Generali 2nd Quarter Profit Rises 51% on Life Business

By and | July 30, 2015

Assicurazioni Generali SpA said second-quarter profit rose 51 percent, beating analysts’ estimates, after earnings from life insurance surged. The shares climbed in Milan.

Net income at Italy’s biggest insurer increased to 626 million euros ($687 million) from 415 million euros a year earlier, when it booked a 113 million-euro loss from the sale of BSI Group, Trieste-based Generali said in a statement on Thursday. That compared with the 581 million-euro average estimate of five analysts surveyed by Bloomberg.

“This is a good set of numbers,” Enrico Esposti, an analyst at Banca Akros SpA who has an accumulate recommendation on the stock, said in a report. “Operating results were better than expected mainly due to the life business.”

Chief Executive Officer Mario Greco, 56, is planning to expand in Europe by adding fee-generating products and commercial partnerships as part of a four-year plan to boost cash flow. Since taking over in 2012, Greco has shed assets to raise funds, divesting units including a U.S. reinsurer and Swiss private bank BSI.

Shares Climb

The shares rose as much as 3.6 percent in Milan to the highest level in two months. They advanced 3.1 percent to 18.15 euros at 9:36 a.m., extending gains this year to 6.3 percent. The 26-company Bloomberg Europe 500 Insurance Index has advanced 13 percent.

“We expect to improve significantly the net result at year-end compared with 2014, preserving the high profitability growth achieved in the first half of this year,” Greco said in the statement. “These results constitute the best starting point for the execution of the new 2015-2018 strategic plan.”

Operating income rose 16 percent in the second quarter from a year earlier to 1.45 billion euros, bringing the total for the first half to 2.8 billion euros, the company’s best performance in the last eight years. Income in the second quarter was boosted by the life segment, which increased 18 percent from a year earlier, and in non-life insurance, up 9 percent.

Solvency Ratio

Greco reiterated that Generali is not interested in acquisitions as the insurer is focused on its organic-growth plan targeting cumulative cash flow of more than 7 billion euros by 2018 and paying out more than 5 billion euros of dividends in the period.

Generali’s economic solvency ratio, a key measure of financial strength, rose to 200 percent at the end of June, according to a new internal model based on a set of European Union capital rules called Solvency II, which will apply from 2016. In May, it had reported a ratio of 186 percent.

“Economic solvency is a clear beat to consensus estimates,” Mediobanca SpA analyst Gianluca Ferrari said in a report.

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