By Giovanni Legorano
Assicurazioni Generali is planning a big commercial push in
Europe, Asia and Latin America 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.
Generali, one of Europe's biggest insurance groups, said it
plans to sell more higher-margin products, offer new services, and
expand its commercial partnerships while also cutting costs as part
of a new strategic plan.
Chief Executive Mario Greco, who is presenting the strategy plan
to investors in London on Wednesday, said Generali has no plans to
make acquisitions in the coming years.
Mr. Greco took the helm of Generali around three years ago after
a group of shareholders ousted the previous CEO, frustrated with
the insurer's declining stock price and disappointing
profitability. Since then, the new CEO has sold noncore businesses
and stakes in other companies and refocused Generali on its core
insurance activity, with some success. Generali's earnings and
capital position have improved, while the stock price has more than
doubled.
Generali said on Wednesday that 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.
"We are opening a new phase of our turnaround plan aimed at
taking Generali where it deserves to be," said Mr. Greco.
The new cash will be used to improve cash returns for
shareholders. Generali aims to raise the dividend payout to EUR5
billion for the 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%.
At the same time, it plans to go on cutting costs by shedding an
additional EUR500 million through the plan on top of the EUR1
billion it pledged to cut between 2012 and 2016.
The insurer also wants to improve its technological capability,
with EUR1.25 billion earmarked for new technology and data
analytics. Generali said it created the new position of Chief Data
Officer who will oversee the integration of data-led decision
making in the development of business processes and new
products.
In terms of commercial strategy, the insurer said it would shift
from the more traditional guarantee-based products to fee-based
ones, such as unit-linked instruments and hybrid products which
generate higher margins.
While not neglecting its corporate business, Mr. Greco said
Generali would focus on growing its retail operations which
represents around 90% of its business. He also said that Generali
aims to grow its presence in Asia and Latin America but reiterated
that the insurer is predominantly European and he doesn't intend to
change that.
Mr. Greco also said Generali will go on strengthening its
capital position, measuring it with a ratio calculated with an
internal model in line with Solvency 2 parameters decided by
international regulators. At the end of 2014, this ratio stood at
186%.
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