Generali plots digital path to 4% premium growth and sizeable cost efficiencies in P&C

Italian insurer  Generali will press for property/casualty (P&C) premium growth in excess of 4 percent annually through end-2024 (ex-automotive) as the core growth element of its headline promise to deliver 6-8 percent compound annual EPS growth in its new three-year strategy, top corporate officials said Wednesday, December 15.

"We will deliver robust earnings growth," group CEO Philippe Donnet told investors and analysts of what he calls "a plan that will deliver strong financial performance, best in class customer experience and even greater environmental, social and governance impact."

"Our new plan will see us strengthen our leadership in Europe and our foothold in developing markets," Donnet said, "... while maintaining our unmatched financial strength driven by [earnings] diversification and robust capital management."

Generali's insurance business will provide roughly 2/3 of the projected EPS growth, a combination of "profitable” growth in P&C, further rebalancing of the life portfolio and efficiency gains that should yank as much as 2.5 to 3.0 percentage points off of the cost to income ratio, the presentation showed.

The asset and wealth management segment will deliver roughly 1/6 of the projected EPS growth and capital management and debt management can deliver the final 1/6, the presentation for the Wednesday investor day events showed.

Business diversification will be designed to increase underwriting and fee-based business to 60-65 percent of total earnings by end-2024, a notable gain from the 56 percent now estimated for end-2021 and a desired reduction in reliance on fickle investment earnings.

Growth in P&C will come from "improved market share in segments with significant growth potential" including SME, European senior care and US travel, Donnet indicated in his opening remarks.

Diversification in P&C appears to be diversification away from automotive, but an upsell from existing automotive and other single-product customers may be the key, officials indicated.

"There is a massive opportunity to grow by focusing on our existing customers," Isabelle Conner, group chief marketing & customer officer, said. Some 65 percent of Generali clients are single-product clients, but of the sum, 61 percent say they'd love to consolidate their insurance if there's something in it for them. The remaining 35 percent of Generali clients have an average of 2.8 products.

Conner rolls out a slew of Generali digital platforms greasing customer contact, easing claims, offering product advice and selling add-on services that are improving KPIs and metrics across the board, including existing upsells. Generali will add 10 percentage points to its multi-product client share over three years to hit the 45 percent in the new strategy, she said.

"Today the agent journey often ends at the sale," Connor said of the new vision. "Our goal is to add customer value at every step and generate new business throughout the entire life cycle."

Digital solutions are being plotted throughout the remainder of the operations beyond the sales and service. Generali is plotting a total of €1.1 billion in digital investments through 2024.

Core amongst the impacts will be a 2.5 to 3.0 percentage point decline in the cost to income ratio in the insurance side of the business from an estimated 64 percent for end-2021, officials said.

"We need to keep making some investments to keep improving efficiency in the machine," Cristiano Borean, group chief financial officer, told the event. Generali is also allowing "some cost increase" in key markets, especially Asia.

In Europe, efficiencies can be leveraged sufficient to fully offset not only the impact of inflation, but also the increase in IT investments, he said.

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