Generali Advances on Operating Profit, Balance Sheet Cleanup

Assicurazioni Generali SpA rose the most in seven months in Milan trading after Italy’s biggest insurer reported higher fourth-quarter operating results and cleaned up its balance sheet.

Generali rose as much as 6.6 percent after it said in a statement today that operating profit climbed 12 percent from a year earlier to 928 million euros ($1.2 billion), boosted by the non-life insurance business. The insurer had a net loss of 1.04 billion euros in the quarter as it wrote down 1.3 billion euros in holdings, including a stake in Telecom Italia SpA. The firm kept its dividend unchanged at 20 cents a share.

“We see positive signals in fourth-quarter results despite the weight of the balance-sheet cleanup,” Matteo Ghilotti, a Milan-based analyst at Equita Sim SpA, wrote in a note today. “Operating profit is higher than expectations thanks” to the property and casualty segment, he said.

Chief Executive Officer Mario Greco, who took over in August, is seeking to convince investors he can revive profit and boost capital by cutting costs, disposing of non-strategic assets and targeting faster-growing emerging markets. The Trieste-based company is selling its U.S. life-reinsurance business and Swiss asset-management unit BSI Group as part of a plan approved in January.

Disposal Schedule

“Asset sales are proceeding, we have no updates so far,” Greco, 53, said on a conference call. “The process is on schedule and we are confident in reaching our 4 billion-euro target sale on time.”

Generali will try to progressively boost its dividend, Greco said, adding that he’s aiming for a 40 percent payout linked to the company’s targets.

Generali gained 7.3 percent to 13.08 euros at 1:20 p.m. in Milan, giving the company a market value of 20.4 billion euros. That’s the biggest intraday increase since Aug 3.

The firm took a 148 million-euro writedown on its Telecom Italia stake, 56 million euros on real estate assets and 792 million euros on assets available for sale, including Intesa Sanpaolo SpA, it said.

“The actions we have taken on impairments brings us in line with international best practice,” Greco said. “2012 saw the start of a deep transformation of Generali, with today’s results marking a turning point.”

Profit Target

Non-life operating profit rose 41 percent to 505 million euros in the quarter and the combined ratio, a measure of claims and costs as a proportion of premiums, improved to 95.7 percent in 2012 from 96.5 percent a year earlier.

“We’re targeting a higher operating profit this year,” Greco said. “The first quarter is going well. We have started all our strategic initiatives.”

Operating income at its life business declined to 462 million euros from 564 million euros a year earlier. Generali’s solvency ratio, a measure of an insurer’s capacity to absorb losses, rose to 150 percent as of Dec. 31 from 140 percent at the end of September. The pro-forma ratio at the end of March takes into account the purchase of a 25 percent stake in its eastern European venture from private-equity firm PPF Group NV.

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