Update: Generali 1st Quarter Net Profit Plunges 84.8% on COVID-19 Investment Hit

By | May 21, 2020

Generali’s first quarter net profit plunged 84.8% to €113 million (US$124 million) from €744 million (US$815.5 million) reported in Q1 2019, as a result of the impact of the COVID-19 pandemic on financial markets.

The hit to its Q1 net profit was attributed to €655 million ($718 million) in net impairments on investments as well as the contribution of €100 million (US$109.6 million) the company made when it launched its Extraordinary International Fund in response to the pandemic crisis.

During an analysts’ call to discuss its Q1 results, Generali Group General Manager Frederic de Courtois said the insurer expects COVID-19-related P&C claims of approximately €100 million (US$109.6 million) during 2020.

Generali’s Q1 consolidated operating earnings rose 7.6% to €1.45 billion ($1.59 billion), from €1.35 billion (US$1.48 billion) reported during Q1 2019.

The insurer’s property and casualty underwriting performance improved during the quarter, with a combined ratio of 89.5%, down from the 91.5% reported during Q1 2019. (Combined ratios below 100% indicate an underwriting profit).

The group’s total gross written premiums reached €19.2 billion (US$21.1 billion) , a slight increase of 0.3% from Q1 2019, thanks to the growth in the P&C segment which offset the decline in the Life segment.

Generali’s preliminary solvency ratio dropped by 28 percentage points to 196% from 224% reported during the same period last year.

“The first three months of the year showed a good operating performance and confirmed the group’s solid capital position. Net profit was affected by impairments due to the current financial markets performance as result of the global pandemic,” said Generali Group CFO Cristiano Borean in a statement.

As for the year ahead, Generali expects its operating result to remain resilient in 2020 as a result of its business mix and diversification. However, it predicted that the weakness of financial markets and the consequences of the pandemic will adversely affect its 2020 net result, mostly due to impairments.

During an analysts’ call to discuss its Q1 results, Generali Group General Manager Frederic de Courtois said the insurer expects COVID-19-related P&C claims of approximately €100 million (US$109.6 million) during 2020.

“It is difficult to provide an accurate estimate of the overall impact as lockdowns are just beginning to ease, and hence we don’t have visibility yet on the shape of the recovery and on the frequency claims pattern for the months ahead,” said a Generali representative.

In its results statement, Generali said it is difficult to provide precise guidance on the impact of the crisis, but the insurer said it “can rely on a favourable business mix and robust standard policy terms.”

“From an operational standpoint, the macroeconomic consequences of COVID-19 will affect the group’s topline [growth], particularly in travel insurance. The recurring financial revenues (from dividends, rental income and fee income) will also be adversely impacted,” said Generali.

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