Generali Earnings: First-Half Earnings Show Our Full-Year Numbers Likely To Be in Line

Generali G has reported a net income of EUR 2.243 billion for the first half of this year. We think that leaves the company on track versus our full-year estimate of EUR 3.1 billion and EUR 1.96 in earnings per share. That is versus EUR 2.14 in EPS as per consensus collected by Refinitiv and EUR 1.41 in EPS delivered year to date. With an 8.4% return on equity so far, we think Aug. 9′s numbers imply at least a midteens return on equity for the full year. We apply an 11% cost of capital to the business, so it looks like Generali will generate economic profits this year. We maintain our fair value estimate of EUR 21 per share and our rating of no economic moat.

In Generali’s property and casualty segment, the company has delivered 10% growth in gross written premium, and that has been balanced across both the motor and nonmotor segments. Nonmotor was particularly aided by growth in Europ Assistance, with travel insurance being the main driver. The property and casualty combined ratio fell 5.4 percentage points to 91.6% as the higher discount rates for claims were the largest impact within this. The impact of natural catastrophes declined by 70 basis points period on period. Those natural catastrophes mainly came from floods in Italy.

In life and health insurance, gross premiums written declined by 30 basis points to EUR 25.9 billion. Here, protection sales grew well by 5.3%, particularly in France, Italy, and Central and Eastern Europe. The savings line also advanced with growth of 6.3% mainly in Asia and France. However, unit-linked sales fell by 14.9%, particularly in Italy and France.

Operating profit increased by 1.3% to EUR 498 million in asset and wealth management. This has mainly been driven by emerging market fees in Banca Generali. The asset management result declined mainly as a result of lower performance fees and higher compensation costs and expenses for information technology.