Company Reports

Generali has reported net profit for the first six months of EUR 2.05 billion. That is versus our full-year forecast of EUR 3.78 billion, but a bit below the EUR 2.09 billion estimated by company-compiled consensus. The result, so far this year, provides shareholders with a 7% return on equity. The business has delivered a positive performance in life and asset management. Net flows are good within protection and unit-linked, though outflows remain in savings and annuities. The asset and wealth management division has performed well because of the consolidation of Conning Holdings. However, the good performance has been offset by financial results that are worse in property and casualty, and the holding and other business' expenses that are worse than consensus. The operating profit of property and casualty has primarily been hit by higher unwinding of the discount on its liabilities. The holding and other business has been hit by higher long-term technology and incentive plan expenses. Despite all this, we think the results are reasonable and maintain our EUR 25.05 per-share fair value estimate. We consider shares cheap trading in 4-star territory.

Generali is a multiline insurer that derives around two fifths of pretax earnings from its home market of Italy. The business has invested significant amounts in data and technology over recent years and those investments have led to improvements in margins across nonlife. We think in nonlife insurance, versus peers the business holds more limited exposure to commercial insurance and also more limited exposure to insurance written in the Americas. Nonetheless, the company’s investments resulted in ongoing improvements in its claims ratio, which we think is the essence of good underwriting. Further, the company went on to acquire the nonlife insurance business of Cattolica a few years ago and that acquisition bolstered its market share in its home country. We think the purchase also introduced more health and property insurance. Under IFRS 4 this division earns above its cost of equity.

Generali is a multiline insurer that derives around two fifths of pretax earnings from its home market of Italy. The business has invested significant amounts in data and technology over recent years and those investments have led to improvements in margins, across its nonlife and life insurance business. We think in nonlife insurance versus peers the business holds more limited exposure to commercial insurance and also more limited exposure to insurance written in the Americas region. Nonetheless, the company’s investments have resulted in ongoing improvements in its claims ratio, which we think is the essence of good underwriting. Further, the company went on to acquire the nonlife insurance business of Cattolica a few years ago and that acquisition bolstered its market share in its home country. We think the purchase also introduced more health and property insurance. This division earns above its cost of equity.

In property and casualty Generali has written 10.9% more gross premiums in first-quarter 2024 than it did in the same quarter last year. A large part of that growth has been caused by hyperinflation in Argentina and we think excluding that country, the company grew premiums by solid midsingle digits. Motor growth has been driven by Central and Eastern Europe, Italy, Asia, and Austria. The combined ratio has deteriorated slightly over the last year by 30 basis points to 91.0%. However, the current year's undiscounted loss ratio excluding natural catastrophes still stands at 65.9%. The impact of natural catastrophes has risen to 0.4% and the favorable impact of discounting has fallen. These are broadly better than company-compiled consensus estimates.

Generali has reported net profit of EUR 3.747 billion for 2023 or EUR 2.43 per share. This is ahead of our estimates of EUR 3.606 billion and EUR 2.28 per share. On the back of these results, the board is proposing a EUR 1.28 per-share dividend, higher than our forecast of EUR 1.23. Company-compiled consensus for the dividend was EUR 1.25. A EUR 500 million buyback for 2024 will also be proposed to shareholders. The announcement on March 12 rounds out a strong year for Generali, with solvency at 220% remaining solid. Normalized capital generation of EUR 4.6 billion, an 11.7% rise, is the highest amount of capital the company has generated. Return on equity was 12.9% for the year. We expect good results to continue in 2024. We maintain our fair value estimate and no moat rating.

Generali is a multiline insurer that derives around two fifths of pretax earnings from its home market of Italy. The business has invested significant amounts in data and technology over recent years and those investments have led to improvements in margins, across its nonlife and life insurance business. We think in nonlife insurance versus peers the business holds more limited exposure to commercial insurance and also more limited exposure to insurance written in the Americas region. Nonetheless, the company’s investments have resulted in ongoing improvements in its claims ratio, which we think is the essence of good underwriting. Further, the company went on to acquire the nonlife insurance business of Cattolica a few years ago and that acquisition bolstered its market share in its home country. We think the purchase also introduced more health and property insurance. This division earns above its cost of equity.

Generali has reported solid 9-month results with a mid-single-digit rise in gross premium written and a double-digit rise in operating profit. The growth is mainly attributable to the property and casualty segment where Europ Assistance and motor insurance have grown well. Generali’s overall property and casualty combined ratio has improved versus the same period last year, though half of that improvement is due to higher discounting. The impact of natural catastrophe losses over the first 9 months amounts to EUR 875 million and those losses have primarily been caused by floods and hailstorms in Italy, Greece, and Central and Eastern Europe. Human-made losses have amounted to a little under EUR 400 million. Overall, Generali property and casualty has delivered a 94.3% combined ratio, 97.9% undiscounted, and versus the same period last year that is an improvement. Property and casualty operating profit is EUR 2.15 billion, marked by nonoperational developments.

Generali has reported a net income of EUR 2.243 billion for the first half of this year. We think that leaves the company on track versus our full-year estimate of EUR 3.1 billion and EUR 1.96 in earnings per share. That is versus EUR 2.14 in EPS as per consensus collected by Refinitiv and EUR 1.41 in EPS delivered year to date. With an 8.4% return on equity so far, we think Aug. 9's numbers imply at least a midteens return on equity for the full year. We apply an 11% cost of capital to the business, so it looks like Generali will generate economic profits this year. We maintain our fair value estimate of EUR 21 per share and our rating of no economic moat.

Generali has reported good earnings for the first quarter of 2023, in our opinion. While we still don’t like the balance sheet, we believe the firm's capital position is improving. Further, on the higher shareholders equity number under the new accounting rules, the company is currently on track to deliver around a 17% return on equity and higher margins going forward. In this quarter's results, the better earnings have predominantly been driven by the property and casualty segment where growth has been reinforced with good standards of underwriting. While there is a small increase in life insurance earnings, the asset management division has reported lower numbers due to a nonrecurring one-off in the prior year as well as some current period investment. Yet with a 6.2% fall in holding expenses, we currently like the profit outlook but remain cautious on the capital position—predominantly because debt remains elevated, and we think the company has high sensitivities.

While Generali is a leveraged company, we view that by and large its operations are of high quality. The company has been building out a strong asset management offering to complement its life division, contributions from fees within life have been growing, and the technical margin remains resilient. The company's non-life division is also one of the best in our list of multilines with technical metrics that exceed peers in most of its markets. For its peripheral operations, such as Asia and South America, there is substantial room for improvement but from those that contribute the most they have been shaped into strong franchises. What tends to hurt Generali and make it an overlooked business, in our opinion, is its lack of exposure and operations in North America. It is predominantly a European insurance company, and so it has missed out on significant revenue and profit potential from North America, and this has led to a market cap lag. However, despite recent turmoil for leadership, we think the current management team has done well. Carving out respectable and good operations in key markets, there is plenty for the business and it can also focus on these peripheral markets. Overall, Generali is a largely overlooked European multiline that deserves more attention and versus other larger peers is comparatively better managed.

When looking at the exposure of insurers to the unfolding banking crisis, we believe this is limited. The main impact of the crisis currently seems to be contagion, so investors are selling shares cheaply. However, exposure to United States bonds is either in government bond securities, or exposure to Credit Suisse, Silicon Valley Bank, and other U.S. regional banks is immaterial, which is 50 basis points or less of their investment portfolio. Some do hold larger bank debt holdings of up to 5.5% of shareholder investments, but nearly all that debt ranks as senior. AT1 debt tends to be very minimal or there is no exposure as a policy with board-level approval. The vast majority of corporate debt held is investment-grade. We maintain our fair value estimates and moat ratings across our European insurance coverage. Allianz remains our Best Idea. Admiral is one of our top picks.

While Generali is a leveraged company, we view that by and large its operations are of high quality. The company has been building out a strong asset management offering to complement its life division, contributions from fees within life have been growing, and the technical margin remains resilient. The company's non-life division is also one of the best in our list of multilines with technical metrics that exceed peers in most of its markets. For its peripheral operations, such as Asia and South America, there is substantial room for improvement but from those that contribute the most they have been shaped into strong franchises. What tends to hurt Generali and make it an overlooked business, in our opinion, is its lack of exposure and operations in North America. It is predominantly a European insurance company, and so it has missed out on significant revenue and profit potential from North America, and this has led to a market cap lag. However, despite recent turmoil for leadership, we think the current management team has done well. Carving out respectable and good operations in key markets, there is plenty for the business and it can also focus on these peripheral markets. Overall, Generali is a largely overlooked European multiline that deserves more attention and versus other larger peers is comparatively better managed.

Generali has reported what we believe to be a good set of results. For full-year 2022 the company delivered EUR 2,906 million in net income and that is ahead of the EUR 2,822 million that we forecast. The company has also announced a EUR 1.16 per-share dividend that is slightly ahead of what we predicted. Against the backdrop of 2022, we find these results to be resilient. Further, the business continues to work on operational improvements, trying to generate unique assets and continue its improvement plan. We raise our fair value estimate marginally to EUR 21.0 per share and maintain our no moat rating.

Generali has reported a good set of results for the first nine months of the year, making good headway in the third quarter. While the business’ expansion in the top line is relatively muted, only growing gross written premiums by 1.3%, the movement to profit is excellent as new business margin on the present value of new business has improved by 68 basis points and the combined ratio remains typically strong and at a muted deterioration of 2 percentage points over the same period last year. We think the good performance so far this year has predominantly been driven by a better spread within the life and health business. Most of Generali’s life liabilities carry guaranteed interest. A double-digit rise in property and casualty gross written premiums has driven a 2.9% rise in the operating result of that division. The detractor has been the operating result from Banca Generali with performance fees from lower market values. Net profit delivered is EUR 2,223 million, taking the business slightly ahead of our EUR 2,825 million full-year estimate. We maintain our EUR 20 fair value estimate and no moat rating.

Many European insurance companies have fallen into 5-star territory year to date. However, we still like and support our preferred picks of two primary firms. In our personal lines subindustry, we still like Admiral. That is because we believe the business is adept at growing its customer numbers ahead of peers and the market. Though we do anticipate slower motor insurance growth over the immediate time frame, coupled with a fall in home insurance volumes due to lower U.K. completed home sales, we still believe in the prospects for Admiral’s long-term growth. Yet, while the business clearly outstrips the competition in terms of expansion, its development is not aggressive. Admiral has grown its U.K. motor market share by 5 percentage points over the last 10 years.

While Generali is quite a leveraged company, we view that by and large its operations are of high quality. The company has been building out a strong asset management offering to complement its life division, contributions from fees within life have been growing, and the technical margin remains resilient. The company's non-life division is also one of the best in our list of multilines with technical metrics that exceed peers in most of its markets. For its peripheral operations, such as Asia and South America, there is substantial room for improvement but from those that contribute the most they have been shaped into strong franchises. What tends to hurt Generali and make it an overlooked business, in our opinion, is its lack of exposure and operations in North America. It's predominantly a European insurance company, and so it has missed out on significant revenue and profit potential from North America, and this has led to a market cap lag. However, despite recent turmoil for leadership, we think the current management team has done well. Carving out respectable and good operations in key markets, there is plenty for the business and it can also focus on these periperal markets. Overall, Generali is a largely overlooked European multiline that deserves more attention and versus other larger peers is comparatively better managed.

Generali has reported net income of EUR 1,402 million for first-half 2022. This places the business a little behind our full-year estimate. The property and casualty segment reported an 8.5% rise in written gross premiums. This growth has mainly been driven by the nonmotor line as the motor line only reported mid-single-digit growth. Generali’s combined ratio for nonlife was typically strong, in the low 90s. In the life division written gross premiums contracted. The business unit continues to focus on unit-linked and protection. Life net flows were also down by high single digits. Asset management remains strong with a mid-single-digit rise in profits from operations. We maintain our EUR 20 per-share fair value estimate and no moat rating.

Generali has announced the resignation of Francesco Gaetano Caltagirone from the Generali board. We think the resignation of Caltagirone marks the end of the power play at the top of the Italian insurer for control of the company and its future direction. We have been pleased with the progress that the incumbent Philippe Donnet has made with the business over the last five years, and saw a change as one that did not recognise this immense amount of evolution and improvement ushered in. In our eyes, this transformation has been nothing but good for the business. Donnet will serve as chief executive officer for a third term.

While Generali is quite a leveraged company, we view that by and large its operations are of high quality. The company has been building out a strong asset management offering to complement its life division, contributions from fees within life have been growing, and the technical margin remains resilient. The company's non-life division is also one of the best in our list of multilines with technical metrics that exceed peers in most of its markets. For its peripheral operations, such as Asia and South America, there is substantial room for improvement but from those that contribute the most they have been shaped into strong franchises. What tends to hurt Generali and make it an overlooked business, in our opinion, is its lack of exposure and operations in North America. It's predominantly a European insurance company, and so it has missed out on significant revenue and profit potential from North America, and this has led to a market cap lag. However, despite recent turmoil for leadership, we think the current management team has done well. Carving out respectable and good operations in key markets, there is plenty for the business and it can also focus on these periperal markets. Overall, Generali is a largely overlooked European multiline that deserves more attention and versus other larger peers is comparatively better managed.

While Generali’s results for first-quarter 2022 with 6.1% growth in gross written premiums that has not flowed to the bottom line, we think overall, the results look good and we are likely to raise our fair value estimate. We maintain our no moat rating.