Generali Italy CEO bets on acquisition, sets bold profit target to keep jobs

FILE PHOTO: The logo of the insurance company Generali is seen on the company's headquarters in Budapest
FILE PHOTO: The logo of the insurance company Generali is seen on the company’s headquarters in Budapest, Hungary, November 29, 2019. Photo taken November 29, 2019. REUTERS / Tamas Kaszas / File Photo

December 15, 2021

By Gianluca Semeraro

MILAN (Reuters) – Generali said it would stick to bold earnings targets for 2024, raise its dividend and make its first buyback in 15 years as Philippe Donnet’s bid to stay on as CEO. The operation of Italy’s largest insurance company faced opposition from two billionaire investors. Donnet’s reappointment the following year was opposed by construction magnate Francesco Gaetano Caltagirone and Leonardo Del Vecchio, founder of eyewear giant Luxottica, who wanted the insurer to be more ambitious in expanding through buying.

The new strategy outlined Wednesday spends up to 3 billion euros ($3.4 billion) on mergers and acquisitions (M&A) activities in the insurance and wealth management sectors.

That compares with the previously planned €4 billion M&A budget, of which Generali spent 85%.

Donnet, 61, said the latest number was “a good number”.

“We want to strike the right balance between capital returned to shareholders and capital invested in growth,” he told a news conference.

“M&A remains a tool to accelerate shareholder value creation,” he said, adding that Europe and Asia will be the target of insurance and wealth management, while the US and He is only for property management.

When the plan was put up for a board vote, Caltagirone opposed it. A representative for Del Vecchio did not attend the meeting after saying it received the details too late to study them properly, two sources close to the matter said.

Overall, the plan won 11 out of 13 votes, sources said. Donnet is backed by Mediobanca, Generali’s largest shareholder. Caltagirone and Del Vecchio are the second and third largest.

Analysts support Donnet’s plan, but the market’s reaction has been muted. Shares were up 0.35% by 1602 GMT.

“Strategically, there is a lot of similarity to Generali (which we think is a good thing), BofA Securities said.

In addition to the buyback over the next 12 months, Generali aims to pay up to 5.6 billion euros in dividends over the next three years, up from 4.5 billion euros in the previous plan.

It said it targets an average earnings per share (EPS) growth of 6-8% a year, which Jefferies calls a “positive surprise” compared to Allianz’s 5-7%.


“The new targets for EPS growth, cash and dividends… are all more ambitious than we expected,” said Kepler Cheuvreux.

Caltagirone, who could not be immediately reached for comment, and Del Vecchio agreed to consult on a total of 15.6% voting shares. Sources close to the matter said they will propose a new CEO candidate at the board meeting in April.

Mediobanca, which has a 13% stake, borrowed shares to obtain 17% of the voting shares.

Under the new strategy, the Trieste-based insurer will increase its digital investments by 60% from 2021 to a cumulative €1.1 billion by 2024.

It also aims to increase non-motor property and casualty insurance premiums by more than 4% a year on average between 2021-2024, targeting small businesses and aged care in Europe and Travel insurance in the United States.

“Implementing such a plan will be key as Generali tries to convince of its digital transformation and development of new revenue streams,” Citi said.

(1 dollar = 0.8879 euros)

(Reported by Gianluca Semeraro; written by Valentina Za; edited by Edmund Blair and Jason Neely) Generali Italy CEO bets on acquisition, sets bold profit target to keep jobs

Bobby Allyn

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