November 12, 2012 9:48 pm

Generali to target emerging markets

Generali will sell non-strategic assets in the next year to free up funds to invest in its core business of selling insurance as it expands in China and other emerging markets, says Mario Greco, chief executive of Europe’s third-largest insurer by premiums.

The planned asset disposals will be in addition to the already announced sale of Generali’s US reinsurance subsidiary and Swiss private bank BSI, Mr Greco told the Financial Times in his first interview since taking the helm in August. Investments will be directed towards stimulating organic growth rather than acquisitions, he says.

“For BSI and US reinsurance the banks are contacting potential buyers, but there is more to be sold and the concept is the same – get rid of businesses that are not core,” says Mr Greco, the former head of general insurance at Zurich Insurance Group. “In this business you have to be focused. You can’t do everything and you can’t be everywhere. You have to make choices and that is what we are doing now.”

Those choices, part of a strategic review Mr Greco and his closest managers have been working on since he arrived, will be presented to investors on January 14 in London.

He would not comment on his plans for Generali’s stakes in an array of Italian companies including investment bank Mediobanca, publisher RCS MediaGroup, tyremaker Pirelli and Telecom Italia. Those stakes, which together are worth more than €1bn, are locked up for differing periods and hark back to a time when intricate cross-shareholdings created an almost impenetrable web designed to keep out unwanted suitors.

“We have the cash, the business is making a profit and we have other assets that are not core that can be sold to fund our needs for the future,” says Mr Greco, quashing any suggestion he might ask investors for fresh funds to shore up capital. “What we wouldn’t be able to do by ourselves is grow through acquisitions. I wouldn’t be shy about going to the market to say, ‘there is a fantastic opportunity in China, would you give me the capital to do this?’”

While Mr Greco would not say specifically where Generali will invest – the company is present in 60 countries with 85 per cent of its 82,000 employees working outside Italy – he made clear what his priorities are.

“We have 70 per cent of our business in western Europe, that is not reflective of the world economy and we need to adjust,” says Mr Greco. “Western Europe doesn’t have 70 per cent of the people in the world, it doesn’t even have 70 per cent of the middle class in the world. We must invest where the middle class in the world is based and this is in the growing emerging parts of the world. China and the rest of Asia, eastern Europe and Latin America.”

Generali units that support the insurance business, such as asset manager Banca Generali, under which the insurer is moving all its trading activities, will not be put on the block, he says.

Among the assets to sort out is a 51 per cent stake in Generali PPF, a holding company with insurance businesses in 14 eastern European countries. Generali and its Czech partner valued PPF at €5.1bn when they created the company five years ago by pooling assets.

“My approach is to ask how strategic is it really?” says Mr Greco. “How much do we plan to grow in the coming years in eastern Europe compared with India, Brazil and China? What we are assessing right now is how promising the economies of eastern Europe are.”

Last month Mr Greco became sole chief executive after a period of more than 15 years in which the insurer had two people in the top job. In a move he says is in line with other large international insurance companies, he also created a management committee of 10 senior executives who report directly to him.

Mediobanca, which has often used its position as Generali’s largest shareholder to meddle in the insurer’s affairs, has not made any effort to influence decisions since his arrival, says Mr Greco.

“I’m aware of the history and just like everybody else I hear the stories of the past, but today Generali is run as a public company,” says Mr Greco. “Mediobanca is a shareholder like all the others.

“All shareholders have the same rights, which we respect. The board knew I wouldn’t have been a good choice for the job if the idea was to have any one shareholder dictating policy.” 

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