An "interesting and ambitious" plan that will have a "leap of discontinuity". Thus the CFO of Generali, Alberto Minali, defined the new three-year plan of the Lion which will be presented on 27 May in London. “It will be interesting and ambitious. We will give new objectives - said Minali, who intervened on the occasion of the presentation of the quarterly accounts during a conference call with the press agencies - and very clear indications on what Generali will be like in the next three years. There is a strong leap of discontinuity also for our business model”. "After May - he added - there will be a whole activity to transfer the strong strategic indications into operational plans for all the group's realities".
The discontinuity is the result of a process of renewal and reorganization that the group undertook with the arrival, in 2012, of the new managing director Mario Greco. And the objectives of the current plan for 2015 have been achieved a year ahead of schedule.
The accounts for the first quarter of the year, released this morning and well received by the market (+1,10% for the stock against +0,3% for the Ftse Mib), indicated profits of 682 million (+3,3% ), above analysts' expectations, and an operating profit up 6% to 1,32 billion euros. This is the best performance for 7 years, driven by the life business (823 million, +8,2%), while in the non-life business, operating dropped to 505 million (-4,6%), due to the impact of events catastrophic events in Italy and Central Europe.
Faced with the expected recovery of the GDP of the advanced economies but in a context characterized by interest rates at historic lows, the group specified in the press release on the accounts, "the trend in life premiums will continue to reflect a careful underwriting policy and a greater focus on products with low capital absorption and higher value”.
THE KNOT OF GUARANTEED POLICIES
TOWARDS LINKED UNITS
In this context of very low rates, life insurance policies with guaranteed minimums represent a difficult element for insurance companies. The average guaranteed minimum level in life policies that present this characteristic for Generali "is around 2%, therefore below the current return on assets which is around 3,5% on average - explained the CFO Minali - So there is always a very significant spread between the return we generate from the assets and the guaranteed minimum”. On the other hand the business is going towards different products. "Over the last year and in particular in this quarter - said Minali - we have continuously shifted the new business towards unit linked and therefore in relative terms, the business savings which is the one that has guaranteed returns is decreasing in the portfolio" .
Finally, in addition to an evident mass of reserves with guaranteed minimums in the various areas of operation, Minali reassured, new production "is having a guaranteed minimum which in the euro area has dropped to 0,75% and in Italy it is at 0,5%". Which means that there is a positive flood effect on the minimum guaranteed stock.
TELECOM ITALIA AND INGOSSTRAKH,
STILL NO DECISION
It is still early to understand what the future of the Telecom share will be. If it is now clear that for Leone it is a financial, and not a strategic, share, however it is not yet possible to make forecasts on the timing of the disposal because there are still no indications on the timing of the completion of the demerger of Telco, the holding company through which the Generali hold the stake in Telecom (the decisions of the Argentine authority are still missing). Generali, in fact, will decide only when it has the technical availability of the securities. “Now it is too early to say what we will do – said Minali – we will see the market conditions, the share and the asset allocation. It is a financial, non-strategic share and will be the object of normal investment activity”. No news also for the Russian insurance company Ingosstrakh: it is not strategic, but the Lion has not yet made any decision, "either to sell it or to do anything".
TOWARDS SOLVENCY 2,
“MORE THAN ADEQUATE” CAPITAL
As regards the solvency ratios, the transition phase to Solvency 2 is underway. “We have completely changed the valuation metrics, we have entered the new scheme – said Minali – Our model will be published during the strategy day. At the moment, the group's capital position is more than adequate". Minali recalled that the new Solvency 2 metric represents a leap of discontinuity with respect to the past and that therefore any reference to the old model must be abandoned.
