Franklin Templeton’s recent outburst against Generali makes it the second fund manager openly to attack the Italian insurer but activist investors are still a long way from forcing any change at Europe’s third largest insurer.
Algebris Investments, the UK hedge fund, said in October it wanted corporate governance changes at Generali because it believed the Italian insurer was being held back by its unusual arrangements which include two chief executives. It wants Antoine Bernheim, Generali chairman, removed.
Now Franklin of the US has joined in the call for change, and criticised plans by Generali possibly to acquire assets in the US and other English-speaking countries. It says Generali should not be diverted into mature markets where it has no competitive advantage.
Such activist shareholder demands are very rare in Italy and Generali is the first pillar of the Italian corporate establishment to come under the sort of attack witnessed at ABN Amro in the Netherlands or HSBC in the UK.
But even if other investment funds join in the chorus for reform, they have little chance of success, for now.
That is because Generali, like almost every Italian company, is in effect controlled by a small handful of large shareholders. While it is interesting that outside hedge funds feel emboldened enough to test the system, it is not crumbling yet.
Mediobanca, the Italian investment bank which in the past co-ordinated cross-shareholdings at the most important Italian companies, is Generali’s largest shareholder with 15.7 per cent of the shares. Cesare Geronzi, the chairman of Medio-banca’s supervisory board, said last month there was no need for a change of personnel at Generali.
His comments have been shared by Leonardo Del Vecchio, a Generali director and shareholder who founded Luxottica, the sunglasses company. The board in general said in December that Generali’s good results demonstrated that its governance, however unusual, was working and did not need to be changed.
The unpredictable state of markets is after all playing into Generali’s famously conservative hands.
Giovanni Perissinotto, one of the chief executives, told a conference last week: “In the turbulent times we’re living through, Generali’s share price has strongly outperformed the European insurance sector. Indeed we are proud of our track record as a safe haven.”
People close to the company acknowledge that in boom times Generali can look staid and lacking in vision. As soon as the markets turn down, it becomes attractive. Mr Perissinotto said the current share performance “has not come about by chance. It is the result of some fundamental strategic choices.”
He resisted investor calls for a rush to a transformational deal or other big changes. “For us, maximising value from investments does not necessarily mean maximising financial returns in any single year ... Sometimes that has not been fashionable. But we are not driven by fashion.”
Nonetheless Generali is still going to be the subject of speculation up to its annual meeting in April. Algebris and others could submit motions calling for change, and by then they could have been joined by other fund managers. Davide Serra at Algebris said this week: “The issues raised in Franklin Templeton’s and Algebris’ letters found a great echo among institutional investors.”
Meanwhile, financiers and others in northern Italy are gossiping about behind-the-scenes manoeuvring in spite of public declarations of support for Mr Bernheim by the Generali board.
Replacements for Mr Bernheim have been discussed in the Italian press, and the chairman, who is French, has hardly helped calm speculation. He has stoked the febrile environment by talking about prominent Italian shareholders plotting against him. “I will strive to protect the company from this Mafia attack,” he said recently.