Generali Promises Commercial Push, Richer Dividend

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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