Assicurazioni Generali S.p.A. (G) Earnings Call Transcript & Summary

Good morning, everybody. It is my privilege to welcome you to our 2020 Investor Day on behalf of the Generali Group management team. Please note that today's presentation has been prerecorded. In the first part of the day, we will start with Generali 2021 strategic update from our group CEO, Philippe Donnet. Then our General Manager, Frédéric de Courtois, will take you through our strategic transformation. Finally, our Head of Sustainability, Lucia Silva; and our Group Head of Investment Management Solution, Bruno Servant, will present our integrated ESG approach. After that, we will take a short break of 15 minutes. Let's get started. Let me now hand over to our group CEO, Philippe Donnet.

Ladies and gentlemen, welcome to our 2020 Investor Day. We are here to give you an update on our Generali 2021 strategy and targets. I wish I were able to speak to you directly in person as I did when we presented the plan in November 2018. Given the current environment, we have leveraged technology to make our virtual meeting as effective, as informative and as interactive as possible. When we launched Generali 2021, few would have predicted the global economic and social challenges created by the COVID-19 pandemic. However, thanks both to our hard work in previous strategic cycles and the successful execution of Generali 2021, we have been able to effectively navigate the current context from a position of strength. Our strategy has proven to be the right one, and I'm therefore pleased to reconfirm our financial target for 2021. We are able to do this, thanks to 3 key factors. First, our resilient financial performance based on the key strength we identified at the launch of Generali 2021, a clear strategy, a focus on technical excellence, a strong distribution network and a diversified business model. Second, the proactive and decisive actions taken since the start of the crisis to protect shareholder value as well as our customers and our people. Servicing customers with continuity and care will always be our #1 priority in line with our lifetime partner ambition. Third, our commitment to the core convictions underpinning Generali 2021, which are, today, more relevant than ever, and in many cases, allow us to capitalize on emerging opportunities. Let me talk about each of these 3 elements in a bit more detail. Generali has delivered a robust financial performance as demonstrated across a range of key financial metrics also during the third quarter of this year. Our diversified business model and optimized risk selection have minimized the COVID-19 claims impact on our business with estimated Property & Casualty direct claims of around EUR 100 million. We have maintained our top line resilience and excellent technical performance, both in Property & Casualty and Life. Gross written premiums in Property & Casualty were up by 3% year-on-year, while Life net inflows stood at EUR 9.3 billion, thus annualizing at over 3% of reserves with a favorable business mix, thanks to the strong alignment of our distribution. Our Property & Casualty combined ratio at 89.7% is among the best in the industry. And the same is true for our Life new business margin, which stands at 4.1%. Our asset management strategy is delivering greater revenues and earnings diversification, and it is instrumental part of our Life business strategy. Our goal is to become one of the 5 most profitable multi-boutique asset management platforms in the world, and you will hear more on this from our Chief Investment Officer, Tim Ryan, a bit later. I also want to underline our strong balance sheet with the highest Solvency II ratio among our peers at 203% and strong net holding cash flows. The disciplined execution of our Generali 2021 strategy as well as the actions we implemented in light of the COVID-19 crisis allow us to fully commit to our financial targets for 2021. This serves as credible evidence of the strength of our organization in meeting our objectives. For earnings per share, we confirm a compound annual growth rate increase between 6% and 8%. Our Chief Financial Officer, Cristiano Borean, will take you through the key drivers in more detail. We remain committed to distributing cumulative cash dividends of $4.50 to EUR 5 billion between 2019 and 2021, subject to regulatory approval. We also confirm our normal dividend payout range of 55% to 65%, which is a guidance and not a constraint as our General Manager, Frédéric de Courtois, will discuss later. Furthermore, we remain committed to an average return on equity of more than 11.5%, clearly excluding the impact of COVID-19 and other one-offs in 2020. As you have already seen, we have not been permitted by regulators to distribute the second tranche of our dividend for full year 2019 at this time. To be clear, in our view, the full year 2019 dividend belongs to the shareholders. For this reason, we are already accounting for its full distribution in our solvency margin. We will continue, in any case, our active dialogue with regulators, emphasizing the strength of Generali's financial position and our intent to resume dividend payments as soon as we are allowed. That being said, in the face of wider economic uncertainty, we took decisive actions to ensure the delivery of our Generali 2021 strategy. We conducted an extensive review of our portfolio, both to identify and to minimize direct business impact. In addition, we took effective capital and liquidity management actions to optimize remittances and cash utilization to ensure we are ahead of plan. Cristiano and Tim will tell you more about our outperformance versus the planned 2021 debt reduction target and our asset liability management actions to strengthen further the balance sheet. We also accelerated our expense reduction plans for 2021, and we will deliver a further EUR 100 million on top of our original target of EUR 200 million for major insurance markets. I also want to stress again that right from the beginning of the pandemic, we put the health and safety of our people as our #1 priority while ensuring continued support for our customers and communities. We remain fully committed to the core convictions underpinning Generali 2021, which are strengthened in the current environment and could even create further opportunities. European market will remain attractive. And here, we will strengthen our leadership. The strong ECB response and fiscal stimulus framework cement our view, and we expect further opportunities for consolidation and M&A. The retail and SME market segments will drive profitable growth. The pandemic has triggered a greater awareness of insurance needs, particular when it comes to health and protection. We are also seeing increased demand for integrated protection and investment solutions as a result of the lower-for-longer interest rate scenario. We will, therefore, capitalize on these 2 opportunities by effectively combining our traditional expertise in insurance with our growing asset management proposition. Finally, our strong physical distribution network will be further empowered by digital platforms. This is one of our distinguishing competitive advantages with over 155,000 agents and distributors. Customers are looking for a combination of both words, and this has been evident during the lockdown phase of the pandemic. We are accelerating the pace of digital transformation to provide a true omnichannel experience for our customers. Generali's objective for almost 2 centuries has been and will continue to be earning and maintaining the trust of our customers in every phase of their lives. This is why our lifetime partner ambition is another vital component of Generali 2021. Two years later, delivering on this ambition is more important than ever. The COVID-19 pandemic has shown once again that the human touch is key and that it is fundamental to have a deeper relationship with customers. This means knowing their needs and expectations and assisting them in making important informed decisions. We are working hard to deliver on our lifetime partner ambition in 3 key areas: first, using the latest digital and data analytics capabilities to ensure our offer is best-in-class; second, strengthening the connection among us, our agents and our customers; and third, making the Generali brand the first choice in our key markets. We are making good progress on these strategic priorities, and you will hear more about this from Frédéric shortly. Generali 2021 would not be possible without 3 key enablers. An empowered work force is key to our current and future success. We continue to invest in our people, with 1/3 of employees already involved in upskilling and reskilling programs. We are establishing a consistent and distinctive brand experience, leveraging the strength and values that make Generali unique. In July, we launched the first global advertising campaign in the 190 years of our group's history. The feedback we received so far has been incredible across all markets. We have integrated sustainability throughout our group and are fully committed to acting as a responsible business partner and investor. It is not just the right thing to do, but makes real business sense. We are committed to leading the way and have established clear sustainability targets, including a detailed climate strategy. And you will hear more about our sustainability strategy and commitments in the dedicated presentation by Lucia Silva and Bruno Servant. Generali has provided coordinated support to our stakeholders throughout the COVID-19 crisis in partnership with our business units across more than 25 different countries. At the very start of the crisis in March, we committed a total of EUR 100 million to an extraordinary international fund to address the emergency. Generali's business units also activated additional resources in their own areas of competency, while our employees and top management also directly contributed. We provided our agents and distributors, not only with financial support, but also with digital tools to help them continue the great job they do for our customers. We extended insurance coverage and assistance for our customers, and we promoted more favorable terms for existing policies. Further, in our communities, we provided free life insurance for those operating in the health care sector. In 2018, we defined rigorous and disciplined criteria for M&A transactions taking place over the course of Generali 2021 and identified 3 key strategic areas where acquisitions and partnerships could boost our existing offer. We have been consistent with our strategic priorities and effective in our integration. We have reinforced our leadership in Europe, thanks to the acquisitions of Adriatic Slovenica in Slovenia, Concordia in Poland and Seguradoras Unidas in Portugal, all of which we successfully integrated. In June, we announced a strategic investment in Cattolica that will allow us to reinforce further our leadership position in our domestic market across 4 key areas: asset management, Internet of Things, health and reinsurance. We also enhanced our asset management capabilities in areas like alternative usages and ESG and integrated successfully KD Skladi and Union Poland. In conclusion, today, Generali is a sound and resilient group from a financial and operating standpoint. Our third quarter results, which we published last week, are a proof of this. We have a clear set of priorities that will guide our delivery throughout the rest of this plan and beyond. We will continue to manage our cash and capital consistently and with discipline. We will carry on delivering strong results in Life and P&C, leveraging our agility and best-in-class technical expertise. We will further develop our multi-boutique platform in asset management. And last but not least, we will continue with our relentless focus on efficiency of paramount importance in an even lower interest rate environment. You are now going to hear more about them from our team in their presentations, and I will then return for some concluding remarks before we answer your questions. I now leave the floor to Frédéric. Thank you so much.

Thank you, Philippe. Good morning, everyone. I'm pleased to update you on our strategic transformation from both an industrial and operational perspective. Here, we have highlighted the key drivers of our strategic transformation. Our strong technical profitability underlines the increasing positive gap versus our peers and the reliability of our earnings. I will outline how we see the future of the life business in a lower-for-longer environment. Our focus on compelling boutique asset management is bearing fruit. I will provide some details on this before you hear more from Tim. Our customer lifetime partner ambition powered by improved digital capabilities is driving higher loyalty, while our powerful combination of agent and direct distribution channels remain a key growth driver. Our transformation drives increased productivity and reduced costs. I will outline how we are going further than our current expense reduction targets for 2021. And finally, our strong and sustainable cash generation is delivering a material increase in net holding cash flows, and I will explain how we intend to use this cash. Implementing a strategy is all about execution. We are showing, once again, that we have the right capabilities and we are focused on the right priorities. Looking first at life and pensions. The Life business includes savings, protection, health and unit-linked and is complemented by in-house asset management solutions. The challenge remains lower for longer interest rates. But they are still underestimated opportunities in this environment. Customers worldwide are saving more, thanks to a growing middle class, increased available liquidity due to accommodating monetary policies and more recently, greater uncertainty. Savings rate in the euro area peaked at an all-time high of 24.7% in Q2 2020. Consumers also want to be more protected. All our analysis tell us that clients want to buy more insurance, especially life protection products. Consumers, chiefly sourced in Western Europe, are also investing more in unit-linked products because competing products have become less attractive, but also because clients, especially younger clients have a higher risk appetite. Finally, retirement solutions is the big topic of the years to come as consumers will need to save more for their old age. Generali has all the assets to leverage these opportunities, excellent owned or exclusive distribution networks, best-in-class technical know-how and a complete product range, including our unit-linked offer with in-house asset management capabilities, also leveraging our multi-boutique platform. Our clients appreciate the strong ESG focus embedded in our offer. So how do we guarantee the sustainability of our savings insurance business in a lower-for-longer environment? Generali has been a first mover in derisking, and we are proud of this. On this slide, we have outlined the strategic actions taken to achieve this. First, it is about achieving a high proportion of unit-linked and protection in our business mix. We have accomplished this in all our main countries, thanks to our distribution channels as you can see in Germany where we are #1 in unit-linked assets under management. This is not only about reducing guarantee to 0%. We have transformed guarantees as you have seen in Italy, where we were the first company moving to maturity guarantees. We have also reduced the crediting rates, as seen in France, where Generali has been a market leader on this. We have been proactive in our ALM approach, lengthening portfolio duration in order to reduce interest rate risk. We improved our risk-adjusted asset allocation, reallocating capital while sustaining portfolio yields. Finally, we have disposed in force blocks or companies when we believe we are not the best owner, and this is what we have done in Germany, Holland and Belgium. We will remain the first mover on all these matters, relentlessly seeking new product features and solutions while always optimizing capital allocation. In France, the new euro croissance products will be a cornerstone of our strategy, granting 80% of principal guarantee. In Italy, we are moving from maturity guarantees to guarantees only in case of death, which allows us to keep our margins under all market scenarios. We have successfully tested this approach through our subsidiary, Alleanza, and we will extend it to General Italia. On the asset side, we are increasing diversification, both between asset classes and at a geographical level with a focus on real asset and full ESG integration. And we have several in force projects in the pipeline, some smaller and some more significant. Our P&C business remains extremely profitable achieving the best and the most combined ratio compared to our peers. This is due to our positioning, top 3 in the majority of our markets as well as our retail and SME focus to our proprietary or exclusive distribution channels and to our underwriting and pricing sophistication and discipline. It is also due to prudent reinsurance strategy and enhance that analytics approach. Our Corporate & Commercial business, which represents around 10% of our business, has recently delivered better results than our peers. This is due to a focus on high-quality and diversified mid-sized accounts and to discipline in underwriting. COVID-19 was another test of our discipline and underwriting excellence with negligible exposure to event cancellation and limited impact from business interruption. Europ Assistance will deliver a much better result than initially expected and a much better result than competition. Europ Assistance is a large travel player, but mostly positioned on vacation rental. And hence, it has been less impacted by this crisis, especially on the claims side. Finally, we often hear that retail and SME market may be impacted by lower average premiums. Maybe too early to say, but we believe that the way we manage motor discounts over the past month, granting individual and segmented discounts rather than blanket once was the right approach to keep clients satisfied and manage profitability. Our asset management strategy is contributing strongly to the growth and diversification of our cash flows. It is complementary to our Life business in terms of commercial offering and product definition and is instrumental in supporting our shift to unit-linked. Our asset management business is delivering strong revenue growth, and this, in turn, is translating into high earnings growth, thanks to best-in-class operating margins. In 2020, our asset management business contributed north of EUR 250 million in cash remittances with a payout in excess of 90%. It is a very light -- very capital-light business with a capital absorption of just over 2 basis point of assets under management. I will leave Tim to take you through the business in more detail. Our goal is to be the lifetime partner of our clients and we have defined 4 customer hallmarks or characteristics as well as 4 distributor hallmarks to drive an enhanced customer relationship. Each hallmark is managed as a global project, demonstrating our commitment to progress. Positive customer experience is essential for the success of Generali 2021. We measure our success with a number of KPIs, but the 2 main ones are NPS, both transactional and relationship and customer retention. On relationship NPS, in particular, we aim to become the best amongst our international European peers by the end of 2021. This was intentionally challenging objective, but we have made significant progress over the first 18 months, growing faster than our competitors. The results of our constant focus on customers is increasing satisfaction and loyalty. The increase in retention also has a meaningful impact on profitability. Embracing and delivering new technologies is a key component of customer satisfaction. Generali is a leader in motor telematics, thanks to our experience in Italy. We now want to leverage this experience in combining insurance and IoT in other business lines, like home and health insurance and in other markets. Germany and Spain have already adopted this solution using our own Jeniot platform. This example illustrates how we work as a group. Our mantra is convergence. As a group, we incentivize our business units to develop tools such as the Jeniot platform that can be reused by others. We also drive co-development projects involving various business units through co-financing and support. The scale and diversity of our group is an asset that we leverage. This is also the purpose of our International Innovation Fund launched 1 year ago, which selects and co-finances promising solutions to be shared across the group. It has already built powerful momentum, financing 60 ideas in 2020 alone. Sticking with convergence. Mobile hub is our digital interface with clients. It has been codeveloped with our different companies, with coordination and co-financing provided at a group level. It is now used by 3.8 million clients in 10 countries growing fast. Our focus is to promote active adoption, and we are doing well. Last year, we also launched the Agent Hub. It has been launched in Spain and Austria and will soon be adopted in Italy. Our revamped website is like the Jeniot platform, a tool initially launched in Italy that is now being exported to other countries in order to facilitate lead management. We now also have competency centers on CRM and smart automation and an ambitious data analytics initiative led by our group team. Our transformation is driven by client needs, and these needs drive the transformation of our distribution, our operating machine and our product offer. Let's move to distribution. Generali is and will remain an agent company. We believe that clients need expert advice and want to speak to a trusted partner about the protection of their family or their pension. The same applies to business owners that want to protect what they have built. But Generali is also a direct company, and it's either #1 or 2 in direct business in Italy, Germany, Central Europe, Portugal, Argentina, Turkey and France, where the business is focused on Life. Our distribution strategy is about focusing on sales channels through which we can own the customer relationship. In France, we are also growing our non-intermediated Life direct business through the targeted acquisition of fintechs. We believe that well-managed agent have a great future if given the right tools. The COVID crisis has highlighted the strength of our agents who have continued to support their clients throughout the lockdown, resulting in increased sales and higher market share in most markets. What everybody had underestimated is our agents' ability to interact with clients and sell without physical contact. 82% of our agents are now digitally enabled to operate remotely. We will leverage this earnings to drive productivity improvement in our agent channel. These investments, part of the EUR 1 billion defined at the beginning of the plan, are measured by their impact on technical results, on costs and/or on customer satisfaction. On costs, we now target a EUR 300 million reduction, up EUR 100 million on our Generali 2021 target for mature markets, thanks to increased discipline and savings from our new work force initiative. On this point, we do expect our teams to go back to the office at the end of the pandemic, but remote work is now fully ingrained in how we operate. So we do expect to achieve long-term cost savings. At the launch of Generali 2021, 2 years ago, we indicated a cumulative target on available cash at the holding company level of more than EUR 10 billion for the duration of the plan. Our delivery on remittances and the successful implementation of our new cash and capital framework enabled us to exceed the targeted EUR 10 billion cumulative available cash at the holding by around EUR 1 billion. This is due to strong capital generation, thanks to the underwriting of capital-light business, a sound capacity to upstream cash from our business units and improved interest and holding expenses. Let's look at how we intend to use this cash. As mentioned by Philippe, subject to regulatory environment, we confirm our dividend target for this plan. This is equivalent to a payout range of EUR 4.5 billion to EUR 5 billion over 3 years. We confirm our long-term policy of a payout ratio between 55% and 65%, which is a guidance and not a constraint and should be seen in tandem with the objective to deliver steadily growing dividends. We have reduced our debt by EUR 1.9 billion, 2 years ahead of plan, first entering the COVID-19 crisis with an even stronger balance sheet and the better quality of capital. You will hear more about this from Cristiano. The over delivery of our net holding cash flows enabled us to fulfill some internal deployment for growth in Asia as well as the capital injection required in Switzerland, which Cristiano will explain in more detail, while leaving a slightly higher buffer for capital redeployment via M&A. We have up to EUR 2.5 billion, not accounting for potential divestitures but after accounting for the recent investment in Cattolica to dedicate to further acquisitions that are fully aligned to our clear strategic priorities. And as Philippe said, we will continue to be disciplined. In conclusion, Generali has been extremely resilient. This is thanks to our business focus on retail and SMEs, our geographical focus, our proprietary channels and our technical discipline. Our strategy has been validated and our transformation remains on track. Many aspects of Generali 2021 ensured that Generali entered the COVID-19 crisis well prepared. We have also learned that 2 experiences made during this crisis will bring further permanent benefits. First, the new form of working will bring structural cost savings while increasing employee satisfaction; and second, our agents' ability to interact remotely will bring strong productivity gains and customer satisfaction. I am convinced that Generali will exit this health and economic crisis stronger. I will now hand over to Lucia to guide you through our sustainability journey. Thank you.

Thank you, Frédéric, and good morning, everyone. My name is Lucia Silva. I am the Head of Sustainability and Social responsibility within Generali. In Generali, we strongly believe that sustainability is the key to our future success. A growing number of stakeholders, investors, regulators, customers, current and potential employees are paying more and more attention to ESG factors, and the COVID-19 pandemic has only amplified this focus. Today, with my colleague, Bruno Servant, we will present Generali's sustainable business transformation journey. We have a clear pathway, purpose and ambition built on strong foundations. Our ESG strategy is rooted in our solid governance, integrated across all levels of the business and align to clear targets and metrics. We are making great progress across a range of strategic areas and playing an active role in all the communities where we operate. I will now take you through our ESG priorities, and then my colleague, Bruno Servant, will outline how Generali is fully integrating ESG in our investment activities. Generali's path to sustainable business transformation is about putting our purpose into practice based on a clear ambition to pursue long-term growth and the integration of sustainability in our core business. We have already built on solid foundations. Our governance, remuneration, control functions and reporting guarantee that our day-to-day decision-making is aligned with ESG while we are engaged and listen to our stakeholders. In terms of achievement, let me mention that we are proud to be sustainable innovator. And in fact, we are the first European insurer to have issued a green bond, and we have accelerated on concrete and measurable actions tracked by our D&I index, in particular on gender, disability and LGBT, both with global and local initiatives. We are also part of powerful sustainability platforms, which enhance both our visibility and our influence in the international arena. And we have gained recognition as a sustainable player not only from key external indices, such as DGSI and MSCI, but also our own people who are embracing the transformation. Our integrated governance is essential to driving sustainability at all level of the organization. At Board level, we have a highly independent gender balance board and have also established a dedicated committee focused on sustainability, chaired by the Chairman of the Board of Directors. Our senior management team is highly committed to the strategic integration of sustainability. Our group CEO is driving this process supported by a sustainability committee made up of executive members, including the heads of group functions and our country CEOs. This integrated approach is reflected at the operational level, where we have a number of committees and working groups with cross-functional composition and expertise known as our task forces. And as the proof is in the pudding, ESG performance is part of executive remuneration at Generali. We have a clear sustainability strategy as part of Generali 2021 with defined goals and firm climate priorities. We are delivering on our commitments. First, allocating EUR 4.5 billion to green and sustainable investment; and second, increasing the premiums deriving from green and social products while also developing dedicated solutions for responsible consumers; then launching enterprise as an initiative to acknowledge the most sustainable small and medium enterprises; and finally, expanding the human safety net, our flagship initiative in the community. We are also publicly committed to fighting the climate crisis through our climate strategy. It defines measures taken all across our core business to ensure a fair and socially just transition to a net 0 economy. Climate change has a pervasive impact across our entire organization as well as society at large. Our action focused on the activities of investment, insurance, underwriting and customer and stakeholder engagement where we believe we can have the biggest impact. We are also continuously improving our nonfinancial reporting and have started to report on tax force on climate-related financial disclosures recommendations. We continue to learn and to improve. Here, you can find some of the key metrics that we monitor and publish every year in our audited annual integrated report. A structured process for ESG metrics is an essential part of our approach. These are the key metrics that represent how the group is integrating sustainability in all main areas of our business: investment, customers, our people, the community and our operations. These specific metrics ensure that Generali creates value now and also in the future. Prioritizing diversity and inclusion, engaging with our people, involving NGO in our communities and focusing on small and medium companies allows us to increase our understanding of the context in which we operate. This increases the resilience of the business model and ensure that our capability to deliver results is future-proof. Let me now briefly focus on our innovative responsible consumer ecosystem. Generali is developing a differentiating value proposition for customers looking to have a positive impact on both the society and on the environment. This distinctive offer will connect green and social products and sustainable investment solutions. Together with technical function, we developed an internal classification of green and social products. This definition are flexible and dynamic and take into account input from relevant sources above all regulators who are starting to look at what can be defined as sustainable. Our agreement social products definitions follow 3 main drivers. The first, product with a positive impact on the environment. For example, sustainable mobility products such as pay as you drive. Second, products promoting responsible behavior such as connected insurance products that incentivize health and well-being. Third, products protecting specific demographics such as the elderly and young families. Let me give you some examples on how we are applying this approach in our key markets. In Italy, GeneraSviluppo Sostenibile is the first investment insurance solution-based on UN's sustainable development goals through Banca Generali's innovative approach. In France, the Aderne-Base Carbone initiative aims to make the Generali agents network the first low-carbon agency network in France. And in Germany, Austria and France, vitality encourages customer to adopt a healthier lifestyle, benefiting themselves and the welfare system around them. Now I will hand over to my colleague, Bruno Servant, to talk about the integration of ESG into our investment strategies. Thank you.

Thank you, Lucia. Generali is delivering on its firm commitment to proactively integrate ESG consideration into the investment process across all asset classes, supporting the group to deliver long-term financial returns while reinforcing its risk management approach. This conviction is underpinned by our commitment to 3 key global initiatives, which inform our responsible investment strategies. Generali Group signed the UN principles of Responsible Investing in 2011. Sustainability and transition risk management are among its key goals. The group is also part of the investor leadership network, which primarily focuses on climate change, sustainable infrastructure, diversity and inclusion. And this year, the group joined the United Nations-convened Net-Zero Asset Owner Alliance, thus committing to decarbonize its portfolio to reach net 0 emissions by 2050. As a major asset owner, which delegates management's responsibilities to group asset managers, our investments create a significant opportunity to deliver on these commitments. Generali Group as asset owner is responsible for integrating sustainability into its long-term investment strategy. And our asset management businesses are implementing group policies on responsible investments while, at the same time, offering sustainable solutions for our growing third-party client business, leveraging on our multi-boutique model and dedicated group asset managers like Sycomore. This approach is supported by more than 50 dedicated ESG specialists across the group. Generali is also ensuring it meets all upcoming disclosure requirements set by the European Union as well as local regulators, demonstrating how sustainability factors impact the business model and the investment result as well as the delivery against key sustainability targets. Generali applies an integrated ESG approach to its investments. The exclusions are the baseline of the pyramid because they apply to all our direct listed as well as real estate investments. We believe that some behaviors and activities have no future and must be completely excluded from our investments. This includes companies that reach the UN Global Compact regarding unethical behaviors as well as those companies with an important part of the revenues coming from polluting activities such as coal and tar sands. Moving up to pyramid, 80% of our direct-listed investments are covered by an integrated ESG assessment. This number includes EUR 35 billion of ESG-driven mandates managed by our group asset managers according to clear ESG integration criteria. At the third level of the pyramid is thematic investing, whereby companies are selected according to their ability to contribute to a specific theme, such as green infrastructure, renewables and energy efficiency solutions. In the current context, sustainable investments are playing a vital role, and we're launching the economy in a sustainable way, making it more resilient in the future. To that end, we committed to invest EUR 1 billion in sustainable investments to contribute to the EU plan for a sustainable recovery from COVID-19 based on 3 key pillars: fair and inclusive recovery, green economy and digitalization. In addition, as mentioned earlier, we have a target of investing at least EUR 4.5 billion in new green and sustainable investments between 2019 and 2021. As of the end of Q2, we had invested EUR 4 billion in the key areas mentioned already, a target of EUR 4.5 billion has been reached at the end of Q3. We are also a strong believer in the role of active ownership as a contributor to long-term risk mitigation and value creation. In many cases, initiating a dialogue with companies on their ESG journey is more effective than simply excluding them from the portfolio. And through our expertise, it can contribute to positive results, both for these companies and for us as investors. To summarize, Generali is very committed to ESG integration and also cautious to avoid greenwashing or exposure to controversies. Finally, I would like to point out that data quality will be crucial going forward given the increasing number of variables and indicators to monitor.

Thank you, Bruno. Today, like never before, insurance has a huge responsibility in shaping the world for future generations. And most sustainable economy is no longer nice to have or simply an opportunity, but the must have if you want to guarantee a future for shareholders, all stakeholders and ultimately our planet. We understand what this means today. We appreciate the expectations of clients, regulators and investors. We have defined a clear framework, and we are fully satisfied with the results achieved. The path we are on will further and continuously improve our positioning. Thank you very much. [Break]

Welcome back. We can now start the second part of the event with an update on our investment and asset management delivery by Tim Ryan, Group Chief Investment Officer and CEO of Asset and Wealth management. Last but not least, our group Chief Financial Officer, Cristiano Borean, will unveil the financials underpinning our strategic delivery. Over to you, Tim.

Thank you again for joining us today. Before I take you through Generali investment asset management activities, I would like to start by giving the highlights of our investment, asset and wealth management business on the Slide 38. Our business unit covers the 3 pillars we presented in November 2018. Starting from the left-hand side, our 300 insurance investment professionals have been able to secure and maintain a profitable spread between the asset yield and the cost of liabilities despite difficult headwinds. For asset management in the center, the key measures is that we are on track for our 2021 targets on the 3 front: earnings, margins and third-party clients. Finally and but importantly, our wealth management business of Banca Generali is again beating the odds. We have a record level of inflow with more than EUR 4 billion of net flows, which propel our asset under management to EUR 70 billion for the first time despite market fluctuations with an improvement of our recurring earnings. As Gian Maria Mossa, our CEO for Banca Generali, has already presented to the market last week, I will focus my presentation on our progress in investment and asset management. Let's start on the investment side, where I will share with you how far we have come during the last 3 years, highlighting in particular a strong performance over the last 9 months. Moving to Slide 39. I would like to highlight our asset allocation evolution since 2016, made possibly by our transformed investment framework, which delivers a greater flexibility while preserving risk discipline. During the last 3 years, we have strengthened our asset and liability discipline and risk management approach from a strong fixed income base with 85% of asset exposure. We have effectively diversified into real asset with real estate, private equity, private debt and infrastructure. On the other hand, we have reduced our exposure to corporate bonds by 7 percentage points as it became more challenging to source good assets and yields against the embedded risk. Our investment framework is not fully linked, following a 360-degree review of all asset opportunities, thanks to the investment of substantial time, money into system and people to better connect the different part of our business unit. We now use the same ALM tools across the group, while our asset manager are fully integrated insurance constraint and the evolution, including Solvency II constraints into their review. We have also strengthened our credit review and liquidity discipline. Slide 40 highlights the tangible results of the change I just mentioned. Our ability to increase and maintain attractive spread between the yield of the asset and the cost of the guarantees, as shown on the first row, is linked to 2 main factors in addition to the already mentioned. First, the increase of our asset duration by 1.5 years for Life and 0.5 years for P&C since 2016. And second, the methodical deployment of real asset by EUR 10.4 billion, increasing our exposure from 7.5% in 2016 to 10% in 2020. The recent increase in financial market volatility has naturally been a test for asset liability management, and the slide shows the action taken and the result achieved so far. Asset management team has done a fantastic job in defining and protecting our credit portfolio, as shown in the upper left-hand side of the slide. During the last 9 months, the percentage of corporate bond downgrades in our portfolio from investment grade to high yield has been 0.9%, while the same metric for European indices was 2.3% downgrade. If we look at the entire portfolio, our corporate bond face a 9% downgrade versus 15% for indices. I would like to thank our credit analyst, our portfolio manager for this significant achievement. The lower-left chart illustrates the significant derisking we carried out on equities. We took the opportunity to lower our equity exposure and diversify it out of Europe during the rebounds experienced in the late spring and the summer of 2020, with a reduction of more than 30% of our listed exposure, which translated into EUR 4.4 billion in sales. Now moving to the right side of the screen. My colleagues from Generali Real Estate have also worked to reposition our real estate exposure over the last 3 years, well ahead of the emergence of the current sector challenges. For instance, we decided to reduce non-core assets, such as logistics as well as exit from non-prime locations, both on commercial and residential properties. We have also worked tirelessly with our tenants during the current crisis to strike a difficult balance of maintaining financial discipline while also supporting them. Thanks to this effort, the overall impact is a decrease of just 3% on our rent, a decrease which we expect to be temporary. At this point, our real estate, on the lower hand side of the slide, are impact between negative, positive price evolution is neutral for 2020. As we received several questions on our private equity during the result call last week, we wanted to take the opportunity to highlight the quality of our program on Slide 42. It is important to understand that this activity is a fund of fund activity. Our dedicated PE team is selecting and monitoring highly qualified specialists to source, manage and rotate the assets. When I joined in January 2017, I made 2 key decisions on private equity. First, we extended our private equity program to Life portfolios to provide additional return for both our policyholders and our shareholders. The second decision was to start to invest in secondary transactions to diversify our vintages, our managers and capture attractive discount from sellers. This transformation is shown on the upper right-hand side of the screen. Today, we have EUR 13.6 billion committed with EUR 6.3 billion net asset value that is well diversified across developed region of the world. Finally, over the last 4 years, we have been able to distribute EUR 757 million of dividend to our insurance company and register a multiple of 1.37 on our capital invested net of fees. From this strong base, how are we going to address the challenge of financial market going forward? Slide 43 provides our key conventional markets. In broad terms, we expect interest rates and credit spread to remain low in and outside of Europe. We expect that equity markets will continue to face substantial dislocation by sectors and geographies as seen in 2020. Real estate will face challenges outside of prime location, and it will take time for the economies to heal while the need to finance them will continue to sky rocket. On the right side, I'm sharing with you how we plan to navigate this environment. We have 6 main levers to use in addition to our strong ALM discipline. We will use a strong base in real asset to further source attractive risk-adjusted return. I will come back to this. We will be more opportunistic by investing also outside of Europe as more than 85% of our exposure is in euro-denominated asset. ESG and SRI are a key element to capture sustainable returns and strengthen our resilience. While we have invested in and are using innovation to make better investment decision and lower cost of sourcing and managing assets, we will rely further on the skill of our asset managers, a further driver behind our effort to build a world-class multi-boutique asset management business. At last but not least, we will continue to work on the L of ALM to reduce our liability cost. Over the course of the next 3 years, we will deploy at least EUR 15 billion into real asset, increasing our asset exposure to 13% from 10% by 2023. We will focus on expanding real estate investment, both geographically and in terms of sectors. We will leverage specialists, including our boutique in areas such as infrastructure debt and equity, private credit and private equity. It is important to understand that we are realistic in our deployment program. The pie chart on the right-hand side shows that whilst we have -- and we will invest a sizable amount into real asset, it will represent 20% of our reinvestment program in the next 3 years. Slide 45 illustrates the importance of 3 aspects of our levers for our Generali account investment, the quality of our private equity fund of fund business to increase investment in real asset, the importance of our alpha generating capabilities from our multi-boutique and the relevance of ESG investment. If you look back at the premium that our private equity team was able to deliver versus public market equities, we have a plus 3.3% performance after fees, which translated into more than EUR 200 million value creation before tax and policyholder participation on our insurance asset. And Generali account investment into our boutiques have generated plus 8.6% alpha, which is equivalent to EUR 250 million of value. Our ESG investment is much more than just nice to have. As you've heard from Lucia and Bruno, Generali has a strong conviction that this is the best way to invest for long term, and our recent outperformance of 7.6% support this belief. In a nutshell, to navigate the current markets, we will use nontraditional instrument for insurance companies: more real asset, invest outside of our home market, combined financial and nonfinancial data to make investment decision with ESG, use innovation to extract greater yields and use skill asset manager to deliver performance to our policyholder and shareholder. However, one thing that will not change is our ALM discipline across the different parts of our group, and this is the same discipline we use to implement our asset management strategy. Now I will share with you starting on Slide 46. In May 2017, we launched a new strategy to broaden our investment capabilities and product offering and accelerate the transformation of group liabilities through a multi-boutique platform approach. Since then, we have grown our revenue substantially from just under EUR 500 million in 2016, up to EUR 900 million this year. About 25% of the increase is through the alignment of group Generali account mandate fees to the market standards, and another 25% of this growth has been achieved, thanks to the contribution of our acquired companies. The bulk of the growth, more than EUR 230 million, has been achieved by organic growth executed through our Generali and boutique distribution channels. This growth of revenues has translated into a substantial growth in profit as our revenue per asset under management have increased from 10 basis points in 2016 to 17 basis points in 2020. Our profit have gone from EUR 150 million for financial year 2016 to more than EUR 350 million forecasted this year. The key contributing factor for this success have been our increased product offering and strong performance achieved as seen on Slide 47. In the last 3 years, we have added 5 new fixed income strategies, 5 new multi-asset equity offers and a remarkable 17 new real asset or alternative strategy to our product portfolio. This increase of quantity is also combined by an increase of quality as illustrated by our performance numbers. Over the past year, our active management fund overperformed their benchmark in 80% of our cases and rank in the top Morningstar quartile in 67% of cases, far above where we were in 2016. This contributed to much improved asset management brand recognition. Generali has now reached #11 in terms of preferred asset management firm among the top 40 players by European fund selectors for the very first time in the latest Cerulli report. As a result, a base of customer -- external customer to our group company has significantly grown to 32% of revenues. The result we have been able to achieve in such a short period of time are thanks to our multi-boutique strategy, which we'll cover on Slide 48. It is worth reminding you of the underlying characteristics that each party brings to a collaborative platform. At Generali, we want to create value by blending our partner expertise in Generali's strategic capital, scale and distribution capabilities. This is why we seek out and protect the entrepreneurial spirit of our partners, complementing it with direct support in terms of product structuring, day-to-day business control and access to our powerful global distribution network to reach both Generali and external clients. Generali Global Infrastructure, Aperture Investors, Axis are 3 great examples of our smarter boutique offer in action, reaching breakeven point this year and already delivering very profitable return on investment. Another way we have created value and strengthened our capabilities is through targeted acquisitions, such as liquid alternative specialist, Lumyna, which will cover on Slide 49. Lumyna management has done a fantastic job in terms of increasing asset under management from external clients, from EUR 7 billion in 2016 up to more than EUR 16 billion today. This has been rewarded by important market recognition while delivering a significant return on investment for Generali above 20% since our acquisition from Bank of America Merrill Lynch. Our strong operating margin is an additional driver of our performance as seen on Slide 50. We achieved an operating margin of 52% in 2019, which is higher than the median of our insurance asset manager peers as well as other major multi-boutique platforms. We have achieved this result, thanks to a strong control over costs. The key drivers are: economies of scale achieved, thanks to the size of the group; implementation of a 0 base cost discipline in the entire business unit, including wealth management; centralized procurement services in Prague for middle back office provided to our boutique; and the access to the powerful Generali insurance sales network, which is scales -- which scales our overall distribution costs. From day 1, we have applied tight control oversight to our boutiques, maintaining an autonomous approach to investment management while ensuring close supervision by Generali with regard to governance, risk management, compliance, finance and audit. Generali has a majority position on each company, Board of Directors and our local Board representative and well and highly qualified professional with an average experience of more than 26 years in the industry. In addition, Generali extended its policy to all of its boutique from day 1 and appointed local heads for compliance, risk and finance with a dotted reporting line to the corresponding business unit functions. In conclusion, let me remind you that 3 years ago, Generali started a long-term growth path with the aim of enlarging and strengthening the group fee-based business. At that time, we identified 2 key priorities: to broaden and deepen our capabilities and product offering, and to accelerate our growth through focused distribution. I'm pleased to say that since then, we have made substantial progress in spite of adverse financial markets. This has translated into a strong growth of our profits. Today, we reconfirm all our targets for asset management in 2021 despite the current context. We are increasing our total net result as well as the share of our net revenue from external clients. And we are achieving best-in-class industry margin through an efficient cost control and by scaling our business. We also confirm that we will meet 2020 European asset management financial target by reaching a net result higher than the EUR 300 million we set as a target 3 years ago. I would like to take the opportunity to thank all of those people who work and contributed to this remarkable success. A journey towards becoming a strong player in asset management market has started well but we still have much more to do and much more to give. With this, I'd like to hand over to Cristiano. Thank you.

Good morning, everyone, and great to talk to you all again. I'm pleased to have this opportunity to follow up on what I presented to you at our Investor Day in November 2018 as well as during exploring Generali in May 2019 and in recent results presentation. Let's get started. Today, you've heard from Philippe on our strategic progress to date and from Frédéric on how we are accelerating the delivery of our transformation journey. You have also heard from Lucia, Bruno and Tim on some fundamental elements of our strategy that are sustainability, investments and asset management. I am going to speak about Generali's financial strength and resilience, illustrating how our operational capital and liquidity strengths remain the foundation of our consistent delivery of the Generali 2021 plan. I am going to focus on 5 key areas today. One, we are fully committed to delivering Generali 2021 financial targets. I will outline the key components that underpin the achievement of our earnings per share growth. I will explain how higher contributions from expense reductions and debt optimization helped us to remain on track, even considering the challenging context of the COVID-19-related macro slowdown and the ultra-low interest rate environment. Two, our commitment to technical excellence is reaffirmed both in Life and P&C. Furthermore, we are accelerating product rebalancing. We continue to proactively manage our Life business through liabilities, both new business and in-force business. Our unmatched propriety or exclusive distribution networks allow us to continuously adjust our products, depending on market conditions and client needs. In Life, we are shifting towards more profitable and less capital-intensive business by steering net inflows to our preferred protection and unit-linked lines and increasing the weight of non-guaranteed business in savings. And in P&C, our commitment to further improve technical excellence, also leveraging on our strong competencies in risk selection and reinsurance and our geographical footprint will continue to drive strong results. Three, we outperformed our debt optimization targets, and we have further potential opportunities to improve our cost of debt. We reduced the gross cost of debt by EUR 200 million and our outstanding financial debt by EUR 1.9 billion. Our proactive approach to debt optimization is a proof of our commitment to rebalancing our debt maturity profile while considering always our Solvency II position. We'll maintain an opportunistic and flexible approach to that management, depending on market conditions and investment opportunities and favor, where possible, sustainability options, as seen by our green bond framework. Four, we have a very strong and resilient capital position at both group and major business units level even under stress scenarios. The expected impact of the extension of our internal model to include operational risk as well as the implemented capital management actions and our strong capital generation contribute positively to our solvency position. And five, a successful implementation of our cash and capital management framework is fundamental to achieve our targets and also delivers a net holding cash flow ahead of the Generali 2021 plan. I will share some additional details on remittance, normalized capital generation and cost centralization strategy. As Philippe said, we have committed to our Generali 2021 financial targets, even considering the challenging context we are facing. We are on track to deliver the 6% to 8% earnings per share compound annual growth rate for the 2018-2021 period. In the next slide, I will illustrate in more detail the trend of the different growth drivers. We remain fully committed to our dividend policy and meet all the requirements in terms of solvency and liquidity for the distribution of a cumulative 2019-2021 dividend of between EUR 4.5 billion and EUR 5 billion. To remind you, our target is the distribution of a cumulative 2019-2021 dividend of between EUR 4.5 billion and EUR 5 billion with a payout ratio of 55% to 65%. This payout ratio range is the midterm guidance, but it is not a constraint, particularly in a year like 2020 where results have been hit by various one-off effects and by COVID-19. Of course, we are always depending on regulatory environment for the actual payment. As you know, we met the return on equity target of more than 11.5% in 2019 and we expect in 2021 to be also above 11.5%, sustained by the growth in net result. I remind you that due to the negative impact from some nonrecurring items in the first 9 months of the year as well as the impact of COVID-19 on financial markets, the net result for 2020 is expected to be lower than that of 2019. Therefore, both the 2020 return on equity and the 2019-2021 average return on equity are expected to be below 11.5%. On this slide, we show the drivers that make up our earnings per share growth presented at the Investor Day in 2018 and provide an update for each of them. Starting from the left with growth and profitability from our Insurance business. In Property & Casualty, we are delivering sound and disciplined growth, driven by technical excellence and portfolio steerings towards non-motor. In Life, we benefit from the shift in business mix and the proactive management of the in-force even in a challenging environment characterized by interest rate headwinds and COVID-19. The growth trajectory is negatively affected mainly by Switzerland with an impact of around 2.5% 2018-2021 EPS compound annual growth rate. There will be a dedicated slide about the management of the Swiss unit-linked runoff portfolio. On the efficiency side, as already presented by Frédéric, we have improved our expense reduction target in Insurance Europe by EUR 100 million, leveraging on the new way of working and accelerated digitalization. This will lead us to reach, in Insurance Europe, about EUR 300 million savings versus the 2018 baseline. We are on track to deliver on our growth targets for investments and asset management as already covered by Tim. On the debt side, the successful delivery of our debt management strategy brings an increased contribution. We have achieved EUR 200 million of gross interest expense savings versus 2017 baseline compared to our target of EUR 70 million to EUR 140 million. The cumulative effect of all those 4 levers add up to a 4% to 5% EPS compound annual growth rate. The increased weight of efficiency and debt management in the earnings mix also implies even higher quality and lower volatility compared to the past. In addition, the contribution from selective and disciplined capital redeployment is on track. Among the key growth contributors, I would like to highlight Seguradoras Unidas in Portugal, the Eastern European acquisitions, the growth of our multi-boutique portfolio and the expected contribution from our investment in Cattolica that will be accounted with the equity method. I would also like to point out that we still have up to EUR 2.5 billion available for discipline and selective capital redeployment. Adding all the levers together, we are on track to reach our 6% to 8% range of EPS compound annual growth rate over 2018 to 2021. Let me continue by presenting some more details on building blocks, which will contribute not only to the Generali 2021 earnings per share target but also to the future earnings per share growth. Looking first at the Insurance business component, we will provide some additional detail on top of what Frédéric already shared, starting with Life. Please take a moment to have a look at the slide before I guide you through it. Starting from the top of the page. As you can see, we are managing our business by making the liabilities our primary focus and continuing the shift towards more profitable and less capital-intensive business. Our goal is to achieve sound growth in a lower-for-longer interest rate environment. Our proprietary or exclusive distribution network allow us to actively rebalance and diversify our portfolios, concentrating net inflows in preferred protection and unit-linked lines, supporting and reshaping reserves growth, shifting the weights between investments and technical results. Protection and unit-linked diversify well with marginal capital consumption. Unit-linked capital consumption can be further reduced, thanks to our management fees hedging strategy. Moving now to the bottom part and focusing on saving business. As you can see, we are selectively reducing our exposure and are continuing to reshape our traditional savings business with the goal to progressively decrease its capital intensity. How? One, reducing net inflows and extensively bundling the traditional savings components of our new products with unit-linked and protection components and therefore decreasing the weight of traditional savings in the portfolio. Two, progressively reducing minimum guarantees as demonstrated by our capability to bring new business average guarantees below 0 in the Eurozone. When this is not enough, we are going to 0 or negative net inflows. And three, reshaping guarantees. As an example, in Italy, where the traditional savings business is almost entirely fee-based, the weight of non-guaranteed business, i.e. business where the guarantee is granted only in case of death, is expected to increase from 2% in 2018 to 14% in our 2023 projections. As of our 9 months 2020 results, Italian saving new business premiums were almost entirely with 0 guarantee at maturity or with guarantee only in case of death, with an even split between the two. These features implicitly reduce the average level of guarantee. If we, for illustrative purposes, associate a conservative 0 guarantee to the 14% business without guarantee, then the average guarantee in 2023 in Italy would be 0.7%. This is a sharp decrease compared with 1.2% in 2018. All these actions allow us to sustain investment result even in the current low interest rate environment and highlight our continuous focus on the capital intensity of our savings business. I would like to provide more details regarding the management of the Swiss unit-linked regular premium runoff portfolio that has, as of year-end '19, almost CHF 8 billion reserves and a 2.4% average guaranteed benefit at maturity. This portfolio is partially hedged and has high loadings and fees attached and profit stemming from the associated profitable risk coverages. In order to strengthen the company's SST ratio and decrease its volatility, we are continuously implementing capital management and ALM actions, including lengthening of the total asset duration, derisking investment and extending hedging through dynamic hedging on interest rate and equity risk. Moreover, in the last quarter of 2020, we will execute a capital increase of CHF 400 million to provide an additional cushion for the SST ratio to absorb stress scenarios. As of 9 months 2020, the SST ratio was in the region of 130%, also due to the measures already implemented to date, and the capital increase will bring this figure to around 150%. You should expect further improvement in the future, considering the implementation of the additional measures described above. Moreover, full in-sourcing of the management of the unit-linked funds has been completed in the third quarter of 2020. One other topic that I would like to address is the guarantee reserve. The purpose of the guarantee reserve is to progressively finance in advance cost of guarantees that are due far into the future. It is therefore dependent on methodology assumptions and financial market development. I would like to point out that the mutualization between Swiss portfolio is not allowed. Due to declining interest rates, Generali started the contribution to guarantee reserve in 2010, with a methodology agreed with the local regulator. We remind you that the guarantee reserve as of year-end 2019 amounts to CHF 1.3 billion. In the top right chart, we illustrate the 2 key drivers of the discontinuity in yearly guarantee reserve contribution experienced in 2020. The black arrow represents the increased amount of the total cumulative contribution to fulfill the future cost of guarantees, and the red arrow represents the acceleration effect of 2020. I remind you that the financing of the cumulative contribution to IFRS-guarantee reserve is mostly covered by technical profits and fees. As a proof of this, the Solvency II present value of future profit of this portfolio is negative and amounts to minus CHF 0.6 billion at half year 2020. In the chart underneath, you can see the historical pattern of the contribution to the guarantee reserve under group IFRS accounting and the expectation until 2021. In 2017 and 2018, around CHF 0.2 billion per year were allocated to the guarantee reserve. In 2019, taking into consideration the scenario of negative swap rates, a higher amount of around CHF 0.4 billion was allocated. To reflect even lower interest rates, long-term expectations and COVID-19 impact on equity markets in 2020, we used more prudent assumptions to calculate the cumulative contribution and adopted, also in line with the agreement with the local regulator, an accelerated reserving pattern. This translates into an expected contribution of around CHF 0.6 billion in 2020. According to the projection, based on the actual financial and demographic scenario for 2021, a contribution of around CHF 0.3 billion is expected. Positive or negative variances will be allocated to the guarantee reserves linearly in the next 7 years. Moving away from accounting, we would like to remind you that Solvency II already embeds the full economic view of the portfolio. Solvency II present value of future profits of the unit-linked run-off portfolio moved from breakeven at year-end 2018 to minus CHF 0.6 billion at half year 2020, mainly due to the deteriorated market conditions. Not considering guarantee reserves contribution but increase the present value future profit, the decrease is around CHF 1.1 billion, which is reflected also by the increased contribution to the guarantee reserves from 2019 onwards. However, I would like to highlight that the Solvency II present of future profit for the whole Swiss Life company is slightly positive as of half year 2020. We remind you that this is the only portfolio of this nature in the entire group. Let us now move to P&C segment, where I would like to highlight how we have delivered and are able to sustain the growth of results. The first message I want to stress is our leadership position in retail and SMEs with a high-quality and diversified portfolio, both in terms of geography and product offering. The geographical footprint and business lines are the outcome of strategic choices and drive our robust top line growth. Higher-growth business, units like Austria, Central, Eastern Europe and Russia continued to increase their weight in terms of premiums. Moreover, acquisitions like Adriatic Slovenica and Seguradoras Unidas confirm our potential on high-margin markets and support the growth. In terms of business mix, we are growing our portfolio with an increasing share of profitable non-motor products. Please consider that excluding Europe assistance, whose travel business was materially affected by COVID-19, we would have registered a growth at 9 months 2020 versus the same period in 2019 of 1.6% on a like-for-like basis. As you can see on this slide, we have progressively reduced our combined ratio over the last few years, both at group and business unit level. The sustainability of our combined ratio demonstrated by our solid track record is also confirmed by the reduced COVID-19 impact compared to our peers. This is due to our portfolio composition and disciplined underwriting approach, with prudent reinsurance and with relatively limited exposure to business interruption and large GCNC accounts and hardly any exposure to event cancellation. To drive further technical excellence, we will continue to implement claims management actions aimed at reducing fraud and streamlining claims centers. This will be added to continuous portfolio management and technical pricing refinement. Finally, what I want to stress is that the performance of our combined ratio has been achieved while preserving our historically high level of prudency in reserving. Let's move to debt management. In our Generali 2021 strategic plan, we announced an active debt management approach, targeting a gross interest expense reduction of between EUR 70 million and EUR 140 million, with a year-end 2017 as the baseline, and financial debt reduction of between EUR 1.5 billion and EUR 2 billion compared to the end of 2018 level. We materially overachieved the gross interest expense reduction target 1 year in advance as we expect to land with EUR 200 million lower interest charge in 2021 compared to 2017. Financial debt reduction stands at EUR 1.9 billion and is secured in the high end of the target range announced, again, 1 year ahead of plan. We have been quite active in the last 2 years, and debt management gave us also the opportunity to focus on our sustainability commitment through the issuance of 2 green bonds. We were the first insurance company in Europe to issue such an instrument, a testament of how sustainability is at the heart of our strategy. We took a proactive approach aimed at rebalancing the debt maturity profile while optimizing our Solvency II position in terms of quality of capital. We achieved this through 4 transactions in these 2 years. At the beginning of 2019, we announced the reimbursement of EUR 750 million of subordinated debt, replacing it by issuing only EUR 500 million of subordinated debt. This led to a reduction of our external financial debt by EUR 250 million. In September 2019, we launched the first liability management transaction, followed by a second one in July 2020, to smoothen the 2022 maturity peak, resulting in a more balanced debt profile, giving ourselves the flexibility on timing and solutions for refinancing. The first liability management in September 2019 led to a deleveraging of EUR 250 million, while the second one was neutral in terms of outstanding debt but helped to further reduce the refinancing risk and led to additional savings in interest expenses. In January 2020, we repaid a EUR 1.25 billion senior debt with internal resources. The maturity profile is now significantly reshaped, avoiding peaks in specific years and with a longer average maturity. Looking at the upcoming maturities in the next 3 years for a total amount of around EUR 2.7 billion, they entail both subordinated and senior bonds with an average interest cost of 6.4%, providing further opportunities for interest cost reduction in coming years. Proactive debt management is, in fact, a lever where we benefit from the low interest rate environment. We will continue to manage our total debt in a proactive, flexible and opportunistic way, considering market conditions and the trade-off decisions versus other investment opportunities. Let's now move to discuss about solvency position. I would like to present you the resilience of our solvency position at both group and major company level, even in further stress scenarios. We have carried out a stress scenario based on the 9-month 2020 position, which already reflects the financial impact of COVID-19. We call this the stress-on-top-of-stress approach. We have considered a further 125 basis points widening in the Italian BTP spread against the euro swap. This corresponds to around 240 basis points on the Italian BTP spread against the euro swap. I would like to highlight that under such a scenario, there would be no activation of the country-specific Italian volatility adjustment. We added a further drop in interest rates of minus 25 basis points compared to 9 months 2020. I would like to highlight that between year-end 2019 and 9 months 2020, there was already a minus 45 bps drop in interest rates on the 10-year euro swap rate. Additionally, we have modeled a 20% fall in equity markets and 125 basis points widening of corporate spreads. Despite the additional stress, you can see on the slide that our solvency remains at healthy levels, well above 150%, both at group and major company level. The resiliency of our solvency is supported by the capital management actions, including asset duration lengthening and equity derisking performed in the last months. The year-end solvency position will be further supported by the expected impact of internal model extension to operational risk, accounting for up to 10 percentage points on a pro forma basis, and by our strong and consistent capital generation, driven by Life new business resiliency and the excellent non-Life current year best estimate result. This will also support the local company's solvency position. For France, I would like to remind you that the movement between year-end '19 and 9 months '20 is also impacted by the regulatory change for the IORP business, where unrealized gains and losses recognition was decreased from 25% in 2019 to 15% from 2020 onwards. The impact on the group solvency ratio was around 2%. I would like to highlight that the group solvency ratio presented is the net of the second tranche of the 2019 dividend and the 2020 pro rata dividend, both to be paid in 2021. We will continue to deduct the 2019 second tranche and the 2020 pro rata dividend as we consider them due to our shareholders. In conclusion, we have a solid solvency position that can cope with further stress, both at group and major company level. This also sustains remittances as we will see on the next slide. I would like to remind you that remittances from subsidiaries are reported on a cash basis instead of on an accrual basis. This graph shows that we derive the biggest part of the remittance from subsidiaries with a very strong solvency position. As you can see, almost all the remittance in 2019 and was expected in 2020 and 2021 derive from subsidiaries with a solvency above 170%. In 2021, the decrease of the weight of remittances coming from subsidiaries with solvency above 250% is also due to the successful implementation of our capital management framework but foresees excess capital repatriation from the subsidiaries with a capitalization and tangible capital in excess of our preferred range. As of today, 100% of expected group remittance for 2020 has been secured despite the challenging COVID-19 context but created both market volatility and regulatory uncertainty. Despite the impact of lower interest rates, we expect remittances to remain resilient next year with over 90% originated from subsidiaries with a Solvency II ratio of over 170%. In this complex environment, we also believe that such strongly capitalized entities reduce risk of regulatory intervention. On this slide, I recap where we stand today in relation to the main targets connected with the successful implementation of the capital management and cash management strategy. As I have already said, 100% of the expected group remittances for 2020 have been already secured. This puts us in a very good position on our remittance target to upstream at least EUR 9.5 billion from business units. As of today, we are on track. And thanks to the strong local solvency position described in the previous slide, future remittances are based on solid foundations. Looking at the 2019-2021 cumulative net holding cash flow target of over EUR 7 billion, we are currently ahead of the Generali 2021 plan, thanks mainly to the decrease in gross interest expenses on debt, tax and costs. In terms of normalized capital generation, we are on track for the EUR 10.5 billion target, driven by Life new business and non-Life current year best estimate results. We have been very consistent in our cash centralization strategy by extending the participation to the cash centralization platform to newly acquired entities and by enabling new centralization levers to complete the treasury model. This has translated into a greater discipline in cash management across the group as reflected in a higher and more stable cash position at the parent company level. All this contributes to the strong cash position even after deduction of dividend and of the capital increase in Switzerland. To summarize, we are fully committed to Generali 2021 financial targets even in this challenging context. Generali's commitment to technical excellence is reaffirmed both in Life and P&C, and we are accelerating product rebalancing. In Life, we are managing our business with a primary focus on our liabilities, shifting towards more profitable, less capital-intensive products and are reshaping our traditional savings business. Our goal is to achieve sound growth in a lower-for-longer interest rate environment. In P&C, we maintain our commitment to drive technical excellence and position ourselves in terms of business mix and geographical footprint to capture profitable growth opportunities. We outperformed our debt optimization target and have further potential opportunities to improve that cost. Generali has a very strong and resilient capital position at group and major company level, even in further stress scenarios, and this secures our commitment towards dividend distribution. Our effective cash and capital management framework is fundamental for the achievement of our targets and to enhance financial flexibility. For example, we were among the first to implement the hedging of our unit-linked fees with benefits in terms of decrease of capital intensity and reduction of volatility of both P&L and own funds. With all this in mind, I am confident that we will deliver on our Generali 2021 strategic plan commitment. Thank you for your attention.

Thank you, Cristiano. Before opening the live Q&A, our group CEO, Philippe Donnet, will provide us with some closing remarks. And after that, we will show you a short video of our recently launched advertisement campaign. Over to you, Philippe.

You should now have a clear picture of our strategic and financial progress against our Generali 2021 plan. While the context has changed significantly since we first presented this strategy, I am extremely proud of the proactive and decisive actions taken by our teams to face these challenges head on. In the last 10 months, we stayed true to our strategy by seeking out-of-the-box solutions to ensure business continuity, anticipating change in order to innovate our business and pushing forward with our sustainability goals and always acting in the best interest of all our stakeholders. The current context has made us more mindful that we must always be ready to adapt to the situation we find ourselves in. It has also allowed us to accelerate our digital transformation at all levels and reminded us that the human touch so deeply grounded in Generali's DNA is all the more important. We have always been close to our customers, and now more than ever, we see the true value of what we offer to them, security and peace of mind in the most challenging moments. Our ambitions go far beyond the conclusion of the current strategic plan. We want to be a group that our stakeholders can truly rely upon investors, customers, employees, families, distributors and our communities. None of this could be possible without our people, our 72,000 colleagues and our 155,000 agents in 50 markets across the world who contribute to the same purpose, to enable people to shape a safer future by caring for their lives and dreams. It is thanks to them that we are able to come to you quarter after quarter, year after year to present you with the fruits of our efforts, results that are the hallmark of the trust that people place in us and are the manifestation of our group's credibility. We have proven to be reliable and resilient time and time again. With almost 200 years of experience and technical expertise, we have the know-how to face the challenges of the pandemic and the current low interest rate environment. At the heart of everything we do is and will be our ambition to be the lifetime partner, building trust and allowing our customers to achieve their dreams, caring for them and being by their side in every phase of their life. I sincerely expect that our next meeting will be in person so I can shake your hand and thank you personally for your continued support for Generali because as I have always said, insurance is a people business. It's about trust, it's about providing security and protection in a world of growing uncertainty. It's about being a source of hope for the future. Thank you so much. [Presentation]

We can now start the Q&A section. We will start by taking questions coming through the phone.

[Operator Instructions] Your first question, Michael Huttner from Berenberg.

What a great investor day and it's really nice. So most of the [indiscernible] was nice and short. So I only have really 2 questions. First one is on the cash. What was the cash position now? You alluded many times it was bigger, et cetera. And I just wondered what the figure is. And then you have this -- the Life spreads, the, I think, 186 bps in 2019, up from 156 bps in the asset liability management. You spoke a lot about the investment side and you kind of alluded to the liability management. Does that actually mean transforming bits of the back book? And how much has been done and how much can still be done?

Thank you. I'm going to ask our Group CFO, Cristiano Borean to answer the first question.

Michael, so let me remind you, at the 9 '20, the holdco position was higher of EUR 4.1 billion cash. And by year-end 2020, we expect to be above the EUR 4 billion. Please take this into account also after the announcement of the second tranche delay.

And then on the second question, I will ask our General Manager to talk about the mix and the back book transformation. And then I will ask Tim to give some comments on the investment margin.

Thank you, Michael. We've done, over the past 2 years, 5 deals, which I would call in-force deals with, of course, Generali Leben but also Belgium, Holland and the disposal of 2 smaller portfolios in the U.K. And our philosophy remains the same. I mean we are extremely opportunistic and disciplined on this and we are permanently screening our portfolios. And that's why I can tell you that we have other projects in the pipeline. Of course, I cannot mention specifically these projects, but we have other projects in the pipeline on info disposals. There is appetite on the market, as you know. But of course, you never know before closing the deal. So we will close these deals only if they make sense for our shareholders.

On the investment margin, as you know, we always look at assets and liabilities. We have done, as Frédéric mentioned as well as what Cristiano mentioned, a tremendous work on the cost of liabilities and the change of product mix. If I look forward on 2023, we see that our margins are going to compress by roughly 20 basis points. We are going to offset that by a substantial deployment into a real asset. As you have seen, we have an ambition to be able to deploy EUR 15 billion on real asset. By the time we get to 2023, real asset will represent roughly 50 basis points on the total yield of our portfolio. So it's quite an important initiative but we are also very careful on the way we deploy. We're using our boutique as well as a very thorough risk management framework compliance and liquidity.

Can I just ask, the 20 bps that you mentioned, is this before or after the extra investment in real assets?

It is after the use of real asset because we need time to be able to deploy those real assets. As you know, the most important part is to source the asset to be able to control the quality of those assets and of course, to reshuffle, if needed, those real assets. So it is after.

And your next question comes from Peter Eliot from Kepler Cheuvreux.

Three questions, if I may. It's great that you're still confident on the EPS CAGR target, attracted very well. I mean if I compare your waterfall on Slide 56 to my numbers, then I guess the main difference is the benefit from the deployment of excess cash and from the EUR 100 million of expense savings. I guess if I'm honest, I'm surprised that you can get the full run rate of those that quickly by the end of next year, I mean, especially given the bulk of the firepower, is all waiting to be deployed as I understand it. So I'm just wondering if you can help me understand those dynamics there. And then the second question was on Switzerland. If I look at the operating profit then in 2017, this was EUR 200 million; 2018, it was above that; 2019, it would have been above EUR 200 million without the reserving actions. But you mentioned that you expected negative in 2021. So I guess my question is, if the reserving requirement is only EUR 100 million up in 2021, then why are we expecting such a big swing the operating profit? And maybe if you could give some comments about what you sort of think the long-term run rate might be, once you're sort of back to a normal level. And sorry, if I can cheekily get in a third question. You mentioned 100% of the expected 2020 remittance was secured. Could you just clarify if that means you've got all the cash from all the entities you're expecting or whether some entities were subsidizing others?

Thank you. Cristiano, over to you.

Yes. Peter, so first question related to EPS target, the deployment part. Please note that as I correctly mentioned during the speech, the deployment entails also the effect of all the investment done so far, including the Cattolica part, which immediately start with an equity accounting method. So you have to imagine that there is a pro rata benefit also on this one. And going forward, you will see progressively also all the benefits coming from the synergies progressively even getting higher. In the second question related to the Switzerland operating profit, I would like to hand over to Frédéric.

Thank you. Yes, Peter. I'll start explaining to you what we are doing in Switzerland, and then I give back the word to Cristiano. So in Switzerland, first, I think this is important to remind that there are 3 different pieces in the business. The first one is the P&C one, which is a good business. The second one is the Life new business, which is also a good one. And then we have an in-force book, which needs attention. We have especially this 8 billion unit-linked with guarantee at maturity. And let me just tell you that this is the only unit-linked with guarantee that we have in the group. I think this is also important to remind you that the PVFP of our Life business in Switzerland is slightly positive. So yes, we have high guarantees on some products and you know that we have a 2.4% average guarantee, but we have also extremely high fees and we have extremely profitable riders, protection riders attached to the business and attached to the savings business. So what we've done over the past year is that we've taken decisive actions to derisk the portfolio and to lower the volatility. So one, we have and we are extending the dynamic hedging. Second action is that we have lengthened the duration of the assets so that we have a better matching. And all of these allow us to have a solid solvency margin in SST, so according to the 3 standards, we were around EUR 130 million at the end of September, and we will be around EUR 150 million out of the EUR 400 million capital increase that we are implementing at year-end. So our conviction is that we have implemented the right action to derisk the portfolio in Switzerland. Now to Cristiano, on the result.

Yes. And to complete the point exactly in line with what Frédéric was explaining you, Peter, there is the effect of a kind of stop loss, risk management decision in order to increase the hedging and the dynamic hedging, as you know, as a cost and pass-through P&L on one side and the lengthening of duration clearly has an effect also of lower recurring income. So you need to put all these things adding up and taking into account the variances of the reserving for 2021 as an effect, which explains this going forward as a lower contribution. Relating to...

Yes. Could I just follow up very quickly on that? I mean if I just sort of then take 2021 as the base where we're expecting EUR 300 million of reserving and an operating profit of double-digit negative, then beyond that presumably, we're going to be back to a run rate of sort of EUR 200 million. So that maybe means that the operating profit we should expect from Switzerland is maybe double-digit positive on an annual basis past 2021? Is that the right sort of thinking? Or am I -- I mean, as a result of the derisking, we've sort of lowered the baseline a little bit?

You should lower the base. It is not going back to that level exactly for the reason I was telling you. So the run rate goes below because of less recurring income, more cost on the hedging and in general, broader lower risk management income coming from the investment strategy even going forward. So you should expect a decrease and not such a level of run rate.

That's very clear.

Okay, third question related to cash remittances. Are some entities subsidizing the others? As I showed you in the stress-on-stress scenario, all the major entities are well capitalized to bear very large stress scenario. And this is allowing us to allow the full remittance plan of what we were expecting, especially, as I highlighted, I can confirm you that 100% of the remittance 2020 has been secured, which means that in the number I gave you as cash at year-end, we will have the full 2020 remittance plan expected in our bank accounts interested by year-end.

Thank you very much. Next question, please.

This question comes from Andrew Sinclair from Bank of America.

Three from me. Firstly, as you speak of a good update on progress, reiterate there a lot of targets today. One, I didn't spot, apologies if it's in there, was the operating profit target, which I think was 4% to 6% compound over the time period. I just wondered if you could give us thoughts on that, so we'd be able to hit that and just really getting the idea of the operating-nonoperating split. Secondly, was on the cash for M&A, the EUR 2.5 billion that you've got remaining. Really just thoughts are you looking at splitting that between smaller acquisitions or would you prefer for one larger acquisition? And just thirdly, was you mentioned strong reserving levels maintained historically strong reserving levels on P&C. I just wondered if you could give us any numbers or details around any increased expectation for reserve releases.

Andy, sorry, your line wasn't perfect. Can you confirm your first question is about our operating profit target? Your second question is about how are we planning to deploy the EUR 2.5 billion M&A, correct?

Correct, yes. Could it be smaller acquisitions or one larger?

Major one, yes. Thank you. And finally, I didn't catch the third question. Do you mind to repeat it again?

Sure. It's probably my accent as much as the M&A -- or as much as the line. But the third question was on -- you mentioned historically strong reserving levels for P&C. Just wondered if you could put any numbers or details around that, just further that would mean an increased expectation for reserve leases.

Perfect. Cristiano, if you can start with the first question and then I'm going to -- we can move to Philippe for the M&A and the reserving for Frédéric. Thank you very much.

So Andrew, the operating target, we did not give in this plan an operating results target. Anyhow, it is a very important component, as you can see, a very resilient component of our result -- total result. What I can confirm you is that the projection of our operating result stays strong because of the resilience of the book, also thanks to the contribution of non-life business, which is strong and less impacted than COVID than average in the market. And this is, again, a factor of stabilization of the operating result going forward. So you should expect a sufficiently resilient and growing operating result for the 2021 part.

Over to you, Philippe.

Yes. On M&A, the framework we described a couple of years ago is still accurate, both on the strategic standpoint and on the financial standpoint. As you said, we still have EUR 2.5 billion to allocate to acquisitions. The difference compared to 2 years ago is that obviously, due to the COVID-19 crisis, new opportunities may be available. And definitely, we would look at them as well. Talking about the size of the acquisition, I would say it doesn't really matter. What matters most is the quality of the acquisition. So obviously, the price, our ability to integrate successfully the business we acquired. This is very important to us. So, so far, we've been very proactive on small and medium acquisition, which is a good strategy. I would say all the options are on the table. We are open to all options remaining in our strategic and financial discipline and being opportunistic. So the quality matters more than the size.

Over to you, Frdric.

Andrew, on your question of -- on P&C reserves. First, you know that over the past years, we had about 4 points positive impact due to reserve release on prior years. And if you look at our Solvency II disclosures, despite this reserve release, you've seen that our reserve buffer, if I may say, has been pretty stable over the past years, which means that we are reserving in a cautious way. Clearly, this year, the release will be lower, which means that the buffer will increase. What -- the buffer on our reserves. What do I expect in the coming years? I expect that we come back to, I would say, a normal rate, which is last year rate, so reserve release of about 4 points a year.

And this question comes from William Hawkins from KBW.

First of all, a question for Tim, please. On Slide 39, you show that your asset mix has actually shifted towards government bonds over the past 4 years. That's superficially counterintuitive. I can imagine there's a number of potential explanations regarding market movements and asset allocation and the rest of it. So I just wondered, could you help me understand why your government bond exposure has increased on that period in the slide? Secondly, please, I'm not sure if this is for Tim or Philippe, but you frequently make reference to this ambition of becoming a top 5 most profitable asset manager in the boutique area. Forgive me, but can you just remind me how you're actually measuring that? Where you are today and what you actually need to do to get into the top 5. And then lastly, sorry, if I can sneak in a third question. Your retail orientation at the moment is serving you very well through the COVID crisis in non-life. That's clear. But I think many people still have a question about whether being so materially underweight commercial lines leaves you with a long-term competitive disadvantage when we think about the disruption from technology and the Internet of Things and automated cards and all that kind of stuff. So even though you're doing well this year from being underweight retail, are you strategically thinking about the opportunities of expanding more into commercial lines over time?

Tim, I suggest you take the first 2 questions. Yes, thank you.

Yes, I'll take the first 2 questions. So thank you, William, for this. The first aspect on your question on exposure is part of what I presented, which is the extension of duration. I believe that interest rate risk is better panel by government bonds. And we have extended the duration of our portfolio by 1.5 year in life and 0.5 years in P&C, because we also have, obviously, the willingness to reduce the risk of the downside in interest rate risk. The second part of this reason why you see this is as we go into real assets, many of the real assets have -- especially on private debt, have a low duration, are floating most of the time. And for us to be able to counterbalance this effect of having very good yield and spread as long as you are very good at sourcing and managing the risk, you need to also counterbalance this aspect of short duration with longer duration, and we use government bond to do this. So this is to address your first question. At the end, it's a 1 point increase, but this is important to notice, and we are very, very deliberate in the way we do it. And we are looking at the 360 degrees of all the implication. This is also an explanation of our increase of cash. I can come back to this, if you want. The other topic on multi-boutique. Multi-boutique is, for us, a merger in terms of success around our net profit. Today, as you asked directly the question on where we stand, we are #6 if we compare that to all the different multi-boutique in the world that define themselves as multi-boutique and operate as multi-boutique. That is to have a majority or a stake from a company like Generali and give autonomy and an investment decision outside. I can give you many names. But the point is we're in #6 in terms of profit. To be on a #5, we will probably need to have a EUR 75 million to EUR 80 million additional net profit to be at that level. This goal of being #5 or on the top 5 is a long-term goal. It's not 2021. We know it takes time. The consolidation in this market is pretty active. As you know this year, we had a couple of multi-boutique that have been through transformation. And -- but on our side, we are convinced this is the right model to be able to align interest of clients, interest of, obviously, group in terms of diversifying our fee business and, obviously, for our shareholders. So this is to address your 2 questions. I will leave now the floor to the question around the third one to Philippe.

Yes, Philippe, start, then maybe Frdric can add. Thank you.

Thank you. Yes, the -- our portfolio, which is mostly a retail portfolio, as you said, has been protecting us this year, definitely. But I would say not only this year, because this year, our combined ratio was under 90%. But in the previous years, we had a combined ratio around slightly above 90%, in any way the best of the industry. So we are definitely happy with the quality of our portfolio. You remember that when we presented our strategic plan, Generali 2021, 2 years ago, we said that one of our strong convictions was that we would be able to get growth and profitable growth remaining in our core market, which is individuals, families, professionals and SMEs. And this is even more true today. We've seen that people are not protected enough. SMEs are not protected enough. So we just can confirm this conviction, and this will remain our core business. Having said that, we are not out of the large corporation insurance business. We have a dedicated business unit, corporate and commercial, with around EUR 2 billion premium, and we are quite happy with this business. The quality of this business is good, is strong. We are confident that in the next few years, price will increase, and we'll be able to further increase the profitability of this business. But we will not shift our core business from retail and SMEs to corporate and commercial.