More cash to better remunerate partners and a hi-tech breakthrough to increase customer loyalty. Assicurazioni Generali presented in London the new business plan for 2018 which aims at a profound transformation of the business model, with the introduction of the figure of Chief Data Officer (to integrate data analytics tools in the development of processes and products) and investments for a total of 1,25 billion thanks to cost savings and budget reallocation to support strategy and innovation based on data analytics tools and technology. On this front, Generali is negotiating to acquire the British MyDriveSolutions, a data analysis company specializing in customer profiling.
The goal is to be the leader in the European retail segment, not only based on size but also for other factors such as innovation. Generali's strategic plan "was developed 100% within the group", said Greco: under the guidance of senior management, the plan took shape thanks to the five months of work by a team of "40 young talents ” from the entire group, selected out of 900 applications on the basis of certain precise criteria, such as being under-35, fluent in English, willing to travel and at least three years of insurance experience. Analysts promoted the plan and in the afternoon the stock rose by 2,37%.
NO MORE TRANSFERS, NOW BUSINESS
During the meeting with the financial community, Greco confirmed that the group does not have strategic shares and that it will dispose of the shares in the most appropriate manner (it is a shareholder of Telecom and Rcs). After four billion euros of disposals, the time for asset disposals was over.” We have been the leading investment bank in recent years. Now let's work on the business”, said Greco who, returning attention to the core business, left no room for discussions on the stability of the company's shareholding structure or on the possible introduction of multiple voting for long-term shareholders.
On the other hand, he recalled, that “the best defense against takeovers is to create value. Companies that do not create value are the most vulnerable. We have created a lot of value in recent years, we believe and hope to continue to create as much in the coming years. And this is the greatest defense we have against any idea of climbing”.
THE NEW BUSINESS MODEL
The new plan presents a completely new business model for both Generali and the insurance sector, Greco underlined in the business plan note. A business model based on consumer service and customer loyalty on data analytics tools. “The goal – he said – is to differentiate ourselves from the competition and face the emerging challenges of the insurance sector by making Generali the leader in retail insurance in Europe”.
Among the novelties introduced in the plan are new value-added services to be integrated into the product offering, business opportunities through new partnerships and the use of data analytics tools to define better pricing. "These actions - explained the group in the note - will produce benefits on profits and customer loyalty with positive effects on: profitability of customers currently in the portfolio, lower acquisition costs, cross and up-selling opportunities and a more efficient underwriting capacity ”.
In general, the Group will shift its focus from traditional products based on guaranteed returns to an innovative commission-based offering, which consists of protection products, Unit-Linked instruments and hybrid products that provide higher margins and greater value for both customers and for the company.
CUMULATED DIVIDENDS ABOVE 5 BILLION IN 2018. ROE ABOVE 13%
Generali aims for cumulative dividends above €5 billion by 2018, a greater focus on cash generation with more than €7 billion in total free cash flow and further savings of €0,5 billion by 2018 in addition to the €2016 billion expected in 6,3 , keeping the cost base flat at €2018 billion in XNUMX.
Numbers that refer to a well-defined group perimeter: CEO Mario Greco has once again ruled out growth through acquisitions. “This strategy has a defined perimeter. The plan does not consider acquisitions, we will not make any. We have everything we need,” said the CEO, presenting the plan during a conference call with news agencies. The commitment is for an operating Roe above 13% every year. “We expect profit to grow with a satisfactory dynamic, but we don't want to give targets”, added Greco.
In terms of solidity ratios, Generali's pro-forma Economic Solvency ratio, “calculated on the basis of the internal model, in line with Solvency 2 principles”, was 2014% at the end of 186. The group underlined that it is "carrying forward the application process on schedule in order to obtain approval from the competent authorities for the use of the internal model" for Solvency 2 which will enter into force on 2016 January XNUMX.
ANALYST PROMOTES THE PLAN
Analysts have welcomed Greco's plan. Bofa-Merrill Lynch spoke of "a solid capital message and growing target". For Jp Morgan Cazenove "the new strategic plan is strong and the new targets are better than expected". On the whole, experts like the goal of achieving European leadership in retail, considered an attractive and relatively low-risk strategy. Banca Akros raised its rating to accumulated from neutral. The broker notes that the new financial targets close the gap compared to competitors, aligning Generali's dividend policy and capital position with that of groups of equal importance.
