€bn) Connected Health and Big Data
CAGR: Technological innovation (e.g. wearable devices,
+1,5%
147 147 149 149
154 electronic medical folders) is providing major benefits:
142 146 146
138 141
134 • Better assessment of client risk profiles, reflected
34 35 40
31 31 31 33 33 33 33 in a higher client retention
30
• Change of the type of offered services, tending towards an
integrated service of prevention and continuous
monitoring
107 110 111 113 114 113 114 115 113 114
104
Demands unaddressed by the public sector
In 2017, periodic monitoring from the Italian Ministry of
Health showed that 5 out of 16 analyzed regions in Italy
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
could not fully reach minimum standards of
Public medical expenditure Private medical expenditure healthcare services required
Source: “VIII Rapporto RBM - Censis” - 2018, ISTAT, OECD

9M18 overview & industry outlook

PwC 24
Section 4 – 9M18 overview & industry outlook
9M18: Insurance market trend update
9M14/9M18 Italian market GWP

105.5 108.7
99.8 99.9
95.1
23.2 22.6
22.5 23.1
22.6 Non-Life
€ million
Life
82.4 86.1
77.3 72.5 76.8
9M14 9M15 9M16 9M17 9M18
Source: PwC analysis on IVASS data
9M18 Italian Life & non-Life GWP breakdown per LoB

9M18 total GWP (life and non-life) increased by €4.8bn compared to
the previous year with a growth of 5.1%, in line with forecasts of +5%
for 2018. The increase in GWP is pushed in particular by life business, 63% Non-life market - Breakdown per motor and non-motor
growing by +6.0% with respect to the same period of 2017. 3M13 30%
In specific, sales in life investment products grew by 9.0% compared to Life Non-life 48%
9M17, combined with a solid growth also on traditional products €77bn 52%
€23bn
+4.4% compared to 9M17. 42%
58%
For what concerns non-life business, Sickness (+7.9% compared to 4%
9M17), Land-vehicles (+5.8% compared to 9M17) and Other Damages
2%
(+5.8% compared to 9M17) coverages are leading the +1.7% growth in Traditional products
Unit & Index linked
the portfolio, in line with 2018 forecasts. Capitalisations Motor
Others (Mutual funds & Sickness) Non-Motor

9M18: life insurance market update
Life GWP quarter breakdown per LoB
62,750
57,752 56,796
46,604 48,718
€ million
24,414 22,658 23,274

15,147 17,241
3,482 2,775 1,965 1,684 3,255 1,167 1,267 1,433 1,563

976
Traditional products Unit & Index linked Capitalisations Others (Mutual funds & Sickness)
9M14 9M15 9M16 9M17 9M18

Breakdown per type of policies Breakdown per channel
8.5% 14.4% 14.0%

16.8% 15.3%
9M18 64% 36%
FY17 64% 36%

69.9% 62.3% 61.0% 63.0%
62.0%
FY16 72% 28%
FY15 68% 32%

1.0% 0.5% 1.2% 1.3% 2.0%
FY14 75% 25% 20.2% 21.2% 22.1% 22.4% 21.0%
0% 20% 40% 60% 80% 100% FY14 FY15 FY16 FY17 9M18
Traditional contracts Investment contracts Agents Others Banks Financial promoters

9M18: non-life insurance market update
GWP breakdown per motor and non-motor Breakdown per distribution channel
0.2% 0.2% 0.2% 0.2% 0.2%
4.3% 4.7% 5.5% 6.2% 6.7%
23,153 23,090 18.4% 14.0% 14.4% 14.7%
22,619 22,470 22,604 17.4%
€ million
10,083 10,259 10,556 10,838 11,192
77.0% 81.1% 79.9% 78.9% 75.7%
13,070 12,360 11,914 11,766 11,898
9M14 9M15 9M16 9M17 9M18 FY14 FY15 FY16 FY17 9M18
Motor Non-Motor Agents Brokers and direct sales Banks Financial promoters
Source: PwC analysis on IVASS data Source: PwC analysis on IVASS data
GWP breakdown per main LoB
13,070
12,36011,914
11,76611,898
€ million
3,912
3,367 3,450 3,615 3,782 3,275 3,254 3,325 3,337 3,477
1,808 1,853 1,866 1,872 1,922 1,634 1,702 1,750 1,848 1,882
Motor Accident & Sickness Fire & other damages General TPL Other
9M14 9M15 9M16 9M17 9M18


Industry outlook
In 2017, Italian GDP increased by 1.5%, with the expectation for 2018 Life GWP outlook
2018 of a lower growth by 1%. 98,610 101,085
According to the Italian Association of Insurance Companies

(ANIA), the Italian insurance market will return to a generalized 76% of
2018 forecast
growth by +2.4% in 2018.
€ million
Life business in particular will grow by +2.5% and reach ca. 76,81
0
€101bn, pushed by traditional products (+3.0%) as sales will
+6.0%
be supported by the growth in bond interest rates. Investment vs. 9M17
products on the other hand are expected to decrease by -2.5%
as a consequence of volatility in 2018 in the Italian financial Actual 2017 Forecast 2018 Actual 9M18
market.
Italian non-life GWP is expected to increase by 2.1% in 2018,
as non-motor LoBs are expected to benefit from the economic
2018 Non-life GWP outlook
outlook. In particular, health insurance is expected to continue
growing by +7%, while property businesses will be
supported by fiscal benefits introduced in 2018 and would
32,340 33,027
grow by +6%. With regards to motor business, sales on MTPL € million
69.9% of
are expected to remain stable with constant average 2018 forecast
premiums, whereas Land Vehicles would grow by +6%. 23,090
+2.2%
vs. 9M17
Actual 2017 Forecast 2018 Actual 9M18
Source: OCSE, ANIA

M&A activity

PwC 29
Section 5 – M&A activity
M&A Transactions
Life market – Recent Italian transactions Recent deals

PwC has assisted clients on most of the deals in
Stake Deal Size
# Year Target Bidder % (€m)
the life and non-life Italian markets
1 2 01 8 Pr a m er ica Life SpA Globa l Ba n ker s In su r a n ce LLP * 1 0 0 .0 % 85 In specific, the team advised on the following:
2 2 01 7 Popola r e V it a SpA Ca t t olica A ssicu r a zion i SCpA 65% 545
3 2 01 7 Eu r ov it a A ssicu r a zion i SpA Cin v en Pa r t n er s LLP nd nd
 Equity Transactions (buy-side and sell-side)
4 2 01 6 UNIQA Pr ot ezion e SpA Societ a Rea le Mu t u a di A ssicu r a zion i SpA 1 00% 295  Processes related to renovation of existing
5 2 01 6 Old Mu t u a l W ea lt h It a ly SpA Cin v en Pa r t n er s LLP 1 00% 27 8 bancassurance agreements or signing of new
6 2 01 5 C.B.A . V it a SpA HDI A ssicu r a zion i SpA 1 00% nd
7 2 01 5 ERGO Pr ev iden za SpA Cin v en Pa r t n er s LLP nd nd
distribution partnerships
8 2 01 4 Ca r ig e V it a Nu ov a SpA A pollo Globa l Ma n a g em en t LLC 1 00% 170  Supporting in the development of several
9 2 01 3 Eu r ov it a A ssicu r a zion i SpA JC Flow er s & Co. LLC 80% 47 business plans for both life and non-life
10 2 01 2 Ch ia r a V it a SpA Helv et ia Holdin g A G 3 0% 23
insurance companies
* Global Bankers Insurance and Pramerica Life agreed on 8th February 2019 not to complete the acquisition.  Feasibility studies related to the launch of
Non-life market - Recent Italian transactions new products
Stake Deal Size

# Year Target Bidder % (€m)
1 2 01 8 Pr im a A ssicu r a zion i SpA Bla ckst on e Gr ou p / Goldm a n Sa ch s nd 1 00
2 2 01 8 IMA it a lia A ssist a n ce SpA Ca t t olica A ssicu r a zion i SCpA 35% 9
3 2 01 8 Net In su r a n ce SpA A r ch im ede SpA 3 0% 9
4 2 01 7 A v ipop A ssicu r a zion i SpA Ca t t olica A ssicu r a zion i SCpA 65% 3 09
5 2 01 7 A v ipop A ssicu r a zion i SpA Gr u ppo Ba n ca Popola r e di Mila n o 5 0% 265
6 2 01 6 UNIQA A ssicu r a zion i SpA Societ a Rea le Mu t u a di A ssicu r a zion i SpA
1 00% 295
7 2 01 6 ERGO A ssicu r a zion i SpA Da r a g A G nd 50
8 2 01 6 Filo dir et t o A ssicu r a zion i SpA Gr u ppo In t er g ea SpA 51% 7
9 2 01 5 In Ch ia r o A ssicu r a zion i SpA HDI A ssicu r a zion i SpA 49% nd
10 2 01 5 ERGO A ssicu r a zion i SpA Cin v en Pa r t n er s LLP nd nd
Source: PwC analysis on Mergermarket and Bankit data

Section 5 – M&A activity
Return On Equity historical trend

Life market (€bn)
2.5 -1.8 3.8 0.3 -2.6 5.1 3.1 3.5 3.8 3.5 Net Income
12.7% 15.2%
8.2% 9.2% 9.6% 9.2% 9.1%
1.0%
-8.2% -9.3% 38.1 37.8 38.9 39.1 38.1
33.7
30.0 29.3 28.2
22.0
ROE
Equity
Non-Life market (€bn)
-0.2 0.1 -1 -1 0.6 2.1 2.4 2 2.1 2.4 Net Income
8.2% 9.2% 7.2% 7.8% 8.7%

2.2%
-0.9% 0.3%
-4.8% -5.1%
27.3 27.3 28.9

25.8 26.6 ROE
21.8 21.0 20.0 20.6
18.9 Equity
Source: PwC analysis on IVASS Data

Our contacts
Marco Falchero Gabriele Picuti

Associate Partner | Financial Services Manager| Financial Services
M: +39 335 8086953 M: +39 344 1530845

marco.falchero@pwc.com gabriele.picuti@pwc.com
Davide Bigatti
Senior Associate | Financial Services
M: +39 340 5872955

davide.bigatti@pwc.com
© 2019 PricewaterhouseCoopers Advisory SpA. All rights reserved. PwC refers to PricewaterhouseCoopers Advisory SpA and may sometimes refer to the PwC
network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes
only, and should not be used as a substitute for consultation with professional advisors.

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The Italian Insurance

The Italian Insurance Market • 2017 figures + 9M18 overview

Italian insurance market

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 2

Italian insurance market trend

FY13 FY14 FY15 FY16 FY17

In 2017 Italian GWP decreased by -2.4%, continuing the

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 3

Top Italian insurance players Companies

market share 17,405 market share

2017 top 5 ranking of non-life insurance companies and groups by GWP

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 4

FTSE All Share Insurance

FTSE All Share Insurance Spread BTP-Bund

The negative trend in motor premiums continues, but

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 6

250% 255% 250%

2017 Composition of Basic Solvency Capital Requirement (BSCR)

13% (21%) The introduction of Solvency II regulatory framework in

The main source of risk is represented by market risk

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 7

The Italian Insurance Market • 2017 figures + 9M18 overview

Italian life insurance market

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 8

Italian life business distribution

2013/2017 Italian market life GWP (€mn) Product mix

On the other hand, sales of investment contracts (i.e. unit-

Source: PwC analysis on IVASS and ANIA data

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 9

Breakdown of net inflows

Breakdown of net inflows Net inflows breakdown by LoB

Traditional Unit & Pension

Written premiums Amounts paid

Source: PwC analysis on ANIA data

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 10

3.77% 3.56% Focus on segregated funds

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 11

FY15 11% 72% 17%

FY16 18% 69% 13%

FY17 22% 63% 15%

Agencies & others Banks Financial promoters

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 12

The Italian Insurance Market • 2017 figures + 9M18 overview

Italian non-life insurance market

PwC | The Italian Insurance Market • 2017 figures + 9M18 overview 13

Italian non-life insurance at a glance

33.7 32.8 32.3

FY13 FY14 FY15 FY16 FY17

2017 Breakdown of GWP by distribution channel

Direct sales premiums are stable

GWP equal to €1,929m, of which 2.2 0.2 3.8 0.1 0 0.1 6

2013/2017 Trend of direct sales over distributed GWP

€1.4bn €1.4bn €1.3bn €1.2bn €1.2bn

7.7% 7.9% 7.9%

4.8% 4.8% 4.7% 4.4% 4.3%

FY13 FY14 FY15 FY16 FY17

Expense, loss and combined ratios

2017 Expense, loss and combined ratios by LoB