Generali Third-Quarter Net Income Rises on Fewer Writedowns

Generali Third-Quarter Net Income Rises on Fewer Writedowns
Generali reiterated that it expects non-life premiums to climb, while life premiums will match last year’s level. Photographer: Alessia Pierdomenico/Bloomberg

Assicurazioni Generali SpA, Italy’s biggest insurer, said third-quarter profit jumped after year-earlier writedowns of Greek bonds and stakes in Italian companies weren’t repeated.

Net income rose to 291 million euros ($369 million) from 20 million euros a year earlier, when the insurer booked 289 million euros of writedowns, the company based in Trieste said in a statement. Net income missed the 351.5 million-euro estimate of 13 analysts surveyed by Bloomberg.

Third-quarter operating income rose 43 percent to 948.5 million euros, boosted by the life insurance segment.

“Generali’s figures were in line at the operating level,” analysts at French brokerage Natixis wrote in a note to clients today. “The financial strength of the group benefited from the decline in the spread on the Italian sovereign debt,” while net income suggests a lower dividend yield for this year compared with its peers, they said.

Mario Greco, who took over as chief executive officer in August, is reviewing the insurer’s strategy as he focuses on bolstering profit and strengthening capital. Generali is selling its U.S. life reinsurance business and Swiss asset-management unit BSI Group because they aren’t strategic assets, Greco said on a conference call today.

Generali has hired Citigroup Inc. to advise on the sale of Generali USA Life Reassurance Co. and the unit may be worth $800 million to $1 billion, people familiar with the matter have said.

Investor Presentation

“Any other sale or exiting from businesses will be reviewed over the period, considering its capital efficiency and capital absorption,” said Greco, who will outline his strategy to investors in London on Jan. 14.

Generali’s agreement with PPF, a private-equity group controlled by Czech billionaire Petr Kellner, hasn’t changed after Moody’s Investors Service downgraded the insurer, Chief Financial Officer Alberto Minali said on the conference call, denying Italian press reports that PPF may exercise a put option before 2014.

Generali and Amsterdam-based PPF formed a joint venture in 2007, combining their insurance assets in eastern Europe to create a company with 9 million customers in 12 countries. Generali has to buy the 49 percent stake if its partner exercises the option.

The Italian company reiterated today that it expects non-life premiums to climb, while life premiums will match last year’s level. The insurer is targeting net inflow of 2 billion euros in 2012.

The shares fell 2.4 percent to 12.10 euros at 2:39 p.m. in Milan, giving the company a market value of 18.8 billion euros. The Bloomberg Europe 500 Insurance Index, which was down 2 percent today, has risen 24 percent this year, compared with Generali’s 4 percent increase.

Profit Target

“We are confident of achieving a 2012 operating result in excess of 4 billion euros, in line with our previously announced target,” Greco said. Generali said earlier this year that operating profit would be in a range of 3.9 billion euros to 4.5 billion euros in 2012.

Shareholders equity rose to 19.2 billion euros from 17.4 billion euros at the end of June, helped by the recovery of Italian government bonds and equity markets.

The company’s strategy this year was to reduce its equity and bond holdings in peripheral euro-area countries such as Portugal in order to reduce risk, Minali said.

Non-life operating profit fell 2 percent to 403.5 million euros in the quarter. Claims and costs as a proportion of premiums, known as the combined ratio, was unchanged at 96.6 percent in the first nine months.

Generali’s solvency ratio, a measure of its capacity to absorb losses, rose to 140 percent at the end of September from 130 percent at the end of June.

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