Generali nails third consecutive record operating profit; P&C slips on nat cat

Generali increased its gross written premiums by 6.4% in 2021 on its way to its third consecutive year of record operating profits and a sizeable jump in net profits from a prior year slump. The group claims to be well into its new strategic cycle, despite the ‘uncertainty and volatility’ now flowing from eastern Europe.

Its gross written premium rose 6.4% to reach €75.8 billion, on a 6.0% gain in life and a 7.0% gain in P&C, financial statements out pre-session showed.

EBIT of €5.85 billion was up 12.4% to the third consecutive all-time record, albeit in part on a boost from the Cattolica acquisition. Some €2.65 billion came from P&C, €2.82 billion from life, €672 million from asset management, ahead of group costs. Each segment improved year-on-year by a nine-digit sum.

FY2021 net profits of €2.85 billion were up 63.3% on the prior year period. Return on equity was up 4.4 percentage points to 12.1%.

The Russian invasion of Ukraine "has resulted in a context of greater uncertainty and volatility and a risk of a downward revision of growth estimates," management said. No more precise impact can yet be estimated.

For the time being, Generali is standing by the financial guidance it offered in a mid-December 2021 investor day, chiefly for 6-8% EPS growth, increased cash generation targets and a high dividend vow.

And Generali will likewise stand by the associated gameplan: rebalancing the life portfolio towards capital-light with review of existing portfolios, maximum growth in mature P&C markets and good inroads into growth markets and an expansion of the product line-up in asset management.

In the P&C segment, underwriting profits slipped, only leading to the EBIT gain thanks to improved investment earnings.

Gross written premiums in P&C grew 7.0% to €24.15 billion. Gains included 4.9% growth in motor focused in the central European ACEE region, Argentina, France and Italy. Non-motor grew 7.5% with gains visible across the entire group, management said.

The combined ratio in P&C rose 1.7 percentage points to 90.8%, including 2.2 percentage points (pps) from nat cat, 0.7 pps above the prior year impact. Management considers the impact "limited" given a strong reinsurance position.

The ongoing reduction in Covid-19 restrictions was also said to have hit P&C loss ratios beyond the hit from nat cat.

Life brought a 6.0% gain in gross written premiums to €51.7 billion, and would have been up 9.5% excluding the €1.5 billion prior year impact of a one-off pension deal, management said.

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