Investments

At 31 December 2011, total investments of the life segment (1) amounted to € 312,913.0 million, of which € 304,378.4 million related to insurance liabilities. The decline compared to 31 December 2010 (down 2.0%) was due in particular to the intensification in the fourth quarter of the sovereign debt crisis in the countries of the Euro Area with a high public sector debt, which resulted in a considerable decrease in the value of these investments.

In detail, total investments other than financial assets backing linked policies amounted to € 254,601.0 million (€ 258,732.6 million at 31 December 2010), and the latter amounted to € 58,312.0 million  (€ 60,637.0 million at 31 December 2010).

In the current financial scenario the investment strategy pursued by the Group in the life segment, always with the aim to ensure an asset allocation consistent with the technical reserve profile, is extremely focused to optimize the risk/return profile in accordance with the guarantees present in outstanding portfolios. In further detail, within the Euro Area it is pursuing the gradual goal of eliminating cross-border exposure within this area by matching the liabilities of each country with securities from that same country, without prejudice to the principle of matching assets and liabilities by currency.  The investment in corporate securities has been oriented towards bonds of the non-financial sector, with a preference for short- and medium-term maturities, thereby favouring a decrease in the credit risk and thus in the capital absorption of this asset class.

With the same objective, the Group has increased the amount of cash and other cash equivalents, whose weight went from 2.7% at 31 December 2010 to 6.8%. The weight of the bond portfolio fell from 84.1% at 31 December 2010 to 81.7% and the weight of equity instruments declined from 7.3% at 31 December 2010 to 5.3%. Breaking down the portfolio of bond investments, there was a decrease in exposure to government bonds, which decreased from 57.1% at 31 December 2010 to 54.2%, whereas the corporate bonds increased to 45.8% (42.9% at 31 December 2010). The average duration of bond portfolios remained virtually stable at 6.1 years.

Exposure to real estate investments in this segment continued to increase, rising from 3.3% at 31 December 2010 to 3.9%, with the aim of supporting the current return in the context of low interest rates observable in some countries where the Group operates in order to ensure higher inflation indexed income and a limited capital absorption, as well as to realize the increase in value of such assets in the medium-long term.

Despite the difficult financial market situation, the strategy described above implemented by the Group allowed to increase the return on investments, which amounted to 4.5% (4.3% at 31 December 2010). By contrast, the contribution to the result of the period of harvesting operations was negative, falling from 0.6% at 31 December 2010 to -0.8%. In further detail, while the net realized gains recorded by the Group were largely stable, there was both an increase in impairment losses as of the second quarter on Greek bonds and a decline in value of bond and equity portfolios through profit or loss, primarily in the third quarter of the reporting year.

Another consequence of the aforementioned decline in the value of equity and bond portfolios, which was reflected in particular in shareholders’ equity, was a considerable decline in comprehensive return, which includes both the current return and changes in value of the period through both profit or loss and equity, to 0.2% (2.8% at 31 December 2010).

The actions implemented by the Group in the life segment on the bond portfolio, aiming at supporting adequate portfolio liquidity and a accurate selection of government and corporate bonds of issuers with solid valuations able to ensure adequate coupon returns, enabled the Group to sustain the growth of current returns, which amounted to 4.5% (4.4% at 31 December 2010). 

Breakdown of investments by asset classes of the life segment
 
31.12.2011 30.09.2011 31.12.2010
(€ million)Total book value% of totalTotal book value% of totalTotal book value% of total
Equity instruments (*) 13,414.7 5.3 14,363.9 5.5 18,921.4 7.3
Available for sale financial assets 11,113.5 4.4 11,998.2 4.6 16,567.1 6.4
Financial assets at fair value through profit or loss 2,301.1 0.9 2,365.7 0.9 2,354.3 0.9
Fixed income instruments (**) 208,088.2 81.7 218,216.1 84.0 217,318.1 84.0
Bonds 186,112.5 73.1 197,261.6 77.5 197,878.3 76.5
Other fixed income instruments(***) 21,975.8 8.6 20,954.5 8.1 19,439.8 7.5
Held to maturity investments 3,706.7 1.5 3,517.4 1.4 3,722.7 1.4
Loans 58,236.2 22.9 59,553.0 22.9 59,572.2 23.0
Available for sale financial assets 138,343.2 54.3 147,242.5 56.7 145,574.5 56.3
Financial assets at fair value through profit or loss 7,802.2 3.1 7,903.1 3.0 8,448.6 3.3
Land and buildings (investment properties)(****) 9,823.6 3.9 9,972.1 3.8 8,614.1 3.3
Other investments  6,017.6 2.4 6,417.4 2.5 6,898.7 2.7
Investments in subsidiaries, associated companies and joint ventures 4,523.6 1.8 4,873.7 1.9 5,121.9 2.0
Derivatives(*****) 543.8 0.2 571.3 0.2 265.2 0.1
Receivables from banks or customers 0.0 0.0 0.0 0.0 0.0 0.0
Other investments 950.2 0.4 972.3 0.4 1,511.6 0.6
Cash and cash equivalents (******) 17,256.9 6.8 10,678.3 4.1 6,980.4 2.7
Total (******) 254,601.0 100.0 259,647.8 100.0 258,732.6 100.0
Investments back to unit and index -linked policies 58,312.0
56,789.9
60,637.0
Total investments 312,913.0
316,437.7
319,369.6

(*)Investment fund units amounted to € 3,013.6 million (€ 3,034.8 milion at 30 September 2011 and € 3,561 milion at 31 December 2010).

(**) Investment fund units amounted to € 7,409.7 million (€ 7,432.3 milion at 30 September 2011 and € 7,545.6 milion at 31 December 2010).

(***) Investment fund units amounted to € 2,079.3 million (€ 2,247.4 milion at 30 September 2011 and € 2,250.6 milion at 31 December 2010).

(****)Taking into account derivative instruments booked as liabilities which amount to € 845.6 million (€ 886.8 milion at 30 September 2011 and € 760.1 milion at 31 December 2010).

(*****) Taking into account Reverse REPO which amount to € 71,1 million (€ 594.6 milion at 30 September 2011 and € 1,958.7 milion at 31 December 2010) and REPO which amount to € 359.1 million (€ 267.3 milion at 30 September 2011 and € 589.6 milion at 31 December 2010).

(******) Taking into account derivative instruments booked as liabilities and REPO.

Breakdown of investments by Country
(€ million) 31.12.2011 30.09.2011 31.12.2010 Change
YE2011/YE2010
Total investments - life segment 254,601.0 259,647.8 258,732.6 -1.6%
Italy 69,743.8 72,095.0 75,230.7 -7.3%
France 65,605.6 68,543.1 67,906.0 -3.4%
Germany 75,128.5 74,921.7 72,747.6 3.3%
Central and Eastern Europe 5,912.0 6,110.1 6,063.9 -2.5%
Rest of Europe 25,106.0 25,271.4 24,715.4 1.6%
of which Spain 7,493.0 7,685.9 7,622.2 -1.7%
of which Austria 7,015.5 7,048.5 6,985.8 0.4%
of which Switzerland 3,529.6 3,411.6 3,125.5 12.9%
Rest of World 13,105.1 12,706.5 12,069.0 8.6%

(1) Effective 30 September 2011, a part of the Israeli insurance portfolio, previously classified in the traditional business, was reclassified among linked portfolios to ensure a placement that better reflects the technical characteristics of the products issued. As a consequence, all investments hedging that portfolio have been reclassified accordingly for the comparative periods as well.