Generali to generate €1bn by leaving markets; reducing costs by €200m

Generali is aiming to generate at least €1 billion in cash from leaving unattractive markets and plans to reduce costs in mature markets as it prioritises efficiency and profitability over size.

The Italy-based insurer will exit less profitable markets in order to increase operational efficiency, improve capital allocation and mitigate risks. The process is expected to deliver at least €1 billion of cash by 2018. Generali has already started with the disposal of businesses in Guatemala and Lichtenstein.

Furthermore, Generali plans to improve its operating performance by reducing costs, and intends to begin a restructuring, integration and simplification process in mature markets to generate a net reduction in costs of €200 million between 2016 and 2019.

“We will further improve our operating performance and will create long term value,” said Philippe Donnet, CEO of the Generali group. “We’ll improve our efficiency through significant productivity gains and we will optimise our geographical footprint, while securing investments in key growth markets. We will maintain and further improve our leading edge in technical performance and excellent profitability, both on our P&C and life business, in order to overcompensate the effects of a prolonged period of adverse market conditions.”

While Generali reduces costs, investment will be made to boost the business in growth markets.

The company believes the planned actions will help the efficiency and effectiveness of the operating performance by reducing duplication and eliminating overlaps in terms of products, structures, systems and processes.

Donnet commented: “Today we are announcing an increase in the scope of our ambition, to be a leader where we operate and deliver excellence in everything we do. We are starting from a strong base: Generali is financially solid and we have a tight control on a lean cost basis. We have established greater coordination and discipline across business units with local CEOs empowered to monitor the progress of our strategic levers through targeted KPIs. Our goal is leadership in our chosen markets, not measured by size but by profitability.

Generali has confirmed its 2018 targets announced in May 2015. The Group aims to achieve by 2018 a cumulative net free cash flow of more than €7 billion and cumulative dividends of over €5 billion. In reaching these targets, Generali confirms a return on equity (RoE) at more than 13 percent on average over the plan period (2015-2018).