Operating result

Technical margin
(€ million) 31.12.2011 31.12.2010 Fourth quarter
2011
Fourth quarter
2010
Technical result 669.3 184.3 177.0 31.5
Net earned premiums 20,662.5 20,274.0 5,295.1 5,143.1
Net insurance benefits and claims -14,247.4 -14,451.4 -3,579.7 -3,638.8
Net acquistion and administration costs -5,699.9 -5,582.2 -1,527.0 -1,450.7
Other net technical income -45.9 -56.1 -11.4 -22.2

As mentioned above, considerable growth continued to be reported with reference to the technical result, which rose from € 184.3 million at 31 December 2010 to € 669.3 million, thanks to the efficacy of tariff, underwriting and claims settlement policies that resulted in a decrease in the average cost paid in the Group’s main countries of operation. These trends determined an improvement in the combined ratio, which stood at 96.5% (98.8% at 31 December 2010).


31.12.2011 31.12.2010 Fourth quarter
2011
Fourth quarter
2010
Loss ratio 69.0% 71.3% 67.6% 70.8%
Expense ratio 27.6% 27.5% 28.8% 28.2%
Acquisition costs / net premiums 21.6% 21.5% 22.7% 22.3%
Administration cost / net premiums 6.0% 6.0% 6.1% 5.9%
Combined ratio 96.5% 98.8% 96.4% 99.0%

Confirming the trend already seen in the first nine months of the year, the loss ratio declined (down 2.3 pps) to 69.0%. The current loss ratio related to non-catastrophic events continued to decline (down 1.7 pps) owing to the reduction seen in both the Non-motor line, in Italy and in foreign markets, especially in Germany, Central and Eastern Europe and Spain, as well as in the Motor line, especially in Italy, owing in part to the effective claims settlement activities.

The above-mentioned improvement in the current loss ratio was partly offset by the lower contribution of previous years run off, which was however obtained in the usual context of prudence in the reservation policy of the Group, as well as by the aforementioned higher reinsurance cost.

As a result of the increase in written premiums, operating expenses increased by 2.1% to € 5,699.9 million. In fact, the growth of 2.2% of  the acquisition costs, which stood at € 4,461.9 million, was concentrated in the retail Non-motor line — characterized by higher underwriting costs given the line’s lower loss ratio — especially in France, Central and Eastern Europe, Latin America and Switzerland. Lastly, there was also a rise in administration costs (up 1.8%) to € 1,238.0 million, essentially due to increases reported in Latin America, owing also to the dynamics of the inflation rate that charaterizes the countries of this area.

The expense ratio remained however substantially stable at 27.6% (27.5% at 31 December 2010).

 
Combined ratio (*) Loss ratio Expense ratio
(%) 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Group
total
96.53 98.81 68.95 71.28 27.58 27.53
Italy 96.8 99.6 74.7 77.5 22.0 22.1
France 98.7 101.3 71.2 73.3 27.5 28.1
Germany 94.4 95.2 65.1 65.1 29.4 30.1
Central and Eastern Europe 89.5 93.2 54.5 60.2 35.0 33.0
Rest of Europe 96.4 99.3 68.3 71.4 28.1 28.0
of which Spain 94.8 98.1 68.0 71.2 26.8 26.8
of which Austria 95.3 95.2 68.2 68.3 27.1 26.9
of which Switzerland 95.5 95.9 69.0 69.0 26.5 26.9
Rest of World 104.2 101.6 65.4 64.3 38.8 37.2

(*) CAT claims impact, net of reinsurance, on the Group combined ratio for 0.9 pp, of which 0.4 pp in Italy, 0.6 pp in France, 1.9 pp in Germany and 0.8 pp in Switzerland (at 31 December 2010 the total impact was 1.9 pp of which 0.8 pp in Italy, 2.3 pp in France, 1.6 pp in Germany, 5,6 pp in Central and Eastern Europe and 0.8 pp in Spain).

Breaking the performance of the combined ratio down by the Group's main countries of operation, the ratio in Italy improved by 2.8 pps, reaching 96.8%. Given the stability of the expense ratio, which stood at 22.0% owing to the containment of operating expenses, the improvement in the combined ratio was driven solely by the positive performance of the loss ratio, as a result of an effective underwriting and claims settlement policy. The latter fell by 2.8 pps, reflecting the improvement witnessed in both segments. As mentioned above, the country was affected by severe flooding in October and November, which had an impact of 0.4 pps on the loss ratio (0.8 pps at 31 December 2010).

In France the combined ratio was 98.7%. The improvement of 2.6 pps may be attributed to the decline in both the loss ratio (2.1 pps), concentrated in the Motor line, and in the expense ratio (0.5 pps), which amounted to 27.5% due to the containment of administration costs. In November, the south of the country was struck by flooding, the effects of which had an impact of 0.6 pps on the loss ratio. In the previous year, similar catastrophic events had had an impact of 2.3 pps.

The combined ratio also improved in Germany, falling to 94.4% (down 0.8%). Given that the loss ratio remained stable at 65.1%, the decrease was due to the decline in the expense ratio (down 0.7 pps), which went to 29.4% thanks to the containment of expenses. In August and September, storms struck the country, resulting in an impact of approximately € 57 million (1.9 pps). In 2010, the impact of catastrophic events had been 1.6 pps.

There was a considerable improvement in the combined ratioin Central and Eastern Europe, which remained the best at the Group level, amounting to 89.5% (down 3.7 pps). In further detail, the increase in the expense ratio of 2.0 pps, due to the rise in acquisition costs in the Non-motor line, whose weight on the total portfolio increased, was more than offset by the considerable improvement in the loss ratio (down 5.7 pps), which went to 54.5%, thanks to the contraction witnessed in the Non-motor line. That decrease was also positively influenced by the lack of catastrophic events, which had had an impact of 5.6 pps in the same period of the previous year.

The combined ratio in Austria was substantially unchanged standing at 95.3%. In further detail, while the loss ratio remained stable, amounting to 68.2%, the expense ratio rose slightly (up 0.2 pps) as a result of the increase in acquisition costs in the Non-motor line.

There was a considerable improvement in the combined ratio in Spain (3.3 pps), which amounted to 94.8%, owing to the positive performance of the loss ratio (3.3 pps) in both the Motor line and, more markedly, the Non-motor line. The expense ratio was stable.

The combined ratio in Switzerland remained stable at 95.5%. There was no change in the loss ratio,- which amounted to 69.0% - affected by catastrophic events by 0.8 pps, whereas the expense ratio decreased slightly (0.3 pps).

Investment result
(€ million) 31.12.2011 31.12.2010 Fourth quarter
2011
Fourth quarter
2010
Investment result 1,120.3 1,196.1 272.5 303.0
Current income from investments 1,631.0 1,678.0 421.6 437.8
Other operating net financial expenses -510.7 -481.9 -149.1 -134.8

The investment result in the non-life segment, which consists of current income from investments and other operating net financial expenses, went from € 1,196.1 million at 31 December 2010 to 
€ 1,120.3 million. The de-risking strategy pursued by the Group in this segment allowed it to maintain a stable current income on total investments, calculated on book values, of 4.3%, characterized by the increase in income on fixed income securities, which offset the decline in dividends, and the reduction in current income on real estate investments due to the decrease in their weight within this segment. 

Current income from investments went from € 1,678.0 million at 31 December 2010 to € 1,631.0 million. As mentioned above, due to the investment strategy adopted by the Group in this segment, income from investments in fixed income securities increased, rising from € 905.5 million at 31 December 2010 to € 927.0 million, with an increase in the related return to 3.9%, whereas there were decreases in both dividends (from € 118.2 million at 31 December 2010 to € 104.5 million), although the related return increased to 2.8%, and current income from real estate investments (from € 533.5 million at 31 December 2010 to € 497.2 million), with the related return virtually stable at 8.6%.

Other operating net financial expenses, which include interest expenses on liabilities linked to operating activities and investment management expenses, amounted to € -510.7 million (€ -481.9 million at 31 December 2010).

 
Gross amount Reinsurers' share Net amount
(€ million) 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Non-life net insurance benefits and claims 15,294.9 15,744.7 -1,047.5 -1293.22018 14,247.4 14,451.4
Claims paid 15,163.5 15,563.4 -1,192.1 -1,303.0 13,971.4 14,260.5
Change in the provisions for outstanding claims 105.3 189.6 144.1 5.7 249.4 195.3
Change in claims paid to be recovered -6.6 -16.3 2.5 0.0 -4.2 -16.4
Change in other insurance provisions 32.7 7.9 -1.9 4.1 30.8 12.0
Administration costs
  Non-life segment
(€ million) 31.12.2011 31.12.2010
Net acquisition costs and other commissions 4,461.9 4,366.2
Investment management expenses 72.0 80.9
Other administration costs 1,297.2 1,280.9
Total 5,831.0 5,728.0

31.12.2011 31.12.2010 Fourth quarter
2011
Fourth quarter
2010
Loss ratio 69.0% 71.3% 67.6% 70.8%
Expense ratio 27.6% 27.5% 28.8% 28.2%
Acquisition costs / net premiums 21.6% 21.5% 22.7% 22.3%
Administration cost / net premiums 6.0% 6.0% 6.1% 5.9%
Combined ratio 96.5% 98.8% 96.4% 99.0%
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P&C profitability - Net combined ratio64.05 KB