The Generali Group announced impressive preliminary results for 2005 and an ambitious growth plan at a general meeting yesterday, March 6, in Milan. 2005 profits rose 15 percent to €1.918 billion ($2.3 billion). The Group also announced a series of measures it plans to implement over the next three years to increase profits and consolidate operations.
The initiatives include issuing new € 4 billion ($4.8 billion) hybrid securities issue, essentially to fund the buy-back of around €1.8 billion ($2.16 billion) worth of shares from various minority interests and another €2.3 billion [$2.75 billion] purchase of minority and policyholder interests in various entities. Both A.M. Best and Standard & Poor’s commented favorably on the results and the strategic plan (See related article).
Generali also listed the following 2005 earnings highlights:
— Consolidated premiums of € 62.8 billion [$75 billion] up from € 55.8 billion [$67 billion] in 2004 (+13.1 percent like for like);
— Combined ratio improves year on year by 1 p.p. to 97.9 percent from 98.9 percent in 2004;
— ROEV (return on embedded value) improves to 11.9 percent from 11.2 percent in 2004;
— On the basis of 2005 preliminary figures, a 26 percent increase in the 2005 dividend is proposed, equivalent to € 0.54 per share (2004: €0.43 per share) [64.8 cents from 51.6 cents].
The Group unveiled the following financial targets for 2008:
— ROEV to increase by 2.6 p.p to 14.5 percent;
— 50 percent increase in consolidated profit to approximately € 2.9 billion [$3.5 billion];
— 10 percent compound annual growth in NBV (new business value) over the plan period;
— Combined ratio to improve to 95.5 percent;
— Above market premium income growth;
— Doubling of dividend proposed for financial year 2008: +100 percent compared to 2005.
To accomplish these ambitious goals Generali said it plans to create a new international management board that will “extend group-wide cooperation and guide group-wide initiatives.” It also plans to “move to a common country organizational model in key territories and significant performance improvement in core markets.” By 2008 it anticipates generating some €700 million ($840 million) through the “application of significant group-wide scale-based projects (it; asset management; risk and capital management, global treasury) and international dissemination of best practice (motor tariffs, claims management, and operational excellence).”
Already a market leader in Italy, Germany and France, Europe’s third largest general insurer plans to enhance its position in these countries by “strengthening of distribution capacity across traditional and personal financial services channels; investments in innovation and extension of web-based distribution models in which the group is already a market leader.” It will also go forward with plans to list Banca Generali during the plan period and plans to enter the Indian market and to continue growth in China and Central and Eastern Europe.
Generali also announced plans to acquire an additional 10 percent of Israel’s Migdal Insurance & Financial Holding from Bank Leumi for a total cash consideration of € 118 million ($141.6 million). Following the transaction the Generali Group will control approximately 70 percent of Migdal.
The Board of Directors, chaired by Antoine Bernheim has approved the strategic plan. Commenting on it, Co-Group CEO Giovanni Perissinotto stated: “Generali today embarks on its plan for accelerated growth and profitability. Over the past three years we have come together as a Group as never before. The new dimension this adds to our traditional strengths of financial soundness and unmatched local market knowledge puts us in better shape than ever to achieve our goals. We start this new phase of our project with record results and an even more challenging set of objectives. This is the base from which we intend to pursue further growth, both organic and external, at the same time maximizing the efficiency of our capital structure. In order to achieve this rapidly the possibility of a share buy-back will be proposed to the next Annual General Meeting of shareholders.”
The announcement notes: “The Plan sets out a series of initiatives in all territories of operation to continue the process of change across all territories following the successful execution of the previous strategic plan as the Group pursues its mission to become a leader in value creation.”
Co-CEO Sergio Balbinot commented: “A key element in the success of the 2003-2005 plan was our ability to get all the Group’s core businesses moving forward together for the first time sharing a common strategic plan with clear targets while capitalizing on our strong presence in and knowledge of local markets. This approach has also been rewarded in new markets, opening the way to significant initiatives such the one undertaken in China. The new plan will see a strong acceleration in the implementation of this winning model thanks to a series of Group-wide projects. At the same time we will strengthen our presence in territories showing the highest growth potential such as China, India and the Central and Eastern European countries. It is our conviction that these moves will lay the foundations for the Group’s further long-term development.”
Bernheim added: “The Strategic Plan the CEOs are presenting to the market today is both ambitious and realistic. This constitutes a further important step in the strengthening and growth of the Group that with the realization of the plan objectives will secure its position amongst the international leaders in the sector, ensuring its continued success into the future.”
The full text of Generali’s announcement and the presentation to analysts can be obtained on the Group’s Website at: www.generali.com.
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