GENERALI: Relevant contribution of the CEE markets to the group's growth

21 November 2012 — Daniela GHETU
generali4CEE markets accounted for about 6% of the aggregated gross premium of EUR 50.94 billion written by the GENERALI subsidiaries in 3Q2012. In terms of profitability, the CEE contribution to the total EUR 3.3 billion operating result (+9.4% y-o-y) was of about 9.5%. Commenting upon the overall Group's achievements in the first nine months of 2012, GENERALI Group CEO Mario GRECO said that the Italian insurer expects for the end of 2012 "a result in excess of € 4 billion, in line with the previously announced target."

The GENERALI Group closed the first three quarters of the year with strong growth in net profit to EUR 1.13 billion (+37.3%). The result was driven by progress in production and - particularly in the Life segment - by growth in the operating result. The P&C operating result remained robust despite the impact from significant catastrophic events. An additional contributing factor to the profit increase was the improvement in the investment result, due in particular to a reduction in impairment losses.

In an environment where insurance premiums fell in many of the markets in which GENERALI operates, the group reported a positive performance in premiums, buoyed by the expansion of its proprietary networks and continued product innovation. Total gross premiums rose to EUR 50.94 billion (+1.8%), driven by premiums in the P&C segment (+4.7%), particularly in France, Germany and CEE countries.

In the Life business, the Group focused on profitability, registering growth in savings products (+1.9%) and protection covers (+4.4%), generating overall production of EUR 33.50 billion (+0.4%). Life net inflows - premiums collected less outflows - were positive at EUR 1.14 billion after the negative result of EUR 378 million in the first half of the year. This performance is particularly notable given the group's decision to cease renewing certain contracts with profitability levels deemed not adequate.

Life insurance

Written premiums for the life segment, including premiums related to investment contracts, totaled EUR 33.50 billion, up 0.4% on equivalent terms, in line with the half year results, mainly as a result of the growth in savings and pension lines, especially on annual premiums, and in protection policies. By contrast, UL business continued to be affected by severe financial market volatility.

Gross written premiums in CEE reached EUR 1.24 billion, up by 1.6% on equivalent terms. The "Savings and pension" chapter accounted for about 61% of the CEE life insurance portfolio, while UL products' share in GWP was of 24.6%. According to the Group's 3Q interim report, growth continued both in savings and pension policies (up 2.3% on equivalent terms), especially in the Czech Republic, Russia and Poland, and protection policies (up 10.7% on equivalent terms), mainly in the Czech Republic, Poland, Russia and Hungary, while linked polices decreased (down 4.9% on equivalent terms), above all in the Czech Republic, Slovakia and Hungary.

New business in CEE decreased (down 3.0% on equivalent terms) due to the decline in linked business (down 23.1% on equivalent terms), only partially offset by the positive trend of the traditional savings and pension (up 36.7% on equivalent terms) and protection business (up 8.0% on equivalent terms).

Group's operating result in the life segment was EUR 2.19 billion, of which CEE market's contribution reached EUR 135.8 million.

Non-life segment

At the Group level, written premiums in the non-life segment increased by 4.7% on equivalent terms, to EUR 17.44 billion, thanks to the growth in all the lines of business of the Non-motor segment (up 5.7% on equivalent terms). Also the Motor line reported a positive performance (up 2.4% on equivalent terms), though showing differing trends in the Group's main countries of operation.

According to the Group's interim report, GWP in CEE markets confirmed the development witnessed in 1H2012, reaching EUR 1.82 billion. Motor lines accounted for 39.5% of the CEE non-life portfolio, followed by commercial/industrial insurance lines (26.6%), Accident & health (~19%) and personal lines (~14.8%). The 8.4% GWP increase on equivalent terms was entirely attributable to the Non-motor lines (up 20.5%) and, in particular, to the increase in Russia of both the Accident and Health lines and the Commercial/Industrial line and the positive performance in Poland of the Commercial/Industrial line. The Personal line showed a positive trend in all countries, excluding Romania. By contrast, the Motor line, characterized by strong competition resulting from the line's profitability, declined (down 5.9% on equivalent terms) in the Czech Republic and Hungary, while its performance remained positive in Poland.

Group's non-life operating result was EUR 1.16 billion, showing a 4.3% decline on equivalent terms, primarily attributable to the reduction in the net investment result, which was affected in particular by lesser current income due to the de-risking policy undertaken by the Group and lower current reinvestment rates, especially in France and Germany.

The technical result reached levels similar to those of the previous year, despite the impact of certain catastrophic events of relevant extent for the Group, which caused total claims of approximately EUR 311 million, compared to about EUR 96 million in the same period of the previous year. Excluding such events - among which mention should be made of the earthquakes that struck northern Italy in May and the significant snowfall that affected Italy, France and Austria in particular - the technical result improved considerably.

In the CEE markets, the indicator was affected by the deterioration of technical margins, following the increased weight of the acquisition component tied to the different business mix. The aggregated operating result recorded by the CEE subsidiaries was of EUR 195.2 million, with about 13% less y-o-y. The aggregated value of the combined ratio for the CEE markets grew y-o-y by 1.7 pp, to 90.4%, yet maintaining a lower level than the 96.6% Group's average.

The 3Q2012 interim report of GENERALI Group is available here.

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