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European storms weigh on Generali’s H1 P&C results

3rd August 2021 - Author: Matt Sheehan

Generali has recorded a 3.6% decrease in its property and casualty (P&C) operating result for the first half of 2021, after booking €218 million of natural catastrophe claims during the period.

generaliThis compares with €118 million of claims for H1 2020, as losses this year were boosted by a storm in Spain in January, and subsequent storms that affected central Europe in June.

The company attributed the lower P&C operating result of €1,256 million to a 5.6% contraction in the investment result due to the low interest rate environment. The P&C technical result likewise fell slightly by 1.5%.

Despite this, the P&C combined ratio remained relatively stable at 89.7%, compared with 89.5% in H1 of last year.

It’s also worth noting that the €218 million of catastrophe losses in H1 represents Generali’s net total after reinsurance, as the June storms triggered the company’s per event reinsurance coverage, which is tapped for losses exceeding €100 million.

Looking at the overall picture, Generali’s operating result rose by 10.4% to €3 billion thanks to the positive performance of its life, asset management and holding and other businesses segments.

Gross written premiums also increased by 5.5% to €38 billion, up in both the life segment at 5.8% and the P&C segment at 4.9%.

For the P&C segment, the increase in premiums reflected positive development in both the motor line (+4.7%) and non-motor line (+4.9%), as well as a return to growth for Europ Assistance at 5.2%, following disruption to the travel insurance sector last year.

The non-operating result was a loss of €496 million, versus a loss of €941 million in 1H 2020, with the improvement attributed to the lower impairments on available for sale investments – which were particularly affected by the impact of the pandemic on financial markets last year.

Looking ahead, Generali foresees a recovery of the global economy in 2021, sustained by expansive monetary and fiscal policies, which it believes will have a positive impact on the insurance sector as a whole.

In this context, the company plans to continue with its strategy to rebalance its life portfolio in order to further increase its profitability and with a more efficient capital allocation.

In the P&C segment, Generali’s objective is to maintain the positive trend of premiums accompanied by profitability, despite the impact of natural catastrophe claims in July in continental Europe and, at the same time, to gain ground in high potential markets, by expanding its presence.

Accordingly, the firm has confirmed its target of annual compound growth in 2018-2021 of earnings per share of between 6% and 8%. In addition, the 2021 RoE is expected to be higher than 11.5%, with a cumulative dividend target for 2019-2021 of between € 4.5-5 billion.

“Today’s excellent results confirm that we are fully on track to successfully deliver the ambitious targets of the current ‘Generali 2021’ plan, even in this very challenging environment,” said Generali Group CEO Philippe Donnet.

“The significant growth achieved in the first six months of the year strengthens Generali’s position as the European leader, thanks to our operational excellence, the acceleration of our digital innovation and the quality of our distribution network,” Donnet continued.

“We will continue to forge ahead with an even stronger focus on our Lifetime Partner ambition, leveraging on the enthusiasm, passion and energy of our 72,000 colleagues and 165,000 agents worldwide, and we look forward to presenting the new plan at the Investor Day on December 15th.”

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