Capital management

Generali Group aims at maintaining both a level of capital adequacy consistent to the current requirements of the prudential supervision, and to the coming Solvency II framework. Compared to Solvency I, the framework currently being developed at European level, is characterized by a market consistent valuation of all balance sheet items and by the consideration of all risks the Group is exposed to. Risk calibration is performed according to the Value at Risk approach with a confidence level of 99.5% over a one year period. The risk appetite defined at Group level gives due consideration to that calibration level, even increasing it for internal and ratings purposes.

The use of the Group Internal Model, along with Embedded Value metrics, supports the capital management processes within the strategic planning activities

The main Group's objectives in capital management are the following:

  • to grant that solvency requirements defined by the regulatory frameworks of each operating segment where the Parent Company and participated companies operate (non-life segment, life segment and financial segment) are fulfilled;
  • to ensure business continuity and the capacity to develop its activity;
  • to continue guaranteeing an adequate remuneration of shareholders’ capital;
  • to pursue the optimal ratio between equity and debt, by ensuring adequate remuneration of all capital and debt sources; and
  • to determine adequate pricing policies which are consistent with risk levels of each activity sector.

In this context, the main evidences related to current capital requirements are then described.

In each country the Group operates, local laws and/or local supervisor authorities require a minimum capital. This minimum capital should be maintained by each subsidiary to face its insurance obligations and/or operational risks. This minimum level of capital has been continuatively maintained during the financial year.

The Group is a financial conglomerate and it is subject to a supplementary supervision about adequacy capital requirements, risk concentration, intra-group transactions and internal control. In 2011, the Group available margin amounts to € 20.8 billion (€ 22.3 billion at 31 December 2010) and the Group required margin to € 17.8 billion (€ 16.9 billion at 31 December 2010). Therefore, the Group Solvency I cover ratio (i.e. the ratio of available margin to required margin) is 117% (132% at 31 December 2010).

The regulation framework concerning the adjusted solvency regime is currently in evolution. The objective of legislation update is to limit the impact of the financial markets volatility, in particular that related to debt securities issued or guaranteed by countries of the European Union, on the solvency parameters of the Italian insurance companies.

In the aforementioned context of particular legislative uncertainty the usual sensitivity analysis to market risk is not provided, as not significant in perspective terms.