The Life operating result came to € 3,141 million, up 1.8% over the € 3,084 million of year-end 2016. The development of the investment result was particularly positive. It was offset in part by the decrease of the technical margin net of acquisition and administration costs.
The Life operating return on investments stood at 0.75% (0.75% at 31 December 2016), despite the current context of low interest rates.
Technical margin
Life segment operating result: technical margin
| (€ million) | 31/12/2017 | 31/12/2016 | Change |
|---|---|---|---|
| Technical margin | 5,867 | 5,895 | -0.5% |
| Net earned premiums | 44,943 | 45,498 | -1.2% |
| Fee and commission from financial service activities | 136 | 141 | -3.3% |
| Net insurance claims adjusted for financial interests and bonuses credited to policyholders | -39,585 | -40,049 | -1.2% |
| Other insurance items | 373 | 305 | 22.5% |
The technical margin2, which totalled € 5,867 million, showed a slight decrease due to the positive results on some portfolios recorded in 2016 and not repeated this year.
This margin does not include the insurance expenses, reported under the item insurance and other operating expenses.
Net investment result
Life segment operating result: investment result
| (€ million) | 31/12/2017 | 31/12/2016 | Change |
|---|---|---|---|
| Net investment result | 2,209 | 2,080 | 6.2% |
| Operating income from investments | 15,622 | 12,918 | 20.9% |
| Net income from investments | 11,683 | 11,290 | 3.5% |
| Current income from investments | 10,953 | 11,243 | -2.6% |
| Net operating realized gains on investments | 1,946 | 1,668 | 16.7% |
| Net operating impairment losses on investments | -251 | -706 | -64.5% |
| Other operating net financial expenses | -966 | -916 | 5.5% |
| Net income from financial instruments at fair value through profit or loss | 3,938 | 1,628 | n.m. |
| Net income from financial instruments related to unit and index-linked policies | 4,107 | 1,707 | n.m. |
| Net other income from financial instruments at fair value through profit or loss | -169 | -79 | n.m. |
| Policyholders' interests on operating income from own investments | -13,412 | -10,839 | 23.7% |
The net investment result, amounting to € 2,209 million, was up (+6.2%) on the € 2,080 million recorded at 31 December 2016.
This performance was particularly brought about by the growth in net realized gains and reduced net impairment losses. This was partially offset by the decrease in current income from investments in equity and bonds due to continuation of the low interest rates in general.
In detail:
- current income from investments – which also include the current income from investments at fair value through profit or loss – fell to € 10,371 million (€ 10,672 million at 31 December 2016), while the related profitability, calculated on the basis of the book value of the investments, was slightly down to 3.1%. In more detail, the current income from fixed income instruments fell from € 9,734 million at 31 December 2016 to € 9,528 million. The current income in the equity line was down, falling from € 520 million at 31 December 2016 to € 462 million. Finally, current income from investment properties was slightly up, at € 566 million (€ 543 million in 2016);
- net operating realized gains on investments stood at € 1,946 million (€ 1,668 million at 31 December 2016) against higher realized gains on all asset classes, in part coming from the planned Asset & Liability Management activities.
- net operating impairment losses on investments decreased from € -706 million at 31 December 2016 to € -251 million; this performance mainly reflects lower impairments on equity and bond instruments following the positive performance of the markets in the last year;
- other operating net financial expenses, which includes interest expense related to operating debt and investment management expenses, amounted to € -966 million (€ -916 million at 31 December 2016);
- net income from financial assets and liabilities related to unit-linked and index-linked policies fell from € 1,707 million at 31 December 2016 to € 4,107 million. This trend was affected by the change in value of the investments against the positive performance of certain financial markets with respect to the corresponding period of the previous year;
- net income from other financial instruments at fair value through profit or loss amounted to € -169 million (€ -79 million at 31 December 2016). The change is mainly due to the effect of exchange rates.
The policyholders’ interests on operating income from own investments went from € -10,839 million at 31 December 2016 to € -13,412 million, up from the corresponding period of the previous year, mainly due to the related growth of the income from financial instruments at fair value through profit or loss associated with linked contracts.
Insurance and other operating expenses
Life segment operating result: total insurance and other operating expenses
| (€ million) | 31/12/2017 | 31/12/2016 | Change |
|---|---|---|---|
| Insurance and other operating expenses | -4,936 | -4,890 | 0.9% |
| Acquisition and administration costs related to insurance business | -4,817 | -4,820 | -0.1% |
| Net other operating expenses | -119 | -70 | 68.9% |
The insurance and other operating expenses increased from € -4,890 million at 31 December 2016 to € -4,936 million.
More specifically, acquisition and administration costs related to insurance business stood at € -4,817 million, basically in line with last year. Acquisition costs, which totalled € -3,803 million, fell by -1.3%, reflecting the general decrease in the different countries where the Group operates. They are particularly rising in France consistently with the trend in premiums, and in Asia following the targeted changed business mix of the portfolio, while they are decreasing in Germany, CEE and EMEA. Administration costs rose, amounting to € -1,014 million (+4.8%).
The ratio of the acquisition and administration costs to volume stood at 10.2% (10.1% at 31 December 2016).
Finally, the percentage of the total administration costs related to insurance business to the average insurance provisions stayed substantially stable at 0.27%.
The other operating items rose to € -119 million due to the higher net expense. This item also includes the brand royalties paid by the companies in this segment to the Parent company for marketing and global branding activities.
1 Please refer to the Glossary in the Appendix to Management Report section for more details on the way the indicator was calculated.
2 Please refer to the methodological note on alternative performance measures in the Appendix to Management Report section for more details on the way the indicator was calculated.