Generali Reports Good Results

Generali G reported what we believe to be a good set of results. For full-year 2022, the company delivered EUR 2,906 million in net income, ahead of the EUR 2,822 million we forecast. The company also announced a EUR 1.16 per share dividend that is slightly ahead of what we predicted. Against the backdrop of 2022, we find these results to be resilient. Further, the business continues to work on operational improvements, trying to generate unique assets and continue its improvement plan. We raise our fair value estimate marginally to EUR 21.0 per share and maintain our no-moat rating.

The big news in the March 14 results was probably the EUR 70 billion drop in assets under management. Generali has been on a strong improvement plan over the years to introduce a more unique boutique asset-management offering, and up until recently, it did this well. The market movements of 2022 put paid to this as assets under management fell to EUR 505 billion from EUR 575 billion one year ago. That fall is almost entirely down to a drop in the value of fixed-income assets. Nonetheless, margins have not deteriorated and asset-management margins have improved by 2.4 basis points. The performance fee margin remains flat. In terms of products that these assets support, inflows into unit-linked and protection products were strong, while the business continued to let go of guaranteed rate assets. Commensurately, the average guarantee was managed down by 3 basis points and the guarantee on new business is 15 basis points. Premium growth in nonlife was strong. While there are some concerns about price, at the moment, the technical profitability of Generali nonlife looks like inflation never happened. This year will test how real that is.

Solvency is strong at 221%, nearly all due to capital generation. The business is positioned for rates to rise and spreads of sensitivities have been tightened.