Generali’s Investments Have Been Effective, Yet Returns Have Been Weighed by Traditional Savings

Generali is a multiline insurer that derives around two fifths of pretax earnings from its home market of Italy. The business has invested significant amounts in data and technology over recent years and those investments have led to improvements in margins, across its nonlife and life insurance business. We think in nonlife insurance versus peers the business holds more limited exposure to commercial insurance and also more limited exposure to insurance written in the Americas region. Nonetheless, the company’s investments have resulted in ongoing improvements in its claims ratio, which we think is the essence of good underwriting. Further, the company went on to acquire the nonlife insurance business of Cattolica a few years ago and that acquisition bolstered its market share in its home country. We think the purchase also introduced more health and property insurance. This division earns above its cost of equity.