Event in Progress:
View the latest research on other companies in the sector.
An attractive story, at a more reasonable price We continue to like Generali''s actions to reduce its Balance Sheet risk and deliver operational improvement. However, following a 10% relative share price increase ytd, the near-term upside appears more limited to us. We think consensus estimates are now more reasonable and the company has provided confidence on delivery of key underwriting targets. As such, we downgrade the shares to Neutral whilst we await the details of the next strategic plan, to come in early 2025. Valuation remains reasonable despite the strong performance Generali has performed well, but it continues to remain at a sizeable discount to peers. We forecast the company trading with an c.500bp discount on Capital Generation yield to AXA and Allianz. This discount on a FCF yield is 120bp and 180bp respectively. We continue to believe this discount is excessively wide given the de-risking of the business and the improved operational performance. However, the catalyst for this closing is not obvious or imminent. Consensus has caught up to targets Consensus has been trending positively for Generali. 2026E average consensus EPS estimates are up 12% since the end of July last year. The company is now being given credit for its combined ratio targets. The consensus undiscounted combined ratio target is at 95.7% for 2024, in line with the 96% target. 2025 is almost at the 95% target, with some scope that it will move there in our view. Similarly consensus remittances are now above EUR4bn for 2024, as we anticipate. This leaves more limited near-term upside in our view. Where are the opportunities for further upside We continue to like Generali. However, with consensus appearing up with events, near term upside is more limited. Going forwards, there is potential upside from guidance on cash conversion increasing. However, this is not likely to come until a new strategic plan is unveiled. Also see INSURANCE: Cash Nexus 2024: the return...
Assicurazioni Generali Assicurazioni Generali S.p.A.
Generali''s investor day supported the views outlined in our note, Derisky Business, that Generali is a significantly improved operation that offers a lower risk Balance Sheet and a lower volatility proposition for investors. The updated targets, such as the lower solvency range and upgraded cash and capital generation expectations, highlight the benefits of this improvement for investors. This has culminated in Generali conducting a EUR500m share buyback 1 year earlier than expected. Cash and capital delivery continues and brings buyback expectations forwards The derisking of Generali''s Balance Sheet, the lower economic sensitivities and the lower capital target range all point positively to the reliability of capital returns. This is supported by the company''s continued performance on capital and cash generation. The company upgraded the targets on these items, albeit this was expected. With some sizeable remittances expected from recently acquired entities, Generali''s holding cash position and remittance flow will look healthy. This healthy position and low cash pay-out ratios clearly brings the prospect of a more recurring share buyback into view. 95% on the table for 2025 Generali did not state a date for achieving its 95% undiscounted combined ratio target. However, commentary suggested to us that it can be achieved by 2025. The company is targeting a below 96% level in 2024. This is despite a 60-70bps increase in the CAT budget. Rate increases are continuing to earn through and new business rates are moving up materially, notably in Italy. This, along with synergies from Liberty Seguros, should support 95% being achievable for FY25. Interesting growth options The focus on Generali''s Life business has historically been on risks (guarantees, BTPs). However, the presentation highlighted significant growth opportunities in European Health and Protection markets. High margin, capital light business with attractive returns. Conning opens up new...
Generali’s results were in line. The P&C figures were expected to be weak following the warning on its Nat Cat budget. Nonetheless, the Life business provided positive signals as outflows slowed down, and the CSM results surpassed expectations. We believe the market has placed undue emphasis on the Solvency II figure, which fell below expectations. However, this deviation can be attributed to operating variances, known for their historical unpredictability. Otherwise, this number would still have been in line with expectations.
The results were in line for Generali, with good signals from the Life business. The impact on life CSM from the revised customer lapse assumption is lower, and the CSM contribution is still strong beside the market movements. While the P&C results were initially expected to be weak due to the announced Nat Cat losses exceeding the annual budget, the continued influence of discounting benefits has played an important role. Despite the challenges, the results have held steady.
In this report, we present our key assumptions regarding Generali’s model under the IFRS17/9 accounting standards. The transition from IFRS 4 to IFRS17/9 has no impact on Generali’s cash generation or on dividend payments. Following the publication of our new IFRS17 model, we raise our target price, from €22 to €23.3. This increase is primarily driven by the higher profit forecast, which elevates the embedded value and the P/E-based valuation, collectively accounting for 60% of our final target price.
Earnings on the rise. Margins expanding. Volumes poised to ratchet. Things are looking good over in Trieste, so what could possibly be holding you back? We''re willing to bet it''s risk, and specifically how much of it there is on the balance sheet. Or rather, was: In this granular and comprehensive view of all the moving parts, we show that Generali has turned a corner. Operating performance has been knocked into shape, the financials are trimmer than you might think, and an underappreciated and impressive campaign of derisking has rendered Generali''s business almost... boring. Well, not entirely: company-specific challenges do remain. But do you really need zero risk when the net cash generation yield is over 11%? Outperform.
A remarkably positive performance for Generali’s H1 results in the P&C segment, marking the first time that the P&C segment has achieved a higher operating result then the Life segment. The prevailing interest rate environment adversely impacted the performance of Generali’s Life business, despite the company’s effective execution of its strategy, which emphasizes the focus on capital-light product lines. This situation has resulted in the P&C segment emerging as a leader within the company segments.
Generali to acquire Liberty Seguros for EUR2.3bn Generali has announced it will acquire Liberty Seguros from Liberty Mutual for EUR2.3bn. Liberty Seguros has predominantly PandC operations in Spain, Portugal and Ireland. An attractive deal in terms of market consolidation The deal will take Generali to being the number 4 insurer in Spanish PandC markets (c6% market share) and reinforces its number 2 position in Portuguese PandC markets. It will also give Generali a top 10 position in the Irish market, a market the company has not been present in before. A deal in line with plan At Generali''s CMD it outlined discretionary FCF of EUR2.5 - 3bn accumulated over FY22 - 24e available for MandA. It highlighted one of its MandA priorities as a desire to consolidate its leadership positions in European insurance markets. Both the deal size and deal target fit with this disclosed strategy. Back of the envelope valuation appears reasonable Liberty Seguros''s 2022 SFCR showed a combined ratio of 93%. Profit at Liberty have been volatile in recent years, however, Generali estimate a normalised run-rate profit of cEUR100m for this entity. If we assume a 95% normalised COR, 2x investment leverage, 3% investment return and a 25% tax rate, we reach a similar conclusion. This does appear to be a very high P/E of c23x pre-synergies. However, we note Liberty Seguros has a solvency ratio of 332% at FY22 on a SCR of EUR373m. If we assume excess capital of c100% of SCR and deduct this from the deal price, we arrive at a multiple closer to 19x pre-synergies, which does still appear high. Strong synergies expected from the deal Generali are anticipating strong synergies from this deal. If we assume Generali can remove 35% of the Liberty Mutual cost base we reach a cost saving of cEUR140m. This equates to a post-synergy run-rate earnings of cEUR200m. This puts the post excess capital, post synergy deal price at c10x vs Generali''s current 2024e multiple of 8.5x.
Generali’s Q1 23 results were strong. The higher rates environment still temporarily weighed on Life but P&C recorded an outstanding performance. Today’s release confirms our point: Life should hold on, despite being under pressure and P&C is the strong performer. However, the release also confirmed our argument on IFRS 17. Despite the massive improvement in earnings, the firm did not raise its objectives. We believe this is due to uncertainties and caution with respect to the new accounting standards.
Generali released very strong FY results. The firm’s profitability is improving and, ignoring the recent volatility, we believe that the stock is ideally positioned to outperform the sector thanks to better investment and underwriting results going forward.
Generali released strong 9M 22 results however in our view there are a couple of signals that could hold back a recovery in the share price. Our positive opinion is confirmed despite these macroeconomic uncertainties.
Generali’s H1 22 results were very strong on operations. Most of the outperformance came from an outstanding investment result, on the back of higher interest rates already kicking in. However, the share price reacted negatively which we believe is due to the further downside potential for the book value due to the Russian exposure and interest rates sensitivity. We strongly confirm our positive opinion but remain cautious in terms of momentum.
Strong Q1 22 results posted by Generali. Both Life and Non-life have disclosed strong performances top-line wise and in terms of profitability (although P&C was rather helped by the dividends from the Private Equity business and Banca Generali). Contrary to our expectations, the firm confirmed its CMD’s objectives (sketched out in December and well ahead of the fears surrounding the macro-economic context). Governance issues are now tempered; Generali has started its year well.
The long-lasting battle for control over Generali has finally come to an end. The current CEO Philippe Donnet has been re-elected by Generali’s shareholders, along with a new set of Board members proposed by the exiting Board. Now that the governance turmoil should be over, the management will be able to focus on delivering on its ambitious and challenging strategic plan (unveiled before the invasion of Ukraine by Russia). The battleground may now move to Mediobanca.
Earlier this morning, a conference held by Mr Gaetano Caltagirone (not initiated by Generali) took place in Milan, gathering the so-called “Finance community” to promote to investors, both Mr Costamagna and Mr Cirina, respectively as the Chairman and CEO candidates backed by Mr Caltagirone. The conference’s content seemed a farce. Shareholders may end up being the ultimate victims of the battle for board control between Mr Donnet (current CEO) and active shareholders (Caltagirone and del Vecchio). This needs to end.
Generali’s FY 21 results are satisfying. The firm recovered well from the tough 2020 due to the global pandemic and delivered on its last plan’s objectives. While Generali communicated last December on its next three-year plan, its execution and completion remains questioned because of the latest governance turmoil and the possible consequences of the current conflict between Russia and Ukraine.
Generali released a very ambitious three-year plan. On the agenda were increased cumulative cash dividend distributions, an outstanding EPS growth which should be partly driven by investments in digitalisation, and further light M&A activity in Insurance and Asset management. However, such an ambitious plan was not much of a surprise considering the very unstable throne on which CEO Donnet is sitting, aimed at convincing investors to support him.
Generali, in continuity of most insurers’ results releases, is on track to deliver on its FY objective as well as its 3-year strategic plan. All eyes are now turned towards the CMD to be held on 15 December and the AGM in Spring 2022 when CEO Donnet’s position might be challenged.
Generali and Italy’s most powerful business empires are throwing themselves into a bloody battle over Italy’s biggest insurer CEO’s head. Considering the timing, there is a high risk of Generali suffering from a jeopardised governance, while the Italian insurer is deciding upon its 2022-24 strategy, to be presented in two months time. The next few days as well as Mediobanca’s AGM on 28 October will be decisive.
Generali’s results fall in line with expectations and guidance. At constant environment and as we are approaching the end of the 3-year plan, we believe that all eyes will be on governance changes.
Generali delivered a strong Q1 21 performance. From top to bottom lines, consensus estimates have been beaten. Although these figures give us much optimism for the rest of the year, we are disappointed that Generali only confirmed that the performance is in line with expectations.
Generali succeeded in posting increases in both sales (up 0.5% to €70,704m) and operating earnings (up 0.3% yoy to €5,208m). Net profit dropped by 34.5% to €1,774m. The Board will propose a total dividend of €1.47 per share, of which €0.46 is relative to 2019. The insurer confirmed all its strategy plan’s targets. We reiterate our positive opinion on Generali.
Even at the age of 85, Leonardo Del Vecchio kept his power in the Italian financial system. He seems to be behind the appointment of Andrea Orcel as the new CEO of Uncredit, a key issue for the possible acquisition of Monte dei Paschi di Siena and for the future of Generali.
Share: