Generali (BIT:G)
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By Giovanni Legorano

MILAN--Italian insurance giant Assicurazioni Generali SpA's (G.MI) net profit declined by 18% in the third quarter, hit mainly by lower income at its life business as market turbulence took its toll.

Trieste-based Generali, Europe's No. 3 insurer, said Thursday that net profit declined to 420 million euros (EUR457 million) in the third quarter, down from EUR513 million in the year-earlier period.

Operating income for the quarter dropped by 9% to EUR1.1 billion.

The operating income of its life business declined by 15% to EUR625 million in the third quarter, compared with the same period a year earlier. This was partly offset by its property and casualty business, which grew by 11% to EUR501 million, mainly as a result of lower claims compared with premiums collected.

Chief Financial Officer Alberto Minali blamed the insurer's lower net profit on the poor performance of financial markets, saying the life business was hit by declining capital gains and higher impairments of its investments. This, in turn, hit the insurer's net profit.

On a brighter side, he said the quality of the business generated by the insurer's life sector was improving, with higher sales of business protection and unit-linked insurance products, which absorbed less capital.

"In the coming months of the year the group will continue to take all actions aimed at improving the overall operating result, therefore expecting a net profit significantly higher than 2014," Generali said.

Generali said its capital position, which has been a source of concern in recent years, had improved during the first nine months of the year.

A ratio based on an internal model, in line with Solvency 2 parameters decided by international regulators, stood at 196% at the end of the quarter, compared with 186% at the end of last year.

Mr. Minali said this level is more than adequate for the risks to which the insurer's balance sheet is exposed.

In May, the company outlined plans for a big commercial push in Europe, Asia and Latin America. The plan aims to improve cash-flow in the next four years, with gains to be returned to the Italian insurer's shareholders through fatter dividends rather than deployed for spending on acquisitions.

At the time, the company said the combination of new measures should generate cumulative net free cash-flow of more than EUR7 billion between 2015 and 2018, equivalent to around EUR1.8 billion a year. Last year the company generated EUR1.2 billion in cash.

Chief Financial Officer Alberto Minali said on Thursday that cash generation is proceeding according to the company's plans.

The new cash will be used to improve cash returns for shareholders. Generali aims to raise the dividend payout to EUR5 billion for four years of the plan, compared with the EUR930 million, or EUR0.60 a share, paid out on last year's earnings. While achieving these targets, Generali has committed to generating a return on equity of more than 13%.

This week the Financial Stability Board replaced Generali with Dutch insurer Aegon NV on its list of insurers that are considered "too big to fail."

Mr. Minali said the company welcomed this decision, saying it confirmed the work done to refocus Generali on its core insurance business and to strengthen its balance sheet.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

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(END) Dow Jones Newswires

November 05, 2015 03:43 ET (08:43 GMT)