January 14, 2013 4:44 pm

New chief seeks ‘revolution’ at Generali

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Mario Greco©Bloomberg

Mario Greco: 'a fundamental year for the turnround'

The new head of Generali issued a scathing critique of the Italian insurer’s former management as he set out a plan to revive the fortunes of a group he said had “lost its way”.

Mario Greco, who was appointed chief executive of Generali in August after several months of boardroom turbulence, said the business had been held back by “opaque governance” and “a lack of transparency”.

The former Zurich Financial Services executive set out a series of financial targets on Monday, pledging to cut €600m of costs by the end of 2015 and increase Generali’s exposure to property and casualty insurance.

“We want to introduce at Generali a revolution of discipline, simplicity and focus,” said Mr Greco. “This can once again be an insurance company that consistently outperforms the market.”

Shares in Generali, which had already rallied more than two-fifths in the six months before the investor presentation on Monday, were down 3 per cent to €14.10 at the close.

“We welcome the new targets, but do not believe they are overly ambitious,” said Michael Klien, analyst at Nomura.

Mr Greco told the investors gathered in London that Generali planned to raise about €4bn by 2015 through asset sales, indicating that further disposals were on the cards.

The group has already sold its controlling stake in Israeli insurance company Migdal for €705m and analysts expect it to raise a further €2.5bn by disposing of its Swiss BSI unit and Generali US life reinsurance.

Generali declined to say what other businesses were on the block although equity analysts pointed to markets in which the group has a limited presence such as the Netherlands and Belgium.

Mr Greco said the group had “recently lost some of its financial discipline” in life insurance, which was “not as profitable as it could or should be” and where the group would prioritise “profitability rather than volumes”.

He said Generali had an “underweight” exposure to property and casualty insurance compared with its peers and planned to boost these operations’ contribution to group operating profits from little more than a third to about half.

General is planning to use the cash it generates in mature markets of western Europe to expand in the faster-growing regions of central and eastern Europe and Asia. The group is targeting more than €2bn of cash generation and a 160 per cent solvency ratio by 2015.

The company also unveiled two new executive appointments on Monday.

Carsten Schildknecht is joining as chief operating officer from Deutsche Bank, where he held the same position at the bank’s wealth management and private banking division.

Nikhil Srinivasan, chief investment officer at Generali’s German rival Allianz, will assume the same role at the Italian company.

Generali said it would target an operating return on equity of 13 per cent “over the cycle”. The cost savings would come from reorganising the Italian business and other efficiency drives include centralising IT and procurement.

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