January 10, 2013 5:28 pm

Generali to outline emerging markets push

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Generali will next week unveil plans to strengthen its focus on developing markets, such as China and Latin America, as it seeks to assert “a clear, executable strategy” under its new chief executive Mario Greco after more than a year of boardroom turbulence.

The Italian insurer’s new plan, for the first time to be presented in London, comes as it this week said it would buy out the 49 per cent of Generali-PPF it does not already own for €2.5bn as it targets expansion in central and eastern Europe alongside other growth markets.

Big global insurers have for years used the cash generated in mature markets to fund expansion in faster-growing regions, many of which have low levels of insurance penetration.

“We are investing in growth markets and we will use the core markets to finance growth in the developing markets,” Mr Greco, a former executive at Zurich Financial Services, told investors this week ahead of the unveiling of the plan.

Shares in insurers that have successfully grown in emerging markets, such as UK-based Prudential, which refers to southeast Asia as its “sweet spot”, tend to trade at a premium to peers. The Prudential’s Asian division in 2011 became the biggest contributor to group profits for the first time.

In the five months since his arrival at Generali, Mr Greco has undertaken a shake-up of Europe’s third-largest insurer by premiums after shareholders who were unhappy about the company’s share price ousted its former chairman and chief executive. The shares have risen nearly 50 per cent in the past six months since the announcement of Mr Greco’s appointment.

Mr Greco, who has pledged to provide a “simple, clear and executable strategy”, is expected to provide more detail on the shake-up on Monday with the naming of a new chief operating office and chief investment officer.

He will deliver details on cost-cutting, including the impact on Italy since he has cut Generali’s eight competing brands focusing on just three.

The group, which operates in 60 countries, will also update investors about the sale of its Swiss BSI unit and Generali US life reinsurance. This Friday is the deadline for non-binding offers, and several expression of interest have been received, Mr Greco said this week.

These changes are set against a backdrop of increasing competition in Generali’s core market of Italy where it faces a more significant local competitor in Unipol after the latter merged with rival Fondiaria-Sai last year.

Deutsche Bank analysts, who have a “buy” on Generali shares, expect cost savings, improved underwriting, and disposals to feature as the group details initiatives to improve profitability and strengthen the balance sheet. They believe a successfully executed plan could increase value by up to 50 per cent.

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