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Generali wants to bolster position in Europe with bolt-on M&A, says CEO

Generali is aiming to boost its position in European insurance through bolt-on acquisitions, CEO Philippe Donnet said March 14.

It will also look for deals beyond Europe to grow its asset management business, the CEO told analysts on a conference call for Generali's full-year 2018 earnings. Responding to a question about specific geographic targets or areas of focus, Donnet said that on the insurance side of the business, "we said that we would further strengthen our leadership position in Europe, so Europe remains an essential geography."

From an insurance business lines perspective, Donnet said Generali would "definitely consider" deals on the property and casualty side, as well as health, assistance protection business and unit-linked business. In asset management, Donnet said the company would also look outside Europe, including the U.S. and Asia, but added that it would stick to its strategy of focusing on "the acquisition of competence, rather than the acquisition of volumes."

Generali's general manager, Frédéric de Courtois, noted that the insurer was keen to ensure that any deals were a strategic, financial and cultural fit and that "we want to remain extremely disciplined."

Generali has completed a series of bolt-on acquisitions in recent months. It closed the purchase of Polish insurer Concordia in November 2018 and in February 2019 bought U.S. travel insurance underwriting agency Trip Mate from broking group Arthur J. Gallagher through its Europ Assistance unit in February; completed the acquisition of Slovenian insurer Adriatic Slovenica; and wrapped up the purchase of a majority stake in French asset manager Sycomore.

De Courtois declined to give a precise number for how much Generali had spent on its recent bolt-on acquisitions, but said it was "in the hundreds of millions" of euros.

Commercial fix

Generali boosted group net profit to €2.31 billion in 2018 from €2.11 billion in 2017 and increased its dividend per share by 5.9% to 90 cents. Donnet said the company had "over-delivered" on its financial goals for the 2015 to 2018 period, beating targets for cumulative net operating cash, cumulative dividends and average operating return on equity.

But one area where the insurer saw a downturn was in its €2 billion premium global corporate and commercial segment, which focuses on specialist insurance for mid-sized companies. De Courtois conceded that "last year was not a good year" for the division, as, like several of its peers, it had been hit by a series of man-made claims. He added that the division had reported a combined ratio, a key measure of underwriting profitability, of between 101% and 102% for the year.

He also said, however, that the company had implemented a plan to be even more selective on underwriting. He said: "We believe that this business unit can be profitable if it remains very strict on the underwriting and very focused on specialties and [mid-corporate]."

Shares in General were up just short of 1.1% in late afternoon trading March 14, broadly in line with the STOXX Europe 600 Insurance index.