Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group Full Year 2021 Results Conference Call. At this time, I would like to turn the conference over to Ms. Giulia Raffo, Head of Investor and Rating Agency Relations.

Please go ahead, madam.

Giulia Raffo: Thank you, and welcome all to Generali 2021 full year number presentation. Before we open our Q&A session with our group CEO and our group CFO, I'd like to hand over to our group CEO, Philippe Donnet for some opening statements. Thank you very much.

Philippe Donnet: Thank you, Giulia, and thanks to all of you for joining this call.

Today, we published our full year 2021 financial results. They were strong, and this further proves the soundness of our business strategy. I will go over the highlights very shortly. Before focusing on the numbers and what we have achieved over the last year, I would like to briefly comment on what is currently happening in the Ukraine. We are all deeply shaken up by the situation and our thoughts and prayers go out to all the people who have lost loved ones and who are fleeing their homes and communities.

Recently, our group implemented several initiatives to support the war stricken population. We created an emergency fund of €3 million to support refugee programs, which includes a donation to UNHCR, the UN Refugee Agency. In addition, through our sustainability project, the Human Safety Net, we launched a global fundraising campaign to support UNICEF in the work to address impacted families and the donation collected will be matched by Generali. Further, as we recently announced, we made the decision to begin closing our operations in Russia, in line with the current international sanctions in place. These efforts are truly part of our role as an insurer and asset manager in society and as a global corporate citizen.

As far as our 2021 results are concerned, I would like to highlight five key messages. First, for the third year in a row, we posted a record operating results of almost €5.9 billion with strong contributions from all business lines. The adjusted net results of €2.8 billion is our highest to date as well. Also, our total gross written premiums rose to €75.8 billion, with an increase both in the Life and Property/Casualty segments. These accomplishments prove once again the solidity of our business model even in the current unforeseen circumstances.

Second, the group solvency ratio reached the excellent level of 227%, up 3 percentage points versus year-end 2020 whilst absorbing the impact of M&A redeployment. Following these achievements, we will propose a dividend per share of €1.07 to our shareholders. Third, with these results, our strategic plan, Generali 2021 officially reached its conclusion. Even in an unprecedented global scenario due to the COVID-19 pandemic that is still not over, we were able to execute successfully, thanks largely to our group's agility and our people. Fourth, our commitment to sustainability, which will continue to grow has allowed us to deliver a strong performance for all stakeholders.

Finally, we are now focused on our new strategic plan, Lifetime Partner 24, driving growth whose execution is well underway. It is a plan that has sustainability at its true originator and that is built around an even stronger commitment to being a lifetime partner to our customers. And now this commitment is more relevant than ever. We look forward to updating you on our progress on the plan in the upcoming months. And in the meantime, now together with my team, we are happy to take your questions.

Thank you for your attention.

Operator: . The first question is from Michael Huttner with Berenberg.

Michael Huttner: Congratulations. These are truly outstanding results.

I have two questions. The first one is on rate rises, the second one is on cash and third is on Cattolica. On rate rises, I've spoken to a lot of your peers, like my colleagues, I'm not unusual in any way to Groupama, Unipol, AXA and one of them...

Giulia Raffo: Michael, sorry to interrupt you. Can I please ask you to adjust the mic because we can't hear your voice very clearly, sorry about that.

Michael Huttner: This is better?

Giulia Raffo: Volume a bit low.

Michael Huttner: Sorry, is volume low?

Giulia Raffo: Now it's perfect.

Michael Huttner: Sorry about that. So rate rises. So you lines.

I just spoke with AXA. We've spoken with Groupama and Unipol before and all of them in various markets of France access more European and Unipol potentially say that that's having trouble raising rights at the same pace as perceived inflation of , I'm never quite sure what that means. So I just wondered if you can comment on that and whether that would affect margins because obviously, the other things you've got frequency and things. So that's the difficulty in raising prices. The second is on cash.

So €8.4 billion net cash remittance for the last 3 years, which is an amazing number, given that your initial target was over €7.5 billion. But the next -- it makes the next target look really like -- I'm not saying it's easy, nothing is easy, but it looks it's €8.5 billion, you kind of say, that's not much. And I just wondered, maybe you can comment how much conservatism built in or give us a feel because it doesn't -- it feels a little bit relative to what you achieved. And then the final one on Cattolica. Given the accounting and the change in -- from equity accounting to full consolidation, et cetera, et cetera.

I just wondered if you can give a kind of indication of what the figure would have been in 2021. Had you fully earned it throughout the year, so we can have an idea of when to create the model or what to put into '22? I can't ask you on '22, but that's the best thing.

Giulia Raffo: I suggest Philippe to take the first one and then the rest is for Cristiano.

Philippe Donnet: Hello, Michael, and thank you for your congratulations. I will take the first question.

People are not used anymore in the insurance industry to increase prices because there was no inflation for decades. And many underwriters don't even know how to increase prices every year. On my side, I mean, this business is since almost 40 years now. And I remember when I was young, I was increasing prices every year, and it was normal. And we are getting back to this kind of situation because inflation is back.

So inflation is a good way, a good lever to be able to increase price. So that's the philosophy. Having said that, we are taking actions in our group to put under pressure all business units in every countries to monitor prices, to increase prices, and we will monitor this very carefully. And I think there is something which is also very important is the quality of our distribution. As you know, it's a proprietary distribution.

We have, I would say, a very loyal distribution. And we also have -- because we have loyal distribution, we have loyal customers. I would say, we have customers that are a little bit more sticky. Thanks to our proprietary distribution, and this is also something that can help us to monitor prices better than our competitors. And I'm also going to add something which is important.

The fact that we've been strengthening our market position in many European countries and the stronger your market share is, the more pricing power you have. So I'm quite confident that we will be able to increase prices in the next few years.

Cristiano Borean: Cristiano for the money. So for -- with regards to the cash remittance, I do take the challenge you made, but I would like to clarify a couple of points. Let me look at retrospectively and then look at prospectively.

Retrospectively, the 3 years we are closing were actually accounting for some specific excess capital repatriation operation and in general, capital management actions. If I look in the 3-year, we basically had almost €1.8 billion of capital management action between '19 and '21. And on top of that, we had €300 million one-off excess cash from fiscal consolidation benefits, which is not foreseen. If you just add all these together and you strip it out and you compare the €500 million of capital management foreseen in the '22, '23, '24 plan I was commenting in December when we presented the plan, basically, it's 1.8 plus 300, 2.1 versus 500. And so there is a €1.6 billion more.

And then I take another perspective view. If you just take the net holding cash flow of 2021, which is €2.6 billion, and you might multiply it by 3, you get at €7.8 billion of net holding cash flow. So the 8.5, it is actually a little bit growing and challenging and it's not, I'd say, jogging in the fresh air, but I do take factually the point, but we need to understand the underlying dynamics. Third question related to Cattolica. Here, I hope not to disappoint you because the theoretical question is impossible to be answered.

The consolidation of a company depends when you do it, you have to reevaluate at fair value, all assets and all liabilities. So the question is depending from the moment you do it, and it is not representative of the going forward view. So allow me to maybe try to help you in your exercise, which is what you are forecasting and foreseeing going on. The contribution of Cattolica in 2021 for the group overall is €110 million, and this is stemming out from 10 months of equity accounting plus 2 months of full accounting. And here, I would like to clarify one point.

It is impossible to extrapolate the minority component result. We are not having out of a full Cattolica result because when we do the so-called purchase price allocation, we allocated the bad wheel to our -- we readjusted all the assets and the liabilities compared to what is in their balance sheet. So just to tell you, in the operating result contribution due to the fact that the first 10 months were fully accounted in the P&C component, we have €146 million of Cattolica contribution in the operating result in 2021 figure, of which €17 million in Life segment and €129 million in the P&C segment, yielding to €110 million net result because the first 10 months were accounted at equity method we saw the full amount and so it was gross equal net on the contribution. Going forward, if you like and try to project, you need to take into account the fact that Cattolica has restructuring also to go on. And you have to expect in the next year, the quota retained by Generali to pursue something which is in the mid to high double-digit million euros, so slightly below the triple-digit figure you've seen this year.

Operator: The next question is from Andrew Sinclair with Bank of America.

Andrew Sinclair: A great well done on these results. Three from me as usual, please. Firstly, it was just on parent company liquidity. I just wondered if you could give us the level today and how much would be left pro forma after deducting the announced acquisitions and buyback? Secondly, it was just on the really good P&C volumes -- premium volumes in Q4, 9.4% like-for-like growth in Q4 is a huge figure.

I just wanted to understand is there anything one-off in there? And thirdly, it was just on the Swiss reserve strengthening, I just really wondered if you can give us the contribution for 2021? What was the total number in the end? And remind us how much are you now expecting for 2022?

Giulia Raffo: Thank you, they are all for you, Cristiano.

Cristiano Borean: Yes. Andrew, so allow me to remember because when you will look at the Assicurazioni Generali local gap balance sheet, you will find for almost €4.1 billion of cash, but I have to explain the source around it. And exactly as you said, and we need to strip out a lot of elements. First, you need to remember that we prefinanced €500 million of debt which partially already happened in February and the other part will be recalled in the 1 of July of this year.

And so we had €500 million ready for that operation. On top of that, there are the €500 million for the buyback and other acquisition of the same amount, totaling another €1 billion summing buyback and the acquisition already reserved, which we announced. On top of this, don't forget that we have €1 billion liquidity buffer, which I maintain and contain to have, especially in an uncertain volatile environment as we are facing today. And the rest is just amount of money which are volatile for treasury operations. So at the end of the story, what sticks is what we presented in the Investor Day of December where basically after deducting from the buyback, we are in €0.1 billion to €0.2 billion of left, not used from the previous plan.

Regarding the P&C premium growth, is it a one-off? So what we observed for sure, there are two effects. There is an effect of the baseline of 2020, which was partially impacted on the collection -- on the COVID effect. So the 2021 restart has a relative term point. But then I recall you that due to the pricing action and the strategy we announced as well coherently in December on the strategic plan, we are expecting the low mid-percent premium growth throughout the 3 years. Third question related to the Swiss reserve strengthening contribution for 2021.

We were in the order of CHF 300 million and for 2022 I recall that the reserve is under IFRS accounting, approach is more than complete on the coverage, and we are continuing to prudently reserving also in 2022, and we are expecting something in the CHF 200 million plus depending of the situation, but obviously seen the rates are up and we do not expect a deviation out of this. I remember that every year regarding the part of the liquidity pro forma for you just to complete the first answer, I would like to add that if you look at the €2.6 billion of net holding cash flow of 2021, we deducted the proposed dividend of €1.7 billion. We are in the ballpark of €900 million, €1 billion of free cash after dividend, which is -- recurringly is composed by the group on an yearly basis.

Operator: The next question is from Farooq Hanif with JPMorgan.

Farooq Hanif: Can you just turn to the combined ratio.

So you talked about the 92.3% combined ratio if you take out COVID effect. What gives you confidence that you get back to 92% or below going forward? Can you talk about some of the drivers? And in particular, I noticed that France had big underlying loss ratio increase. You had a loss ratio increase also in Italy. Can you explain some of the factors there and what might get better? That's sort of question area number one. Question number two, could you highlight again, apart from Cattolica, are there any one-offs in the investment results in non-Life that we need to take into account? And the last question also Cattolica, could you also remind us now that it's in the business the timing and plans for any future synergies, revenue and costs that will come through that we should bake into our numbers?

Cristiano Borean: Yes.

I start with the combined ratio, Farooq. So ex-COVID drive at 92.3%. Why we stick to the 92% guidance and 92% below guidance? The drivers are mainly related to a couple of factors. For what regard the pricing part, we are increasing rates all over the board, both in personal and in commercial lines. Clearly, commercial lines higher than on the personal one, but we are having this injected already in all the line of businesses.

On top of that, we are managing our claims accordingly as a speed of payment in order to reduce also the delayed time in an inflationary environment. And on top of that, there is a frequency effect, which you should also take into account because we are observing anyhow a macro trend on potentially frequency. There is still something to be confirmed. But even the start of the year, in the first two months, the effect was less severe but very widespread around COVID infection and some lower infrequency effect. We are still below the pre-pandemic level on frequency.

So if you have to combine all the three factors, this is giving us this direction. I recall as well the very prudent prior year effect of also 2021 versus 2020. And I recall you that going forward, we have to look everything under a best estimate and not at the current year. France, combined ratio was impacted in the second half of the year because of the higher amount of frequency of bodily injury claims compared also to an increased level of prudency that we inserted in the business, but it is nothing specific related to underlying profitability we'd like to clarify. On the investment result, the effect of the benefit of Cattolica, which amounted in €83 million for the sum of the contribution of the accounting -- equity accounting plus the demands.

There was the €101 million of Banca Generali dividend and the €163 million of the dividends from Lion River. How this is sustainable going forward? If I just look at the number, we are projecting in the investment result for the P&C. We have, especially on the current return in general for all investment component and not only the current one, we have basically a stable 2022 budget versus 2021. And now I hand over to Philippe.

Philippe Donnet: Yes, on Cattolica, as you know, we -- at the moment, we own 84.5% of the shares of Cattolica, which means that we control the company, and we are already managing Cattolica as a controlled company.

We are also starting the merger process with Cattolica. So as you know, we will go for delisting and a merger or a merger and a delisting. This process requires obviously some regulatory steps. We never disclosed any plan on the merger. But obviously, we will merge as soon as possible.

And I can confirm that run rate, the cost synergies will be in excess of €80 million a year.

Farooq Hanif: If I may -- that's really clear. If I may just ask one more question on the combined ratio. I remember you didn't take a lot of frequency benefit fully in motor, historically, during COVID. Is that also something that prudence also available to you to help smooth the combined ratio?

Cristiano Borean: Yes.

Farooq, let me add just to complete also the first question, I would like to give you another point, which I think would be useful, and then we connect on the frequency. I don't forget that in 2021, we had a higher than above natural catastrophe impact, which was actually limited to 2.2 percentage points of combined ratio, that's clearly above our historical average because also of the good reinsurance coverage strategy we pursue. And this is another driver. For what regard frequency and benefit in motor? We have always been prudent in the way these have been seen in the accounting component, but don't forget that when you look at the capital generation part where you have the current year best estimate result, you have the actual development under the economic underlying effect. We are still observing an improvement in 2021.

The only country which was below the 2020 was Germany as a frequency motor. In Italy, there was an increase of frequency clearly to level, which are more than 20% increase in relative terms of frequency, in Italy and France, but these were well below the -- still below the '19 level. So I hope this is giving you some guidance. Also this year, we are starting the year in the first 2 months, what I observed was a frequency, which is below the year end '19 average frequency level in motor.

Operator: The next question is from Andrew Ritchie with Autonomous.

Andrew Ritchie: Cristiano, sorry, I'm confused. Just following up on your comment, why is the journey from IFRS non-Life result to the S2 owned funds P&C? Last year, I could sort of tax the IFRS number and I more or less gotten there, but there's a bigger gap this year. If you're booking IFRS more conservatively above price estimate than you were, then it doesn't make any sense because the S2 is on best estimates. So can you explain the difference this year, why the difference is bigger between S2 P&C generation and IFRS? Second question, in nonoperating restructuring charges in Q4 or the second half of the year. I understand the Cattolica restructuring, maybe clarify is that most of the restructuring charge done? Could you just give us a more detail on all the other.

There seems to be a shopping list of other restructuring charges. So there's about another €100 million in Italy outside of Cattolica, you mentioned France, you mentioned Switzerland. Are you sort of upfronting some of the investments for the plan? Or should I assume some of these recur? And just the final thing on clarification. When I look at the annual report, it talks about €10.7 billion of private equity on Page 320. Is that the new -- I thought the private equity stock was about €7 billion.

Is it €10.7 billion? And do you have any sense as to the pipeline of realizations to occur in 2022 on that?

Giulia Raffo: For you, Cristiano.

Cristiano Borean: Yes, Andrew. Thank you. So no, the P&C to France has a bigger gap than last year because don't forget that last year we had extremely low frequency element. As I was commenting before, we had this increase in frequency and underlying economic terms in 2021 versus 2020.

Don't forget that this is visible also because of the underlying combined ratio on economic terms being higher. And basically, you have an effect, which is, if you just evaluate under the premium, basically, you are almost 3 percentage points higher on the current year best estimate effect in 2021 versus 2020. Don't forget that we have also some investment effect, but the major driver was the current year best estimate. So with regards to the nonoperating restructuring charges, the one which we are not Cattolica, that was on top of the completion of a plan started in France to be completed 2022, which was basically -- we are entering in the last part of our restructuring plan as well and in 2021, there has been an acceleration. There was the acceleration of some exit on expenses on CTAs with, let's say, people in Italy on top of the Cattolica part and as well a new restructuring plan, which has been launched in Switzerland, which started to bite in 2021, but will accelerate throughout the plan '22, '24.

So overall, there was not a kind of acceleration compared to the '22, '24. There was a kind of, let's say, anticipation of some specific projects, but not an acceleration compared to the announced investment done. So going forward, you should expect anyhow less restructuring charges because this was a very specific year. Notwithstanding with that, we will continue to do our operating expenses to transform the company. What is the stock of private equity related to the year-end '21? We have, at the balance sheet level, almost €10 billion worth of private equity and we are foreseeing to increase.

Basically, the private equity result in 2022, especially on the operating contribution side, but as well on the net, is almost flattish, slightly lower, but because there was some one-off small contribution in 2021 due to some unicorn investment that we have in private equity. But going forward in 2023, 2024 due to the different mix I was mentioning in the past, between Life and P&C, where P&C, you benefit 100% of the result but Life, you have less. So the increased weight of Life versus the P&C component, we will have something which is in the order of the kind of €100 million operating result lower than the 2021 contribution on the budgeted level. Then we will see because I recall you, we need also to take into account going from '23 onwards in the IFRS 9 accounting, we will see the full fair value change of the private equity investment.

Andrew Ritchie: Okay.

Can I just ask on the restructuring? I think the commentary talks about pension plan -- or pension reform in France. What was that? And what is that going forward?

Cristiano Borean: Yes, yes. More than restructuring that was a kind of other net nonoperating expenses. It was not charged in the restructuring part, but in the other net nonoperating expenses. And this is a charge of almost €40 million, basically that is the ballpark, which we did in anticipation of a potential change in reform from pension in France.

We were among the first to do it because we think that if this is active, that you have the visibility cost which will increase for the company because you pay to visibility cost to your insured people up to the age of retirement. If the age of retirement is delayed, you have higher cost of visibility. So we did and took in anticipation of this prudently according to the closing of the balance sheet. So you can understand the level of prudence we set for this year.

Operator: The next question is from Peter Eliot with Kepler Cheuvreux.

Peter Eliot: Thank you very much. Yes, I just want to understand some numbers as well in a couple of areas. First of all, in the Asset Management, would you be able to explain just a little bit more the €30 million impact from real assets that you had? And in terms of the Chinese result there, you said it was much better than you'd expected at the Investor Day. Should I take from that, that there's sort of partly one-off in nature? Or because also talked about the growing contribution. So just trying to understand how much of that potentially is one-off? And then secondly, just coming back on private equity.

You gave us the dividends for non-Life at €88 million. So I was wondering if you could also give us the dividend for the other divisions as well? And if I look at the sort of non-Life dynamics, the €88 million in dividends suggest that the private equity results associated with non-Life was 247. So I guess you've just given guidance on the sort of budget for next year. But I mean, am I sort of right in thinking that a good proportion of that 247 should make it through to the non-Life next year?

Giulia Raffo: Peter, sorry, can I ask you please to repeat your second question. The first part didn't come out too clearly on your...

Peter Eliot: So, okay. The second part was on private equity. You've given us the dividend number for the non-Life division. So I was asking if you could also give us the numbers for the other divisions. And then I was also just trying to understand the dynamics because you said the dividend was €88 million, which from your reconciliation, I think that suggests 247 in sort of private equity results associated with non-Life.

And am I right in thinking that a fair proportion of that should come through in dividends for that division next year?

Cristiano Borean: Okay. Yes, yes. Now it's clear. I will take it through. So first, explanation of the €30 million impact of the real estate.

This is a combination of specific fees from higher transaction when we sold partially our sky scrapers in Milan and in Paris and as well a one-off carve-out operation, which has been pursued during 2021. On the Chinese, what I much better than expected, is this a one-off? Well, we were not forecasting such a positive contribution, but we are observing a track record of this company, which is growing, just for your reference, since 2009, they increased more than 10x the asset under management. So there is a very positive dynamic in this company, which is performing well above the equity stock exchange of the Chinese market, creating interest on it. We have an equity stake, which is accounted as equity contribution, which is, by the way, also polluting in common when we calculate the cost/income ratio because it is an income without the cost, which is clearly supporting it. Regarding the private equity dynamic for all the divisions.

So what we, I think, communicated is, I think, you should follow through more is the combination of the managerial view and then look through where all the profits were there, which is something we put in the presentation as well. And not the all dividend paid, but you have to guess, but when we say that, had we accounted for the whole results, for example, in Life, you see €179 million operating result difference. This should be expected as a dividend to be received in next year. But don't forget, 2022 is the last year where we will account this phenomenon in this way because we will go in fair value accounting when we will enter IFRS 9 and 17 and this will be even more simpler. So I would not focus too much on the dividend.

I will focus more on the managerial representation. I hope I gave you the guidance.

Operator: The next question is from James Shuck with Citi.

James Shuck: My first question is just keen to understand the life and health gross written premium in France and Italy and development across the year. So very divergent trends.

So savings and pensions up very strongly in France and unit linked up even more strongly. In Italy, savings and pensions down a fair amount, kind of high single digit and unit linked up in low single digits. So keen to understand the relationship between the sort of euro-denominated products, the traditional profit sharing unit linked and packaged items within that, perhaps any changes in France that might be driving some of that unit-linked growth? Secondly, just looking for an update on Vitality, I know you've extended the agreement. This was something that was announced back in 2016, and I think you launched in Germany, retail and in France, corporate -- that's coming back quite some time. That seems a long time before actually seeing any benefits from this.

So just keen to get an update on what's happening in Italy. And as you roll out more widely throughout the group, when and how should we expect this to come through in the numbers? And then just one last question on the life investment margin, particularly in Italy. That was down 86 bps down to 78 bps. Is that a sustainable level? How should we think about the impact of kind of impairments and equity realized gains and resilience of that given the current environment?

Giulia Raffo: Cristiano, over to you.

Cristiano Borean: Yes, James.

So what is the dynamic of life premiums in France and Italy? The dynamic in France related to 2021 has to be read in comparison to 2020. 2020 observed, especially in the beginning of the COVID crisis, an amount of lapses coming from people taking out also the savings component. On relative terms, so we had an excess of exit, especially in the first part of 2020 of savings, which was pulling down the net inflow. When you look at the 2021 dynamic, it is more normal in the sense that still, we are in a negative outflow, okay, for the saving component in France. But we have a much higher growth of the unit linked because selling hybrid product is the unit linked, the juicy part.

And I please recall you again, but the unit-linked fees are out of the profit sharing technical margin what you calculate, which is particularly diminishing the results for the rest of the lines also in the technical part of the business. That's why it's so important to have a collection of unit linked and keep a negative outflow in savings. But the 2021 is more reasonable compared to the 2020 effect. On top of that, in Italy, we observed the opposite dynamic because Italy is focusing even more in hybrid product with a higher percentage of unit linked. So if you just take out of Italy in 2020, the so-called Cometa fund, which was a one-off of €1.5 billion collection, the unit linked growth would have doubled.

And this is key, again, to create long-term value and not exposing to investment risk. Here is exactly the dynamic behind -- and here is the way you should look at it. So France is a combination of much higher unit linked with negative outflow in savings to keep changing the business. In Italy, it is refocusing towards a higher growth of unit linked. On the second question, I hand over to Philippe.

Philippe Donnet: Thank you, Cristiano. Yes, we launched Vitality about 6 years ago, even a little bit more. We have an exclusive partnership with discover for Europe, and we are very happy about this because it's a good way. The Vitality service we offer to our customers is perfectly in line with our ambition to become the lifetime partner to our customers because -- thanks to Vitality, we can help our customers to improve the health to improve the way of life. So it's really important.

It's also a digital business. So it's fully part of our strategy. It takes time to grow it for many reasons because it's not in Europe, it's not exactly like in the Anglo-Saxon word that we have different cultures. And let me say that in some ways, our culture in Continental Europe is a bit less healthy than in the U.K. or in the U.S.

than the culture in Italy or Germany or France, it's completely different as well. And also don't forget that the COVID-19 pandemic, on the one hand, didn't help us to grow this business because, for example, all the gym rooms were closed during the pandemic. So it was a bit difficult -- a bit more difficult to offer this kind of service. But in the same time, the COVID-19 crisis changed a little bit the mindset of the people. And I think that now people realize that it's important to take better care of the way of life.

So we are very confident that -- thanks to the implementation of Vitality in Italy. At some point, we will see an acceleration of the adoption of Vitality. And at some point, definitely, it will become profitable. We should not expect huge profits from this, but it's definitely a service that we need to offer our customers being in line with our Lifetime Partner Ambition.

Cristiano Borean: James, I take the third question on Life investment margin in Italy, and I profit to recall all of you that this number is showing Italy alone in '21.

Don't forget that starting from first quarter 2022, we will start allocating the Cattolica result that we've seen the country, Italy, perimeter, which was not the case for 2021 since we acquired control only in the last part, and it is accounting in the other segment. So there will be -- my answer is based splitting the problem into the underlying Italian perimeter already existing also on a like-for-like perimeter basis, has been impacted in 2021 versus 2020 by an increase of asset management fees on the business, which basically accounted for half of the investment result decrease. On top of that, there were slightly less realization than in Italy in 2021 compared to 2020 when there was the change in asset allocation. 2022, going forward, we will have, on this perimeter and effect of increase of maturing government bonds, for example, of Italian government bonds, a higher coupon, but mainly concentrated in portfolio where there is a fixed fee charge and not a profit sharing with the classical, which should not have a material effect. But having said that, we need also to embed the second piece, which is the Cattolica business within Italy.

So on a non-Like-for-like basis, the Cattolica investment margin is lower than the one of the Generali perimeter. So you should expect when this is fully consolidated as likely decrease, but very marginal due to the small size of Cattolica, which is basically telling me that you can keep the actual level broadly at this. I hope I gave you the full picture.

James Shuck: Nearly, just to clarify on the last point. So on a like-for-like basis, Life investment margin in Italy, you're expecting that to be stable in 2022 regardless of the equity market moves and economic capital?

Cristiano Borean: Yes, stable, if not marginally benefiting from the contribution of the private equity as well, which should start kicking in as well.

Stable overall, basically, because of the Cattolica.

Operator: The next question is from William Hawkins with KBW.

William Hawkins: Most of my questions have been asked. So just two, hopefully brief. On Slide 39, when you showed the normalized capital generation, thank you for the comments about the P&C business.

Just at the high level, do we take that €$3.7 billion as a clean base for the future? Or are there any particular unusual or unsustainable factors? And then when we look at that small positive SCR release, can you just remind me, is that something that's sustainable and should be growing? Or at some point, are you expecting, for example, new business strain to kick in or whatever? So the outlook for normalized capital generation, please? And then secondly, very briefly, but thank you for all the detail about the direct exposure to Ukraine and Russia. That's useful context. What if anything are you guys thinking about in terms of second order risks? I mean I'm guessing for most insurance companies, like you, the direct exposure is not so bad, but the second order could be more significant. You've already talked a bit about inflation. But I'm just wondering what you guys are focusing on when you respond to this?

Cristiano Borean: Hello, William.

So on the normalized capital generation, you have to take into account there are three basically components, non-Life, P&C, but as well holding and financial where the benefit of the lower cost of the debt and the better result of the financial segment, be it the asset management and Banca Generali was supporting. So I would split starting from the last one, all the way financial, you will continue to see an increased contribution from the financial segment, while in the holding one, the big decrease of the cost of debt is rolling to the steady state. And you will see going on Life and P&C on a broadly -- on a broadly stable capability to generate this level. So overall, this is a run rate level of normalized capital generation, which is as you are seeing basically 20 percentage points of solvency per year before deducting the dividend, which is a quite healthy point. On the second question, I will hand over to Philippe.

Philippe Donnet: Yes. As you said, our direct exposure is very low. Our main concern once again, it's about the people. It's a human concern. Having said that, what is our vision of the future of what could happen on the financial and economic basis.

Definitely, we would have expected higher growth getting out, hopefully, of the pandemic. And unfortunately, what's happening there could slow down the growth. This is detrimental to the P&C business. But as always, it's positive for the savings business because when people do not spend, they save -- they save money. And this is the reason why our company is quite immune and protected because we can mitigate risk.

We do both, Property & Casualty and Life business. Then on the profitability of our business, what could be a likely scenario according to us? Definitely, there will be some inflation higher than before, which -- and I always -- already said it, which is an opportunity for us to better monitor prices and to increase prices on the P&C side. This inflation -- this higher inflation might put some pressure on the interest rates that could raise. But on the other hand, when you look at the public debt in many countries, there is a strong pressure not to increase too much the interest rates. So at the end, a very likely scenario is a slight increase of interest rate, which is a very positive scenario for the profitability of our Life business for the value of our new business -- Life new business and also for our Solvency ratio.

Operator: The next question is from Alberto Villa with Intermonte SIM.

Alberto Villa: Three quick ones. First one is on the unit-linked business. You have done very well in 2021. I was wondering if you have any indications of potential slowdown in selling this product with the current market volatility and if there are any geographies or distribution that may suffer more than others from such a situation if it persists throughout the year.

The second one is on motor. Thanks for the comment on the frequency. I was wondering if you have any update on the cost inflation there, if there are evidence of more pressure coming from inflation already in the claims settlement? And finally, the third one is on asset management. Can you please give us an idea of quantification of the, let's say, performance fees contribution from -- in your operating profit in the Asset Management segment in 2021.

Giulia Raffo: Philippe, if you want to take the first one? And then Cristiano on the other two.

Philippe Donnet: Yes, Giulia. On the first one, for -- at the moment, we do not see any slowdown in the sales of unit-linked. So we are quite confident that we will be able to keep this trend. This is due to the quality, once again, of our distribution and to our ability to monitor the business mix even in challenging conditions. Cristiano, on the second?

Cristiano Borean: Yes.

On the cost inflation and on the claims settlement. So first of all, I would like to recall what we shared already in the previous call. When we basically explained that on the spare parts cost inflation, what we are observing was a huge spike right immediately after the COVID because it was normally allowing the spare parts producer to survive and so they increased the cost. And so on a rolling window of 12 months, we are not observing the same level of growth, though we are observing a growth, but much lower than what we observed before. On the claims settlement component, I would like to recall that, yes, we did an acceleration when possible of the claims, but also to give just an indication on how we manage inflation even when we look in the reserving, I would like to recall you that historically, our -- actually did took a long-term view on the inflation expectation and notwithstanding the fact that we have inflation, which was not always reflected, the HICP in the cost inflation of the business.

Our prudent reserving approach is, for example, for the Motor TPL line is embedding already something, which is in between the 4% to 5% embedded inflation, which is an absolutely safe level of representation. On the third question regarding the classification of performance fee contribution to the operating result, I think you are referring to the fact that last year, we had €121 million, €122 million of performance commission in 2020 -- last year, I mean year-end 2020 was a very good year because volatility is bringing potential good performance if you have the right strategies. And in 2021, we had only €56.6 million -- €57 million of operating earnings from commission. What I was telling you is that the performance fees contribution to the operating result is the combination of the amount earned. And usually, it is 30% of it paid out in the part of the boutique, especially, which is part of the, let's say, bonus of the asset manager.

This is maybe the classification element you were thinking. So you cannot count one-on-one because this is for almost one third -- 30% accounting for extra labor cost as bonuses for the boutique only.

Operator: The next question is from Andrea Lisi with Equita.

Andrea Lisi: Just two quick questions from my side. The first one is, if you can provide us an indication of the segment, Life and P&C to which the -- about €300 million of direct and indirect investment in Russia and Ukraine are located? And if also this investment are classified in the "once impaired, always impaired" category.

The second one is if you can provide us an update on how many funded costs are you expecting core from Cattolica integration.

Giulia Raffo: Cristiano?

Cristiano Borean: Yes, Andrea. So the -- about €300 million investment are allocated -- I mean, I speak apart from stake. So we speak about the listed investment we were showing are mainly allocated in portfolio of Central Eastern Europe entities shared between our Czech and our operation in Bulgaria and the other minor countries, but these are the two largest contributors. I recall you that they are basically all bonds.

And so bonds were not impaired before -- usually the impairment on a bond is done when there is the uncertainty regarding the recoverability of the coupon and the notional. And so far, there was no any sign of default. So they were not impaired. Clearly, we will need to make a specific one-by-one assessment. They are basically all denominated not in rubles, only in euro or local currency of the country term and mainly euro.

And so we will see what will happen in the next weeks. And many of them are allocated in the Life segment but I recall you that in these countries, profit sharing rule does not apply. So it is more similar to an effect -- to higher shareholder effect. And maybe I hand over to Philippe if he wants to add on Cattolica integration? Okay. So on the integration cost of Cattolica, I have nothing else to add on the €212 million accounted by Generali Italy as a one-off restructuring cost.

The integration is underway, the all streams are at the core of our Italian companies, and they are working well together to fill on the time schedule. But the costs were booked, especially the one on personnel we're booked in advancement. So and then progressively, we will see the -- and popping up of the synergies, which will be progressively achieved throughout the integration plan.

Operator: The next question is from Najeeb Ahmad with UBS.

Najeeb Ahmad: Just two questions from me.

So when I'm looking at Life cost your financial leverage, you're lower than your peers. So I was just wondering if the right opportunity presents itself in your focused areas of Europe, Asia in Asset Management, could you raise that to invest in those areas? And could you tell us a bit more room of between €103 billion over the next term? And then second question is related on your target for interest expense reduction of €50 million to €100 million. Are we looking at the bottom end of that range given rising interest rates now?

Cristiano Borean: Yes. So the financial leverage, I really appreciate that you pointed out the fact that the indicator on the restricted Tier 1 ratio is to be looked because this could become even more looked going forward when we will have this substituted by the contractual service margin as many rating agencies are still seeking at, so which is bringing us in a leverage ratio level, which is acceptable and fine, allowing us to have flexibility and to catch it in case of opportunities. We have always been absolutely extreme flexible and opportunistic in the way the opportunities are popping up.

But I just wanted to highlight that we reached a good level or clearly regarding the saving on the interest expenses, clearly higher -- higher interest base -- interest rates are higher, potential expenses. Don't forget that in any case, we are always prudent in hedging or pre-hedging in some cases, some of the refinance amount. But in any case, yes, this is a fair comment to say that going forward, the potential benefit if we say at this level, we were projecting in the plan rates, which were marginally lower. So on one side, on the financial leverage and the debt cost, we could have slightly less. So the lower range of the benefit or the mid-range while don't forget there is the whole benefit in the full asset part because of higher investment result even also in the liability part because there is a much better loss absorption capacity.

Operator: The next question is from Steven Haywood with HSBC.

Steven Haywood: Just one question from me. In the outlook in the press release, you mentioned risk of downgrade. Can you give any more color on this and any implications on your targets. And then you also mentioned the outcome of extensive analysis of Life portfolios.

Has there been further work done here since your Investor Day presentation in December. And can you give us any idea of what might have been done since then? And obviously, with the current market conditions, does this increase the likelihood of sort of Life in-force transactions or management actions?

Cristiano Borean: Okay. Yes, Steven. So for what regards the outlook. I just recall that we mentioned the situation of uncertainty stemming out from this war in Ukraine.

So clearly, it is difficult to make prediction related to what the outcome of the war would come. Notwithstanding this, we commented that we are committed to pursue our targets, and we do not change anything around what we communicated in December against our target. So we are confident on that. So with regard to the in-force management actions, for sure, we had some interest management action already in Italy as we explained during the Investor Day. On top of that, we did some other interest management, which allowed to reduce the average guaranteed rate in the country.

But at the end, this is an environment which could become conducive for in-force management and capital deployment action because it is accelerating the possibility. This together with the next year application of the principle where basically you are resetting many portfolio up their accounting economic level, allowing it for a risk margin.

Philippe Donnet: plus the market and also the accounting changes accelerating this in-force.

Operator: The next question is from Gian Ferrari with Mediobanca.

Gian Ferrari: A couple of questions.

The first one is on India. I was wondering if the 25% stake purchase from Future Enterprises has been just put on hold or you expect that to be no more on the table given the situation with the bondholders out there. The second is on the fact that we recently read on the Italian press that the government would be, once again, looking at the COVID benefit of Italian insurers than it's pretty strange that we are still looking at that after TWO years, but I was wondering if you can comment a bit on this.

Philippe Donnet: Thank you, Gian Luca. As you know, in January, we announced the acquisition of a 25% stake in our P&C joint venture in India from the Future Group.

The completion of the acquisition is obviously subject to regulatory approvals. And definitely, this acquisition is still on the table. What happened is that one of the Future Group lenders had filed an injunction for blocking the deal in the court in Mumbai, but this decision of this court has been overruled by a higher court. And definitely, the deal is coming back on the table, and it will proceed according to the, I would say, the Indian culture, which maybe in some ways a little bit chaotic, but we are very confident that it's going to happen.

Cristiano Borean: Yes.

Regarding the press, we read as well. We take always into account what are the developments. We are in constant reach with our business unit in Italy. So far, I have never experienced any form like this outside the discussion I read on the press. We will follow, but I recall you, we were extremely also prudent and very open in supporting our clients, our distribution.

There were huge amounts of money put on the table by all our business units starting from Italy during the period of COVID. So I think the equation should be balanced with all the effects.

Operator: This concludes our Q&A session for today. Ms. Raffo, the floor is back to you for any closing remarks.

Giulia Raffo: Thank you all. We just want to thank you for all your questions. And as always, the Investor Relations team will be at your disposal for any follow-up questions you might have. Have a good day. Thank you very much.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.