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Generali feels 'opportunistic' about exposure to Monte dei Paschi, says CEO

Generali will likely become the largest private sector shareholder in Banca Monte dei Paschi di Siena SpA and will approach its holdings in the troubled lender with an "opportunistic" attitude, CEO Philippe Donnet said during a second-quarter earnings call.

The Italian state is taking over the bank after rescuing it from collapse. Generali owns a large amount of Monte dei Paschi debt, which is being converted into equity, but since that process has not been concluded yet, the Italian insurer does not know what percentage of the lender it will end up controlling, Donnet said.

"As of today, we don't know exactly how much will be our share in the capital of Monte dei Paschi — we believe we will be the second shareholder after the Italian state, very far from the Italian state," the CEO said, suggesting that Generali will wait and see how the relisted bank performs on the Milan stock exchange before deciding whether to hold or sell its stake.

"This is not a strategic participation for us," he added. "Nevertheless, we will manage this investment with the objective of maximizing [its value]. So, we will exit if it's better for us to exit; we will stay if it is better for us to stay. So, we'll be very opportunistic in managing this investment."

Cautious optimism

Meanwhile, the insurer sees reasons for cautious optimism in the Italian motor market even though conditions have worsened slightly in recent months, leading to a 4.9% decrease in the company's property and casualty takings in Italy, CFO Luigi Lubelli told analysts.

Calling the Italian market "challenging at the moment," he said: "Relative to the market, we actually think that our companies are doing pretty well in the sense that in nonlife, we are holding our ground — we're certainly quite disciplined in our underwriting."

A long-standing "war on prices" in Italy was the cause for the decline in motor-related earnings, Donnet said. "[But we] continue seeing positive signals in terms of pricing in the motor new business in Italy," he added, though he cautioned that it would take time before any gains find their way to Generali's bottom line.

The company increased motor insurance prices in August and July, Donnet said, while diminishing the discount on its portfolio. "All this has a positive impact on the average premium," he told analysts.

Generali's net result attributable to the group was €1.22 billion for the first half of 2017, up from €1.18 billion a year earlier in 2016. The company's economic solvency ratio, which represents the economic view of its capital, stood at 207% as of June 30, compared to 194% at the end of 2016.