OPERATING RESULTS

The consolidated statement of profit or loss is shown below.

Poste Italiane Group

n/a: not applicable
n/s: not significant

During a year in which the economic environment remained challenging, the overall results of the Poste Italiane Group and its Parent Company reflect positive performances from financial and insurance services, offset by a further decline in traditional postal services, which recorded a progressive reduction in revenue, weighing heavily on the results for the year. In particular, the Group’s operating profit amounts to €691 million (€1,400 million for 2013), whilst the Parent Company reports a figure of €381million (€917 million for the previous year), reflecting, as already noted, the decline in revenue from Postal and Business services, which is down from the €4,452 million of 2013 to €4,074 million in 2014. As the reader will be aware, the fact that variable costs have limited impact on the operating performance and that the Company’s cost structure is primarily made up of personnel expenses has a significant impact on margins. In fact, Postal and Business services contributed a loss of €504 million to the consolidated operating result, compared with a profit of €300 million in the previous year.

It should also be noted in relation to this segment, which benefits from intersegment revenue generated on transactions with BancoPosta RFC, that the Parent Company’s postal operations report an operating loss of €1,154 million, after a partial recovery of its Universal Service costs, as calculated under the regulatory accounting model. This result marks a deterioration with respect to 2013, when the operating loss was €575 million.
Revenue from Financial services is in line with the figure for 2013 (€5,358 million in 2014, €5,390 million in 2013), whilst the contribution to operating profit is up 15.5% (€766 million in 2014, compared with €663 million for 2013).
Poste Vita made a significant contribution, reporting an excellent operating performance for the period (€15.4 billion in premium revenue, up 17%), enabling the company to consolidate its growth.

OPERATING RESULTS OF THE POSTE ITALIANE GROUP

Revenue by operating segment^(*)

^(*) After consolidation adjustments and elimination of intercompany transactions.

Group - Total revenue

The Group’s Postal and Business services

n/s: not significant
^(*) This item includes Postal services revenue, other revenue from the sale of goods and services and other operating income. It does not take into account the portion attributable to BancoPosta RFC.

As noted above, the Group’s total revenue of €28,512 million (€26,268 million in 2013) benefitted from the positive contribution from Poste Vita’s premium revenue.
Taking a closer look, total revenue from Postal and Business services is down 8.5% (a reduction of €378 million) and continues to suffer from the crisis in traditional forms of communication, reflecting the growing popularity of digital technologies, and the general reduction in demand for products and services, exacerbated by tough price competition.
Total revenue from Financial services, amounting to €5,358 million, is in line with the previous year (down 0.6% on 2013), having benefitted from the positive performance of other income from financial activities, which is up from the €315 million of 2013 to €404 million in 2014. This category of revenue includes income from investments in fixed income Italian government securities, purchased with the aim of anticipating renewal of BancoPosta’s investments close to maturity.
The Insurance services provided by the Poste Vita Group have contributed €18,840 million to total revenue, marking growth of 16.5% on the €16,166 million of the previous year.
Total revenue from Other services amounts to €240 million (€260 million in the previous year) and regards the revenue generated by the mobile telecommunications services provided by PosteMobile SpA and Consorzio per i servizi di telefonia Mobile ScpA.

COST ANALYSIS

The cost of goods and services is down 3.1% from €2,734 million in 2013 to €2,648 million in 2014, reflecting a reduction in the cost of funding, represented by interest paid to private customers by BancoPosta RFC and the interest payable to major financial institutions acting as counterparties in repurchase agreements.
The increase in technical provisions for the insurance business and other claims expenses, which is closely linked to the above growth in premium revenue recorded by Poste Vita, amounts to €17,883 million and is up 17.1% on the previous year.
Other expenses from financial and insurance activities of €76 million is in line with the previous year (€74 million in 2013).

Personnel costs

n/s: not significant
^(*) This includes the following items described in note C8 to the consolidated financial statements: salaries and wages; social security contributions; employee termination benefits; temporary work; Directors’ fees and expenses; other costs (cost recoveries).

Ordinary personnel expenses, linked to salaries, contributions and sundry expenses, are down 1.3% (a reduction of €74 million) on 2013, reflecting a decrease in the average workforce employed during the year (approximately 800 fewer Full-Time Equivalent staff employed on average in 2014, compared with the previous year) and a reduction in costs compared with 2013, when the figure was influenced by additional pay caused by 3 public holidays falling on a Sunday. The reduction also reflects payments relating to renewal of the national collective contract and payment, in 2013, of a bonus based on the achievement of certain operating results by the Group, in accordance with specific union agreements.
Personnel expenses also reflect an increase in redundancy payments, which are up from €53 million in 2013 to €152 million in 2014, and provisions for restructuring charges of €256 million (provisions of €114 million in 2013), made to cover the estimated costs to be incurred by the Parent Company for early retirement incentives, under the current redundancy scheme for employees leaving the Company by 31 December 2016.
Finally, the change in personnel expenses also reflects income of €20 million recognised by the Parent Company in 2013, following the agreements of March 2013 between the Parent Company and the labour unions, regarding the re-employment by court order of staff previously employed on fixed-term contracts.
Total personnel expenses are thus up 3.7% from the €6,008 million of 2013 to €6,229 million in 2014.

The above movements in revenue and costs have resulted in operating profit of €691 million (€1,400 million in 2013), as shown in the following table.

OPERATING PROFIT: BY OPERATING SEGMENT

n/s: not significant
^(*) Elimination of costs incurred by Poste Italiane SpA for interest paid to consolidated subsidiaries (recognised by the latter in finance income)

Net finance income of €6 million (€128 million in 2013) reflects, among other things, the impairment loss recognised on the investment in Alitalia-CAI SpA (€75 million).

Income tax expense is down from €746 million in 2013 to €485 million in 2014.
The effective tax rate for 2014 is 69.58%, consisting of the sum of the IRES tax rate (34.69%) and the IRAP tax rate (34.89%). Compared with the figure for 2013, when the effective tax rate was 34.26%, it should be noted that the previous year benefitted from the positive impact of recognition of an IRES refund for the years from 2004 to 2006, in accordance with Law Decree 201 of 6 December 2011 (resulting in a reduction in the tax rate of 14.57%). In addition, the rate for 2014 reflects the greater impact of the non-deductibility of personnel expenses for the purposes of IRAP, due to the fact that profit before tax is lower than for the previous year.
Profit for the year ended 31 December 2014 thus amounts to €212 million (€1,005 million for 2013).

OPERATING RESULTS OF POSTE ITALIANE SPA

Revenue

To ensure the comparability of amounts for the two years, certain amounts for 2013 have been reclassified.
^(**) Subsidies for tariffs discounted in accordance with the law.
n/s: not significant

Poste Italiane SpA’s revenue from sales and services amounts to €8,471 million for 2014, down 5.6% on the figure for 2013 (revenue of €8,978 million in the previous year). As noted in the review of the Group’s results, this performance is due to the downturn in revenue from postal and business services market, reflecting a decline in demand for traditional mail services, above all from major customers due to both e-substitution, where electronic forms of communication replace paper forms (individual letters replaced by e-mails, bank statements and bills made available on line, etc.), and a tendency among companies to reduce their dependence on business post in order to cut their operating costs.
As a result, market revenue from mail and philately services is down 10.3% on 2013 (a reduction of €312 million), reflecting a 10.4% reduction in volumes (431 million fewer items sent in 2014, compared with 2013). This is primarily due to the negative performances registered by Unrecorded Mail (volumes down 14.5% and revenue down 14.6%), Recorded Mail (volumes down 6.7% and revenue down 8.1%) and Direct Marketing (volumes down 5.8% and revenue down 6.7% on the previous year), the latter market having been hard hit by the economic downturn of recent years. The performance of the postal services segment also reflects growing use of digital forms of communication between government agencies and the public.
The only area showing any signs of growth is the Express Delivery and Parcels segment, where revenue is up 13.8% from the €123 million of 2013 to €140 million in 2014, thanks to the Company’s commitment to developing its e-Commerce offering.

The compensation partially covering the cost of the universal service for 2014 has been determined taking into account the limits represented by the amount earmarked for this purpose in the Government’s budget, contained in art.1, paragraph 274 of Law 190 of 23 December 2014 – Provisions concerning development of the Annual and Multi-year Budget (the 2015 Stability Law). The cost incurred by Poste Italiane SpA was calculated using the new “net avoided cost” method, introduced by EU Directive 2008/6/EC and transposed into Italian law by Legislative Decree 58 of 31 March 2011⁽¹⁾. The compensation, amounting to €277 million, is in any event significantly lower than the actual costs incurred, as calculated by the Company.
Market revenue from BancoPosta services amounts to €5,228 million (€5,326 million in 2013), marking a slight decline (down 1.8%) due to both a reduction in the return on the mandatory deposit of the current account deposits of Public Sector customers with the Ministry of the Economy and Finance (the rate of interest received has fallen from the 2.61% of 31 December 2013 to 1.34% at 31 December 2014), and a reduction in fees generated by the processing of bills paid by payment slip, reflecting a decline in the number of payment slips handled.
Other income from the sale of goods and services, not specifically attributable to postal or financial activities, amounts to €96 million (€105 million in 2013).
Other income from financial activities is up from €308 million in 2013 to €389 million in 2014, essentially reflecting the gain realised on the sale of financial assets attributable to BancoPosta RFC.
Finally, other operating income contributed €306 million (€147 million in the previous year) to total revenue (€9,166 million in 2014, compared with €9,433 million in 2013), including €201 million in dividends from subsidiaries.

COST ANALYSIS

Operating costs incurred in 2014 are up 3.2% (an increase of €269 million on 2013), primarily due to personnel expenses, as described below.
A closer look shows that the cost of goods and services is down €104 million (5.1%), due primarily to a reduction in interest expense (down €102 million on 2013) paid to BancoPosta’s private customers and to major financial institutions acting as counterparties in repurchase agreements.
Depreciation, amortisation and impairments, which have risen from €501 million in 2013 to €578 million in 2014, include impairment losses primarily on industrial buildings owned by the Company (buildings used in operations) and commercial buildings leased by the Company (leasehold improvements). These impairments have been recognised following a prudent assessment of the impact on their value in use, should the future use of such assets in operations be reduced or halted.
Other operating costs are up from €233 million in 2013 to €314 million in 2014, reflecting, among other things, an increase in provisions linked to the procedures and timing involved in the collection of amounts receivable from the parent.

Personnel expenses break down as follows.

Personnel expenses

n/s: not significant
^(*) This includes the following items: salaries and wages; social security contributions; employee termination benefits; temporary work; Directors’ fees and expenses; other costs (cost recoveries).

Ordinary personnel expenses, linked to salaries, contributions and sundry expenses, which are down 1.5% (a reduction of €84 million) on 2013, reflecting a decrease in the average workforce employed during the year (more than 900 fewer Full-Time Equivalent staff employed on average in 2014) and a reduction in costs compared with 2013, when the figure was influenced by additional pay caused by 3 public holidays falling on a Sunday. The reduction also reflects payments relating to renewal of the national collective contract and payment, in 2013, of a bonus based on the achievement of certain operating results by the Group, in accordance with specific union agreements.
Personnel expenses also reflect an increase in redundancy payments, which are up from €53 million in 2013 to €151 million in 2014, and provisions for restructuring charges of €256 million (provisions of €114 million in 2013), made to cover the estimated costs to be incurred by the Company for early retirement incentives, under the current redundancy scheme for employees leaving the Company by 31 December 2016.
Personnel expenses also benefit from net releases of €6 million from provisions for disputes (net releases of €47 million in 2013), reflecting updated estimates of the liabilities and related legal expenses, based on both the overall level of claims actually paid and application of the so-called Collegato lavoro legislation, which has introduced a cap on compensation payable on current and future claims brought by workers on fixed-term contracts, who have been reemployed on permanent contracts by court order.
Finally, the change in personnel expenses also reflects income of €20 million recognised by Poste Italiane in 2013, following the agreements of March 2013 between the Company and the labour unions, regarding the reemployment by court order of staff previously employed on fixed-term contracts.
Again with regard to fixed-term contracts, the Company employed 8,052 people on fixed-term contracts in 2014 (8,149 in 2013), equal to 7,743 FTEs (7,946 FTEs in 2013). As a result of specific measures establishing quotas limiting the use of such contracts, the following should be noted: the permanent workforce at 1 January 2014² totalled 143,422 (144,087 at 1 January 2013), equal to 137,983 FTEs (138,877 FTEs at 1 January 2013); the number of people on fixed-term contracts as defined by art. 2, paragraph 1-bis of Legislative Decree 368/01³ – the so-called “causale finanziaria” – amounted to 2,388, equal to 2,345 FTEs; the number of people on fixed-term contracts as defined by art. 1, paragraph 1 of Legislative Decree 368/01, as amended by Law Decree 34/14⁴ - the so-called “Jobs Act” - amounted to 4,496, equal to 4,260 FTEs⁵. Total personnel expenses are up 3.8% from €5,755 million in 2013 to €5,972 million in 2014.

Net finance costs total €108 million (net finance income of €47 million in 2013), reflecting, among other things, the impairment loss recognised on the investment in Alitalia-CAI SpA (€75 million).

Income tax expense is down from the €474 million of 2013 to €216 million for 2014.
The total effective tax rate for 2014 is 79.16%. Compared with the figure for 2013, when the rate was 26.54%, it should be noted that the previous year benefitted from the positive impact of recognition of an IRES refund for the years from 2004 to 2006, in accordance with Law Decree 201 of 6 December 2011 (resulting in a reduction in the tax rate of 22.59%).
In terms of the composition of the tax rate, the effective rates for IRAP and IRES in 2014 are 72.71% and 6.45%, respectively; the significant reduction in the effective tax rate for IRES, compared with the statutory rate of 27.5%, primarily reflects the deductibility (95%) of dividends received from certain subsidiaries.

Profit for 2014 thus amounts to €57 million (€708 million for 2013), despite benefitting from the profit reported by BancoPosta RFC (€440 million), which was unable to offset the losses incurred by the postal business.

⁽¹⁾ This method defines the cost incurred as the difference between the net operating cost incurred by a designated universal service provider when subject to universal service obligations and the net operating cost without such obligations. Application of the method requires a series of assumptions in order to construct the hypothetical postal operator without obligations, on which to base assessment of the related net costs and revenues.
⁽²⁾ The workforce at 1 January of each year is identical to the workforce at 31 December of the previous year.
⁽³⁾ Art. 2, paragraph 1-bis of Legislative Decree 368/01 requires, among other things, that fixed-term contracts must not represent more than 15% of a company’s workforce on 1 January of the year in which the staff are recruited.
⁽⁴⁾ Art. 1, paragraph 1 of Legislative Decree 368/01, as amended by Law Decree 34/14 (the so-called “Jobs Act”) establishes, among other things, that employees recruited on fixed-term contracts cannot exceed 20% of a company’s permanent workforce at 1 January of the year in which they are recruited, after rounding up to the nearest whole number should the figure be equal to or above 0.5.
⁽⁵⁾ The number of fixed-term contracts – expressed in terms of both headcount and FTEs – includes, for 2014, both contracts and renewals during the year in question. In fact, given that Law Decree 34/14 came into force on 21 March 2014, there were no contracts in effect at 1 January of that year previously executed in accordance with the Jobs Act.

FINANCIAL POSITION AND CASH FLOW

FINANCIAL POSITION AND CASH FLOW OF THE POSTE ITALIANE GROUP

In addition to movements in non-current assets and working capital, the reduction in net invested capital at 31 December 2014 reflects:

• a reduction of €513 million in the net balance of deferred tax assets/(liabilities), primarily due to the increase in the fair value reserve for BancoPosta’s investments in securities, which generated an increase in deferred tax liabilities;
• an increase of €168 million in provisions for risks and charges, primarily due to the effect of the expected liabilities for restructuring costs.

Non-current assets break down as follows at 31 December 2013 and 31 December 2014:

Compared with the end of 2013, non-current assets are down €251.5 million, as a result of reductions of €689.5 million and additions totalling €438.0 million.
Reductions regard depreciation, amortisation and impairments, totalling €670.8 million, of which €409.0 million regards property, plant and equipment, €257.4 million intangible assets and €4.4 million depreciation and impairments of investment property, after reversals of impairments. Further reductions in non-current assets regard:

• retirements and sales of €10.9 million, including €7.7 million regarding intangible assets, €2.4 million property, plant and equipment, €0.6 million investment property and €0.2 million non-current assets held for sale;
• Postel SpA sale of shares in Docugest SpA, totalling €4.5 million, to Cedacri Global Service SpA;
• the net impact of changes in the scope of consolidation, totalling €2.3 million, reflecting consolidation on a lineby- line basis, from 1 January 2014, of PatentiViaPoste ScpA and PosteTributi ScpA;
• net adjustments of the value of investments, totalling €1.0 million. An adjustment of €0.6 million refers to the investment in Docugest SpA, the value of which was aligned with the sale price on 4 July 2014.

Additions regard:

• the purchase of property, plant and equipment, totalling €219.6 million, primarily by the Parent Company and attributable to the purchase of new hardware for the technological upgrade and restyling of the Group’s post offices, in addition to non-routine maintenance of properties owned by the Group;
• the investment of €217.5 million in intangible assets, regarding the purchase of new software licences and the development of network platforms¹ by the Parent Company and Group companies;
• purchases of investments, totalling €393 thousand, essentially including (€391 thousand) subscription for the new shares issued by Poste Holding Participações do Brasil Ltda (76% owned by Poste Italiane SpA and 24% owned by PosteMobile SpA). Moreover, following the decision to put the Virtual Mobile Network Operator project in Brazil on hold, on 27 November 2014, Poste Italiane SpA’s Board of Directors decided to put the company into liquidation. A further €2 thousand regards the Parent Company’s acquisition of 20% of Italia Camp Srl.
• purchases of investment property, totalling €0.5 million.

Working capital of breaks down as follows at 31 December 2014 and 31 December 2013:

Working capital at 31 December 2014 amounts to €3,941 million, up €889 million compared with the end of 2013. The increase is essentially due to the following.

• An increase of €657 million in trade receivables and other current receivables and assets. The main components of this balance include receivables due from the State; in particular, €535 million regards recognition of an amount due from the shareholder which, as provided for in art.1, paragraph 281 of the 2015 Stability Law (Law 190 of 23 December 2014), is due to the return of amounts deducted from the Parent Company’s retained earnings on 17 November 2008 and transferred to the MEF, pursuant to the European Commission’s Decision C42/2006 of 16 July 2008 (described in greater detail in section 10.1, “Principal proceedings and relations with e authorities”). In addition, a further €335 million consists of amounts accruing during the year as Universal Service compensation².
• A reduction of €73 million in trade payables and other current liabilities, primarily reflecting normal trends in the payment of suppliers.
• a €148 million increase in the balance of trade receivables and other non-current assets and liabilities, primarily due to tax assets deriving from the prepayment by Poste Vita SpA (for the years 2010-2014) of withholding and substitute tax on capital gains on life insurance policies.

At 31 December 2014, equity amounts to €8,417.9 million (€7,116.3 million at 31 December 2013) and breaks down as follows:

• Share capital €1,306.1 million
• Reserves €3,159.9 million
• Retained earnings €3,951.9 million.

Compared with 31 December 2013, equity has increased by €1,301.6 million due to the following changes:

Additions:

• a €1,141.8 million increase in fair value reserves net of tax, as a result of positive and/or negative movements in the value of investments in securities held by BancoPosta RFC and Poste Vita SpA;
• movements in the cash flow hedge reserves, amounting to €66.2 million, net of tax;
• profit for the year of €211.9 million;
• €535 million taken to retained earnings as a result of recognition of the amount due from the shareholder which, as described above, is required to return this sum to the Parent Company following the ruling of the EU Court of 13 September 2013, which has become final. As the payment of the sums under the Decision of 2008 were drawn from the Company’s portion of retained earnings accrued “ideally” from the returns on Poste Italiane SpA’s deposits with the MEF, the MEF’s obligation to return the above amounts has, accordingly, also been recognised in retained earnings, to the extent provided for by the 2015 Stability Law. Retained earnings also include taxation of €25.2 million on the interest component of the amount due from the shareholder.

Reductions:

• €500 million regarding the Parent Company’s payment of dividends to the shareholder;
• €128.1 million resulting from the recognition in equity of net after-tax actuarial gains and losses on employee termination benefits.

LIQUIDITY

⁽¹⁾ Cash and cash equivalents does not include the restricted component of cash deposited in the buffer account held at the MEF (€262 million at 31 December 2013 and €511 million at 31 December 2014) or the component of cash attributable to technical provisions for the insurance business (€624 million at 31 December 2013 and €415 million at 31 December 2014).

Reconciliation with statement of cash flows in financial statements

Cash flows during the year were primarily affected by movements in working capital, due, among other things, to an increase in trade receivables, which include amounts due as Universal Service compensation, and tax assets deriving from the prepayment by Poste Vita SpA of withholding and substitute tax on capital gains on life insurance policies.
Cash generated was also used to finance capital expenditure and investment in financial assets, totalling €347 million.
Cash flow from financing activities, on the other hand, primarily reflects the issue of subordinated bonds by the subsidiary, Poste Vita, totalling €750 million. The bonds were placed in their entirety with institutional investors. A further amount relates to a net increase in funding raised by the Parent Company, after repayments of repurchase agreements.
Cash and cash equivalents, after the distribution of €500 million in dividends to the shareholder, amounts to €747 million (€530 million at the end of 2013).

Net funds at 31 December 2014 amount to €4,741 million (net funds of €3,257 million at the end of 2013), reflecting: the results of the fair value measurement of investments in available-for-sale financial assets (approximately €2,650 million); cash subject to restrictions, as shown in the following table, as attributable to technical provisions for the insurance business or subject to investment restrictions (BancoPosta RFC); net financial assets held by Poste Vita and Banca del Mezzogiorno-MedioCredito Centrale, which are subject to supervisory capital requirements (approximately €1,900 million).

FINANCIAL POSITION AND CASH FLOW OF POSTE ITALIANE SpA

Poste Italiane SpA’s net invested capital amounts to €4,613 million (€4,500 million at 31 December 2013), 100% financed by equity.

In addition to movements in non-current assets and working capital, the increase in net invested capital at 31 December 2014 reflects:

• a reduction of €442 million in the net balance of deferred tax assets/(liabilities), primarily due to the increase in the fair value reserve for BancoPosta’s investments in securities, which generated an increase in deferred tax liabilities;
• an increase of €158 million in provisions for risks and charges, primarily due to the effect of the expected liabilities for restructuring costs.

Non-current assets break down as follows at 31 December 2013 and 31 December 2014:

Compared with the end of 2013, non-current assets are down €32,5 million, as a result of reductions of €608.0 million and additions totalling €575.5 million.
Reductions regard depreciation, amortisation and impairments, totalling €578.6 million, of which €371.3 million regards property, plant and equipment, €202.8 million intangible assets and €4.5 million depreciation and impairments of investment property, after reversals of impairments. Further reductions in non-current assets regard:

• impairments of €25.1 million, reflecting the write-off of the value of Poste Italiane’s investments in Mistral Air Srl and PosteShop SpA (€19.9 million and €4.9 million, respectively) based on the results of the impairment tests conducted and available projections; a further impairment of €0.3 million regards the investment in Poste Holding Participações do Brasil Ltda, following the decision to place the company in liquidation;
• retirements and sales of €4.3 million, including €2.1 million regarding property, plant and equipment, €1.4 million intangible assets, €0.6 million investment property and €0.2 million non-current assets held for sale.

Additions regard:

• capital expenditure of €332.2 million, of which, as described in the section “Capital expenditure and financial investments”, 58% relates to investment in ICT (Information & Communication Technology), 32% to the modernisation and renovation of buildings and 10% to postal logistics. In more detail, additions during the year primarily regard: €180.6 million invested in property, plant and equipment, relating to the purchase of new hardware for the technological upgrade and restyling of post offices, in addition to non-routine maintenance of properties owned by the Company; €151.6 million invested in intangible assets, reflecting the purchase of new software licences and the development of software for network platforms;
• acquisitions of investments, totalling €242.8 million, which breaks down as follows: €232 million relating to the subscription for new shares issued by Banca del Mezzogiorno-MedioCredito Centrale SpA; €9.9 million in capital injections for Mistral Air Srl to cover losses incurred to 30 June 2014 and establish an extraordinary reserve; €0.8 million relating to the subscription for the new shares issued by Poste Holding Participações do Brasil Ltda; €70 thousand regarding the subscription for shares representing 58.12% of the consortium fund of Consorzio PosteMotori ScpA; and €2 thousand regarding the acquisition of 20% of Italia Camp Srl.
• purchases of investment property, totalling €0.5 million.

Working capital of breaks down as follows at 31 December 2014 and 31 December 2013:

Working capital at 31 December 2014 amounts to €2,926 million, up €878 million compared with the end of 2013. The increase is essentially due to the following:

• an increase of €689 million in trade receivables and other current receivables and assets. As previously noted in the section on the Group’s financial position, the main components of this balance essentially include receivables due from the State;
• a reduction of €289 million in trade payables and other current liabilities, reflecting normal trends in the payment of suppliers, and a reduction in the amount payable by the Parent Company to its subsidiaries after offsetting, in its role as consolidating entity for the tax consolidation arrangement², payments on account made by the subsidiaries, withholdings paid and taxes paid overseas.

At 31 December 2014, equity amounts to €6,504.9 million and breaks down as follows:

• Share capital €1,306.1 million
• Reserves €2,933.9 million
• Retained earnings €2,264.9 million.

Compared with 31 December 2013, equity has increased by €1,074.7 million due to the following changes:

Additions:

• a €1,065.8 million increase in fair value reserves net of tax, as a result of positive and/or negative movements in the value of investments in securities held by BancoPosta RFC;
• movements in the cash flow hedge reserves, amounting to €66.2 million, net of tax;
• profit for the year of €56.9 million;
• €535 million taken to retained earnings, as previously noted in the section on the Group’s financial position, as a result of recognition of the amount due from the shareholder, the MEF, as provided for in art.1, paragraph 281 of the 2015 Stability Law. Retained earnings also include taxation of €25.2 million on the interest component of the amount due from the shareholder.

Reductions:

• €500 million regarding the Parent Company’s payment of dividends to the shareholder;
• €123.9 million resulting from the recognition in equity of net after-tax actuarial gains and losses on employee termination benefits.

LIQUIDITY

⁽¹⁾ Cash and cash equivalents does not include the restricted component of cash deposited in the buffer account held at the MEF (€354 million at 31 December 2013 and €688 million at 31 December 2014).

Reconciliation with statement of cash flows in financials tatements

As noted previously with regard to the Group, cash flows during the year were primarily affected by significant movements in working capital, due to an increase in trade receivables, which, among other things, include amounts due as Universal Service compensation.
Cash generated was also used to finance capital expenditure of €332 million, to provide fresh capital to fund the business development plans of the subsidiary, Banca del Mezzogiorno-MedioCredito Centrale SpA, totalling €232 million, and to subscribe Contingent Convertible Notes, totalling €75 million, issued by Midco SpA, which holds 51% of Alitalia SAI. Financing activities also include amounts deposited by subsidiaries in intercompany current accounts.
Cash and cash equivalents, after the distribution of €500 million in dividends to the shareholder, amounts to €287 million (€220 million at the end of 2013).

Net funds at 31 December 2014 amount to €1,892 million (net funds of €930 million at the end of 2013), reflecting the results of measurement on the fair value reserve for investments in available-for-sale financial assets held by BancoPosta RFC (approximately €2,307 million).

⁽¹⁾ Intangible assets consist of costs directly associated with the development of separable and identifiable software products that will provide future economic benefits for a period of more than one year. No research and development costs, other than those just described, are capitalised.
⁽²⁾ Poste Italiane SpA has adopted a tax consolidation arrangement, which it has elected to apply in accordance with the related law together with the subsidiaries, Poste Vita SpA, SDA Express Courier SpA and Mistral Air Srl. Following adoption of the tax consolidation arrangement, the Parent Company’s tax expense is determined at consolidated level on the basis of the tax expense or tax losses for the period for each company included in the consolidation, taking account of any withholding tax paid or payments on account.

FINANCIAL SERVICES

BANCOPOSTA RFC

During 2014, BancoPosta RFC's commercial offering was focused on cross-selling and attracting new current account deposits. In the private current account segment, the Conto BancoPosta Più offering has been expanded through the introduction of new promotions: customers purchasing a Postaprotezione SiCura and/or a Postaprotezione Infortuni insurance policy or purchasing PosteMobile products have had their annual current account fee cut to zero. The Conto BancoPosta In Proprio offering for SMEs was restyled. Customers who retain a minimum balance on their account each month and purchase or use a certain number of products (collection and payment or loans and insurance) receive a reduction in their account charges.
A number of initiatives have also been taken to attract new deposits and consolidate the market positioning of online current accounts. These regard:

• the launch of “Promozione 1,75%”, offering an annual rate of 1.75% gross until 31 December 2014 for all new customers opening a Conto BancoPosta Più or Conto BancoPosta Click account by 30 June 2014, whilst existing BancoPosta Click customers have been offered an annual rate of 0.75% gross until 30 June 2014;
• three different rates were offered for amounts deposited in term accounts as part of the “Opzione SorpRende” service, which allows customers to earn a higher return than usual if they deposit their money for a longer period; this option was also extended to In Proprio current accounts for SMEs.

The electronic money sector, in which the Group is present with its Postamat Maestro card (6.9 million cards at 31 December 2014 and 6.8 million cards at 31 December 2013) and Postepay card (12.2 million cards at 31 December 2014, compared with 10.5 million cards at 31 December 2013), saw the expansion of contactless debit card technology to both cards in the Tuscany region (after Lombardy and Lazio, where distribution was completed in 2013), and to the Postamat Click MasterCard debit card throughout the country.
The new Postepay card, Postepay Evolution, was launched in 2014. In addition to having all the usual functions of a standard Postepay card, the new card, which will be equipped with an IBAN, will enable holders to carry out the principal banking transactions (to pay in their salaries, effect transfers and post office giro transactions and pay their bills by direct debit) and to use an App to top up their cards with small amounts free of charge from other Postepay accounts (up to €25 a day). The new card, which will belong to the international MasterCard system, will support the United Nations’ World Food Programme (WFP) in collaboration with MasterCard and will be the first card in the world to give customers the chance to make a donation to the WFP each time they use their card.

In connection with the La Carta dello Studente – IoStudio promotion sponsored by the Ministry of Education, Universities and Research (MIUR), involving the distribution of electronic ID cards incorporating a number of payment functions to students, during the first half around 600,000 cards for secondary school students were produced and sent to school administrative offices.
Around 26.3 million top-ups were made using the external top-up channel for Postepay cards, comprising around 40 thousand SISAL betting shops, around 16 thousand tobacconists linked up to the Banca ITB network, and the home banking service provided by the BPM Group and other authorised networks in 2014 (21.6 million in 2013).
In the collections and payments segment, the process of extending the payment of bills using payment slips in supermarkets continued and a Payment Slip for the payment of the new property tax (TASI) was created as an alternative to form F24. Furthermore, from October 2014 new functions were added to the Bollettino postale (Payment Slip) product, enabling invoicers to electronically check unpaid bills and payments received in real time. Again with regard to collections and payments, in June the new version of the “Fattura noproblem” service, which manages the issue of bills to Public Sector entities in compliance with the relevant regulations on behalf of BancoPosta current account customers, was released.
The POS acquiring services for SMEs include the Mobile POS service, the marketing of which was extended to the entire post office network during the year. The introductory promotional offer, enabling customers to buy a card reader at a reduced price, was also prolonged. The service is aimed at small and micro businesses, enabling them to use a smartphone or tablet to manage credit and debit card payments by using a special app and a bluetooth card reader.
The holders of PagoBancomat cards can now top up their mobile phones or their Postepay cards at a Postamat ATM and the process of extending the number of post offices at which bills can be paid by payment slip using a Visa or Mastercard debit or credit card was completed.
In terms of loan products for private customers, numerous low interest rate promotions were run and the terms and conditions applicable to a number of products were revised. In particular, the offer of Specialcash Postepay and Prontissimo BancoPosta personal loan products was extended to include the holders of the new Postepay Evolution card, with the loans credited to their card and repayments being debited directly to the card. The range of Quinto BancoPosta salary loans was extended, with the addition of both a product for Poste Italiane employees, enabling them to obtain loans worth up to two-fifths of their salary, and one for INPS pensioners and Poste Italiane employees, giving them the possibility to obtain a new BancoPosta salary loan to replace a previous one obtained from any other bank. The Mutuo BancoPosta product (mortgage loans) was repriced in order to improve its competitiveness.
With regard to the distribution and management of Postal Savings products, 2014 saw changes to the range of Interest-bearing Postal Certificates (BFPs), with the issue of certain products being halted (the 3-year BFP Fedeltà, BFPRisparmiNuovi, BFPRenditalia, BFP7insieme) to be replaced by new certificates (e.g., BFP3x4Fedeltà, for customers redeeming at maturity certificates or bonds distributed exclusively by Poste Italiane; Buono BFP3x4RisparmiNuovi, aimed exclusively at savers desiring to top up their investments). In addition, the "risparmiodisicuro" plan was launched in April, enabling savers to periodically and automatically subscribe for certain types of certificate (BFP Europa, BFP Diciottomesi, BFP 3x4, BFP Ordinari and inflation-linked BFPs).
Turning to Savings Books, promotion of the Libretto Nominativo Smart product was extended. This offers a higher rate of interest for qualifying customers (e.g., those who maintain a certain minimum balance on their account) until 30 June 2014, for accounts opened between 1 January 2013 and 30 March 2014, and 31 December 2014, for those opened between 1 April 2014 and 23 June 2014 (the latter promotion was renewed for accounts opened between 24 June 2014 and 28 October 2014). In addition, new functions have been added to the online services linked to the Libretto Smart product, enabling account holders to give instructions for: the transfer of funds from bank current accounts; top-ups to their PostePay cards using an App to debit their Libretto Smart account, transfers (from a Libretto Ordinario to a Libretto Smart and vice versa and from a BancoPosta/BancoPosta Click current account to a Libretto Smart account and vice versa), using the RPOL service or via an App.

In terms of investment services, 2014 saw the issuance of three bonds:

• “TassoFisso Sprint BancoPosta”, issued by Banca IMI SpA, and
• “TassoFissoOneStep BancoPosta”, issued by UniCredit SpA, both having 6-year terms to maturity;
• “TassoFissoOneStep BancoPosta”, issued by Banca IMI, with a term to maturity of 7 years.

With regard to International Money Transfer payment systems, a number initiatives were taken to boost usage of the Moneygram service. These focused on use of a Poste Mobile SIM, based on a promotion launched in February, enabling customers to transfer money to any country in return for a flat fee, and pricing initiatives for money sent from Rome, Milan and Naples. In addition, with regard to Eurogiros, the Eurogiro Cash to Account service for sending money from San Marino to Italy, directly to the recipient’s postal current account, was also launched.

Online services

Online home banking services linked to the BancoPosta (BancoPostaOnline) and Conto BancoPosta Click accounts continued to see growth in 2014, with over 1.7 million online consumer accounts (over 1.5 million online consumer accounts active at the end of 2013) and around 257,000 business accounts (around 250,000 at the end of 2013).

Online transactions

Online customers generated more than 23 million instructions during the year (21 million in 2013). Of the classic internet banking services offered, the Bollettino payment slip is the most successful, with 5.7 million online transactions generated in 2014 (up 9% on 2013), followed by PostePay top-ups (up 5.6% on the previous year, with 5.4 million top-ups) and bank transfers which, with over 4.2 million instructions, are up 20.5% on 2013. Post office giro transactions, transferring money between Bancoposta current accounts, totalled approximately 1.8 million (up 17.9% on the previous year).
The number of phone top-ups is down 9.8% from the 4.1 million of 2013 to 3.7 million in 2014. This reflects general market trends, with increased use of social networks as a means of communication and of mobile messaging Apps.

BANCOPOSTA’S OPERATING RESULTS

Revenue

^(*) This item includes all revenue from domestic and international money orders and inbound and outbound Eurogiros.
^(**) This item includes revenue from tax collection forms and tax returns and other Bancoposta revenue.
^(***) This item primarily includes income from the investment of own liquidity and certain financial income classified, for the purposes of the Separate Report, in other items in the income statement.

Deposits

^(*) This refers to the average deposits during the period, including time deposits, repurchase agreements and Poste Italiane's liquidity.
^(**) Deposits include accrued interest for the period, calculated on the assumption that all Interest-bearing Postal Certificates arrive at their scheduled maturity date.

Number of transactions

Volumes

Revenue generated by BancoPosta RFC’s financial services is down from the €5,326 million of 2013 to €5,228 million in 2014 (a decline of 1.8%). This primarily reflects the performance of current accounts, which saw a 5.3% reduction in revenue (€2,775 million in 2014, compared with €2,931 million in 2013). This reflects both a decline in revenue from the payment of bills by payment slip, down 13% from €567 million in 2013 to €493 million in 2014, due to a decline in the number of bills processed (458 million in 2013, compared with 428 million in 2014), and a 5.4% reduction in revenue from the investment of deposits (€1,659 million in 2014, compared with €1,753 million in 2013), reflecting a reduction in the average rate earned on deposits with the Ministry of the Economy and Finance.
Other revenue from current accounts and prepaid cards is up by approximately €12 million, reflecting an increase in fee revenue on the issue and use of prepaid cards, which amount to 12.2 million at the end of 2014, compared with 10.6 million at the end of 2013.
There was a 12.7% decrease in money transfer revenue (€55 million in 2014, compared with €63 million in 2013), essentially due to falls in the volume of domestic transfers processed (5.4 million transaction in 2014, compared with 5.8 million in 2013) and in the number of international transfers (2.2 million transactions in 2014, compared with 2.6 million in 2013).

The sale of Interest-bearing Postal Certificates and inflows into Postal Savings Books, the income on which is linked to a mechanism agreed with Cassa Depositi e Prestiti SpA tied to the achievement of net savings inflow targets, contributed €1,640 million to revenue (€1,620 million in 2013). In terms of assets under management, savings book deposits amount to €114.4 billion at 31 December 2014 (€106.9 billion at 31 December 2013), whilst savings in the form of Certificates are substantially in line with the figure for 31 December 2013 (€211.3 billion at the end of 2014, compared with €211.7 billion at the end of 2013).

Asset and fund management¹ registered an increase in revenue of 4.2% (€400 million in 2014, compared with €384 million in 2013), generated essentially by growing sales of insurance policies (up 9.7%), which have risen from the €329 million of 2013 to €361 million in 2014. This reflects an 11% increase in premiums written by Poste Vita (€14.7 billion in 2014, compared with €13.2 billion in 2013), with the remaining increase deriving from the positive contribution of commission income from the funds segment, up from €17 million in 2013 to €18 million in 2014. Equity and bond placement revenue is down 78.6% on 2013 (€3 million in 2014, compared with €14 million in 2013), due to a reduction in the volumes placed (€110 million in 2014, compared with €589 million in 2013). Delegated service revenue of €136 million (€130 million in 2013) primarily includes commissions received in return for the payment of INPS (National Social Insurance Institute) pensions, totalling €69 million (€63 million in 2013), and commissions earned on the payment of pensions and other sums for the Ministry of the Economy and Finance, totalling €57 million. The decrease in commissions was basically due to the reduction in pensions paid at counters as opposed to current or savings account credits, on which a lower commission is charged than for counter payments.

Revenue from the distribution of loan products² is down 5.5% (€120 million in 2014, compared with €127 million in 2013), reflecting a reduction in the amounts disbursed.

Finally, the 43.7% increase in revenue from other products essentially reflects growth in the number of tax payments processed using the F24 form (51million in 2014, compared with 29 million in 2013).

⁽¹⁾ Asset and fund management includes the distribution of government securities, equities, bonds, insurance policies, mutual investment funds and commissions on safe custody accounts.
⁽²⁾ Personal loans, mortgage loans, overdrafts, salary loans and credit protection.

FINANCIAL SERVICES

BANCA DEL MEZZOGIORNO - MEDIOCREDITO CENTRALE SPA

During 2014 Banca del Mezzogiorno-MedioCredito Centrale (MCC) continued to provide support for creditworthy companies operating in southern Italy, through its lending activities and by promoting and facilitating access to government subsidies.
In February the bank raised fresh capital of €232 million in order to fund an expected increase in medium/long-term lending. In this respect, the bank set up various distribution channels to increase penetration of the various segments and markets. Alongside loan products, associated with collateral or personal guarantees, to support the investment needs of manufacturing companies operating in the eight regions that make up southern Italy, MCC also added a line of products to its offering for households (primarily mortgages and personal salary loans), enabling it, among other things, to diversify risk and reduce funding costs.
The bank’s management of public funds and subsidies, and above all of the Fondo di Garanzia per le PMI (a guarantee fund for SMEs), continued to expand: applications, numbering over 89,900, are up 7.9% on 2013, with over 86,000 approved loans, totalling approximately €13 billion (up 19.7% compared with 2013).
Regarding the incentives for national research projects promoted by the Ministry for Economic Development (MISE), as head of temporary consortium of companies, the bank was awarded a contract to provide an assistance and support service for research, development and innovation project subsidies within the scope of the Sustainable Growth Fund. The Fund promotes various types of initiative, including those aimed at supporting technological research and development projects.

In 2014 the bank reported net income from banking activities of €100.6 million (€64.2 million in 2013) and net interest income of €43.7 million (€21.1 million in 2013). Total loans and advances amount to €1.3 billion at the end of 2014, compared with the €771 million registered at the end of 2013. Net fees are also up (€41.1 million in 2014, compared with the €35.4 million in the previous year), primarily generated by management of the Fondo Centrale di Garanzia per le PMI (central guarantee fund for SMEs).
Net profit for 2014 amounts to €37.6 million (€11.6 million in 2013).

FINANCIAL SERVICES

BANCOPOSTA FONDI SPA SGR

BancoPosta Fondi SpA SGR continued to carry out activities regarding Collective Investment Undertakings – UCIs and the Individual Investment Portfolio service in 2014.

Total assets under management in relation to the company's lines of business (individual and collective investment services) amount to €62.2 billion at 31 December 2014 (up €16.3 billion or 36% on the end of 2013).
Regarding the investment portfolio management service provided to the Poste Vita Insurance Group, total assets under management at 31 December 2014 amount to €57.2 billion (€41.1 billion at 31 December 2013, up 39%).
Regarding collective investment services, total assets under management at 31 December 2014 amount to €5.0 billion (€4.8 billion at the end of 2013, up 6%). Figures regarding total assets at 31 December 2014 do not include third-party UCIs, which were settled during the year as they had reached maturity (approximately €0.2 billion). The gross inflow amounted to 1,704 million, compared with €2,148 million in the previous year. Redemptions amounted to €1,412 million, slightly above the €1,387 million registered in 2013.
Stripping out the above third-party UCIs, the performances of gross inflows and redemptions resulted in a net inflow of €292 million (€761 million at 31 December 2013).
The principal contribution to total gross inflows during 2014 was from bond funds (€521 million, accounting for 30.6% of total inflows), followed by buy-and-hold funds (€486 million, accounting for 28.5% of total inflows), balanced funds (€459 million, 26.9% of total inflows), equity funds (€146 million, 8.6% of total inflows) and the new closed-end balanced bond fund (€89 million, 5.2% of total inflows). Redemptions were concentrated in traditional bond funds (approximately 75% of the total).
The company reports a profit of €14 million for the year (€11 million in 2013).

INSURANCE SERVICES

POSTE VITA INSURANCE GROUP

In continuation of strategic objectives pursued in previous years, in 2014 the Poste Vita Insurance Group primarily focused its efforts on:

• consolidating and strengthening the Poste Vita Parent Company's position in the life insurance and pensions market, with a particular focus on the supplementary pension segment and new emerging needs (primarily welfare and longevity);
• growing the non-life insurance business, with a view to positioning the subsidiary, Poste Assicura, as a leading player in this market.

Thanks partly to a constant focus on products, stepping up support to the distribution network and growing customer loyalty, the company’s efforts concentrated almost exclusively on the offer of Branch I investment and savings products (traditional separately managed accounts) with inflows of around €14.7 billion (€13 billion in 2013), while a marginal contribution was made by the sale of Branch III products (€17 million in 2014, compared with €79 million in 2013).
Total premium revenue amounts to €15.4 billion (€13.2 billion of insurance premiums in 2013).

Poste Vita has also consolidated its undisputed leadership in the pensions market, with the number of subscriptions to Postaprevidenza Valore exceeding 711,000.
Sales of pure risk policies (term life insurance) also performed well. These are sold in stand-alone versions (therefore, not bundled with investment products), with over 26,000 new policies sold during the year, whilst around 123,000 were new policies, again of a pure risk nature, were sold bundled together with financial obligations deriving from mortgages and loans sold through Poste Italiane’s network.
With regard to treasury management, the company continued with its investment policy focused on keeping investment funds separate in order to match investments to insurance obligations and, at the same time, running a portfolio that can provide stable returns in line with the market. Investment policy was marked by the utmost prudence, with a portfolio primarily invested in Italian government securities and highly-rated corporate bonds. In the second half of 2014, the company also launched a process of diversifying its investments, whilst maintaining a moderate risk appetite, via investments in a multi-asset, harmonised open-ended fund of the UCITS (Undertakings for Collective Investment in Transferable Securities) type. Returns on investment from separately managed accounts (4% for PostaValorePiù and 5% for PostaPrevidenza), as well as from the company's free capital, both registered good performances, partly due to realised gains of approximately €55 million.
As a result of the above-mentioned operating and financial performance, technical provisions for the direct Italian portfolio amount to €77.7 billion (€65.2 billion at the end of 2013), including approximately €68.4 billion in Branch I and V provisions (€55.5 billion in 2013). Provisions for products where the investment risk is borne by policyholders amount to €8.5 billion (€9.2 billion at 31 December 2013). Deferred Policyholder Liability (DPL) provisions rose from €2.7 billion at the beginning of the year to €9.4 billion at 31 December 2014, as a result of the increase in the fair value of the financial instruments covering the provisions, reflecting the good performance of financial markets.
Therefore, at the level of the Poste Italiane Group’s consolidated financial statements, provisions amount to €87.1 billion.
Regarding the organisational structure, the process of strengthening the quality and size of the company's workforce continued in 2014, given the constant growth in size and volumes. A number of activities designed to assist development and ongoing functional and infrastructure improvement of the most important business support systems also continued.
In particular, the company launched all the functional activities required to comply with the Solvency regulations planned for 2016, including adaptation of its governance model and organisational and operating structure, with a view to strengthening decision-making processes and optimising risk management procedures, in order to increase and safeguard value creation. Moreover, given that May 2015 will see the start of the preliminary phase of the Solvency II Directive, during which insurance companies will be obliged to meet the initial requirements under the new regulations, the company also conducted significant planning, with organisational and IT implications, aimed at meeting the objectives set out in the regulations from the beginning of the preliminary phase. Finally, planning activities were launched at the end of 2014 aimed at creating and implementing a more up-to-date integrated administrative and accounting system. This will enable more efficient and automated management of data production processes and all the documentation connected with mandatory requirements, at the same guaranteeing the completeness, accuracy and quality of data.
Once again in 2014, administrative costs continued to be far lower than the market average (0.5% of earned premiums and 0.1% of provisions).

Gross profit for the year amounts to €568.5 million (€497.3 million in 2013). However, it should be pointed out that net profit, amounting to €350.2 million (€253.7 million in 2013), was also positively affected by the lower overall tax charge compared with the previous year, which was impacted by higher tax expense (IRES surtax) of approximately €49.3 million.
In terms of capital, it should be noted that, on 30 May 2014, the company completed the issue of subordinated bonds with a total nominal value of €750 million, placed in their entirety with institutional investors. The transaction forms part of an overall plan to strengthen the company’s financial position, primarily in view of expected growth over the two-year period 2014-2015, and the aim of maintaining a solvency ratio of at least 120% until the entry into effect of the new capital requirements, contained in the Solvency II Directive, in 2016.

In September 2014, as part of the process of rationalising and optimising operations, designed to achieve synergies within the insurance group, the transfer for consideration of the non-life insurance portfolio to the subsidiary, Poste Assicura, was completed. The transfer regards non-life insurance products for the retail market, especially the Postapersona Infortuni, Postapersona infortuni senior and Postapersona Salute products. The total value of the portfolio was assessed as €292 thousand plus VAT.
During the year, the company continued to focus on the following priorities:

• exploiting new customer needs in the areas of welfare, healthcare, assistance and income security before and after retirement, developing a new insurance model that covers protection, savings, investment and pension needs at the same time;
• an upgrade of the offering, with a flexible approach to product and service management in terms of varying market conditions and customers' needs;
• optimisation of the network support model, including trials of new sales channels and commercial initiatives.

Premium revenue totalled €86.4 million (up 27% on 2013), with 347,000 new policies sold (323,000 policies sold in the previous year).
These factors, together with the positive performance of net financial income and cost efficiencies, enabled the company to report profit for the year of €7.3 million (€5.5 million in 2013).

POSTAL AND BUSINESS SERVICES

MAIL AND PHILATELY

The initiatives implemented in 2014 were aimed at strengthening customer relations and enhancing the business model, adding to logistics and technology platforms and introducing innovative solutions to better respond to market demand.
To this end, the Infodelivery Light internet service was launched in the recorded mail segment. Aimed at professionals and SMEs, this service enables reporting of delivery outcomes for Registered, Raccomandata 1 and Insured products.
The Posta Pick–up offering was also revisited, with new solutions providing greater flexibility and customisation of the service (based on frequency, weight, day and time), a reduction in activation times and simplification of the related terms and conditions. The Posteinteractive offering was introduced. This advanced, integrated delivery service enables the remote management of complex processes involved in the delivery, replacement and sale of goods and services and the related exchange of documents. The Posta Easy service and the Local Integrated Notification Service were also revisited.
The Direct Marketing segment was enhanced, with new added value services forming part of the Linea Evolution range, which will enable customers to electronically track the progress and delivery of business post and any undelivered items. The advanced PostaZone Smart and PostaZone Premium services were also launched, cutting delivery times and providing a wider, more accurate range of delivery options (for example, items will no longer be delivered to condominium mailboxes).
The new multi-channel offering, Cross Media Solution, which includes integrated physical and digital direct marketing solutions, also began on a trial basis. Postatarget Creative Sviluppo Customer Base, a promotion valid from June to December 2014, was launched for companies already using Postatarget that wish to expand their customer base, including provision of a delivery service combined with a list of prospective customers' addresses.
In December, the Direct Marketing segment also saw the introduction of Postatarget Facile, a new delivery procedure for all products in the Postatarget range, enabling customers to streamline the process of sending addressed advertising material by making it simpler and more immediate.
Finally, with regard to Data Services, the PosteInfoPAL services were launched on an experimental basis. Via a host of local data recording and processing services to support local authorities, this offering will enable optimisation of the processes involved in the management of public spaces and areas (updating of house numbering and place names), tax collection and the provision of public services.

Infine, tra i servizi di Data Service, è stata lanciata, in via sperimentale, l’offerta dei servizi PosteInfoPAL che, attraverso una pluralità di servizi di rilevazione e di trattamento dei dati territoriali a supporto degli enti locali, permettono di ottimizzare i processi di gestione del suolo pubblico (aggiornamento numerazione civica e toponomastica), di accertamento dei tributi locali e di erogazione dei servizi ai cittadini.

Philately customers, consisting of stamp collectors and occasional customers, continue to express interest in the range of stamps and associated products on offer. In particular, in 2014, online sales of postage stamps to tobacconists registered around 35,000 orders (approximately 28,000 in 2013), partly due to activation of the Francobollofacile service, which enables postage stamp purchases via the www.poste.it website.
Spazio Filatelia outlets, which continue to be a reference point for collectors wishing to purchase philately products, are located in major Italian cities⁽¹⁾. A total of 1,400 temporary outlets were also set up during the year at various local and national events.
The philately programme featured many issues celebrating, among others, the Ordinary Public Concistory for the creation of new cardinals, Galileo Galilei on the 450th anniversary of his birth, the 40th anniversary of the Piazza della Loggia bombing in Brescia and the canonisation of John XXIII and John Paul II. Italy's artistic and cultural heritage was marked by, among other things, stamps commemorating the 450th anniversary of the death of Michelangelo, and the fifth centenary of the death of Donato Bramante. For the thematic series, “Excellence in the productive and economic system”, stamps were issued to mark 50 years since the its creation of Nutella and to celebrate sustainable development through the use of renewable energy.
During the year, in addition to the Philately and Schools project, involving pupils from elementary and middle schools, the Philately in Prisons project continued which, through the spread of stamp collecting in prisons, aims to help prisoners in the process of rehabilitation and reintegration within civil society.

Service quality

The table below shows the quality achieved compared with the targets set.

^(*) The figure for 2014 is provisional. The final figure is being computed by IZI at the request of the regulator, AGCom.
^(**) IPC - UNEX End-to-End Official Rule data.
^(***) Monitored by the electronic tracking system.

All products are monitored with an electronic tracking system.

Quality targets

2013
In a Memorandum dated 22 December 2014, AGCom published quality assessment results for universal postal services in 2013. For the first time, the assessment included bulk mail results, which were recorded by Poste Italiane and sent to AGCom following specific requests. On completion of the assessment, all the results achieved, except for the one regarding ordinary parcels, were just under (approximately 0.2%) the regulatory target. Given the only slight divergence from the target, AGCom decided (Resolution 603/14/CONS of 28 November 2014) not to apply the penalty provided for by art. 5, paragraph 7 of the Planning Agreement currently in force.

2014
Regarding delivery quality results for the first half of 2014, the Company sent registered product and ordinary parcel results to AGCom on 29 September 2014, as required by the regulations. These results were in line with the regulatory targets. The Company will send the results for the second half of the year, including the overall figures for the full year, to AGCom by 31 March 2015.
In terms of priority mail, the Company is awaiting the quality report produced by the independent body, IZI, which will include consolidated data for 2014. AGCom will then check the results.

⁽¹⁾ Rome, Milan, Venice, Naples, Trieste, Turin and Genoa.

OPERATING RESULTS FOR MAIL AND PHILATELY

To ensure the comparability of amounts for the two years, certain amounts for 2013 have been reclassified.
n/s: not significant
From 2009 notices of receipt for registered mail have been treated separately, with priority mail volumes (2013 and 2014) also including these items.
^(*) Overall mail volumes, including items handled by Postel and relating to Promoposta (10.2 million items), amount to approximately 3,708.2 million items at 31 December 2014.

The market for traditional postal services continues to suffer the effects of a structural decline in volumes. Moreover, unlike other sectors, and also partly due to the dual effect of economic recession and the switch to web-based and digital forms of communication in general, the process of postal sector deregulation has not generated the expected effects in terms of attractiveness of the market, which instead of growing has gone into decline. This decline, which has affected all of Europe’s postal operators, has been particularly significant in Italy, partly as a result of the worsening economic situation and the small size of the overall market compared with other industrialised countries.
Against this backdrop, the results for mail and philately services in 2014 reveal reductions in both volumes and revenue of 10.4% (431 million fewer items handled) and 11.4% (a decrease in revenue of €351 million), respectively, compared with 2013. This is primarily reflected in the poor performances registered by these segments: Unrecorded Mail (288 million fewer items handled and a decrease in revenue of €190 million compared with 2013), Recorded Mail (15 million fewer items handled and a decrease in revenue of €80 million compared with 2013), Services for Publishers (56 million fewer items handled and a decrease in revenue of €18 million compared with 2013) and Direct Marketing (50 million fewer items handled and a decrease in revenue of 14 million compared with 2013).
Market revenue of €2,713 million is down 10.3%, representing a reduction of €312 million compared with 2013.
In detail, the contraction in the Unrecorded Mail segment, which registered revenue of €1,109 million in 2014 (€1,299 million in 2013), affected volumes of both Priority Mail (168 million fewer items, down 19.3% on 2013) and Bulk Mail (121 million fewer items, down 10.8% on 2013). These result reflect lower demand for “traditional” forms of communication, above all due to large accounts (companies and Public Sector entities) who have continued to develop the digital channel as an alternative to the physical channel by increasingly using the various types of digital communication, as well as the economic downturn, leading customers, above all large accounts, to look for cost savings.
Recorded Mail generated revenue of €912 million (€992 million in 2013), marking an 8.1% decrease (down €80 million compared with 2013), due to the negative performance of Registered Mail (14 million fewer items handled, corresponding to a fall in revenue of €69 million), which was affected by the growing volume of electronic communication used by companies and the Public Sector in their dealings with customers and/or the general public.
Integrated Services registered a 2.8% decrease in revenue (down €7 million compared with 2013), essentially due to a reduction in tax documents sent by customers, whilst the reduction in Multi-channel Service revenue (down €4 million on 2013, equivalent to 12.1%) is due to the steady ongoing decline in traditional telegram, certofax and teltex services.
Direct Marketing services registered a 5.8% reduction in volumes (50 million fewer items) and a 6.7% decrease in revenue (down €14 million) compared with 2013, primarily due to the contraction in the amount of advertising carried out by companies. These minor activities also influenced the Unaddressed Mail segment, which registered overall reductions in volumes and revenue of 4.2% (21 million items handled) and 13.8% (down €4 million), respectively, compared with 2013.
Services for Publishers registered an 11.4% reduction in volumes (56 million fewer items handled) and a 13.5% decrease in revenue (down €18 million) compared with 2013, due to an ongoing decline in publishing product subscribers and an increase in digital subscriptions.

Philately revenue included in postal services revenue, including revenue generated by the sale of stamps, amounts to approximately €116 million (€124 million in 2013), whilst the Philatelic Programme included 45 issues with 89 stamps and 1 postcard, with a total value of €67.70 (50 issues with 88 stamps and 4 postcards with a total value of €40.85 in 2013).

The Postel Group’s external revenue is down 12.5% on the previous year, falling from €168 million in 2013 to €147 million in 2014. This reflects the downturns registered in the Electronic Document Management segment (€40.6 million in 2014, compared with €49.3 million in 2013) and the traditional businesses of Mass Printing (€70.2 million in 2014, €74.8 million in 2013) and Direct Marketing/Commercial Printing (€17.1 million in 2014, €21.3 million in 2013).
Similarly to revenue, but also in part due to implementation of cost saving measures, operating costs incurred during the year register a decrease compared with the total figure for the previous year (€143 million in 2014, €157 million in 2013).
Overall, the Postel Group has contributed operating profit of €4 million (€11 million in 2013) and a loss for the year of €2 million (a profit of €6.7 million for 2013) to the Poste Italiane Group’s consolidated results.

POSTAL AND BUSINESS SERVICES

EXPRESS DELIVERY AND PARCELS

One of the segments the Company is focusing on is e-commerce, which is substantially influencing the Express Delivery and Parcels sector.
E-commerce penetration in Italy is one of the lowest in Europe, so it is reasonable to assume that in Italy too in the coming years this share is set to grow.
Therefore, in this area, Poste Italiane is keen to boost its operational and commercial logistics which, in addition to being one of the Group's traditional businesses, comprises a strategic asset for taking advantage of important opportunities in a fast growing sector.
In this regard, in 2014 the Group focused on activities aimed at further expanding the range of options on offer to customers, leveraging the widespread nature of the postal network so as to ensure that e-commerce products are increasingly flexible and complete, and to strengthen the ancillary services of key importance to the principal operators in the sector.
After a trial phase completed in 2014, one the first actions to support this market was the marketing of Promopacco, a new product specifically aimed at large account business customers operating in e-commerce. In the collection, sorting and delivery phases, using an integrated SDA-Poste Italiane logistics system, it provides a nationwide 4- to 5- day delivery service for small items and goods weighing up to 3 kg. It has been well received by the market and in 2014 around 3.5 million deliveries were handled, including some of the sector's major operators among the product's customers and senders. Moreover, logistical integration enables delivery of Promopacco parcels either to an addressee’s home or to one of the many post offices where the mailstop service is available nationwide.
The range of pre-franked and pre-paid products relating to Gammafree (which includes the Postafree and Paccofree services) was extended with the introduction of new formats (“Envelope”, “Small” and “Medium”) in addition to the existing ones (“Large” and “Extra large”); 12,000 post offices are able to handle these products (compared with 7,000 post offices in 2013).
Moreover, in November the first five APTs (Automated Parcel Terminals) were installed on a trial basis in Rome, Milan, Florence and Cantù, enabling customers to send or pick up their parcels 24 hours day, 7 days a week.
On the international front, with a view to offering solutions in line with e-commerce market requirements, a tracked service for unsigned inbound items of mail known as Exprès was rolled out. This forms part of the international PRIME¹ system and offers short delivery times (J+2/4 days, before customs clearance). Performance-related bonuses are to be paid to the most efficient partners based on the tracking messages sent overseas and the levels of service achieved.

With regard to the business segment, despite the ongoing economic crisis, the activities carried out by the subsidiary, SDA Express Courier SpA, registered a positive performance for shipments within Italy in the B2C and e-commerce market, whilst the performance of B2B shipments remained stable, reflecting the downturn in the economy. The international market also performed well, partly due to the partnerships with UPS (United Postal Service Inc) and Network Eurodis. The year also benefitted from a reduction in industrial action, which affected the cooperatives responsible for sorting activities throughout 2013, also having major repercussions in terms of higher operating costs and lost revenue. In this connection, the Company’s commitment to optimising and upgrading its IT platform continued, with the aim of ensuring it is able to take advantage of new business opportunities. This included the development of software designed to boost integration in the mixed network used by Poste Italiane and SDA for the increasingly popular Promopacco service.

Con riferimento alle attività dedicate al segmento business e condotte dalla controllata SDA Express Courier SpA, la gestione dell’esercizio, nonostante il perdurare della crisi economica, è stata caratterizzata da positive performance delle spedizioni realizzate, in ambito nazionale, nel mercato B2C ed e-Commerce, mentre rimane stabile l’andamento delle spedizioni B2B che maggiormente risentono del negativo andamento dell’economia. Anche il mercato internazionale ha registrato positivi risultati, anche per effetto della collaborazione con UPS (United Postal Service Inc.) e con il Network Eurodis. L’esercizio ha altresì beneficiato della diminuzione delle agitazioni sindacali che, per tutto il 2013, avevano coinvolto il personale delle cooperative addetto alle attività di smistamento, con ripercussioni sulla gestione in termini di maggiori costi operativi e di perdita di fatturato. In tale contesto, sono proseguiti l’impegno e l’attenzione da parte dell’Azienda, verso l’ottimizzazione e il potenziamento della piattaforma informatica, atta a supportare le nuove opportunità di business. Sono stati eseguiti, a tal riguardo, sviluppi software per potenziare l’integrazione del network misto Poste Italiane-SDA nell’ambito del Promopacco, servizio sempre più richiesto dalla clientela.

⁽¹⁾ PRIME is an initiative undertaken by a group of postal operators, in collaboration with the International Post Corporation, to develop value added services using the integrated CSS-Customer Service System.

OPERATING RESULTS FOR EXPRESS DELIVERY AND PARCELS

Poste Italiane SpA's Express Delivery

To ensure the comparability of amounts for the two years, certain amounts for 2013 have been reclassified.

Poste Italiane SpA’s express delivery volumes were up 46.2% and revenue was up 15.1% on 2013 on the back of B2C and e-commerce expansion, bolstered by customers' growing interest in buying goods via online merchants. This positive performance is essentially due to the substantial growth of the Domestic Express Delivery segment, which registered volumes of 9.1 million and revenue of €62.9 million (volumes up 55.3% and revenue up 15.4%, compared with 2013).

SDA Express Courier SpA

n/r: not recordable as such data relates to tailor-made services supplied to banks and insurance companies that cannot be calculated in volume terms.
n/a: not applicable

The subsidiary, SDA Express Courier SpA, made a positive contribution to this segment’s results, recording growth in volumes and revenues, 12.8% and 6.1%, respectively, compared with 2013 (deliveries up 6.9 million, and revenue up €22.8 million).
The positive performance reflects strong growth in the domestic market, where volumes amounted to 47.5 million (43 million in 2013) and revenue €294.7 million (€275.1 million in 2013). As mentioned above, this reflects the positive contributions of B2C and e-commerce.
The international Express Delivery segment also performed well (volumes up 2.4 million, and revenue up €7.9 million), benefitting from the partnership agreements with UPS and Network Eurodis.
In particular, the well-established partnership with UPS (United Postal Service Inc.) led to SDA carrying out around 12 million deliveries in 2014 (around 10 million shipments on behalf of UPS in 2013), generating revenue of around €38.2 million (€31.5 million in 2013). The partnership with Network Eurodis led to around 500,000 inbound and outbound shipments (300,000 in 2013), generating revenue of approximately €5.2 million (revenue of around €3.7 million in 2013). In contrast Dedicated Services, which are tailor-made, flat-rate services, registered a 5% decrease in revenue.
Although SDA Express Courier SpA reported an operating loss of €21.1 million in 2014, this marks an improvement on the operating loss of €27.3 million registered in 2013. This result was also affected by the €3.5 million impairment loss on the investment in Italia Logistica Srl and the recognition of future losses (€3.9 million) expected to arise following the transfer of the document management business unit from Italia Logistica Srl to Postel SpA.

The company reported an overall loss of €21.3 million in 2014 (after a €20.4 million loss in 2013), requiring the company to apply art. 2446 of the Italian Civil Code (a reduction in capital due to losses).

Parcels - Universal Service

n/s: not significant

Universal Parcels Service revenue of €38.4 million (€34.8 million in 2013) reflects the positive performances of Domestic Parcels (up 14.5% in volume terms and 12% in terms of revenue) and International Outbound Parcels (up 2.7% in volume terms and 10.5% in terms of revenue compared with 2013). This made up for the reduction recorded by International Inbound Parcels.

POSTAL AND BUSINESS SERVICES

DIGITAL AND MULTI-CHANNEL SERVICES

With regard to the digital postal services that Poste Italiane supplies through Postecom SpA, the development and supply of the Hybrid Communication offering continued during 2014. This enable registered letters, telegrams, priority mail and e-commerce services to be provided online. In this regard, Poste Italiane’s e-commerce offering was expanded during the year, with the supply of web marketing services for the online promotion of merchants.
PosteID, the system that uses a smartphone or tablet to “provide proof of digital identity” for online transactions on participating websites (without having to key in one's means of payment data), was developed further. Thanks to a secure process guaranteed by Poste Italiane, the user can associate their digital identity with their smartphone in three simple steps:

• going to a post office to register and certify their phone number, or directly on the website www.poste.it using a PCR (Personal Card Reader) for BancoPosta online account holders;
• downloading the posteID app on to their mobile phone;
• making their mobile device secure by installing a certificate that associates their digital identity with their smartphone.

Moreover, PosteID functions were incorporated within the various Poste Italiane apps to authorise mobile transactions, also providing a means of authorisation to be used with PCR for online transactions.

SDA Express Courier also continued to offer interactive services through its www.sda.it website. Over 20.9 million visits were logged in 2014 (18 million logged in 2013), whilst around 82 million tracking requests were made (72 million in 2013) and around 2.4 million customers logged on to schedule pick-ups from their home or business address.
In addition to tracking and scheduling pick-ups, other integrated services available on the website include: clearance of shipments by the sender, via a system that automatically sends the stock list, together with codes the customer may use to clear shipments free of charge from the website; clearance of failed deliveries by the addressee; and search for delivery times to check active services and respective delivery times, based on the postcode and place of origin and the postcode and place of arrival.
A new web platform enables final customers, including retail customers, to manage their shipment on their own, printing the related forms, paying for the shipment and arranging pick-up from the sender’s address. Furthermore, since 2012 the SDA Mobile application has been up and running, which enables direct monitoring and management of deliveries using a smartphone.
Work on upgrading the website continued in 2014 with a view to improving accessibility and user-friendliness. In this regard, Skype was added to the online help desk for international services, and the Search for Shipments function was upgraded to also offer the option of tracking the shipment using not only the waybill number, but also the advice of non-delivery.

OTHER SERVICES

POSTEMOBILE

In 2014 PosteMobile continued to focus its efforts on maintaining and strengthening its “value” proposition, developing initiatives designed to acquire higher value customers, thereby consolidating the quality of acquisitions and increasing the customer base. As a result, the number of lines reached 3.3 million at the end of December 2014 (2.8 million lines at the end of 2013).
A total of 523,000 lines were terminated during the year, down 22% on the 672,000 terminated in 2013.
Voice service minutes exceeded 4.6 billion (up 11% on the 4.1 billion registered in 2013).
The ARPU (Average Revenue Per Unit) for telephone, text and data services stands at €5.7 per customer, per month, down on the €7.0 per customer, per month in 2013. This primarily reflects changes to regulated charges, and the evolution of the traditional services mix in favour of value added services.
The company focused its efforts during the period on the innovation of its commercial offering, adding a number of new initiatives, and further developing the company’s role in the mobile payment services market. In 2014, PosteMobile also switched to a Full Mobile Virtual Network Operator (Full MVNO) operating model, only relying on the traditional operator network to connect to the infrastructure, whilst managing the services it provides and issuing its own SIM cards. This development enables PosteMobile to have greater autonomy and more control of the quality of the services it provides to its customers.
In the consumer market, PosteMobile continued the gradual transformation of the customer base aimed at increasing the number of fixed price plans. This entailed continuing to focus on competitively priced fixed price plans, via a flexible, customisable offering that aims to meet all customer requirements: voice and text only for customers with simple needs and bundled data options for more sophisticated customers.
On the distinctive services front, the role of PosteMobile was further strengthened via dissemination of the PosteMobile app. This led to significant growth in the volume of transactions, which reached a total of 1.3 billion since the launch of the services, enabling the company to position itself as leader in the mobile technology payment services market. The value of financial transactions carried out by customers in 2014 amounts to €339 million (€290 million in 2013).
PosteMobile also strengthened its position in the areas of proximity services, launching the sale of the SuperSIM NFC, which enables the use of payment, transport and loyalty card proximity services, including:

• NFC contactless payments at retail outlets with NFC POS, simply by using a smartphone;
• NFC authentication of digital tickets via a partnership with the Milan and Turin municipal public transport companies;
• the digitisation of loyalty cards and luncheon vouchers to enable their use in retail outlets and participation in points collection and promotional campaigns.

As already mentioned in the section on “Distribution channels”, the number of PosteMobile corners inside post offices has increased (319 corners in operation at the end of December 2014).

Growth of the customer base and a good performance by the flat-rate offering (thanks to gradual repositioning of the portfolio in this segment) mitigated the effects of the reduction in voice revenues which, in the first half of the year, were affected by the reduction in termination charges from July 2013 (bringing down the rate charged from 1.5 to 0.98 cents per minute). Therefore, revenues from sales and services, amounting to €321.5 million in 2014, marks a slight increase on the €321.1 million recorded in 2013.
Despite a reduction in the cost of goods and services, which amount to €233.9 million (€247.0 million in 2013), operating profit reflects higher depreciation and amortisation, primarily due to the Full MVNO platform (up €12.6 million in 2014), and provisions (up €3.5 million). As a result, operating profit is €13.7 million (€25.4 million in 2013).
The company reports a profit for the year of €7.8 million (€15.8 million for 2013).

With regard to the transaction entered into with the Brazilian postal operator, with the aim of launching a virtual mobile operator in Brazil, on 27 November 2014, Poste Italiane SpA’s Board of Directors decided to put the two special purpose entities into liquidation: Poste Holding Participacoes Do Brasil Ltda (76% owned by Poste Italiane SpA and 24% by PosteMobile SpA) and Italo-Brasil Holding SA (wholly owned by Poste Holding Participacoes Do Brasil).

GROUP OPERATING RESULTS

The Group’s reports a positive operating performance for the first nine months of 2015, with operating profit of €930 million up 27% on the same period of 2014 (€733 million in the first nine months of 2014) and profit for the period of €622 million (€333 million for the first nine months of 2014).
Poste Vita achieved excellent operating results in the insurance sector, registering premium revenue of €14.5 billion (€12.7 billion in premium revenue in the same period of the previous year).
Revenue from Financial services is up on the same period of the previous year (€3,974 million in 2015, €3,960 million in 2014), whilst the contribution to operating profit is up 44% (€687 million in the first nine months of 2015, compared with the €477 million of 2014).
Finally, profit for the period of €622 million reflects a proportionate reduction in income tax expense compared with the comparative period, due primarily to the change in legislation that came into effect from 1 January 2015. This has made it possible to deduct personnel expenses for staff employed on permanent contracts from the IRAP tax base.

Reclassified consolidated statement of profit or loss

n/s: not significant
^(*) The figure for the first nine months of 2014 includes losses on investments accounted for using the equity method, amounting to €1 million.

Total revenue by operating segment

^(*) After consolidation adjustments and elimination of intercompany transactions.

The Poste Italiane Group’s total revenue for the period amounts to €23,921 million, marking an increase of 6% on the same period of 2014. In addition to the strong performance of the insurance segment, where total revenue is €16,930 million (€15,386 million in the same period of 2014), the improvement also reflects stable revenue from Financial services. These positive results more than offset the structural decline of the Postal and Business services segment, where revenue is down from €3,034 million in the first nine months of 2014 to €2,836 million in the same period of 2015.
Taking a closer look, total revenue from Postal and Business services is down €198 million compared with 2014, reflecting the growing popularity of digital media and communication, which has led to a progressive reduction in demand for traditional products and services.
As mentioned above, total revenue from Financial services is up €14 million on the same period of the previous year, driven by the positive performance of other income from financial activities, which is up from the €339 million of 2014 to €441 million in the first nine months of 2015 (an increase of 30%). This category of revenue includes income from the sale of available-for-sale financial assets, in the form of euro area government securities, in which the postal current account deposits of BancoPosta RFC’s private customers are invested. In spite of an increase in average current account deposits, revenue and other income is down €84 million as a result of a reduction in the average interest earned on deposits invested in government securities and on interest-bearing deposits with the Ministry of the Economy and Finance.
The Insurance services segment delivered excellent results during the period, with Group companies (represented by Poste Vita and its subsidiary, Poste Assicura) recording premium revenue of €14.5 billion (€12.7 billion in the same period of 2014). This primarily reflects the performances of traditional Class I investment and savings products, where the Group has built up a strong presence. Other income from financial and insurance activities is, however, down from the €2,646 million of 2014 to €2,387 million, reflecting fair value losses on the financial instruments held to cover obligations to policyholders.
Total revenue from other services amounts to €181 million. This is in line with the same period of 2014, despite improved operating results from Poste Mobile.

The cost of goods and services is down 3.4% from €1,930 million in the first nine months of 2014 to €1,864 million in the same period of 2015, reflecting a reduction in the cost of funding, represented by interest paid to customers by BancoPosta RFC, and in purchases of goods.

The net change in technical provisions for the insurance business and other claims expenses, which is closely linked to the above growth in premium revenue recorded by Poste Vita, amounts to €15,475 million, marking an increase of 5.7% compared with the same period of the previous year.
Other expenses from financial and insurance activities are up from €71 million in the first nine months of 2014 to €684 million in the same period of 2015, reflecting the greater impact of fair value losses on financial instruments, for the most part attributable to the subsidiary, PosteVita.

Personnel expenses are down 2.5% from the €4,482 million of the first nine months of 2014 to €4,370 million in the same period of 2015. This reflects a reduction in the average workforce employed during the period (almost 1,200 fewer full-time equivalents on average in the first nine months of 2015, compared with the same period of the previous year) and the use of provisions for early retirement costs set aside in previous years.