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Venice, November 26, 2010
Generali Investor Day 2010
Generali Immobiliare Strategy & Performance
Giancarlo Scotti Chief Executive Officer of Generali Immobiliare
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Disclaimer
Certain of the statements contained herein are statements of future expectations and other forward-looking statements.
These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.
The user of such information should recognise that actual results, performance or events may differ materially from such expectations because they relate to future events and circumstances which are beyond our control including, among other things, general economic and sector conditions.
Neither Assicurazioni Generali S.p.A. nor any of its affiliates, directors, officers employees or agents owe any duty of care towards any user of the information provided herein nor any obligation to update any forward-looking information contained in this document.
The manager in charge of preparing the company’s financial reports, Raffaele Agrusti, declares, pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Financial Intermediation, that the accounting information contained in this presentation corresponds to document results, books and accounts records.
2
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Agenda
II. Corporate Structure
III. Real Estate Strategy & Going Forward
I. Generali Portfolio
Introduction
IV. Final Remarks
3
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Agenda
IntroductionA. Real Estate Asset Class within Generali Group
B. Real Estate Asset Management and Insurance business
C. Real Estate versus Other Asset Classes
D. Recent Trends
4
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
A. Real Estate Asset Class within Generali GroupIntroduction
30.5
258.1
Asset Management: Generali Immobiliare
InsuranceLiabilities
At 30.09.2010
Real Estate(2)
5.5% at book value7.1% at market value
Cash & financialinstruments94.5%
(1) Including own use real estate within own investments. Own investments include own capital and insurance funds (i.e. unit linked excluded)(2) Including real estate mutual funds & own use real estate (3) Net technical reserves; life reserves including investment contracts
Traditional LifeReserves(3)
P&C Reserves(3)
“Own Investments”including own use real estate(1):
Euro 331.1 bn
5
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Insurance objectives and Asset Allocation
B. Real Estate Asset Management and Insurance business
Global real estate investment focuses on two areas: own use assets and investment propertiesReal Estate asset management focuses on investment portfolio to deliver performanceThe real estate assets of the Group provide the insurance business with a specific asset class in the company portfolio and are used to cover life and non-life technical reservesThe investment and management policies of the Group real estate assets are coherent with the insurance business requirements:
Life: Recurring income properties to support yearly income returnAssets with long-term value creation
Non-life: Properties with value appreciation to maximize return on capital
Recurring income and value creationPositive RE yield spread vs. bondInflation hedgingLong-term capital protectionCreation of latent capital gainHigh quality tenants
Introduction
Investment strategy – Key drivers
6
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Property versus other asset classes: Long-term performance
C. Real Estate vs. Other Asset Classes (1/2)Introduction
Real estate is a significant asset class with specific characteristics:
Size of the real estate market
Risk/return profile (between stocks and bonds)
Diversification benefits due to low cross-correlation with financial assets
High proportion of total return in current cash yield
Hedge against unanticipated inflation
Real estate’s relatively low correlation with other asset classes make it a source of diversification in a portfolio.
Source: Generali Immobiliare Research
Total return US Europe(annual in %) 30 years 9 years
Bond 9.8% 6.1%
All property 10.0% 4.1%
Equities 10.8% 1.9%Source: EUROPE -All property: IPD all European pooled property fiunds index, Equities: Morgan Stanley Capital International, Bonds: JP Morgan Co Incorporated
USA- IBBOTSON 2009 (1978 to 2008 data) Property: NCREIF-MIT, Equities: S&P 500, Bonds: US Long-term (20 y) Treasury Ibbotson.
7
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Property in a low interest rate environment (Milan example)
C. Real Estate vs. Other Asset Classes (2/2)Introduction
Increasing spread (Real estate yields vs. Bonds)
Low-cost debt financing
Real Estate spread near record to Government Bonds signals time to buy propertySources: Cushman, Datastream
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Dec. 2005 Jun. 2006 Dec. 2006 Jun. 2007 Dec. 2007 Jun. 2008 Dec. 2008 Jun. 2009 Dec. 2009 Jun. 20100
50
100
150
200
250
300 Spread [RHS]
Milan Prime Yield
Italian Gov. Bond (Rendistato)
(1)
(1) Yields are net of direct costs i.e. maintenance, insurance, local taxes etc
8
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
D. Recent Trends
Medium term outlook improving as market imbalances are reduced gradually
Real estate markets benefited from the increased economic activity in 2010
Rental values to stabilize, sharp decline in new supply and stabilization of vacancy rates
The demand-side environment remains the main short-term concern
We expect slight increases in capital values from 2011 onwardsSource: GIm Market Research, Cushman
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Dec.2005
Jun.2006
Dec.2006
Jun.2007
Dec.2007
Jun.2008
Dec.2008
Jun.2009
Dec.2009
Jun.2010
Paris Munich Milan Madrid
European Prime Office Rental Growth
Introduction
9
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
A. Real Estate within Generali: Description
B. Real Estate within Generali: Operational features and tenancy
C. Real Estate within Generali: Key performance indicators
D. Generali Group and Real Estate Investments
Agenda
I. Generali Portfolio
10
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Total Real Estate Market Value as at 30.09.2010: Euro 24.2 bn:
Own Use: Euro 3.9 bn (16%)
Investment Portfolio: Euro 20.3 bn (84%)
Direct: Euro 17.9 bn(1)
Indirect: Euro 2.4 bn(1)
Latent Capital Gain for the Direct Investment Portfolio as at 30.09.2010: Euro 5.2 bn (30%)
Life: Euro 1.6 bn
Non-life: Euro 3.6 bn
Portfolio comprises more than 2,000 assets
Development projects represent a marginal activity in direct portfolio
Low Leverage level
Real Estate Asset Allocation: 7.1% as at September 30, 2010 at Market Value
A. Real Estate within Generali: Description (1/2)I. Generali Portfolio
Source: Financial Statements 30.09.2010(1) Direct: Re assets owned directly by the group insurance companies or through SPV directly controlled
Indirect: Re funds managed by third parties
Destination of use of the direct portfolio Market Value as at September 30, 2010
Other/Mixed 9%
Retail 6%
Office 74%
Residential 8%
Logistic 3%
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Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
A. Real Estate within Generali: Description (2/2)I. Generali Portfolio
Source: Financial Statements 2010.09.30
Country (Euro bn)
Italy France Germany Rest of Europe
Rest of World
Total
Total Investment MV 9.67 4.99 4.11 4.45 0.96 24.18
Own Use MV 1.55 0.43 0.79 0.95 0.18 3.90
Investment Portfolio MV 8.12 4.56 3.32 3.46 0.78 20.28
Direct Portfolio MV 6.84 4.31 2.46 3.53 0.71 17.85
Indirect Portfolio MV 1.28 0.25 0.86 0.04 0.00 2.43
Market Value by Cities (on Total Investment MV)Market Value by country (on Total Investment MV)
Rest of World 4%
Germany 17%
Italy 40%
France 21%
Rest of Europe 18%
Milan 15%
Munich 2%
Rome 6%
Vienna 5%
Tel Aviv 3%
Hamburg 3%
Cologne 2%Berlin 2%Madrid 2%
Barcelona 2%
Other 39%
Paris 19%
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Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
B. Real Estate within Generali: Operational features and tenancy (1/2)
Secure source of income
I. Generali Portfolio
Long Lease
Office lease contracts have different legal structure:
Italy: 12 years (6+6)
France: 9 years (3+3+3)
Germany: 10 years (5+5)
Long Lease duration, rental level defined over the period
Indexation and natural hedge to inflationInflation Hedging: Full indexation of the rent to the inflation across Europe:
Italy: 75/100% of indexationon inflation (ISTAT)
France: 100% indexed on ICC (Construction Costs Index) or IRL (Life Costs Index)
Germany: Indexation based on inflation with a threshold minimum of 5%
Source: Management report
13
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
High quality source of income
I. Generali Portfolio
Low Counterparty Risk
No exposure to a major tenant at Group level
Good diversification of tenant’s activity sector (financial institutions, retail, state organizations, food, fashion …)
High quality of tenants (credit risk analysis by tenant are performed at country level)
Quality buildings attraction for quality and branded tenants: new buildings in business area and historical building in prime and downtown locations
Multitenancy prevails
Key tenant relation as a priority
Low concentration of expiry date of lease (10-15% per year)
Tenants concentration in main countries
Italy Top 10 tenants represent ca. 15% of passing rent
Economic sector: Financial institutions, Telecom and media, state organization, services
France Top 10 tenants ca. 35% of passing rent
Economic sector: IT and services, food, media, state organization, financial institutions
Germany Top 10 tenants represent ca. 20% of passing rent
Economic sector: Retail, IT and services, media, financial institutions
B. Real Estate within Generali: Operational features and tenancy (2/2) 14
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
C. Real Estate within Generali: Key Performance Indicators (1/3)
Catch momentum and value creation
I. Generali Portfolio
Net Operating Income Increases thanks to active management (risk return profile)Net Realised Capital Gain: Regular stream to support insurance profitabilityContinue value creation: Latent capital gain at 30% over the period
Source: Financial Statements and management accountRecurring return %: (Rental Income – operating expenses, i.e. maintenance, insurance)/Market Value Latent Capital Gain %: (Market Value – Book Value)/Market Value; Realised Capital Gain: Sales Price – Book Value
31% 33% 31%29% 29%
627118
343 352260
2006 2007 2008 2009 2010e
Recurring Returns % Latent Capital Gain % Realised Capital Gain (Euro m)
4.5%4.5%4.2%4.1%
3.8%
Direct Portfolio
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Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
C. Real Estate within Generali: Key Performance Indicators (2/3)I. Generali Portfolio
Take advantage of market timing
Source: Financial Statements and management account
Direct portfolio
Took advantage of market timing and realised capital gain in 2008, turnaround year in the Euro zoneGroup portfolio confirms its resilience in 2009Resume value creation in 2010
Latent Capital Gain Realised Capital Gain
5.2
5.9 5.75.2 5.3
29.0%31.2%
33.3%31.5%
29.4%
4.0
4.5
5.0
5.5
6.0
2006 2007 2008 2009 2010e15.0
20.0
25.0
30.0
35.0
Latent Capital Gain% Latent Capital Gain
117.7
343.0
626.6
351.7260.0
6.2%6.6%
2.5%
10.5%
5.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
2006 2007 2008 2009 2010e0.0
2.0
4.0
6.0
8.0
10.0
12.0
Capital Gain realised% Capital Gain realised vs. latent
16
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
C. Real Estate within Generali: Key Performance Indicators (3/3)
Catch momentum and rebalance asset allocation
I. Generali Portfolio
On a long-term view over the past ten years, Generali has rebalanced the risk return profile of the portfolioBetween 2000 and 2005 sales focused on residential sector to seize the market opportunities (capital gain extraction from low yield properties)Over the period new investments focused on recurring income and value creating office properties
Source: Management account
Asset Allocation by Destination of UseOther/Mixed 18%
Office 74%
Residential 8%
Other/Mixed 15%
Office 55%
Residential 30%
2000 2010
Direct Portfolio
17
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
D. Generali Group and Real Estate Investments (1/9)I. Generali Portfolio
Trieste – Piazza Unità d’Italia
Milan – Piazza Cordusio
Generali was founded in Trieste. The Group then expanded into the Procuratie Vecchie in San Marco’s Square, Venice, one of the most prestigious buildings among the firm’s historic assets. The Group’s evolution and personality are mirrored throughout Europe in the high quality commercial buildings initially own used and then for investment purpose.
A historical portfolio
18
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
ITALY: From historical portfolio …
D. Generali Group and Real Estate Investments (2/9)I. Generali Portfolio
Venice – Piazza San Marco
Rome – Piazza Venezia
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Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
ITALY: … to modern investment properties
D. Generali Group and Real Estate Investments (3/9)I. Generali Portfolio
Milan – Via Filzi Milan – Palazzo Nimeyer
Milan – Maciachini business park
Rome – Via Po
20
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
FRANCE: Historical portfolio and new projects for the city
D. Generali Group and Real Estate Investments (4/9)I. Generali Portfolio
Paris (Issy les Moulineaux) – EOS
Paris – Champs-Èlysées
21
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
D. Generali Group and Real Estate Investments (5/9)I. Generali Portfolio
Hamburg – Covent Park
Berlin – Adidas Cologne – Constantinhoefe
GERMANY: Mostly newly built portfolio
22
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
AUSTRIA: Unique portfolio
D. Generali Group and Real Estate Investments (6/9)I. Generali Portfolio
Vienna – Graben
Vienna – Wipplinger
Vienna – Tegetthoffstrasse, 7
23
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
SPAIN: Madrid and Barcelona CBD portfolio
D. Generali Group and Real Estate Investments (7/9)I. Generali Portfolio
Madrid – Gran Via 10 Madrid – Serrano Barcelona – Paseo de Gracia
24
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
D. Generali Group and Real Estate Investments (8/9)I. Generali Portfolio
OTHER LOCATIONS
Zurich ZH – Freigutstrasse 12-14
Brussels – Louise TowerAmsterdam – Herengracht
25
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
RECENT ACQUISITION: Farragut Building – Washington
Overview Energy Star office property 12 storeyHeart of Washington DC’s CBD, 2 blocks from the White House
I. Generali Portfolio
D. Generali Group and Real Estate Investments (9/9) 26
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Agenda
II. Corporate StructureA. Real Estate Structure within Generali
B. Generali Immobiliare
C. Group Real Estate Divestment / Investment Committee
D. Product Development
27
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Integrated Asset Management Structure
A. Real Estate Structure within Generali
Global Player
Generali is a global key player with strong local competences
Generali Immobiliare: Group Real Estate Asset Management structure, with specialised poles
All investments / divestments approved by a centralised Real Estate Committee
Dedicated team in 11 countries, 500 staff
Italy
France
Germany
Spain
Austria
Vertical integration with focus on Investment Portfolio
Facility Management
Property Management
Asset Management
Product development and Fund Management
Structure dedicated to Insurance Companies
Matching technical reserves
Asset Management for life – non-life segment
Follow Group geographical expansion
Expansion of third party institutional Asset Management
Belgium
Netherlands
Switzerland
Israel
Czech Republic
China
II. Corporate Structure
28
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
B. Generali Immobiliare (1/2)II. Corporate Structure
The globalisation of the Real Estate market provides Generali with a unique opportunity to leverage its competences and become a Global Player with strong local competences
Generali Immobiliare has been set up on the 1st September 2008 as a new department of the Corporate Centre (Assicurazioni Generali) dedicated to the Real Estate across the Group
Generali Immobiliare business model is client-focused and aims to combine Real Estate culture with a strong financial background
Real estate servicesProject managementCommercial property
Generali Immobiliare
Synthesis of both culturesto better serve clients
Real Estate skills Financial skills
Asset ManagementResearch
Finance
Client RelationshipTenants
Client RelationshipInsurance companies Institutional investors
29
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
B. Generali Immobiliare (2/2)II. Corporate Structure
Benoit PRAT-STANFORD Dominique BEGHIN
FRANCEPhilippe
DEPOUX
ITALYGiovanni PAVIERA
GERMANYMartin
SCHRAMM
AUSTRIAKlaus
EDELHAUSER
Countries
Tina PAILLET
SPAINJulio VIDAL
AREAN
ISRAELShlomo
GUTMAN
BELGIUMMichel STAES
THE NETHERLANDS
Ad OLIVIER
SWITZERLANDChristian
BREUTEL
Jacques PLAS
Research Finance Asset Mgmt Invest / DivestElisabeth LOH
Asia
Other Headquarters departments
Strategic PlanningStrategic Asset AllocationFinanceTaxLegal
GREDIC
Generali Real Estate
Divestment /
Investment
Committee
CHIEF EXECUTIVE OFFICERGiancarlo SCOTTI
GENERALI Immobiliare
30
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
C. Group Real Estate Divestment / Investment CommitteeII. Corporate Structure
Generali Real Estate Divestment / Investment Committee ”GREDIC” is the investment / divestment technical & executive centre for Generali Group Real Estate:
All investments / divestments to be approved by GREDIC
Standard presentation with consistent Key Performance Indicators
Presentation from D. Beghin and local team
Comparability of performance investment process across the group
Due diligence and acquisition process covers all aspects of risk and performance
Ensure that local investments are in line with group strategy
Six members, international team, who meet weekly in Paris:
Philippe DEPOUX
Giovanni PAVIERA
Martin SCHRAMM
Klaus EDELHAUSER
Benoit PRAT- STANFORD
Giancarlo SCOTTI
Chairman of GREDIC
31
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
D. Product DevelopmentII. Corporate Structure
Generali Group has developed expertise in product development and real estate fund management for group insurance companies over the past 4 years
Real Estate Funds rationaleOffer opportunity across groupEligible asset for insurance company technical reservesRebalance risk / return profile for each company according to insurance requirements
Creation of dedicated vehicles through Group Real Estate management companiesGenerali Immobiliare Italia SGR: Set up in 2006, dedicated funds with clear investment strategy (AUM Euro 3.2 bn)Generali Immobiliare Asset Management (Lux Co): Set up in 2009, dedicated funds geographically and sector focused
Third Parties Institutional Asset Management activity started in Italy in 2008 with Scarlatti Fund and Eracle FundIncrease Third Party Institutional Asset Management is a target
32
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Agenda
III. Real Estate Strategy & Going ForwardA. Investment Strategy & Market environment
B. Going Forward
33
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Real Estate under Solvency II
A. Investment Strategy and Market environment (1/2)III. Real Estate Strategy & Going Forward
Real Estate estimated capital charge at 25%
Positive margin over bond yield backed by real assets
Total Return as sum of Recurring Income and Change of Value
Real Estate market momentum favorable for long-term investors
Inflation Hedging
Increase life segment exposure to Real Estate as an opportunity to optimize risk / return profile
Real Estate attractive asset class for life business of Generali
Balance RE allocation Life – Non-life considering the risk capital absorption
34
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
A. Investment Strategy and Market environment (2/2)III. Real Estate Strategy & Going Forward
Strategy has to be adapted to uncertain market environment
Globalization to continue
Objective to secure cash flow on existing assets
Some yield recompression across markets
Real estate debt to be refinanced in the next years might generate opportunities
More balanced RE Portfolio to benefit from different market timing
Market timing is key in Euro zone and USA as more mature
Urbanization at an unprecedented speed in China and India
Market and risk monitoring to support expected returns
Significant investment opportunities in Real EstateAttractive returns where cycle is most advanced (USA)
Quality assets at affordable prices in core countries (France, Italy, Germany) due to distressed sellers
China: Entering real estate after markets have cooled down
India: Take advantage of fast urbanization process
35
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
B. Going Forward: Increase Real Estate Exosure (1/2)III. Real Estate Strategy & Going Forward
Increase Real Estate exposureInvest in quality assets with recurring income
Seize opportunities
Continue portfolio turnover to maximize return
Allocation by segment: essentially in life
New Investments structureTraditionally, technical reserves backed by
domestic assets: RE investment directly or through local / dedicated products (domestic funds)
Selectively, technical reserves backed by cross border assets: RE investment through cross-border/specialized products managed internally (international funds)
Opportunity to invest over the next years, market turnaround expected in 2012Ride the market cycle to take advantage of the Group’s existing markets and of new areas (Euro zone)
Investments in countries where yields are attractive (USA)
Start to invest in China following Group expansion to match local insurance reserves
Invest in CEE markets following Group expansion to match local insurance reserves
Gradual increase of Group RE portfolio
36
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
B. Going Forward: Increase Real Estate Exposure (2/2)III. Real Estate Strategy & Going Forward
AsiaChina: Gradually invest local technical reservesIndia: Study opportunities
Central Eastern EuropeMatch Group Assets / Liabilities requirements
Continental EuropePortfolio TurnoverRide market cycle: Quality assets and returnsResilient Portfolio with recurring income
North AmericaAttractive returnsAdvanced Real Estate cycleLiquid marketTop quality products offer
South AmericaStudy opportunitiesFollow group expansion
Focus onNew YorkWashingtonBostonSan FranciscoChicago
Focus onMadrid, BarcelonaParisHamburg, Cologne, Munich, BerlinMilan, RomeViennaLondon Focus on
ShanghaiBeijingShenzhenGuangzhou
Focus onPragueWarsaw
Opportunistic strategy CORE Growth
37
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Agenda
Final Remarks
38
Assicurazioni Generali Group – Investor Day 2010 – Investment Management of Insurance Assets
Final Remarks
Real Estate exposure growth
Third party institutional Asset Management increase
Exposure to Real Estate mainly in life
Integrated Real Estate Asset Management structure
Resilient portfolio with balanced risk return profile
FINAL REMARKS
39
Venice, November 26, 2010
Generali Investor Day 2010
Generali Immobiliare Strategy & Performance
Giancarlo Scotti Chief Executive Officer of Generali Immobiliare