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Generali Profit Unexpectedly Rises as Non-Life Income Climbs

Assicurazioni Generali SpA (UCG), Italy’s biggest insurer, said first-quarter profit rose 6.3 percent as earnings at its non-life insurance business increased.

Net income in the three months to March climbed to 603 million euros ($787 million) from 567 million euros a year earlier, the Trieste, Italy-based company said in a statement today. That beat the 561.4 million-euro average estimate of 10 analysts surveyed by Bloomberg.

Chief Executive Officer Mario Greco is seeking to boost profit at Generali and increase capital by cutting costs, disposing of non-strategic assets and targeting faster-growing emerging markets. The company, which targets 4 billion euros in revenue from disposals by 2015, is selling its U.S. life-reinsurance business and Swiss asset-management unit BSI Group as part of a plan approved in January.

“Generali still is an attractive investment case for investors comfortable with exposure to Italy,” Michael van Wegen and Jelena Bjelanovic, analysts at Bank of America Merrill Lynch, wrote last week. “We expect the company to make steady progress to improve the solvency ratio over the next few years, driven by earnings and divestments,” they said.

Generali reiterated today that it expects an improvement in its total operating result in 2013, forecasting a reduction in life premiums and an increase in non-life.

Income Climbs

Operating income rose 8 percent in the first quarter from a year earlier to 1.33 billion euros as income at the non-life business rose 27 percent to 520 million euros. Operating income at the life business declined 2.6 percent to 797 million euros.

“In this quarter we have recorded our best operating result of the last four years, thanks to an excellent P&C performance and a solid life business,” Greco said. “We are making good progress in implementing the planned measures to turn around our business.”

The solvency ratio, a measure of an insurer’s capacity to absorb losses, dropped to 138 percent on March 30 from 145 percent at the start of the year. The ratio climbed to 145 percent as of April 30, Generali said. The first-quarter reading was hurt by the purchase of a 25 percent stake in the eastern Europe venture from private-equity firm PPF Group NV.

Spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 93.6 percent in the first quarter from 95.4 percent a year earlier.

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