Italy’s top insurer Assicurazioni Generali said on Tuesday it would raise prices to keep pace with rising costs, maintaining its financial targets after a strong life insurance company helped it beat first-half earnings expectations.
Generali, which will start its first share buyback in 15 years on Wednesday, reported net profit of 1.4 billion euros in the first half, above an analyst consensus gathered by the company of 1.33 billion euros. [$1.36 billion].
Net profit decreased 9% year-on-year after EUR 138 million [$141.4 million] impairment on the company’s exposure to Russia.
“Generali’s life insurance business has been the standout in the year so far… significantly improving earnings expectations,” Jefferies analysts said.
Generali reaffirmed all targets under its 2022-2024 strategic plan, including average composite earnings per share growth of 6%-8%.
The insurer was beset by a boardroom battle over the past year in which two of the three largest investors challenged the reappointment of CEO Philippe Donnet.
“The results showed that implementing our strategic plan is the right way to achieve sustainable growth and increase our operational profitability,” despite growing macroeconomic and geopolitical uncertainties, Donnet told a news conference.
Closely monitored net operating profit increased by 4.8% year-on-year to EUR 3.14 billion [$3.22 billion]above 2.96 billion euros [$3 billion] consensus prediction.
The insurer’s shares fell 1.4% at 0745 GMT, slightly underperforming a negative European insurance sector .SXIP, with traders saying the stock had outperformed in the past three days.
To counter the impact of rising inflation on claims costs, Generali will raise prices in the non-life business “significantly,” Donnet said.
Generali, a major holder of Italian government bonds, has reduced its domestic government portfolio to EUR 53 billion [$54.3 billion] in June from 63 billion euros [$64.6 billion] in December, said head of finance Cristiano Borean.
The move reduces Generali’s exposure to rising premiums on Italian bonds, which have suffered from macroeconomic concerns as interest rates rose and Russia cut gas exports, and are now further in the crosshairs of markets ahead of snap elections in Italy next month.
Borean also said Generali had sold more life insurance products that committed less capital.
The solvency ratio, a measure of an insurer’s financial standing, stood at 223% on July 29, compared to 233% at the end of June due to market turmoil and the acquisition of French health insurer La Medicale.
As set out in its strategic plan, Generali will spend EUR 500 million [$512.3 million] to buy back up to 3% of the share capital by the end of this year.
($1 = 0.9736 euros)
(Additional reporting by Giancarlo Navach, editing by Valentina Za and Susan Fenton)
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