Generali Q4 Profit Misses Analysts’ Estimates on Life Income; Donnet Named CEO

By Sonia Sirletti and Francesca Cinelli | March 18, 2016

Assicurazioni Generali SpA’s fourth-quarter profit rose less than some analysts expected on a writedown of its stake in BTG Pactual Group and lower income at its life business. The shares had their biggest decline in more than a month.

The insurer, which appointed Philippe Donnet as its chief executive officer on Thursday, said net income rose to 304 million euros ($344 million) from 81 million euros a year earlier. That missed the 476 million-euro average estimate of four analysts in a Bloomberg survey. Italy’s largest insurer increased its dividend to 72 cents a share from 60 cents the previous year.

“Generali’s results were worse than expected,” Farooq Hanif and Darshan Mistry, two analysts at Citigroup Inc., said in note on Friday. They attributed this to higher life-insurance expenses and non-operating items.

Donnet is replacing  Mario Greco, now CEO at Zurich Insurance Group AG, at a time when low interest rates and pressure on prices are making it more difficult for insurers to maintain earnings growth. Trieste-based Generali’s share price has fallen about 19 percent this year after Greco’s departure created uncertainty over the company’s future direction.

Impairment Charge

The insurer’s operating income at it life segment declined 14 percent to 627 million euros, while operating results at its non-life division rose 27 percent to 382 million euros. Non-operating investment was hurt in the quarter by a 90 million-euro net impairment of insurer stake in BTG Pactual, Generali CFO Alberto Minali said on a conference call.

Generali received the BTG stake as part of sale of its asset management unit BSI to BTG last year. In 2015, the company posted impairments related to the sale of Swiss bank BSI and its stake in Russian insurer OEO Ingosstrakh.

Generali fell as much as 3.2 percent in Milan, the biggest intraday drop since Feb. 11. The shares were down 2.3 percent to 13.56 euros at 10:52 a.m.

‘Positive Signal’

Donnet, 55, joined as CEO of Generali Italy in 2013. The French native has held several roles at insurance companies in Italy, France and Asia and worked for Axa SA, France’s largest insurer, from 1985 to 2007.

“The replacement with an internal manager is a positive signal of business continuity,” said Jacopo Ceccatelli, chief executive officer of Marzotto SIM SpA, a Milan-based brokerage. “It ends the uncertainty that may have contributed to the not-so-good performance of the stock this year.”

Generali confirmed its target of a return on equity of more than 13 percent in 2016.

Claims and costs as a proportion of non-life insurance premiums, known as the combined ratio, improved to 93.1 percent, benefiting from a lower loss ratio. Generali’s economic solvency ratio, a key measure of capital strength, rose to 202 percent from 196 percent in September, according to the insurer’s internal model based on a set of European Union capital rules called Solvency II.

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