The table below shows the development of NBV from 2010 to 2011, together with the usual main profitability indicators.

New Business Value 2011 and 2010 (€ mln)
2011 2010 Change
NBV 976 1,050 -7.1%
Annual premiums 3,094 3,052 1.4%
Single premiums 16,933 22,810 -25.8%
APE 4,787 5,333 -10.2%
Profitability on APE 20.4% 19.7% +0.7 pts
PVNBP 43,197 48,014 -10.0%
Profitability on PVNBP 2.3% 2.2% +0.1 pts
IRR 12.6% 13.9% -1.3 pts
Payback period (yrs) 7.4 6.5 +0.8 yrs

On a like for like basis (neutralising the impacts of changes in perimeter and exchange rate fluctuations), APE decreases at an aggregate level by 9.0%, with the positive performance of annual premiums (+2.7%) offset by the drop of single premiums (-24.8%) compared to the high production of 2010. The weight of more profitable annual premiums on total APE moves from 57.2% to 64.6%.

The effects of the financial crisis have affected APE of both the unit-linked (-16.9%) and the traditional saving (-8.6%) business, whilst the protection business reports a positive development (+2.7%).

The variations of APE from 2010 to 2011 are also affected by the extraordinary production of unit-linked business registered in the first quarter of 2010, relative to policies written in Ireland in the context of the Italian tax amnesty. Net of such extraordinary production, APE decreases by 7.6%.

New business profitability shows an increase both in terms of margin on APE (from 19.7% to 20.4%) and in terms of margin on PVNBP (from 2.2% to 2.3%), thanks to the more favourable mix of volumes/products and the rigorous pricing.

As a consequence, NBV decreases from 1,050mln to 976mln (-5.6% on a like for like basis), as reported in the following table.

Movement of New Business Value (€ mln) and NBM (%)

New business value 2010 1,05019.7%
Change in perimeter –14 
Exchange rate fluctuation –3 
Products mix/volume  –86
Profitability 28 
New business value 2011 97620.4%

The 2011 new business strain (i.e. the investment made by the shareholder into the new business in the first year) amounts to -1,746mln, corresponding to the sum of the negative contribution to profit in the year of sale (-987mln) and the capital absorbed by the new business (-760mln).

The year-on-year increased weight on new business premiums of the industrial profit (from 3.8% to 4.9%) is mainly due to the increased weight of annual premiums, which compared to single premiums are more profitable but pay higher commissions to the distribution network.

The year-on-year increased weight on new business premiums of the capital absorbed by new business (from 2.8% to 3.8%) derives from the significant increase of the required capital at portfolio level (mainly due to the extreme 2011 market conditions), which is attributed on a pro-quota basis to the new production of the year.

Such overall increase in the new business strain (from 6.6% to 8.7% of new business premiums) is the primary reason of the deterioration of both the internal rate of return implicit in the new business sold during 2011 (from 13.9% in 2010 to 12.6%) and the payback period (from 6.5 years in 2010 to 7.4 years), calculated in a “real-world” best estimate scenario (with investment returns based on actual local government bond returns - see Annex B1).

Finally, the following table shows the breakdown of NBV into its components:

Breakdown of New Business Value 2011 and 2010 (€ mln)

2011 2010 Change
PVFP before Time Value of FG&O 1,698 1,738 -2.3%
Time Value of FG&O -449 -432 3.8%
PVFP after Time Value of FG&O 1,249 1,306 -4.3%
Cost of capital -109 -103 5.9%
Cost of NHR -164 -152 7.7%
New Business Value 976 1,050 -7.1%