What happened?
Yesterday, Generali presented its new 2025-27 strategic plan (see our initial take here: Generali investor day: Where to start?). Below we summarise takeaways from the presentation and QandA:
. PandC: Of the c.6% topline growth in the plan, about 60% of this is price, 40% is volume. They believe their undiscounted combined ratio target of 94.5% is conservative. The discounting benefit in the plan is assumed to be slightly lower than it is at present (1.7ppts vs. c.2ppts), and they are assuming roughly flat net investment income. The motor undiscounted combined ratio is expected to improve from c.99% to 96-97%.
. LIFE: lapses have been decreasing, and the need for fee holidays is coming to an end. Flows are recovering they expect to get to EUR11bn of inflows by the end of the plan, vs. c.EUR8bn at present.
. AM: management highlighted the lack of overlap in clients between Generali IM and Natixis, enhancing complementarity, as well as the strength of the new AM business''s US distribution capabilities. Synergy targets exclude potential benefit from at least EUR15bn of seed capital investment.
. ASSET MIX: they will use their expanded asset management capabilities to increase allocations to Private Equity/Infra and Private Credit, having a lower allocation than peers at present. The allocation mix shift will cost 3-4ppts in Solvency cover per year, but given they build c.8ppts of capital per year over-and-above the cash returns, they have plenty of headroom.
. CAPITAL: They assume no benefit from the Solvency 2 reforms - but as things stand, they would expect something like c.10ppts of benefit, albeit the details of the reform need to be finalised. Don''t assume any remittance benefit from the reforms in the current plan; if they were to see any, that would be in the next plan. Capital generation targets are net of LTIP, assumed to hit the top of the range (i.e. this is conservative).
. CASH: the uplift in FCF from c.EUR9.5bn in the old plan to...
