The Fiat Group in 1999 - Report on Operations - Fiat SpA

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INSURANCE — TORO ASSICURAZIONI
Highlights
(<strong>in</strong> millions of euros) <strong>1999</strong> 1998 1997
Consolidated premiums 4,088 3,169 2,162
Premiums earned 3,922 2,959 2,016
Income before taxes 178 116 133
Net <strong>in</strong>come before m<strong>in</strong>ority <strong>in</strong>terests 92 64 88
Technical reserves 9,733 6,386 4,738
Investments <strong>in</strong> f<strong>in</strong>ancial
assets and real estate 10,867 7,393 5,520
Stockholders’ equity 1,444 1,334 1,083
Number of employees 2,907 2,869 2,786
GROWTH STRATEGIES
<strong>The</strong> Italian <strong>in</strong>surance market posted strong growth <strong>in</strong> <strong>1999</strong>. Total
premiums written are estimated to have risen by about 20%, with
especially good ga<strong>in</strong>s <strong>in</strong> life <strong>in</strong>surance. In this environment, the
Insurance Sector cont<strong>in</strong>ued to pursue a growth strategy that has
already enabled it to triple <strong>in</strong> size over just four years.
❚ In life <strong>in</strong>surance, Roma Vita, a jo<strong>in</strong>t venture with Banca di
Roma, posted particularly gratify<strong>in</strong>g results and has now
become one of the top life <strong>in</strong>surance companies <strong>in</strong> Italy.
❚ <strong>The</strong> success of Toro Targa Assicurazioni, a jo<strong>in</strong>t venture with
<strong>Fiat</strong> Auto, enabled the Sector to strengthen its ties with the
<strong>Group</strong>’s dealer network, which it uses to distribute <strong>in</strong>surance
products <strong>in</strong> Italy and abroad.
❚ <strong>The</strong> traditional distribution networks of Toro Assicurazioni
and Nuova Tirrena also performed well.
❚ In an important development, the Sector acquired the
French operations of the Guardian Royal Exchange <strong>Group</strong>,
which specializes <strong>in</strong> the sale of life <strong>in</strong>surance and the
provision of asset management services. This transaction
will help Le Cont<strong>in</strong>ent expand its bus<strong>in</strong>ess <strong>in</strong> several
attractive market segments with excellent growth potential.
RESULTS FOR THE YEAR
Consolidated premiums totaled 4,088 million euros, or
29% more than <strong>in</strong> 1998. This amount does not <strong>in</strong>clude the
premiums written by the Guardian <strong>Group</strong> <strong>in</strong> France (more than
180 million euros), which, if added, would raise the <strong>1999</strong> total
to more than 4,200 million euros. At 2,205 million euros, life
<strong>in</strong>surance grew by 53% compared with 1998. Over the same
period, casualty <strong>in</strong>surance premiums <strong>in</strong>creased by 8.7%,
reach<strong>in</strong>g 1,883 million euros.
Premiums earned totaled 3,922 million euros, for a ga<strong>in</strong> of
32.5% over 1998.
<strong>The</strong> <strong>in</strong>surance operations were affected by a further <strong>in</strong>crease
<strong>in</strong> the cost of automobile <strong>in</strong>surance claims, particularly <strong>in</strong> the
area of personal <strong>in</strong>jury awards. Another important negative
factor was the impact of the natural disasters that devastated
France at the end of <strong>1999</strong>.
<strong>The</strong> Sector posted improved results <strong>in</strong> <strong>1999</strong>, ow<strong>in</strong>g to a sharp
reduction <strong>in</strong> operat<strong>in</strong>g costs and strong ga<strong>in</strong>s <strong>in</strong> <strong>in</strong>vestment
<strong>in</strong>come.
In particular, the ratio of distribution costs and overhead to
premiums earned fell by more than one percentage po<strong>in</strong>t.
Investment <strong>in</strong>come, which reflects both ord<strong>in</strong>ary and
extraord<strong>in</strong>ary transactions, totaled about 620 million euros
(526 million euros <strong>in</strong> 1998), as ga<strong>in</strong>s generated on trad<strong>in</strong>g
securities more than offset the negative impact of the lower
<strong>in</strong>terest rates earned on bonds.
Income before taxes amounted to 178 million euros (116 million
euros <strong>in</strong> 1998). It reflects a decrease <strong>in</strong> net f<strong>in</strong>ancial <strong>in</strong>come
caused by a drop <strong>in</strong> the market rates available for <strong>in</strong>vestments
of liquid funds, offset <strong>in</strong> part by lower extraord<strong>in</strong>ary expenses. In
1998, the Sector absorbed extraord<strong>in</strong>ary non recurr<strong>in</strong>g charges
from the implementation of Legislative Decree No. 173/97.
At December 31, <strong>1999</strong>, <strong>in</strong>vestments <strong>in</strong> f<strong>in</strong>ancial assets and real
estate totaled more than 10,800 million euros, or 3,400 million
euros more than at the end of the previous fiscal year,
exceed<strong>in</strong>g technical reserves by more than 1,100 million euros.
Net <strong>in</strong>come came to 92 million euros (64 million euros <strong>in</strong>
1998). <strong>The</strong> Sector’s <strong>in</strong>terest <strong>in</strong> net <strong>in</strong>come amounted to
94 million euros, up from 59 million euros <strong>in</strong> 1998.
In <strong>1999</strong>, the Sector was aga<strong>in</strong> successful <strong>in</strong> its effort to create
value.