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Generali Holds Exclusive Talks With BTG Pactual on BSI Sale

Assicurazioni Generali SpA Chief Executive Officer Mario Greco
Assicurazioni Generali SpA Chief Executive Officer Mario Greco. Photographer: Simon Dawson/Bloomberg

Assicurazioni Generali SpA is starting exclusive talks with Grupo BTG Pactual on the sale of the Italian insurer’s Swiss private banking unit as it seeks to raise 4 billion euros ($5.5 billion) from disposals by 2015.

The discussions with the Sao Paulo-based bank involve the sale of 100 percent of BSI Group, Generali said in a statement late yesterday. Generali, Italy’s biggest insurer, reported today that first-quarter profit rose 9.4 percent as non-life insurance earnings increased.

Chief Executive Officer Mario Greco is selling BSI as part of a plan to focus on the company’s main business, strengthen finances and boost profitability. The insurer is more than half way to reaching the disposal goal after the sale of its U.S. reinsurance unit and Mexican businesses last year.

“BTG Pactual will start an intensive due diligence in the coming weeks to make an offer that will be reviewed by the board,” Chief Financial Officer Alberto Minali told reporters on a conference call. Generali isn’t planning more disposals other than BSI and its Fata Assicurazioni Danni SpA insurance unit, he said.

Generali rose as much as 1.8 percent in Milan and was up 1 percent to 16.7 euros at 9:46 a.m., giving the company a market value of 26 billion euros. The Bloomberg Europe 500 Insurance Index rose 0.5 percent.

Faster Writedowns

BSI had a net loss of 722 million Swiss francs ($812 million) last year as it took writedowns faster than planned because of new regulations for accounting treatment of goodwill, the bank said April 28.

Generali’s net income in the three months to March climbed to 660 million euros from 603 million euros a year earlier, the company said in a statement today. That beat the 606 million-euro average estimate of seven analysts surveyed by Bloomberg.

The results benefited from a “strong improvement in margins on new life business in Italy,” Matteo Ghilotti, a Milan-based analyst at Equita SIM SpA, wrote in a note today.

“Generali will continue in 2014 to undertake all actions aimed at improving the overall operating result,” the insurer said in its statement. It expects “stable” premiums in the life-insurance segment.

Operating earnings rose 0.5 percent in the first quarter from a year earlier to 1.3 billion euros as profit at the non-life business rose 3.7 percent to 516 million euros. Operating profit in the life business declined to 779 million euros from 781 million euros.

Solvency Ratio

Generali’s solvency ratio, a measure of an insurer’s capacity to absorb losses, rose to about 160 percent at the end of April, in line with a 2015 target set by the insurer last year.

“We will reach our capital target ahead of schedule and independently from market conditions,” Minali said.

Generali has completed its financing needs until 2016 and expects to cut its debt level by 1 billion euros by the end of next year. The insurer has to buy from private-equity firm PPF Group NV the remaining 24 percent stake it doesn’t own in their eastern European joint venture by the end of this year for about 1.2 billion euros.

“The sale of BSI will more than offset the purchase of PPF,” Minali said.

Minali also said that Generali isn’t planning to sell additional stakes in Banca Generali SpA because it wants to keep control of the unit. Generali, which sold a 12 percent stake in the company last year, holds 51.5 percent of Banca Generali.

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