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Generali's Portuguese deal is 'low-risk,' says group general manager

Generali's recently announced deal for Portuguese insurer Seguradoras Unidas SA is a "low-risk acquisition" according to the Italian insurance group's general manager, Frédéric de Courtois.

The transaction, announced mid-July, will make Generali the second-largest nonlife insurer in Portugal.

Speaking to analysts about Generali's first-half 2019 earnings, de Courtois noted that Seguradoras Unidas, commonly known as Tranquilidade, operates in the nonlife and heath markets and distributes its business through agents.

"This is exactly what we know well and we believe the risk of integration and volatility around our business plan is low," he said.

Generali expects Seguradoras Unidas to contribute around €60 million to group profit by 2021. But de Courtois said the contribution should be higher after 2021 because synergies from the deal will have only just started to emerge in that year. He also said the rate of return Generali is expecting from the acquisition is higher than the company's internal hurdle rate.

Generali paid €510 million for Seguradoras Unidas itself; the deal also included service company AdvanceCare, for which the Italian insurer paid €90 million.

Generali reported a 34.6% increase in first-half net profit to €1.79 billion. Excluding profit from discontinued operations, however, profit was up 6.4%. Operating profit improved in all three of Generali's main divisions of life, nonlife and asset management.

On the nonlife side, the company has been shifting its business mix more toward non-motor business. De Courtois said the proportion of non-motor business would continue to grow.

"This is a trend which is here to stay," he said.

One analyst on the call also highlighted a 150-basis-point improvement in Generali's attritional loss ratio, which measures the impact of smaller, business-as-usual on underwriting profitability. De Courtois attributed the improvement to the company's "technical excellence" program, designed to improve underwriting performance, which has been running for more than three years. The improvement was seen across most countries where Generali operates, he added.

While noting that it was difficult to say for certain how sustainable the improvement was, de Courtois said the company was "working hard" to make it so.

"The fact that we see it broad based and consistent with our technical excellence program makes us confident," he said.