Asset allocation
Investments at 31 December 2018
(€ mln)
Investments at 31 December 2017
(€ mln)
At 31 December 2018, total investments amounted to € 415,994 million, a slight decrease compared to the previous year (-0.8%). Group investments amounted to € 350,205 million (-0.3%) and linked investments amounted to € 65,789 million (-2.9%).
In terms of weight of the main investment categories, the relative exposure of the fixed income instruments was down to 85.6% (86.5% at 31 December 2017), while that of equity instruments increased, up to 5.7% (5.0% at 31 December 2017). The weight of investment properties and that of other investments also showed a slight increase, standing at 4.4% (3.9% at 31 December 2017) and 1.1% (1.0% at 31 December 2017), respectively. Other investments mainly include receivables from banks and customers, investments in subsidiaries, associated companies and joint ventures, and derivatives. Finally, the weight of liquidity went from 3.3% to 3.2%.
Fixed income instruments: bond portfolio
Bond portfolio: detail by sector
(€ bln)
Government bonds: detail by country of risk
(€ bln)
With reference to the bond portfolio, government bonds, which represented 53.2% (52.0% at 31 December 2017), were up, standing at € 159,431 million (€ 158,216 million at 31 December 2017). The change during the period was mainly attributable to the net purchasing position of the Group with respect to these types of assets. The exposure to individual government bonds was mainly allocated to the respective countries of operation, in line with the Group’s ALM policy.
The corporate component decreased in absolute terms to € 112,017 million (€ 117,207 million at 31 December 2017), equal to 37.4% of the bond portfolio (38.5% at 31 December 2017), due to the orientation of the reinvestment strategy toward the government bond component.
On the other hand, taking into account the new composition of the current portfolio, there is a substantial decrease in securities exposed to the financial sector, partially offset by an increase in exposure to the telecommunications sector.
Bond portfolio: government bonds by rating
(€ bln)
Bond portfolio: corporate bonds by rating
(€ bln)
The Group’s corporate portfolio confirmed its improvement in terms of creditworthiness, with over 93% of the securities classified as Investment Grade (91% at the end of the previous year). Non-Investment Grade securities declined by € 2.9 billion compared to 31 December 2017.
Equity instruments
(€ bln)
Equity instruments decreased in absolute terms, standing at € 19,807 million (€ 17,697 million at 31 December 2017).
The change is mainly due to the increase in the stock of alternative investments (both for appreciation and for the net purchasing position adopted by the Group) but also to the net purchases of equity instruments made in the period, in spite of a general negative trend in capital markets.
Investment properties
Direct investment properties at fair value
(€ bln)
Investment properties in terms of book value amounted to € 15,258 million (€ 13,616 million at 31 December 2017).
Specifically, the direct investment properties of the Group at fair value amounted to € 20,631 million (€ 18,025 million at 31 December 2017), and were almost all in Western Europe, mainly in Italy, France and Germany, and were held in the respective countries in which they operate.
Investment result
Return on investments
| 31/12/2018 | 31/12/2017 | |
|---|---|---|
| Economic components | ||
| Current income from fixed income instruments | 8,861 | 9,279 |
| Current income from equity instruments | 869 | 650 |
| Current income from real estate investments (*) | 738 | 725 |
| Net realized gains | 1,495 | 2,111 |
| Net impairment losses | -1,205 | -448 |
| Net unrealized gains | -549 | 357 |
| Average stock | 351,577 | 347,991 |
| Ratio | ||
| Current return (*) | 3.0% | 3.1% |
| Harvesting rate | -0.1% | 0.6% |
| P&L return | 2.8% | 3.3% |
(*) Net of depreciation of the period.
The current return on investments fell slightly, reaching 3.0% (3.1% at 31 December 2017). The performance of this indicator is attributable, on the one hand, to the increase in average investments and, on the other, to a fall in the absolute value of current income, which amounted to € 10,668 million (€ 10,847 million at 31 December 2017), due to the low interest rates obtainable as part of the reinvestment activity.
The contribution to the result of the period deriving from net realized gains, net impairment losses and net unrealized gains (harvesting rate)6 showed a decrease, reaching -0.1% (0.6% at 31 December 2017), following both a greater impact of the impairment losses, particularly significant compared to those posted in the previous period, and a lower impact of the net realized gains.
Responsible investments
(-2.2%)
€ 289 bln
direct investments of Group insurance companies to which the Responsible Investment Guideline is applied
In implementation of the Responsible Investment Guideline - the document which regulates the various responsible investment activities at Group level - we identify, evaluate and monitor issuing companies in the portfolio which are involved in controversial sectors (for example, non-conventional weapons) or in activities that involve serious or systematic violations of human rights, serious environmental damage or corruption.
Thanks to the creation of a proprietary ESG methodology - which considers environmental, social and corporate governance aspects - we evaluate the degree of responsibility and involvement of the issuing companies and promote specific actions with respect to them, ranging from a ban on making new investments to the settlement of current holdings or the retention of same until their expiration with no possibility of renewal, or even direct dialogue to encourage them to act responsibly.
A cross-functional committee named Responsible Investment Committee retains the task of supporting the decisions of the Group Chief Investment Officer in relation to potential exclusions from the investable universe of the Group.
Climate strategy
In line with the principles of responsible investment which we have been applying for years, and in execution of the Group Policy for the Environment and Climate, we have defined our commitment, even through investment activities, to mitigate climate change and transition towards energy sources as alternatives to carbon and fossil fuels.
Our rules for running business with integrity
Sustainable and responsible investment funds
Thanks to a methodology developed internally by a dedicated team - which integrates non-financial and traditional financial aspects - we select the best companies in relation to corporate social responsibility and sustainable development policies in order to establish dedicated SRI (Socially Responsible Investment) funds and mandates.
At 31 December 2018, the methodology was applied to funds and mandates totalling € 33.2 billion in assets (-2.1%)*. Of these, 81.4% was subject to the SRI analysis and reported a compliance rate of more than 90% with the Group’s SRI principles. The remaining 18.6% was not covered by the SRI analysis (funds of funds, issuers located in non-European regions, unlisted issuers).
Stewardship
As a responsible investor, we undertake to promote sustainability in our investees through proxy voting and engagement activities. To this end, the Group has developed a Voting Guideline which expresses our fundamental values, including with respect to sustainability. In 2018, the Group participated in 1,201 Shareholders’ Meetings and voted on 15,257 resolutions, 13% against, confirming the Group’s commitment to support sustainability best practices.
* The change considers 2017 comparative data restated following a change in methodology.
6 The contribution to investments backing unit-linked contracts was excluded. Please refer to the Methodological note on alternative performance measures for details on the calculation of the Return on investments.