By Giovanni Legorano
MILAN--Italy's largest insurer Assicurazioni Generali SpA (G.MI)
said its net profit rose 51% in the second quarter, boosted by
higher earnings in all sectors of its business.
Trieste-based Generali reported Thursday that net profit rose to
626 million euros ($687 million) in the second quarter from EUR415
million in the year-earlier period. Operating income for the
quarter grew 17% to EUR1.45 billion.
"We think we can get to the end of the year with an even higher
increase in net profit than seen until now," Chief Executive Mario
Greco said, commenting on the results for the period.
The company shares opened 3.1% higher after the release of its
second-quarter results.
The company gained in particular from its life insurance
business, which saw an 18% increase in operating income to EUR890
million in the quarter.
Premiums in this segment also grew sharply in the quarter. Life
premiums rose 8.5% to EUR13.24 billion, while property and casualty
premiums remained virtually flat at EUR4.78 billion.
By contrast, property and casualty premiums remained virtually
flat at EUR4.78 billion, with growth in the non-motor segment
offset by a decline in the motor business.
In May, the company outlined a new strategic plan which hinges
on a big commercial push in Europe, Asia and Latin America. The
plan aims to improve cash flow in the next four years, with gains
to be returned to the Italian insurer's shareholders through fatter
dividends rather than spent on acquisitions.
At the time, the company said the combination of new measures
should generate cumulative net free cash flow of more than EUR7
billion between 2015 and 2018, equivalent to around EUR1.8 billion
a year. Last year the company generated EUR1.2 billion in cash.
The new cash will be used to improve cash returns for
shareholders. Generali aims to raise the dividend payout to EUR5
billion for four years of the plan, compared with the EUR930
million, or EUR0.60 a share, it paid out on last year's earnings.
While achieving these targets, Generali has committed to generating
a return on equity of more than 13%.
Mr. Greco confirmed the insurer isn't interested in buying other
companies, despite growing activity in the sector, as seen by
Zurich Insurance's interest in the U.K.'s RSA, and rival bids for
reinsurer PartnerRe Ltd. During the past three years with Mr. Greco
at the helm, Generali has spent around EUR3 billion mainly on
expanding company stakes already held by the insurer.
The insurer said it expects a recovery in gross domestic product
growth in advanced economies given the positive outlook for the
U.S. economy and the European Central Bank's expansionary
policy.
Against this backdrop, Generali said it would continue applying
a prudent underwriting policy in the life-insurance business,
focusing on low capital absorption and higher margin products.
In terms of investment, Mr. Greco said the insurer has been
active in "tactical sales" of government bonds during the past
months, but that it hasn't reduced significantly its sovereign debt
portfolio. At the same time, he said the company has sold its
Chinese equity investments before the start of the recent turmoil,
making hefty gains on this portfolio.
Generali said its capital position, which has been a concern
among analysts and investors in recent years, had improved further.
A ratio based on an internal model in line with Solvency 2
parameters decided by international regulators stood at 200% at the
end of the quarter, compared with 186% at the end of last year.
Write to Giovanni Legorano at giovanni.legorano@wsj.com
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