Generali rival vows to ‘awaken the lion’ with bold new plan to double earnings growth

Key investors seeking to wrest Italian insurance group  Generali from the control of Mediobanca at an April shareholder meeting believe they can beat incumbent management at the growth and profits game on both strong M&A and notable cost cutting while still lining investor pockets.

Generali could double its offer to shareholders and deliver annual EPS growth in excess of 14%, including over 11% organic, well above the 6-8% growth offered in the latest strategy from current management, the rival investor group said.

Current management delivered a “low ambition” plan which “under-promises” vis-a-vis Generali potential, according to the investor group that believes EPS growth of 5-6% could be achieved on capital management alone.

“We are not afraid of illustrating a bold ambition of additional 3-4 [percentage points] from inorganic M&A,” the rival shareholder group said in a presentation of its strategic view, titled ‘Awakening the lion’.  A potential M&A war chest could run upwards of €7 billion, more than twice the €3 billion penciled in by current management.

The organic contribution, beyond 2021 M&A already done, could be as high as 8-9 percentage points on growth “of which a significant component is related to cost efficiency.”

The group claims Generali is a sleeper under current management, with “unsolved gaps” in business mix, cost performance, geographic footprint, technology and growth.

The presentation is the latest salvo from major shareholder Francesco Caltagirone who leads several allies in a running bid to wrest the insurer from the grip of Mediobanca in a battle that dates at least to a fractured 2021 shareholder meeting.

Caltagirone later brought fellow billionaire Leonardo Del Vecchio and others on board to build votes for the pending rematch. He has now assembled a list of independent candidates who would join him on a revamped supervisory board and has identified Generali’s top officer for Austria and CEE, Luciano Cirina, as his pick to replace CEO Philippe Donnet.  Cirina was promptly suspended from his post on the news. Caltagirone stormed out of his own board post back in January.

Caltagirone’s presentation is rife with suggestion that the Mediobanca relationship is holding Generali back. Mediobanca brings “underlying conflicts of interest” and needs to be countered with “the most stringent standards and transparency on corporate governance,” the presentation claims.

" Generali must be ‘freed’ from the influence of a single shareholder and it must be ensured that the choices are only aimed at creating value for all shareholders."

Performance under Donnet has lagged chief rivals and Generali risks leaving the “Great Four Club,” the rival group says. Generali showed compound annual growth in GWP of ~0.4% vs. an average of ~1.5% for Allianz, AXA and Zurich while EPS growth at neighborhood 5.6% lagged the ~7.6% from the peer group.

The Caltagirone prescription: “review and rationalize” the geographic footprint to focus on growth and profitability opportunities, while potentially freeing up resources for new directions. Likewise in market segments, Caltagirone would focus management on priority areas such as SME and mid-market, health and asset management.  Top targets: China and India plus US asset management.

OPEX can come down to the tune of €600 million by 2024, bringing the cost to income ratio down 9 pps to 55% by streamlining and simplifying a “heterogeneous” and “Complex” group structure. Headcount or other OPEX cuts were not specified.

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