Generali Second-Quarter Net Climbs 74% on Non-Life Business

Assicurazioni Generali SpA, Italy’s biggest insurer, said second-quarter profit rose 74 percent as higher non-life earnings outweighed a drop at its life business.

Net income climbed to 478 million euros ($634 million) from 274 million euros a year earlier, Trieste, Italy-based Generali said today. That matched the average estimate of six analysts surveyed by Bloomberg.

Chief Executive Officer Mario Greco is selling non-strategic assets and refocusing on Generali’s core business to strengthen finances and boost profitability. The insurer is more than half way to its goal of raising 4 billion euros from asset sales by 2015, after selling its U.S. reinsurance unit and Mexican businesses.

“Generali published mixed results,” Raphael Caruso, an analyst at Raymond James Euro Equities, wrote in an e-mailed report to clients. “Earnings were supported by the strong performance of the non-life insurance segment. Nonetheless, the life insurance segment’s earnings were significantly hampered by low investment results.”

Generali shares declined 0.9 percent to 14.68 euros as of 11:49 a.m., giving the company a market value of 22.9 billion euros. The stock has advanced 6.8 percent this year compared with the 16 percent gain in the 30-company Bloomberg Europe 500 Insurance Index.

Italian Operations

“We have taken significant strides in strengthening our capital position and improving our operational and financial performance,” Greco, who took over as CEO last year, said in a statement. “Generali is more focused and profitable than it was a year ago and we are well on track to achieve the targets we have set ourselves,” he said, reiterating that Generali expects to report higher operating results this year.

Generali yesterday replaced Raffaele Agrusti with Philippe Donnet as CEO of its Italian operations, which are being restructured.

“The Italian unit restructuring starts now a new step to develop business, which will require several years,” Greco said on a conference call. “It was the right move to have a manager with long-term prospective.”

Greco said Generali’s 6.8 percent stake in Telecom Italia SpA, Italy’s biggest phone company, is among the assets that will be sold “ under right conditions.” Generali, which is the second-biggest shareholder of Telecom Italia, may consider exiting Telco SpA, the group controlling the phone company in September, even if “no decision has been taken yet,” Greco said.

BSI Sale

The Italian insurer is also selling its Swiss asset-management unit BSI Group as part of a plan approved in January.

“BSI is a good asset and we want to sell non-core assets at the right price,” Greco said. “There is a complicated market at the moment, so a sale at a fair value takes time, requires negotiating, and this is what we are continuing to do.”

Bankinter SA of Spain may buy BSI, CEO Maria Dolores Dancausa said in April. The firm offered 1.5 billion euros in partnership with U.S.-based Apollo Global Management, Swiss newspaper L’Agefi reported in March. Generali has said the unit has a book value of 2.3 billion euros.

“The company is on track to achieve attractive earnings growth and returns, driven by the ongoing restructuring,” Michael van Wegen, an analyst at Bank of America Merrill Lynch, wrote in a note to clients. “Although the Italian macro remains challenging, in our view Generali still is an attractive investment case for investors comfortable with exposure to Italy.”

Mixed Results

Non-life operating profit increased 23 percent to 389 million euros as the insurer reduced costs. Claims and costs as a proportion of premiums, known as the combined ratio, improved to 94.7 percent in the first half from 97.1 percent a year earlier.

Total operating earnings rose 1.7 percent to 1.05 billion euros in the second quarter from a year earlier as profit at the life business fell almost 13 percent to 683 million euros.

Generali’s solvency ratio, a measure of its capacity to absorb losses, rose to 139 percent by June 30 from 130 percent a year earlier, the insurer said. As of mid-July, the ratio was 142 percent, excluding a contribution from the sale of Mexican minorities and U.S. assets, the company said.

Generali was one of nine insurers designated systemically important by global financial rule makers last month, which may mean it will face tougher capital standards and tighter regulation. Greco said today the implications of being a systemically important insurer aren’t clear and that the company may not be included on the list in the future.

Generali was put on the list because of its non-insurance activities, said Greco, adding that “the position in that list might change over time as they are focusing on core insurance activities, and disposing of non-core assets.”

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