GENERALI, 1H2013: The ongoing restructuring process already show the first results

8 August 2013 — Daniela GHETU
generali7The first half of 2013 ended for the Italian group GENERALI with "the best half-year result for the last five years", according to Mario GRECO, GENERALI Group CEO. Net profit over passed the EUR 1 billion threshold (+28.4% to EUR 1,081 million, as compared to EUR 842 million in 1H2012), while the operating result stood at EUR 2,378 million (+5.3%) sustained by the excellent premium income in Life and P&C and higher business margins.

"We have made a strong start to 2013" said Mario GRECO on the occasion of the half-year results presentation. "We have taken significant strides in strengthening our capital position and improving our operational and financial performance. The process of restructuring and simplifying our businesses in Central-Eastern Europe, Italy and Germany is progressing well. 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. The Group expects to report a higher full year operating result compared to 2012"

According to the Groups' release, the operating result was driven in particular by the performance of the P&C operating result to EUR 909 million (+24.8), reflecting its excellent technical margins. The Combined Ratio recorded a 2.4 pp improvement to 94.7%, benefitting from prudent underwriting policy, efficiency measures in claims management and favorable frequency trends in some markets.

In the Life segment, a better business mix and higher technical margins resulted in a solid operating result at EUR 1,481 million (-7%) despite an adverse financial climate still affected by low reinvestment rates.

The launch of new business initiatives and the strength of the Group's distribution networks supported production growth. Total premiums reached EUR 34.8 billion (+1.7%, from EUR 34.6 billion in 1H2012).

The P&C segment saw the confirmation of the positive trend in premium income at EUR 11.7 billion (+0.8%) especially due to Germany (+4.2%).

In the Life segment, premiums rose to EUR 23.1 billion (+2.2%). The production growth, together with lower out flows from maturities and surrenders especially in Italy and France, contributed to the significant rise in the net inflows to EUR 4.9 billion, from EUR -378 million in the previous year. Life new business, with APE at EUR 2.3 billion (+1.3%), registered high profitability with the New Business Margin rising to 20.6% (19.2% FY2012), reflecting the better business mix oriented towards protection covers and unit-linked products and the initiatives taken on guarantees.

GENERALI's evolution on the CEE markets

The CEE markets contribute with only 3% to the overall premium production of the Group. Still, considering their high potential for future growth, the Group puts a lot of effort in developing its business in the region.

Life insurance - Gross written premiums of CEE went from EUR 842 million in 1H2012 to EUR 790 million (−2.6% on equivalent terms) in 1H2013. In detail, while linked policies increased (+13.0% on equivalent terms), especially in Poland, and protection policies grew (+9.2% on equivalent terms), attributable to the performance in Slovakia, the Czech Republic and Poland, savings & pensions policies decreased (−11, 8% on equivalent terms), particularly in Poland and the Czech Republic.

The new business decline (−17.5% on equivalent terms) was mainly attributable to volatile trends of pension funds in the Czech Republic and Poland, which were affected by recent regulatory changes and uncertainties.

Net cash inflows increased compared to 30 June 2012, chiefly thanks to the considerable growth witnessed in the Czech Republic owing to the lesser outflows from pension funds as a consequence of the restrictions imposed by the pension reform.

P&C insurance - Gross written premiums in CEE decreased to EUR 1,001 million (−1.3% on equivalent terms). The decrease is attributable exclusively to the Motor line (−3.9% on equivalent terms), that offset the upward trend of the Non-motor lines (+1.4% on equivalent terms). In detail, the Motor line, which is marked by keen competition due to the profitability of this segment, reported particularly negative trends in the Czech Republic, Romania and Slovakia which were only partially offset by growth in Poland. The growth of the Non-motor lines is mainly attributable to the uptrend of all business lines in Poland and Hungary.

The combined ratio of Central and Eastern Europe amounted to 90.6% and worsened by 3.1 pps, due to the increase in the loss ratio (+7.7 p.p.), which reached 58.0% and was impacted for 5.4 pps by catastrophic events such as the June floods. The expense ratio decreased considerably (−4.6 pps), mainly due to Non-motor lines.

On equivalent term, excluding Russia, the Ukraine, Kazakhstan and Belarus, the combined ratio was stable, with a 1.5 pps deterioration of the loss ratio and a simultaneous 1.6 pps increase in expense ratio due to acquisition costs.

The full interim report published by GENERALI is available here.


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