The operating result of the Life segment stood at € 3,067 million, up 2.8% compared to € 2,982 million at the close of 2017. Specifically, the technical margin net of insurance operating expenses grew.
The operating return on investments8 of the Life segment stood at 0.83% (0.82% at 31 December 2017), despite the current environment of low interest rates.
Technical margin
Life segment operating result: technical margin
| (€ million) | 31/12/2018 | 31/12/2017 | Change |
|---|---|---|---|
| Net investment result | 1,835 | 2,098 | -12.6% |
| Operating income from investments | 2,642 | 13,606 | -80.6% |
| Net income from investments | 8,991 | 10,104 | -11.0% |
| Current income from investments | 9,518 | 9,682 | -1.7% |
| Net operating realized gains on investments | 1,220 | 1,558 | -21.7% |
| Net operating impairment losses on investments | -817 | -266 | n,s, |
| Other operating net financial expenses | -931 | -870 | 7.0% |
| Net income from financial instruments at fair value through profit or loss | -6,349 | 3,502 | n,s, |
| Net income from financial instruments related to unit and index-linked policies | -5,834 | 3,849 | n,s, |
| Net other income from financial instruments at fair value through profit or loss | -515 | -346 | 48.6% |
| Policyholders' interests on operating income from own investments | -807 | 11,508 | -93.0% |
The technical margin9, equal to € 5,819 million, was experiencing strong growth; in particular, note the increase in loadings, the improvement in the impact of longevity risk in France, and the increase in fees from the sale of unitlinked products in Italy.
This margin does not include the insurance operating expenses, reported under the item insurance and other operating expenses.
Net investment result
Life segment operating result: technical margin
| (€ million) | 31/12/2018 | 31/12/2017 | Change |
|---|---|---|---|
| Technical margin | 5,819 | 5,430 | 7.2% |
| Loadings | 3,117 | 3,075 | 1.4% |
| Technical and other result | 1,345 | 1,065 | 26.3% |
| Unit/index-linked fees | 1,357 | 1,290 | 5.2% |
The net investment result, amounting to € 1,835 million, was down (-12.6%) from the € 2,098 million at 31 December 2017.
This trend was, in particular, determined by the reduction in net income from investments, impacted by an increase in impairments and a drop in the realized component. In particular:
- current income from investments - which also include the current income from investments at fair value through profit or loss - was down at € 9,518 million (€ 9,682 million at 31 December 2017), while the related profitability, calculated based on the book value of the investments, was down to 3.1%;
- net operating realized gains on investments stood at € 1,220 million (€ 1,558 million at 31 December 2017) against a general decline in realized gains on all asset classes, deriving in part from planned Asset & Liability Management operations;
- net operating impairment losses on investments went from € -266 million at 31 December 2017 to € -817 million. This trend mainly reflected the impairments on equity securities following the negative market performance in the last year;
- other operating net financial expense, which includes interest expense on liabilities linked to operating activities and investment management expenses, amounted to € -931 million (€ -870 million at 31 December 2017).
The net income from financial assets and liabilities related to unit and index-linked contracts fell from € 3,849 million at 31 December 2017 to € -5,834 million. This trend reflected the change in the value of investments caused by a rise in spreads on corporate bonds and the negative performance of some equity markets compared to the corresponding period of the previous year.
The policyholders’ interests on operating income from own investments rose from € -11,508 million at 31 December 2017 to € -807 million, mainly due to the related decrease in income from financial instruments at fair value through profit or loss related to linked contracts.
Insurance and other operating expenses
Life segment operating result: total insurance and other operating expenses
| (€ million) | 31/12/2018 | 31/12/2017 | Change |
|---|---|---|---|
| Insurance and other operating expenses | -4,587 | -4,546 | 0.9% |
| Acquisition and administration costs related to insurance business | -4,497 | -4,452 | -1.0% |
| Net other operating expenses | -90 | -94 | -4.4% |
The insurance and other operating expenses increased from € -4,546 million at 31 December 2017 to € -4,587 million. In particular, insurance operating expenses amounted to € -4,497 million (+1.0%). The acquisition costs, which amounted to € -3,592 million, remained essentially stable. Administrative costs increased, to € -906 million (+ 3.8%), for the trends observed in Italy and France. The ratio of the acquisition and administration costs to premiums stood at 10.2% (10.1% at December 2017).
The percentage of the total administration costs related to insurance business to the average insurance provisions remained substantially stable at 0.27%. The net other operating expenses fell slightly to € -90 million (€ -94 million at 31 December 2017). This item also included the brand royalties paid by the companies in this segment to the Parent Company for global marketing and branding activities.
8 Please refer to the Glossary for details on the method on the calculation of this indicator.
9 Please refer to the Methodological note on alternative performance measures for details on the calculation of this indicator.