Generali Group (BIT:G)

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Generali Group (BIT:G) also known as Assicurazioni Generali and Generali Assicurazioni is a large Europe focussed, insurance centered financial institution that is also an asset manager with an interest in expanding in the area of retail banking services. As a multinational company it has a market presence in 68 countries (though most business comes from 5 Western European countries and another 14 central eastern ones). Insurance products is divided into 2 segments; life and non life which offer a full range of complementary services. More recently the company has ventured into non traditional areas of finance (mostly through acquisitions) such as mortgage and investment services related to such things as hedge funds (Thalia).^[1][2] Partnerships with reinsurers have given it deep market penetration internationally.

There are also regionally based reassurance (reinsurance) subsidiaries of the group that buy insurance (USA, Bermuda). Generali Reassurance USA was created in April 2002 when when it restructured subsidiary Business Men's Assurance Company of America by selling the life insurance and mutual fund divisions of it to the Royal Bank of Canada keeping only the reinsurance segment which it then expanded.^[3]

Runs its own corporate university, Generali Group Innovation Academy which was founded in 2004. In April 2009 it helped to create an international economic initiative focussed on improving the integration of Environmental Management Systems and economic policies. In terms of business Generali Group and Assicurazioni Generali are one in the same however Assicurazioni Generali is generally regarded as the parent; the head of the groups management structure.

Biggest move in 2009 was acquiring half of Intesa Vita from Intesa Sanpaolo.^[4] Also in August 2010 it expressed interest in expanding through acquistions in India and Vietnam. In China Generali Group is the largest foreign insurer, elsewhere in Asia it has a presence in Japan, Thailand, the Philippines, Indonesia and Hong Kong.^[5]

Company Overview

Generali's main business line is Insurance, primarily life and non life but there are also a variety of other class types. Products and services relating to pensions, asset management (Banca Generali) and individual investment types are also offered though some like asset management are run primarily through subsidiaries focussed solely on that. Generali Employee Benefits has improved and expanded on options available to large companies operating in more than one country. The company's asset management operations have seen greater consolidation, instead of having that business run through many loosely connected subsidiaries around the world it now goes through 3, Generali Finances of France, Am-Generali Finanz in Germany and Italy based Generali Asset Management.

There was a 10% different in operating income between 1hfy09 and 1hfy10 with 1hfy10 being higher.

India Generali Group runs total life insurance solutions arms Future Generali India Insurance and Future Generali India Life Insurance (with vehicle (covers most damage and health expenses except for cases where depreciation, war, liquor, natural vehicle breakdown, legal problems had a large impact) and health, personal accident, travel (covers baggage, passport losses and accident with deductables of $25-100) and home insurance divisions). Life Insurance includes retirement, savings plans and critical (payable only once), long terms illnesses as well as fatalities. Non Life Insurance insurance for health, [[medical insurance|medical, vehicle, marine, property, travel costs.

• This division invests in public equity and fixed income in addition to its role as a mutual fund manager.

Operations in the USA are conducted through international divisions Generali Employee benefits, General Claims Solutions Liability Company and American company Generali USA Reassurance Company (USA Reinsurer was awarded an A for Excellent rating by A.M. Best Co. in 2010).^[6]

The US reinsurer deals with life insurance (ordinary policies put together by fairly large US underwriters) and has experienced steady growth between 2003 and 2010. It was acquired by Assicurazioni Generali in 1990 as a life insurer and focused on that until 2003 when it switched over to reinsurance.

International Most written premiums come from Germany Generali Deutschland Holding (EPA:AMB2) (which includes subsidiary companies AachenMünchener, Generali, CosmosDirekt, Central Krankenversicherung, Advocard Rechtsschutzversicherung, Deutsche Bausparkasse Badenia and Dialo has had the groups highest expense ratio since 2004), France (Generali France SA) and Spain (Generali España Holding Entidades de Seguros SA and Banco Vitalicio de Espana) but the company also is among the insurance leaders in several other countries (Switzerland, Israel (presence there for almost a century) and Argentina. ABM Generali is the German subsidiary. There are also minor business dealings in Japan and China (Generali China Life Insurance Co, Ltd). There's also Generali PPF Holding that operates in the 14 CEE nations (that includes Russia and Poland). It has 10 million customers and assets worth over €12 billion.^[7] Generali Bank of Austria was created on December 16, 2002. It also oversees Croation Generali operations. In Austria there's also Generali Vienna Holding AG.

Business & Financials

Property and Casualty Gross Premiums Written Italian operations led all countries at about €7.35 billion down 1.9% yoy but still larger than the next 2 divisions (in order of size based on property and casualty gross premiums) abroad combined, France and Germany (€6.8 billion) which accounted for 31.4% of Generali's gross premiums in property casualty. Overall gross premiums in this segment were down 1.6% to €21.636 billion. Business outside of the 5 largest areas was up 13.2%.^[8]

Gross Premiums Written Net Inflows in 2009 Germany accounted for 25.3% of the groups total, France gained first position over Germany after 114.7% growth gave it a 36.3% share, the CEE made up 4.35% and Italy at about €1.2 billion compared to €2.6 billion in losses the year before.^[9]

Group gross written premiums for life insurance was 126% higher than those for property and casualty (life insurance share of total was at 69.3%). For 2009 shareholders equity was up 29% to €20 billion.

1hfy10 life did a lot better than non life insurance, the result of an above average storm season damage in Europe and a shift in customer behavour tending towards higher end life insurance products. Also during that period operating income from non insurance related business contributed 9.2% of operating income down from 11.5% in 1hfy09 following that trend was total operating income down 9% while total income for non insurance businesses (banking segment) rose to 900.3 million to revenue (2% of total).

2009 Premiums related to investment contracts was up from 3998.7 to 4017.5 mostly due to high premium income in Germany, France, CEE and Ireland. Acquisition and admin costs of life insurance was down 1.4% to 4961.4 million (insur admin costs were lower in the large markets of Italy, France and Germany).

The group's expense ratio was markedly higher in 2010 than the 2 previous years, rising steadly in the quarters leading up to the second quarter of 2010. The ratio was at 98.8% at the half in 2010 compared to 98.3% at the end of the fiscal year for 2009, 97.9% in 1hfy09 and 96.4% at the end of 2008. Non operating income usually is a loss, €2396 million in 2008, €1507 million in 2009 (1045.1 at the half that year) and €807.6 million at the half more recently in 2010. Holding expenses were the usual source of income loss contributing €383.3 million in 1hfy09 compared to €348.5 million in 1hfy10. Interim 2010 data showed a huge increase in losses from financial instruments through profit or loss (a loss of €155.8 million in 1hfy10 compared to a gain of €13.6 million in 1hfy09 while net income losses from other financial instruments were 98.4% higher (reached -€370.8 million) at the half in 2010 compared to a year earlier). Losses from other sources were lower €184.7 million in 1hfy10 compared to €264.5 million in 1hfy09.

Shareholders

Mediobanca 13.465%, Banca D'Italia (private) 4.488%, Blackrock 2.821%, B&D Holding 2.434%, Effeti S.p.A 2.267%, Caltagirone 2.167%, Peter Kellner 2.020%.^[12]

Competition

Chief competitors include AXA in France, Allianz in Germany, and Berkshire Hathaway in the USA.

Trends & Forces

Asset Management and the Effects of Falling Interest Rates

Lower rates mean a smaller margin reducing cash flow since most policies are linked to minimum returns. To adjust to the today's vastly different financial markets the bank has diversified into different financial instruments and different marketing regions. The changing landscape of the world's economy is pressuring insurance companies like Generali to change the way they do business (leading to higher risk exposures in certain areas and lower ones elsewhere). Because of very low coverage rates in the Middle East the region is considered to be a place of great growth potential for insurance companies. Generali Group has had a presence there for almost a century.^[13] Generali Group is also looking to expand in India and Vietnam through acquisitions.^[5]

Expanded international private equity operations in 2006

The Generali Group as a whole internationalized its private equities business in 2006 after setting up a fund and realigning all group private equity and asset management activities with Generali Group Private Equity its equities division. Before that time only its German subsidiaries were able to use the private equity servicies.^[14]

References

1. ↑ Swiss banking major BSI SA (Gernali) to start operations
2. ↑ Thalia Hedge Fund Investments. Retrieved on 2010-09-24.
3. ↑ Generali to Sell BMA Assets, Create U.S. Life Reinsurer (2002-04-30).
4. ↑ Intesa Sanpaolo Businesses
5. ↑ ^{5.0 5.1} Generali eyeing acquisitions in India, Vietnam (2010-08-26).
6. ↑ A.M Best Affirms Ratings of Generali USA Life Reassurance Company (2010-06-09).
7. ↑ Generali PPF Holding B.V.
8. ↑ 2009 Group Generali Management Report (2010).
9. ↑ Group Generali 2009 Annual Report
10. ↑ ^{10.0 10.1} Generali Group 2007 Results (2008-03-18).
11. ↑ ^{11.0 11.1} Generali Group 2009 Results (March 2010).
12. ↑ ^{12.0 12.1 12.2} Generali Group Consolidated Financial Half Yearly Report (2010-06-30).
13. ↑ Insurers urged to transform challenges into opportunities (2010-09-27).
14. ↑ AMB Generali Private Equity sets up fund of funds AMB Generali Private Equity sets up fund of funds (2006-06-30).