strategic goals
Italian insurer Assicurazioni Generali has released a bold
three-year strategic plan that includes increasing net profits to
€3.8 billion ($5.4 billion) by 2009, a 58 percent increase compared
with 2006 and double that achieved in 2005. Another objective is to
increase return on embedded value from 13.1 percent in 2006 to 16
percent in 2009.
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Generali Group joint-CEO Giovanni Perissinotto said the plan builds
on successful restructuring of Generali over the past five years.
“Since 2002 Generali has been reorganised and transformed from a
loose federation of companies into a group producing serial record
results,” said Perissinotto.
He added that many of the goals set out in Generali’s 2006-2008
three-year plan had been achieved in just 18 months. There are now
28 major initiatives running in six countries which are expected to
deliver €61 million additional net profit in 2007. “We are in good
shape to set ourselves new and challenging objectives to take us to
our next phase of development,” said Perissinotto. “Our focus will
be on product innovation, improved efficiency and even higher
customer service and product standards.”
Among goals of the 2006-2008 plan was to achieve group-wide cost
and revenue enhancements of €700 million. The target has now been
upped to €835 million by 2009. In Generali’s largest market, Italy,
a key aspect of its 2007-2009 strategic plan will be full
integration of general insurer Toro Assicurazioni, which Generali
acquired in 2006 for €3.85 billion. The integration is expected to
yield annual cost savings of €160 million by 2009.
In Italy, Generali also plans to extend its territorial coverage,
accelerate the pace of consolidation of back-office operations and
implement a broader range of shared services. To drive initiatives
in Italy, two new posts have been created: chief operating officer
to oversee operations, information technology, claims settlement,
shared services and back-office functions, and head of insurance
development to co-ordinate the market operations of the Italian
business units.
Initiatives in Italy that also include introduction of new products
such as variable annuities are targeted at delivering a CAGR of
just under 10 percent in new business value over the three-year
plan period and annual cost savings of €50 million by 2009.
Generali also has extensive restructuring plans for its operations
in Germany, its second-largest market. The most significant
development will be the merger of its Generali and Volksfürsorge
Versicherungen-branded life and general insurance units in Germany
into a single entity to be named Generali Versicherungen, operating
through agents, brokers and banks.
The new company will have €5.1 billion in annual premium income and
more than 7 million clients, and will rank as Germany’s
fourth-largest life insurer and sixth-largest general insurer.
Generali said changes are designed to reduce complexity, raise
efficiency and improve sales support to traditional distribution
channels.
Certain of Generali’s German units will not be affected by the
reorganisation. Composite insurer Aachener Münchener will continue
to distribute through DVAG, Germany’s largest financial advisor
network, while composite insurer Cosmos Direkt will maintain its
focus on direct channels. There will, however, be full integration
of back-office activities of all German units.
Generali anticipates that the German reorganisation will add €130
million to operating results in 2009, rising to €190 million in the
longer term. The insurer is also looking to achieve a CAGR in new
business value of 8 percent over the three-year plan period. The
restructuring in Germany comes after the completion of a similar
project in France that, according to Generali Group joint-CEO
Sergio Balbinot, yielded “excellent results”.
In addition to the restructuring of its units in Italy and Germany,
Generali plans to extract enhanced returns from the €400 billion in
assets under its management. New initiatives will include:
• implementation of a major review of group-wide investment style
with a view to achieving an integrated management approach;
• launch of an alternative investments platform comprising an
infrastructure investment fund (with investments of €500 million),
a private equity fund (€3.9 billion) and hedge funds (€3.6
billion); and
• creation of a real estate function focused on a global approach
to asset allocation, the launch of new real estate funds,
development of a third-party business and partnerships with other
global real estate specialists.
Generali expects the new investment strategy and the reorganisation
of the real estate function to generate additional profits of €220
million in 2009.
