Commentary - Top 5 Europe Based Multiline Insurance Groups 09Sep2016

DAGONG EUROPE - www.dagongeurope.com
Linas Grigaliunas
Director
Financial Institutions Analytical Team
linas.grigaliunas@dagongeurope.com
Carola Saldias
Senior Director
Sector Head Financial Institutions Analytical Team
carola.saldias@dagongeurope.com
Top 5 Europe Based
Multiline Insurance
Groups: Performance
and Outlook
Significant headwinds, but
standing strong
9 September 2016
Commentary

Financial Institutions
2
Top 5 Europe Based Multiline Insurance Groups: Performance and Outlook 9 September 2016
© 2016 Dagong Europe Credit Rating. All rights reserved.
TABLE OF CONTENTS
1. INTRODUCTION
2. EXECUTIVE SUMMARY
 The main peer group’s credit characteristics
 Outlook
3. OPERATING ENVIRONMENT
 Economic environment
 Brexit impact
 Regulation
 Industry development trends
4. BUSINESS PROFILE
 Management
 Development Strategy
 Size
 Business Lines
 Geographic Spread
 Exposure to China
 Distribution
 Business Growth
5. FINANCIAL PROFILE
 Profitability
 Capitalisation
 Investments

3
1. INTRODUCTION
European and global insurance industry is facing significant headwinds from different
directions, ranging from regulatory changes, low interest rate, low economic growth
environment, changing competitive landscape and digitalisation. In our view, large multiline
insurance groups are best positioned to weather these challenges and come out stronger.
In this commentary, we analyse credit characteristics, the latest performance and trends of
the top five composite insurance groups by premium volumes based in Europe, namely AXA,
Allianz, Generali, Aviva and Zurich. We look at the peer group on aggregate basis to assess
overall trends and to lesser extent on individual basis, mainly to understand and explain the
underlying drivers.
We do not rate any of these five groups on public interactive solicited or unsolicited basis and
prepare this commentary based on consolidated financial statements and other publicly
available information.
EX. 1: Top five composite insurance groups in Europe (2015 EUR Bn)
Head office
Total
assets
Total
shareholders’
equity
GPW
Group
GPW
Non-
Life
share
GPW
Life
share
Net
income
AXA Paris - France 887.1 72.6 91.9 38.0% 62.0% 6.0
Allianz Munich - Germany 848.9 66.1 76.7 67.3% 32.7% 7.0
Generali Trieste - Italy 500.5 24.7 70.3 29.7% 70.3% 2.3
AVIVA London - UK 526.3 24.7 30.2 39.9% 60.1% 1.5
Zurich Zurich - Switzerland 351.7 30.3 43.7 74.6% 25.4% 1.8
Source: Dagong Europe, companies’ financial reports, SNL. We do not consider statutory premiums and take into account only IFRS
premiums reported on the consolidated income statement and corresponding notes.

4
2. EXECUTIVE SUMMARY
The Main Peer Group’s Credit Characteristics
The top five Europe based global multiline insurance groups are one of the largest in the
world. They have significant presence and play very important role in the main European and
other leading insurance markets across the globe. Although their individual performance and
characteristics vary, there share many similarities. We highlight the main general trends on
average/aggregate basis, which represent to some degree the majority of the peers.
Aggregate Strengths:
 Strong operating environment with strong economic fundamentals in their core
markets.
 Strong business profile due to:
o Significant scale and cost efficiency.
o Highly diversified business lines and distribution channels by product and
geographically.
o Strong strategic focus and large budgets allocated for business adaption to
future needs, innovation, digitalisation, etc.
 Resilient and very strong balance sheets:
o Strong regulatory Solvency II ratios.
o High capital base in nominal terms.
o Conservative investment portfolios dominated by fixed income instruments,
well diversified, on average high credit quality and liquid.
o Very strong financial flexibility with proven access to capital markets.
 Strong and resilient profitability and capital generation, based on strong insurance
underwriting and reserving.
 Strong risk management practices and high resilience to stress scenarios.
Aggregate Weaknesses
 High operating complexity and related risks due to high geographic and business
line spread.
 High exposure and sensitivity to low interest rate environment.
 Exposure to Life products with high guarantees.
 High concentration in Europe.
 Reducing investment income.
Ex. 2: Key aggregate peer group’s metrics, performance indicators and Dagong Europe’s forecasts
(2016-2017 EUR Bn)
2010 2011 2012 2013 2014 2015 1H2016 2016F 2017F
GPW 293.4 280.4 287.5 285.4 292.5 312.9 168.4 320.8 330.8
GPW growth rate 0 -4.4% 2.5% -0.7% 2.5% 7.0% -0.7% 2.5% 3.1%
Life GPW 159.5 144.0 144.8 144.0 149.4 160.8 83.9 165.7 172.3
Life GPW growth rate 0 -9.7% 0.5% -0.6% 3.8% 7.6% -0.8% 3.0% 4.0%
Non-Life GPW 133.9 136.4 142.7 141.3 143.1 152.1 84.5 155.1 158.5
Non-Life GPW growth
rate 0.0% 1.8% 4.6% -0.9% 1.2% 6.3% -0.5% 2.0% 2.2%
Net income 15.2 11.2 9.7 19.0 19.1 18.6 10.0 18.0 18.5
Return on assets 0.8% 0.6% 0.5% 0.9% 0.9% 0.8% 0.4% 0.7% 0.7%
Return on equity 9.1% 7.1% 5.6% 11.3% 9.5% 8.5% 4.4% 7.9% 7.8%
P&C: Combined ratio 99.9% 99.4% 99.7% 97.6% 97.7% 98.3% 97.5% 98.0% 98.0%
P&C: Loss Ratio 70.3% 70.4% 69.6% 68.0% 67.9% 69.2% 67.8% 68.0% 68.0%
Shareholders’ equity 166.0 157.2 172.6 168.1 202.2 218.5 228.8 227.2 236.3
Shareholders’ equity over
Total assets 8.3% 7.9% 8.2% 8.3% 9.0% 9.2% 9.1% 9.2% 9.3%
Source: Dagong Europe calculations and forecasts, companies’ financial reports, SNL. In profitability ratios we adjust total assets by deducting
unit-linked and reinsurance assets.

5
Outlook
We expect the rest of 2016 and 2017 to be challenging for the top five European multiline
players, but even more challenging for the rest of the industry.
 Operating environment: We expect headwinds from financial markets volatility and
geopolitical uncertainty to persist. We expect a negative impact of Brexit to European
and UK economy, however scale and impact are uncertain. That aside, we expect
GDP growth in EU to start picking up slowly, supported by ECB’s continuing
quantitative easing, low oil prices and reducing unemployment. We expect low
interest rate environment to remain at least for 2016-2017 in Europe. We consider
the regulations would not only strengthen the development of the industry, but
continue to present some of the major challenges at the same time.
 Growth: We expect to see slowdown in premium growth in 2016-2017 as companies
focus on restructuring their Life portfolios, making them less capital intense and less
sensitive to interest rate volatility and on improving underwriting profitability for Non-
Life in an increasingly competitive environment. We expect growth to improve slightly
in 2017 as companies adjust to the new environment.
 Profitability: We expect profitability to remain flat or decrease slightly on average in
2016, as interest rates continue to slide and we do not expect gains from one offs
and realised investment as high as those in 2015. In addition, restructuring,
optimisation and regulatory costs will push profit further down. However, we expect
these negative factors will be offset by improved technical profitability and lower
costs over medium term, which will lead to improved technical profitability in 2017;
however, the low interest rate environment would continue to deflate investment
income.
 Capitalisation: We expect capitalisation to remain very strong, however, more
volatile on the regulatory Solvency II (SII) basis. We expect further optimisation and
improvements of the internal model and capital generation via shifting product mix
to capital-light products, divesting non-core operations, revising investment mix,
reducing A&L mismatch, and optimising reinsurance strategies. Nevertheless, long-
term capital level will depend on companies’ risk appetites and dividend pay-out
levels.

6
3. OPERATING ENVIRONMENT
We consider operating environment for the top European multiline peer group as strong with
strong macroeconomic indicators in core European markets, very strong regulatory and strong
legal environments and only satisfactory industry development trends.
We expect that operating environment in 2016-2017 might weaken and become more
uncertain and volatile, compared to the last few years, largely due to increased political and
economic uncertainty, financial markets and FX volatility in current environment with weak
economic growth and prolonged low interest rate.
Economic environment
The main drivers for our opinion of the economic environment are relatively high GDP per
capita, low and further reducing unemployment rate in the key European markets, offset by
weak real GDP growth, averaging at only 2%1
in 2015 for the 28 European Union countries.
We expect GDP growth in EU to start picking up slowly supported by ECB’s continuing
quantitative easing, structural reforms, low oil prices and reducing unemployment. However,
we expect low interest rate environment to remain at least until the end of 2017.
Brexit impact
The referendum on Brexit was one of the major political events in 2016 in Europe so far, which
resulted in significant market volatility and increased political and economic uncertainty. So
far, the biggest direct impact we have seen to the insurance industry was a moderate negative
effect from equity market’s volatility. Any predictions are difficult to make due to a very high
degree of uncertainty. However, in our view, the most significant risk for the industry is a
possible consequential slowdown and even weakening of the UK and EU economies, or even
an eventual split of the European Union.2
Regulation
Regulatory environment is becoming much more fluid in the last few years, with the
introduction of SII, change in annuity regulation in the UK, among others. The regulatory
changes not only reinforce the industry, but also add additional operating and cost burden.
However, overall we expect the regulation to improve industry health, long-term sustainability
and protect customers and shareholders’ interests.
The new SII regulatory regime in Europe came to force on 1 January 2016. It has strengthened
the industry’s risk management practices and enhanced regulatory solvency calculation, in
our view. Preparation for SII has been putting strain on companies’ costs and management
time over the last five years. In our view, the peer group is well positioned in general as the
majority of the work is completed and 2016-17 will be dedicated to optimising, fine-tuning and
refocusing on business as usual and other challenges.
In addition, we think that SII will help the peers to consolidated and strengthen their market
positions in Europe. In our view, SII favours large, diversified multiline players and provides a
degree of competitive and cost advantage. For the large players the cost of preparation for
SII is lower on relative terms and easier to absorb than for small and medium players. In
addition, large players developed expensive internal models, which often have lower capital
charges than the standard formula that is frequently used by small and medium players.
Industry development trends
We regard the industry development trends as satisfactory, due to prolonged low interest rate
environment, low growth, high competition and increasing pressures on profitability.
1
Eurostat - http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00115&plugin=1
2
For more information please refer to Dagong Europe commentary “Brexit - Potential Effects to the Insurance Industry
in the UK and Continental Europe”

7
4. BUSINESS PROFILE
We consider the peer group of the largest five European multiline insurance groups, on the
average, to have a very resilient and robust business profile, well positioned to weather current
economic and industry headwinds and continue supporting companies’ sustainability over the
long term. Our view is based on sound strategies and proven track-record of execution, large
size, high diversification by business line and geography, and excellent competitive position
in the core markets.
Management
The peer group in general have stable, very experienced and well-regarded management
teams and usually strong succession planning. However, four out of five companies from the
peer group have seen changes in the top management in the last 12 months with only Aviva
maintaining the status quo.
The management change in AXA and Allianz was part of a natural life cycle and we view it as
neutral. On the other hand, change of the top management in Zurich and Generali indicates
less stability and certain changes in strategy. Although the new teams are experienced and
often from within the same group, the track record of effective strategy setting and successful
execution is yet to be seen.
Development strategy
Business development strategies vary among the peers, however there are common aspects
shared by the majority of them.
In 2014-15 we saw most of the peers focusing on preparation for SII, maintaining profitability,
cost reduction initiatives organisational restructuring and streamlining.
We observe that, strategies for 2016-2018 maintain similar focus with even more emphasis
on profitable growth, underwriting results, efficiency, maintaining or strengthening market
positions, streamlining operations in the core European markets, while expanding and
investing in emerging markets.
Companies continue to adapt to the new SII regulatory regime and low yield environment by
focusing on de-risking, restructuring life portfolios to capital-light, fee-based products,
reducing portfolio with high long-term guarantees. Altering investment strategies to capture
higher returns, allocating capital and resources to most profitable and promising markets and
disposing of non-core operations are also high on their agenda.
We also see much more emphasis on new technology, modernisation, digitalisation, customer
engagement and satisfaction, which in our view is crucial for companies’ viability and survival
in the long-term.
Size
The five groups benefit from their very large size as the largest multilines in Europe and one
of the largest in the world. On an aggregate basis, the five groups’ total assets amounted to
EUR 3.1Tn (The largest AXA with EUR 887Bn and smallest Zurich with EUR 352Nn) and
gross premiums written (GPW) amounted to EUR 313Bn (The largest AXA with EUR 92Bn
and smallest Aviva with EUR 30Bn).
To put this in context, the aggregate GPW of this peer group equalled to 23.6%3
of the total
GPW in the Europe, 7.6% of the world or 89.8% of China’s premium written in 2015. In
addition, the aggregate shareholder’s equity amounted to around EUR 218.5bn and net
income to EUR 18.6Bn – indicating significant loss absorption capabilities. Therefore in our
view, the peers’ large size improves risk and revenue diversification and increases the
3
Dagong Europe calculations, Swiss Re Sigma- World insurance in 2015, and Dagong Europe data. The share of premiums written in
Europe is lower, as some of the premiums consolidated under the groups are written outside of Europe.

8
companies’ ability to resist to market shocks, large losses, various changes in regulatory and
competitive environment.
Ex. 3: Top 5 Multiline insurance groups key indicators (2015 EUR Bn)
Business lines
The peer group is characterised by well diversified business portfolio with significant Life and
Non-Life operations and broad product range. In addition, most of the peers also have asset
management or banking operations, which provide additional degree of business, risk and
income diversification.
On aggregate basis, the peer group’s premium portfolio was well balanced with 51.4% of
GPW coming from Life operations and 48.6% from Non-Life. However, on individual basis,
Allianz and Zurich were more concentrated in Non-Life and Generali to Life business with
respective premiums close to or above the 70% share. AXA and AVIVA had more balanced
portfolios, but still dominated by Life business with around 60% share of its GPW.
Ex. 4: Peer group’s GPW composition by business line (2015 EUR Bn)
012345678910
0 100 200 300 400 500 600 700 800 900 1,000
AXA
Allianz
Generali
AVIVA
Zurich
Total shareholders equity Total assets GPW Net income
0
10
20
30
40
50
60
70
80
90
100
AXA Allianz Generali AVIVA Zurich
Group Life Non-Life
Source: Dagong Europe, companies’ financial reports, SNL.

9
Geographic spread
On aggregate basis, the peer group has wide geographic spread, better than its global peers
based outside of Europe, though still significantly concentrated in Europe.
In 2015, about 71% of
the peer group’s GPW
came from Europe. To
be more specific, about
45% of GPW came from
Germany, France and
Italy, 12% from North
America (largely USA),
6.7% from APAC, 2.9%
from Latin America,
0.8% from Middle East,
0.2% from Africa and
about 6.7% from other
global businesses where
meaningful data split
could not be we
obtained.
The concentrations in Europe are partially explained by the fact that Europe and above-
mentioned countries are the home markets and also one of the largest insurance markets in
the world. Having a leading market share in these markets automatically results in high
concentration of premiums in a few countries.
By the end of 2015, the European insurance market GPW accounted around 32.3% of the
world premium share, with the largest four European markets accounted for 20.3% (the UK
7%, France 5% Germany 4.7% and Italy 3.6% respectively). It is important to mention that
only four other markets in the world are as big or bigger, annual premium wise – USA (28.9%
share of world GPW), Japan (9.9%), China (8.5%), and South Korea (3.4%). These markets
have high entry barriers due to high competition, regulatory and other factors and are also
dominated by large, domestic players with high concentration in their home country.
On individual basis, the companies tend to have highest premium concentration in home
countries and another 2-3 core markets, with the exception of Zurich, where highest premium
share comes from the US.
The best geographically diversified in our view are AXA and Allianz, with top two markets
accounting to 36% and 40% respectively, and a large, diversified and growing premium base
outside of Europe. Aviva and Generali are the most concentrated among the peers with top
two countries accounting to 71% and 59% respectively. Exposure to emerging markets
provides a degree of diversification, however, only a small part of the overall premiums and
profits come from this area.
Germany
18%
France
15%
Italy
12%
Rest of
Europe
26%
North America
12%
APAC
6%
Other
7%
LatAm
3%
Middle
East
1%
Africa
0%
Ex. 5: Geographic spread
of the peer group’s
aggregate GPW (2015)

10
Ex. 6: Geographic spread of the individual peers’ GPW (2015)
Exposure to China
Each of these major European multiline insurance groups have their subsidiaries in China,
which is the third largest insurance market in the world and offers immense growth
opportunities, however very hard to reach for foreign payers.
Due to high regulatory hurdles and other entry barriers, all foreign players struggled to expand
and their premium share in China’s insurance market remains still very low accounting to
about 6.2% (5.8% in 2014) in Life and 2.1% (2.2%) in Non-Life in 2015. During the same
period he aggregated market share of the peer group was 2.5% (2.1%) in Life and 1.1%
(1.1%) in Non-Life. However, if compared only to foreign players, the peer group have a
France
24%
Germany
12%
Switzerland
11%
Rest of
Europe
11%
North
America
15%
Mediterrane
an & LatAm
15%
APAC
8%
Other
4%
AXA
UK
11%
Germany
11%
Switzerlan
d
9%
Rest of
Europe
20%
North
America
32%
LatAm
10%
APAC
6%
Africa
1%
Zurich
Germany
26%
Italy
14%
France
11%
Rest of
Europe
15%
Other
12%
APAC
9%
North
America
9%
Middle East
2%
LatAm
2%
Allianz
UK
47%
France
28%
Poland
2%
Rest of
Europe
13%
North
America
10%
Aviva
Italy
35%
Germany
25%
France
16%
Rest of
Europe
13%
Other
8%
APAC
3%
Generali

11
strong position with 39.9% share among foreign owned Life players and 50.5% among those
of Non-Life.
The peer groups’ Life business showed very high growth of 46.7% in 2015 and significantly
outperforming the market, which grew also very fast at 25%. This growth helped to gain some
market share. We expect the peer group to continue outperforming the market growth due to
their technical expertise, expanding distribution networks and to some extent brand name and
financial strength of the parent companies.
The peer group’s Non-Life business performed worse than Life with only 7.2% growth in
premiums while the market expanded by 11.6%. This was driven by a very fierce price
competition in the Non-Life market, especially motor. In our view, this high level of price
competition is unsustainable over the long term and a more prudent expansion and
underwriting approach of the peers is likely to be more beneficial in the short and long term.
Ex. 7: Overview of the subsidiaries in China (2015 EUR Mn)
Chinese subsidiary name NPW
Premium
growth
rate
% of total
premiums
generated
by foreign
owned
players
% of
overall
premium
share in
the
sector
Net
profit ROE
NPW
% of
the
group
Non-Life
安盛天平 - AXA Tianping
Auto Insurance Co., Ltd.
1,027.3 8.3% 41.1% 0.9% 37.7 6.6% 3.2%
安联 - Allianz China
General Insurance Co., Ltd.
116.9 -9.0% 4.7% 0.1% -1.5 -3.1% 0.3%
苏黎世 - Zurich General
Insurance (China) Co., Ltd.
73.7 13.8% 2.9% 0.1% -2.8 -2.3% 0.3%
中意财产 - Generali China
Insurance Co., Ltd.
45.2 23.4% 1.8% 0.0% 0.3 0.2% 0.2%
Total 1,263.1 7.2% 50.5% 1.0% 33.7 3.8% 1.0%
Life
工银安盛 - ICBC-AXA
Insurance Co., Ltd.
3,374.9 52.8% 23.8% 1.5% 64.6 4.6% 6.1%
中意 - Generali China
Insurance Co., Ltd.
1,316.2 63.7% 9.3% 0.6% 151.8
17.0
%
2.7%
中英人寿 - Aviva Cofco Life
Insurance Co., Ltd.
609.7 11.9% 4.3% 0.3% 48.5 8.3% 3.8%
中德安联 - Allianz China
Life Insurance Co., Ltd.
367.2 19.8% 2.6% 0.2% 1.6 4.1% 1.5%
Total 5,668.0 46.7% 39.9% 2.5% 266.5 9.2% 3.9%
太保安联健康 - CPIC Allianz
Health Insurance Co., Ltd.*
0.8 NA NA 0.0% -8.0 -5.7 0.0%
Profitability wise, China’s insurance market remains very challenging with high price
competition, high operating costs, decreasing local interest rates and need for continuous
investment to finance growth. The peer groups’ Life business performed well with aggregate
ROE at about 9.2%, while for Non-Life subsidiaries was only at 3.8%.
Both business lines have one player in the peer group, which significantly outperformed the
rest and skewed averages upwards. In Life, it was Generali with ROE at 17% and AXA in
Non-Life with 6.6%. Excluding these players, ROE averages dropped to 5.7% for Life and
negative 1.3% for Non-Life, providing a better picture of low underlying profitability. We expect
profitability to remain only marginal in the next few years due to continuing challenging
environment for foreign payers, high operating expenses and investment needs.
Despite that, we expect the peer group to remain committed to China due to growth and
profitability opportunities in the long term.
Source: Dagong Europe, companies’ financial reports, SNL. * CPIC Allianz Health insurance is considered by Chinese regulator as a
local player due to foreign owner – Allianz, holding below 25% of its shares (22.9% and of 2015).

12
Distribution
The peer group has one of the strongest and well-diversified distribution channels in their core
markets, which is a very important factor to their success. With the sweeping change in
technology, lifestyles and consumption patterns the long-term competitive position and market
shares can be maintained only by adapting faster and better to the new technologies and
digital environment.
We see all players investing and expanding their electronic channels, however the share of
overall premium written is still low due to a number of reasons, such us imbedded insurance
purchasing habits, importance of human factor and personal relationships and relatively low
but growing customer inclination to trust and use electronic insurance purchasing channels.
For Life business, the bank assurance model remains the main distribution channel. For Non-
Life, agents continue to be the main distribution channel in Europe, followed by brokers, direct
and bank assurance. We expect this to remain broadly the same for the next two years.
Business Growth
The growth of GPW for the peer group has been recovering over the last two years, after a
dip in 2013 and reached 7% in 2015, which we regard as strong. The growth was well
balanced between Life and Non-Life, but as usual, Life increased a bit faster, driven by growth
in unit-linked products.
We expect overall premium growth to be satisfactory at about 2.5% in 2016 and 3.1% in 2017.
The growth is likely to vary looking at individual basis, due to complex group structures and
broad coverage of markets and products. In addition, the growth rates are often significantly
affected by regulatory changes, increased FX volatility, disposals and acquisitions.
Ex. 8: Peer groups’ premium growth rate (2011- 1H2016)
With the 7% premium growth in 2015, the peer group’s GPW growth has outperformed
benchmarks - 3.8%4
in the world, 1.2% in Europe, 2.2% in the UK, 2.4% in France, 1.5% Italy
and 0.1% in Germany. The outperformance of the core European markets is significant, to a
lesser extent when compared to the world. The reason behind is that the world growth rate
was driven largely by the 20% growth of China’s insurance market, third largest in the world,
where the peer group has still very small market shares.
The results of 1H2016 indicate significant slowdown of growth rates, with premiums of the
peer group shrinking by 0.7% compared with 1H2015. The key drivers for that were mostly
FX volatility, disposals and restructuring of the Life-business portfolios.
4
Swiss Re Sigma
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2011 2012 2013 2014 2015 1H 2016
Group Non-Life Life

13
Life
Life premium growth rates have been improving on aggregate basis over the last five years
and peaked at about 7.6% in 2015. However, we expect growth to slow down to around 3%
in 2016 and 4% 2017. The main drivers for slowdown are restructuring of portfolios towards
capital-light products, increased economic and political uncertainty and higher volatility of
capital markets and FX.
In 2015, the peer group’s premium growth has outperformed benchmarks - 4.8%5
in the world,
1.2% in Europe, 2.5% in the UK, 2.9% in France, 2.9% in Italy and contracted by 2.3% in
Germany.
In 1H2016, premium growth rates varied significantly by company on individual basis, and
also by country and by product type. As example, Allianz grew strongly in Germany, while
Generali contracted. As companies continue adapting to the new environment and
restructuring their product portfolios, some older product lines decline and some are closed
entirely (i.e. capital-intensive, with high guarantees). However, this is often largely offset by
high growth in the preferred, more efficient new product lines.
Ex. 9: Life GPW growth rates (2011 - 1H2016)
Non-Life
The peer group’s aggregate Non-Life premium growth historically has been low, averaging
2.6% over the last five years. We think the 6.3% premium increase in 2015, highest rate during
the last five-year period, would be difficult to be replicated again and expect around 2% growth
in 2016 and 2.5% in 2017.
In 2015, the peer group premium growth has outperformed benchmark rates - 4.8%6
in the
world, 1.1% in Europe, 1.5% in the UK, 1.5% in France, 2.2% in Germany and contracted by
2.6% in Italy.
The peer group’s premium growth rates differ from market to market, but in general, the growth
is driven by price increases and market growth with the exception of Italy. Italian Non-Life
market contracted by about 6%, largely due to rate reduction, and had a material negative
impact to the group’s average growth. In addition, more intensive pruning of the portfolios
among some peers also reduced top line expansion.
5
Swiss Re Sigma
6
Swiss Re Sigma
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2011 2012 2013 2014 2015 1H 2016
AXA Allianz Generali AVIVA Zurich Average

14
Ex. 10: Non-Life GPW growth rates (2011 – 1H2016)
Going forward we expect competition to intensity, but companies to continue focusing on
profitability, possibly resulting in low or even negative growth. Despite that, we expect the
growth to come from price increases, new and innovative distribution channels and products
targeting new customer segments.
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2011 2012 2013 2014 2015 1H 2016

15
5. FINANCIAL PROFILE
We consider the peer group of the top five European multiline insurers to have on average
very strong and resilient financial profile, based on high level of capitalisation and strong
although weakening profitability, liquid and high credit quality investment portfolio. We expect
the peer group’s profitability and capital growth to be challenged by strong headwinds,
however to continue outperforming other competitors and the industry averages.
PROFITABILITY
We consider profitability of the peer group as strong and resilient, but under increasing
pressure from the low interest rate environment. We expect profitability to weaken slightly in
2016 with net income reducing by about 3% in 2016 but recover in 2017 as cost containment
and business transformation start showing results.
Despite continuing reduction of interest rates, 2015 has been a good year for the industry with
net income of EUR 18.6Bn, 3% lower compared to 2014. Life business showed strong
profitability. Non-Life underwriting performance was also strong on average, helped by
relatively low large losses and natural catastrophe claims in 2015. Investments still generated
satisfactory to strong returns, helped by higher yields from older, longer duration investments
and some gains realised from bond sales.
Ex. 11: Overall profitability measures (2011 – 1H2016 EUR Bn)
The first half of 2016 shows still weakening or at best stable profitability on average, with NI
dropping by 13% compared with 1H2015 and only AXA delivering 3% growth. It is difficult to
see the exact degree of weakening in underlying earnings as there were many one-offs (such
as business disposals, one-off costs related to regulatory changes, restructuring, etc.),
distortions due to FX changes, lower realised gains and impairments due to market turbulence
created by the Brexit referendum. That said, we believe that underlying operating profitability
will remain strong and we expect overall performance to improve in the second part of the
year.
0%
2%
4%
6%
8%
10%
12%
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015 1H 2015 1H 2016
Net income Return on assets Return on equity

16
Ex. 12: Net income (2011 - 1H2016 EUR Bn)
Other relative profitability measures such as return on equity (ROE) and return on assets
(ROA) reflect difficult environment and shows gradual weakening of profitability. End of 2015,
ROE stood at 8.5% and ROA at 0.8%, compared to 9.5% and 0.9% in 2014 respectively. We
expect ROE to be below 8% and ROA around 0.7% in 2016 and 2017.
Ex. 13: Return on assets (2010-2015)
Ex. 14: Return on equity (2010-2015)
-2%
-1%
-1%
0%
1%
1%
2%
2%
2010 2011 2012 2013 2014 2015
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2010 2011 2012 2013 2014 2015
-4
-2
0
2
4
6
8
1h 2015 1H 2016
-4
-2
0
2
4
6
8
2010 2011 2012 2013 2014 2015
AXA Allianz Generali AVIVA Zurich
Source: Dagong Europe, companies’ financial reports, SNL. * Exceptionally low result for AVIVA in 2012 was driven by a write-down due to a
disposal of US business.
Source: Dagong Europe, companies’ financial reports, SNL. * Exceptionally low result for AVIVA in 2012 was driven by a write-down due
to a disposal of US business.
Source: Dagong Europe, companies’ financial reports, SNL. * Exceptionally low result for AVIVA in 2012 was driven by a write-down due
to a disposal of US business.
1H2015 1H2016

17
The peer group’s profit sources are relatively well diversified. The peer group’s operating
profits at YE2015 were predominantly coming from the insurance operations, where Life
business contributed 55% of the total operating profit and Non-Life 52%. Asset management
operations also provided degree of diversification and contributed 11%. The holding
operations and other businesses had a negative effect of 18% on average, which in our view
is high.
Ex. 15: Business segment contribution to operating profitability (2015)
Life
We consider profitability of the pear group from the Life business as strong, however facing
significant head winds, from the low interest rate environment and especially those with large
portfolios of long-term high guarantee products (especially the ones in Germany).
We see on average slight deterioration in Life business operating profit and net income. In
this challenging environment, it proves to be quite resilient so far, helped by a large part of
investments being long duration and invested at much higher yields than those available now.
This we believe will continue to partially mitigate pressure from low investment yields.
The reinvestment yields vary between companies and countries, but most peers report an
average being within the range of 1.1% to 2%, which is still quite high and provides good
margins for new business ranging from about 45bp to 140bp. However, companies with large
portfolios of guaranteed business, in particular in Germany (where average in force business
guarantees are of around 3.5%), could face significant problems in the next five to ten years,
if low interest environment persists.
In the medium term we expect that differences in the Life profitability among the peers will
increase due to a very different business portfolio mixes and different management actions
addressing to the low yield environment.
In the long term, optimisation of inforce books and introduction of new, more diverse and
profitable products will help to support Life profitability. However, it is certain that the lower-
for-longer scenario would negatively affect profitability and possibly push for more aggressive
search for yield and increase in risk levels, or make profitable businesses compensate losses
on historic portfolio with high guarantees. Having said that, we believe that peer groups’ high
degree of product and geographic diversification will mitigate negative impact and help record
profitability above market averages.
-40%
-20%
0%
20%
40%
60%
80%
100%
AXA Alianz Generali AVIVA Zurich Average
Life Non-Life Asset management Other

18
Ex. 16: New business margin (2010 – 2015)
Non-Life
We consider overall Non-Life performance as strong, but under increasing pressure. We see
continuing emphasis on underwriting profitability as low yields erode investment returns and
put pressure on profitability, especially for long-tail business. We expect average profitability
to remain the same or slightly improve, assuming benign Nat Cat experience with loss ratios
at about 68% and combined ratios below 98% in 2016-2017.
The average loss ratios have been gradually reducing over the last five years from 70.4% in
2011 to 67.8% in 1H2016, helped by improved underwriting, good risk selection and low
NatCat occurrence. Of course, it varied significantly company by company and country by
country, but due to the peer group’s large scale, geographic and business diversification, the
average loss ratio showed an improving trend. However, there was one exception in 2015,
when Zurich experienced significant increase in manmade and natural catastrophe claims,
including the Q3 2015 Tianjin loss that resulted in sharp loss ratio deterioration. Since then,
the company made a number of actions to address the issues and its loss and combined
ratios showed improvement in 1H2016.
Ex. 17: Non-Life loss ratio (2010 – 1H2016)
Despite Zurich’s loss and terrible consequences of the accident to people and the
environment, we believe the Tianjin event has many lessons to learn. We also hope that it will
serve as a wakeup call for the industry to resist frantic competition, especially in emerging
markets for large corporate clients and encourage to maintain and not compromise on high
underwriting standards, high quality risk analysis and active risk management.
1.5%
1.7%
1.9%
2.1%
2.3%
2.5%
2.7%
2.9%
3.1%
3.3%
3.5%
2010 2011 2012 2013 2014 2015
64%
65%
66%
67%
68%
69%
70%
71%
72%
73%
2010 2011 2012 2013 2014 2015 1H 2016

19
1H2016 results indicate some improvement in average loss ratio compared to 2015 half year
and year-end, which is driven largely by improvement in Zurich’s results. The rest of the peers
have small increases in loss ratio, largely due to higher manmade losses and natural
catastrophes, including spring storms in Germany, flood in France, bush fire in Canada and
US hail storm, among others.
The combined ratios also have been improving over the last five years, but somewhat more
volatile. According to our calculation, it reduced from about 100% in 2010 to 98.3% in 2015
and further improved to 97.5% in 1H 2016. We regard this level as strong and expect the ratio
to remain at about 98% in 2016 and 2017.
Ex. 18: Non-Life combined ratio (2010 – 1H2016)
The volatility of combined ratio comes from fluctuation in expenses. Although most of the
peers have various cost containment and optimisation initiatives, the costs are booked in the
first years while benefits often seen in the following years. In addition, changes in product mix,
distribution channels, investment in business expansion, technology and innovation also
added to higher or more volatile combined ratio.
Softening reinsurance market also provided on average better or the same coverage and
conditions for the same or lower prices.
Investments Income
We observe weakening of investment income in nominal terms, but still regard it as strong
and resilient on relative terms, considering the difficult environment with historically record low
yields, financial markets volatility and very uncertain economic and geopolitical environment
in both developed and emerging markets.
Investment income and yields have been deteriorating across the industry for a few years
already, putting pressure on insurers’ profitability. Despite that, the peer group’s results show
high resilience and return on average investments of about 2.5% in 2015 compared to 3.1%
in 2011, the highest return in 6 years.
The key drivers for such resilient and strong return in 2015 were a significant part of older
long-term investments with higher yields, exceptional gains on sales of property and positive
equity performance. Investment returns were also boosted by realisation of some unrealised
gains from older long-dated fixed-income instruments.
1H2016 showed some deterioration in investment income, largely due to significantly
increased volatility in financial markets and FX and unfavourable timing of reporting – shortly
after the turmoil created by Brexit referendum. Most equity indexes have recovered since.
92%
94%
96%
98%
100%
102%
104%
106%
108%
2010 2011 2012 2013 2014 2015 1H 2016

20
The reinvestment rates vary widely among the peers, ranging from about 1.1% to 2%. There
are many drivers for the differences and some of them can be explained by asset liability
matching policies, geographical business spread and yields at local markets, cash flows,
business growth and risk appetite, among others. However, on aggregate basis the margins
remain strong, while on individual basis the range is between 44bp and 160bp, depending on
the product, instrument and country.
We expect average yield to continue decreasing slowly, however, it does not present
immediate threats over the next few years. We believe that insurers will maintain largely the
same asset mix, however, will become more opportunistic in seeking higher yield.
CAPITALISATION
We view capitalisation as a key strength of the top European multiline insurance groups. It
varies company by company, but on average we consider it as very strong.
The new SII regulatory regime, improving ERM practices and better understanding of own risk
profiles will help companies to manage their own risks better, allocate capital more efficiently
and achieve better capital adequacy and risk weighted returns, in line with their risk appetite.
However, due to pressures on profitability and investors’ high appetite for dividends, we do
not expect material long-term increase in capital adequacy, but rather staying stable or even
reducing. We estimate average shareholders’ equity to be at around 4% in the next two years.
The new Solvency II regime is in place since 1 January 2016 and most of the groups, as
expected, were well prepared with their internal models approved by respective regulators.
We regard SII framework as a very significant improvement in regulatory solvency calculation
and an advancement in industry ERM practices, but it comes with weaknesses such as high
complexity, lack of comparability, among others.
Ex. 19: Regulatory SII ratios (2015 – 1H2016)
The reported SII ratios as of YE15 range from 205% for AXA to 171% for Generali. Zurich
complies with Swiss solvency regime which has equivalence, however is not directly
comparable.
The 1H2016 results showed material solvency ratio volatility with contractions ranging from 6
to 14 percentage points. The main drivers were further reduction in yields and dip in equity
markets due to Brexit referendum that took place just before the reporting period.
We observed that SII ratio is most sensitive to an increase in interest rates and increase in
spreads. Sensitivity to equity market fluctuation is moderate due to relatively low exposure to
equities and hedges in place.
We expect SII ratios to be much more volatile compared to SI. Despite that, we expect
average SII ratio to increase as companies de-risk, optimise and adjust their product/
100%
120%
140%
160%
180%
200%
AXA Allianz Generali AVIVA Plc Zurich*
2015 1H 2016
Source: Dagong Europe, companies’ financial reports and presentations.* Zurich – SST ratio.

21
investment portfolios and capital structures. We also expect that on average the peer group
will maintain its solvency ratio above 170%.
On more comparable, but less risk based measures, capital levels also differed widely among
the companies. However, a correlation with SII measures was high with Zurich, AXA and
Allianz, demonstrating strongest regulatory solvency ratios and well above average
shareholders’ equity to total assets, which stood at 13.2%, 10.7% and 9.2% respectively at
end of 1H2016. At the same time, Generali had the weakest ratios with shareholders’ equity
to total assets at 5.8% and total shareholders’ equity over net premium earned at 36.1% at
1H2016.
Ex. 20: Shareholder equity to total assets adjusted (2010 – 1H2016)
Ex. 21: Total shareholders’ equity over NPE (2010 – 2015)
We also believe that the peer group benefits from very strong financial flexibility based on
proven track record of accessing market funding, high internal capital generation capability
and satisfactory financial leverage at about 34%7
on average. We saw some optimisation of
the debt structures in 2015 and 1H2016 and expect the optimisation to continue in the next
two years (mainly related to cheaper refinancing opportunities), however, the overall leverage
level to remain relatively stable.
In the longer term, if the low interest rate environment remains and earnings continue to
weaken, there might be pressure from investors to further optimise capital structures by
increasing hybrid equity share or level of leverage.
7
Dagong Europe calculation includes subordinated, senior and other financial debt divided by total equity attributable to parent company.
4%
6%
8%
10%
12%
14%
2010 2011 2012 2013 2014 2015 1H 2016
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015

22
Ex. 22: Leverage ratios (2015 – 1H2016)
INVESTMENT PORTFOLIO
We consider the investment portfolio of the peer group to be low risk with conservative asset
mix, high credit quality and well-diversified.
Prolonged low interest rates in Europe have led insurers, in particular Life, to hunt for higher-
yielding assets, either in their local markets or beyond. The asset mix has not been
significantly affected by that and remain stable with around 80%-90% of investment portfolios,
excluding unit-linked assets in fixed income, which in turn is dominated equally by government
bonds and corporate debt.
The investments in equities are at moderate level, in our view. The share of equities in the
investment portfolio has been slowly increasing from 5.7% in 2012 to 8.6% at YE2015.
However, it dropped to around 7.3% in the last six months. We believe the reduction is due to
post Brexit referendum fall in equity markets, increased FX volatility and some divestment. In
the next few years we expect equities to remain below 9% of total invested assets excluding
unit-linked.
The credit quality of the
investment portfolios remains
high, however reducing. The
amount invested in investment
grade assets is stable and on
average stands at around 90% of
the portfolio. Despite that, we see
gradual shift of assets from higher
credit ratings, in particular from
AAA to BBB rated instruments.
The investments in BBB range
rated instruments increased from
8.8% in 2010 to 30.6% in 1H2016.
The quantitative easing of the
ECB also had an impact on yield
rates, and reduced availability of
high rated instruments.
0%
10%
20%
30%
40%
50%
60%
2015 1H 2016
Gov't
Bonds and
Similar
37%
Corporate
Bonds 34%
Other Fixed
Income 17%
Equity
Instruments
9%
Real Estate
3% Other 1%
Ex. 23: Aggregate Investment
portfolio for the peer group
split excluding unit-linked assets (2015)

23
The continuing low yield
environment in Europe might
encourage insurers to seek better
yields and longer duration assets
in the US, if FED were to raise its
interest rates. However, we do not
expect significant shift and as the
peer group tend to match their
assets and liabilities closely and
any differences are usually
hedged to avoid higher capital
charges under SII.
The investment mix overall
remains conservative, but higher
yield assets are slowly increasing
across the board, such as
alternative debt, real estate and
infrastructure, but at low rates.
METHODOLOGICAL AND DATA NOTE
The commentary is based on publicly available information (annual reports, preliminary results
presentations, analysts’ calls and analysts’ presentations) collected and adjusted by Dagong
Europe, and the financial information provided by SNL Financial. We also use other sources:
SwissRe Sigma for aggregated country wide premiums.
In this report, we use Euro as the main currency. The financials of the companies were
converted using FX rates provided by SNL Financial.
AAA-Rated
Assets
17%
AA-Rated
Assets
29%
A-Rated
Assets
18%
BBB-Rated
Assets
25%
Non
Investment
Grade Assets
3%
Not Rated
and Other
Assets
8%
Ex. 24: Aggregate investment
portfolio split by credit rating,
excluding unit-linked assets (2015)

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Commentary - Top 5 Europe Based Multiline Insurance Groups 09Sep2016

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