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    Generali and PPF Group to combine their Central and Eastern Europe businesses to create the region's leading insurer
    04/26/2007

    • Agreement accelerates both Groups’ strategies for expansion in one of the insurance world’s most attractive regions and creates a strong platform for further expansion opportunities in the region and adjacent territories

    • The new joint venture “JV” will be 51% owned by the Generali Group and 49% by the PPF Group. PPF Group is a dynamic financial entity in the insurance sector, through Ceska pojistovna, the Czech Republic’s leading insurer, as well as in the consumer credit business in 5 Eastern European countries

    • Based on pro-forma 2006 data, the JV’s annual gross written premiums will exceed € 2.6 billion, with an Embedded Value of € 2.3 billion and over 9 million customers in 12 countries

    • In addition to its contribution of assets to the joint venture, Generali will pay PPF Group €1.1 billion in cash to achieve its 51% share of JV

    • Petr Kellner, controlling shareholder of PPF Group, will be nominated to the list of Generali Board members to be proposed at the next Annual General Shareholders Meeting

    • Sergio Balbinot, Co-CEO of Assicurazioni Generali, will be the Chairman of JV; Ladislav Bartonicek, Chairman of Ceska pojistovna Board of Directors, will be the CEO of JV;

    • The agreement values Ceska pojistovna Group at €3.6 billion and Generali’s CEE assets at € 1.5 billion

    • In 2008 the transaction will be earnings accretive for Generali Group by 2.2% in IFRS earnings and 2.1% on EV earnings

    The new JV will unite all of Generali’s and PPF Group’s insurance assets in the CEE region giving the combined group unrivalled reach across the following twelve countries: the Czech Republic, the Slovak Republic, Poland, Hungary, Romania, Bulgaria, Ukraine, Russia, Serbia, Slovenia, Croatia and Kazakhstan.

    Commenting on the agreement, Sergio Balbinot, Generali Group Co-CEO said:
    Generali’s historical ties to the CEE region are well known. Since returning to Hungary we have developed our presence so that we currently operate in 10 countries, serving some 4 million customers. To further this success, we have been looking for the right partner with whom we can take the business to its next stage of development.
    We have found that partner in PPF Group and Ceska pojistovna Group. By joining forces we become the leading player in CEE with a pool of over 9 million clients. Working with our new partner our objective is to leverage our combined scale and diversification to accelerater already rapid growth trajectory in the region.
    As was the case in China and India, we believe the partnership model, combining Generali’s insurance capabilities and financial strength with the dynamism and deep market knowledge of a local entrepreneur, will prove to be a winning combination for our customers, our partners and our shareholders”.


    Ladislav Bartonicek, Chairman of Ceska pojistovna Board of Directors, added:
    “PPF Group has a proven track record of value creation in the CEE region through its successful transformation of Ceska pojistovna into a highly profitable and growing business, with strong distribution and a history of innovation. We are the market leader in the Czech Republic and this partnership provides a springboard for our continued success in the wider region. We believe this partnership is a perfect commercial, cultural and strategic fit for Ceska pojistovna Group. We operate in complementary markets and the potential for collaboration is compelling. Joining forces with Generali represents the logical next step in Ceska pojistovna’s development and will provide an excellent opportunity to gain a leading position in the CEE insurance market, strengthening the growth platform in the high-potential CIS countries as well.”

    Key elements of the Preliminary Joint Venture Agreement 

    Based on aggregated pro-forma 2006 data1, JV’s key data will be as follows:
    Gross Written Premiums: € 2,627 million
    Net Profit2: € 305 million
    Embedded Value: € 2,268 million
    Customers: 9 million
    1 All aggregated pro-forma data not audited
    2 On normalized 2006 earnings

    The JV will combine Generali’s core insurance competencies and financial strength to support further growth with PPF Group’s unrivalled local knowledge and entrepreneurial track record.

    The agreement values 100% of Ceska pojistovna Group at € 3.6 billion and Generali’s current CEE operations at € 1.5 billion. The agreement also entails a cash payment by Generali to PPF Group of € 1.1 billion to be fully financed from Generali’s existing resources, in order for Generali to own, on deal completion, 51% of JV, with PPF Group holding the remaining 49% share. PPF Group will have a time-limited earn out on performance above a hurdle on the JV shares acquired by Generali under the cash settlement. The agreement allows for a call option to Generali in case of deadlock and material default and for puts to PPF in certain cases.

    In 2008 the transaction will be earnings accretive to Generali by 2.2% on IFRS earnings and by 2.1% on EV earnings. The deal is expected to be neutral with regard to Generali’s financial ratings.

    Strategic Rationale: CEE region posting a strong potential for future growth
    Central and Eastern Europe is one of the world’s most attractive and fastest-growing insurance markets, and convergence towards the Euro currency is expected to underpin further the growing financial stability of the CEE economies.

    In the 2007-2009 period, real GDP growth in the region is expected to be in the range of 5.0 -5.5%, almost triple that of Western Europe. Continuing rapid economic development is set to further boost families’ disposable income and, in turn, increase insurance penetration levels pushing them towards European averages.

    Reforms of the pensions and healthcare systems are already under discussion in several of the CEE countries and should create all the conditions in which a major new private sector player such as the JV will prosper by:
    • Leveraging the strength of the Generali and Ceska pojistovna brands from their new position as CEE insurance market leader;
    • Combining the operational and product strengths of Generali and the distribution and regional know-how of Ceska pojistovna Group;
    • Applying the new Group’s ability to cross-sell insurance and savings products to provide greater customer choice and increase market share:
    • Capitalising on the strong strategic, geographic and cultural fit that the two partners bring to the new Group;
    • Capturing a range of synergies by the application of best practice in areas such as IT, claims handling, procurement and reinsurance.

    With its combined platform, the JV will also be ideally placed to realize the attractive and fast growing potential of the CEE countries, Russia and of other CIS members.

    Governance

    Generali Group and PPF Group will be equally represented on the Board of Directors of JV.
    Sergio Balbinot, co-CEO of Assicurazioni Generali, will be the Chairman of JV and Ladislav Bartonicek, current Chairman of Ceska pojistovna, will be the CEO.
    Mr. Petr Kellner, founder and core shareholder of PPF Group, will be nominated to the list of Board Members to be proposed at Generali Annual General Meeting, scheduled for 28 April, 2007.

    Timetable

    It is expected that the transaction will be concluded in the second half of the year. The transaction is subject to the approval of the relevant regulatory and anti trust authorities.

    About Generali’s operations in the CEE region

    Generali Group, the third European insurer and leader in Italy, with total gross premiums written of over € 64 billion, operates in 10 countries in the CEE region, in the insurance and asset management sectors. In addition to brisk organic growth, Generali has also been actively acquiring businesses in the region, completing four acquisitions during 2006 in Bulgaria, Croatia, Serbia and Ukraine.

    In 2006, Generali’s combined CEE operations had Gross Written Premiums of € 1,159 million (an increase of 24.6% compared to 2005) of which 62% came from non-life and 38% from life. Net profit (aggregated net bottom line) in 2006 was € 48 million. New Business Value was € 28.9 million, up 66% on the previous year, while the combined ratio was 92.8%.

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