Generali CEO Philippe Donnet promised even better times ahead for the struggling French P&C business as 2016 figures showed it swung to profitability.
"France has been improving significantly — it came a long way, and there is more to come," he told analysts at the presentation of the Italian insurer's full-year 2016 results. "The proprietary distribution in France is smaller compared to Italy and Germany, and we have a significant part of our business coming from third-party distributors such as the internet. … We are reviewing all our distribution agreements because we definitely want them to be more profitable. We might decide if the renegotiation is not successful to [end some relationships], but we are going to look at this business with much stronger capital discipline."
The operating result in Generali's French P&C business improved by 6.9% year over year to reach €137 million in 2016, as the combined ratio slipped into the profitable zone with a decline of 80 basis points to 99.4%. Groupwide, Generali's operating result in P&C was €2.04 billion, up 2.9% year over year, while the combined ratio dipped 70 basis points to 92.5%.
Generali's life business in France — its second largest after Italy — reported a 4.5% increase in the operating result to €593 million. The Italian insurance regulator's decision to approve Generali's internal model calculation of its capital needs for that business helped increase the regulatory solvency ratio of the whole group to 177% at the end of 2016, up from 171% a year earlier.
"It is just four months since we announced our strategic plan, and we are in good shape across the board," Donnet said. "Given the positive momentum we already achieved, we feel confident that we can deliver the cost reduction target by 2018, a year ahead of what [was] originally planned."
Generali will propose a dividend of 80 euro cents per share for 2016, an 11.1% increase year over year.
"The payout ratio remains higher than for peers, which could limit the ability of the company to invest in future growth projects, in our view," RBC Capital Markets analyst Paul De'Ath wrote in a note published shortly after the release of the insurer's results.
Generali's board approved the appointment of Aldo Mazzocco as CEO and general manager of Generali Real Estate SpA. Mazzocco will join the real estate asset manager's board of directors by mid-June.