Assicurazioni Generali S.p.A. (G) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group Half Year 2026 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agencies Relations. Please go ahead, sir.

Hello, everyone, and thank you for joining our first half 2026 results call. Here with us today, we have the Group CEO, Philippe Donnet; the Deputy Group CEO, Giulio Terzariol; the Group General Manager, Marco Sesana; and the Group CFO, Cristiano Borean. Before opening for Q&A, let me hand over to Philippe for some opening remarks.

Thank you, Fabio, and thanks to all of you for joining this call. Generali's excellent financial results for the first half of 2026 demonstrate the strength, profitability and very solid capital position of our group once again. We have now reached the halfway mark in the execution of Lifetime Partner 27, driving excellence, and these results reinforce our confidence in our ability to successfully deliver our fourth strategic plan in a row. I am going to focus on 5 key messages. First, we recorded a strong performance across all key metrics, thanks to the robust contribution of every business segment. Gross written premium reached EUR 53.4 billion, up 5.8% from half year 2025, driven by both Life and Property Casualty. The operating result achieved excellent growth to EUR 4.5 billion, up 11.2%, again, thanks to all business segments. This led to a 13.7% progress in the adjusted net result to EUR 2.5 billion, leading to an adjusted earnings per share growth of 14.3%. And thanks to our sound capital generation, we closed the second quarter with a very solid Solvency II ratio at 216%, notwithstanding the impact of the EUR 500 million buyback in the end of the subordinated bond grandfathering regime. Second, our Life business maintained a very positive growth trajectory, with the operating result increased to EUR 2.2 billion, up 8.8%. Net inflows were very strong, exceeding EUR 8.3 billion. This is a record first half figure achieved thanks to the positive contribution from all business lines. New business value grew significantly by 21.1%, reaching EUR 1.9 billion, benefiting from both higher volumes and improved overall profitability. Our new business margin expanded materially to 5.86%, mainly thanks to the positive impact of a more favorable new mix -- new business mix and enhanced product features. Third, the Property and Casualty operating results rose by 4.7% to over EUR 2.1 billion. This was achieved despite an additional EUR 425 million in both natural catastrophes and man-made claims compared with the first half of 2025. The combined ratio stood at 91.5% from 91% at half year 2025, with a 3.6 percentage point impact from nat cat. The natural catastrophes we witnessed this year, including the recent severe and wildfires in Spain and France, further highlight the importance of closing protection gaps and improving climate change preparedness across the world. In July 2026 alone, our preliminary assessment is that nat cat impacted our business for around EUR 300 million, with around EUR 60 additional million related to man-made events. Beyond large loss events, the current inflationary trend is another factor that we will reflect in our pricing, in particular, in non-motor. Fourth, the operating result of Asset and Wealth Management recorded healthy growth of 31.3% year-on-year. This was driven by the robust underlying performance of both Asset Management and Banca Generali. The segment generated around 16% of the group operating result, underscoring the benefit of a diversified and integrated business model. Moving to my fifth and final point. As the execution and delivery of our plan remain our top priorities, we also continue to expand our capabilities in key strategic growth areas. In this context, I would like to say a few words about Redion, the new brand for our Global Care platform. Redion brings together leading capabilities across employee benefits, assistance, health and mobility, serving multinational companies, financial institutions and millions of customers around the world. It generates annual business volumes of over EUR 5.8 billion, with more than 12,000 employees and operations in over 190 countries. Redion is one of the very few truly global players in this field, being the leading employee benefits network and the second largest player in travel insurance and assistance. Our ambition is to further leverage these leadership positions and become the world's premier care partner. Redion stands out for both its scale and technology. It's data and AI-driven insurtech platform that combines Generali's reach and strength with the agility and innovation of leading digital players. Building on this, we are now scaling embedded insurance, a new B2B2C growth engine that distributes seamless protection within our partners' digital journeys from travel and e-commerce to financial services. This allows us to turn our global distribution relationship into a new and increasingly valuable source of profitable growth. Our business model benefits from long-term structural growth drivers, a rising demand for travel insurance and assistance, employee benefits and embedded and integrated service ecosystems. This is why we are truly confident and excited about the opportunities for Redion, and we will, of course, provide regular updates on its progress. In conclusion, the quality of our performance in the first 6 months of this year reflects the disciplined execution across our 3 key strategic priorities: excellence in our customer relationships, in our core capabilities and in our group operating model. Furthermore, the insurance sector trends on which we built our plan, are proving increasingly relevant, with some of them even accelerating. This is particularly true when it comes to new needs deriving from major long-term social and environmental trends, including an aging population and insufficient public health care, the protection gap related to the increase in extreme weather events due to climate change as well as changing customer expectations driven by market and technological shifts. It is a constantly evolving environment that requires us to stay agile, innovative and forward thinking, to lead and to deliver lasting value to our customers as their lifetime partner into all our stakeholders as a stand-alone group. The 3 foundations that underpin the plan are key to this, our talented people and the structure implementation of AI and data are allowing our business units to strengthen their core technical capabilities in underwriting while further improving the quality of service to our customers and distribution partners. We also continue to demonstrate the quality and consistency of our approach to sustainability. The Financial Times recently recognize us as one of the Europe's climate leaders, while TIME and Newsweek included us in their rankings of the world's most sustainable and greenest companies. We are proud of this important recognition, which makes us even more determined to keep driving profitable growth while supporting a green and just transition and strengthening societal resilience. Finally, before we open our Q&A, I'm pleased to inform you that we will be holding an Investor Day on November 18 in London. This will give us the chance to further update you on the execution of our plan as well as to showcase in detail, some of our strategic initiatives. You will receive all the details in the upcoming weeks, and we look forward to welcoming you there. I thank you very much again for your continued interest in Generali, and with all my colleagues, we are now happy to take your questions.

[Operator Instructions] The first question is from Michael Huttner, Berenberg.

Fantastic. I have 2 questions. One, a little bit cheeky. So the -- I think on the last call, Giulio said that he is the [ metro ] quite often to go and visit UniCredit to discuss business sales and stuff. And of course, today, Allianz also reports -- Allianz, sadly for them, they lost a UniCredit franchise. Is that the one that you're going to pick up? Or are there plans here? Anything you could say would be quite interesting. And then the other one is standard, you talked about inflation and pricing. Could you give us a few numbers on what inflation we're seeing? The feeling I have is inflation has picked up. Pricing is still lagging, but I don't know how you're seeing it.

Thank you very much, Michael. The first question is for Philippe. The second is for Giulio and Marco.

Sorry, Philippe. I didn't say I go to UniCredit often. I said there are 5 train stops between UniCredit and Allianz and Generali. That's a different story, okay?

So we are already doing significant business with UniCredit, including bancassurance distribution in Central and Eastern Europe, including some asset management business as well. And definitely, we would be happy to expand the business we are doing with them as we would be happy to investigate any other kind of business opportunities in Italy and out of Italy.

Okay. So on the price environment, I can tell you what we saw in the first 6 months. On the motor side, we see basically pricing early up -- holding up pretty nicely against a risk premium. So we have a little bit of a positive spread. And when we look at the loss trends part, we see basically, that the inflation is more or less in line with what we saw last year. So we are speaking of inflation between 4% and 5%, but we see also frequency decreasing. I don't know if you remember, in the first quarter, we told you that frequency was going up a bit, but was also related to the difference in the weather-related events between the first quarter 2026 and the first quarter 2025. And now with the 6 months, we see this sort of normalization. So I would say inflation wise, very stable compared to what we saw last year. From a frequency point of view, I will say also, still a decrease in frequency. So the no motor side, I would say, in general, same story. Just the country where we see a little bit of a pickup of inflation in non-motor, which is Germany. We spoke about that also, if you remember in end of June, and we are taking rate increases. But just to remind you, the combined ratio in non-motor in Germany were below 90. So we are speaking anyway of a very strong performance. But as always, we try to keep the marginality as much as we can.

So maybe adding a few words. So we have a close monitoring about all the drivers that can cause inflation. We have -- we are monitoring all the spare parts across Europe, across brands, across Asia. So we look at different drivers. We look at medical rates if they're going up. So at the moment, we -- as Giulio was saying, we broadly see the market that is constant in the way we see inflation. So around that 4% that Giulio was mentioning. There might be inflation. We are monitoring. We don't see it yet. We are preparing. So we are -- we know that as soon as we see inflation, we know how to act. By the way, I just want to remind you also that in non-motor, a large part of the portfolio is indexed to inflation. So there is also an automatic, I would say, recovery that we can make. So at the moment, we see that the market is expecting that, we don't see yet in our portfolio, but we monitor and look and we know how to act if we see the sign of inflation.

The next question is from Fahad Changazi, Kepler Cheuvreux.

Could I just follow up on P&C and inflation? I mean, again, on Q1, you also said that you would look at -- to make a decision on volume growth in P&C in H2. So it looks like it's -- Germany's sort of the odd one out. But in terms of other countries, where are you standing in terms of P&C volume growth? And the second question is on capital. The SCR picked up in both life and non-life, presumably that is normal business growth. But you will still end up very strong, some situation for year '26, and we have the Solvency II review on 30th January. Is it fair to say you will reassess your capital levels at full year results? And also, I suppose will you still want to operate at the top end of the range?

Thank you very much, Fahad. The first question is for Giulio, while the second one is for Cristiano.

Yes. So speaking about the volume growth, I can tell you, first of all, speaking for the motor, non-motor in aggregates, I would say the 20% of our growth in motor is coming from volume, so a little bit less than 20%. When we look at non-motor, including also excellent health and disability, we are speaking of almost 1/3 of growth coming from volume. When I look at the geography, I can tell you that we see -- actually I'm speaking about motor right now, a good development of volume across the board. I just, I would say, 3 exception. One in Switzerland because we do a lot of pruning. And you can see the improvement in the combined ratio is remarkable. Another one in Spain, we are also doing pruning. We're getting to a different better level of combination. And in Italy, if you compare this year -- this quarter, this 6 months to last year, 6 months, you see a decrease. But in reality, the situation is stabilizing. And here, we go back that we are managing clearly volume and profitability and try to find the right balance, and we have a very good performance on our motor book in Italy. So I would say all the other countries, you can see a nice good growth in volume. When we look at non-motor, we'll say you see growth everywhere, with the exception of Switzerland, where we are doing a lot of pruning obviously. And also in this case, you can see the improvement. So overall, I would say, from a volume point of view, there is definitely a momentum which is stronger compared to what we had a couple of years ago.

Yes. Regarding capital, Fahad. So I think that you are seeing the push for the business growth, as we were saying already. Clearly, depending on the mix of also this growth, when you have like we had in net inflow, especially this health here, even distribution between all the lines, where traditionals usually have a slightly higher capital absorption. This will explain some part of the capital put at work for the new business, which is coherent with the positive environment and the future deployment for growth that we are having -- foreseen already the Solvency II review. I reconfirm that in end of January 2027, that Solvency II review will enter into practice. We will have 15 percentage points uplift. For sure, on the final year '26 results, we will show a comparative starting point, which is a common practice, I think, among the all industry we discussed altogether, I think as well in the forum. And the -- regarding the level of the risk appetite framework, we confirm the level we had, as we discussed in the Generali exploring event of March. So our top ceiling element of [ 230 ] still is confirmed. Our idea is to put this capital at work in 4 forms. I repeat it. We are already consuming a little bit of capital from SAA optimization, something in the order of 2 points per quarter. This quarter, we did slightly less because of the positive rate environment, which was not necessity living to obtain the desired target or investment results to push for further risky assets. But in general, we are hinting for 2 points per quarter of SAA optimization. There was also a small event of Belgium downgrade, which accounted for 0.5 percentage point negative effect on solvency. Overall, we will continue to deploy these extra points on 4 drivers. The first one is business growth, as we are already starting. Second one is the investment. SAA, as you said, and we'll continue to invest in the business, in the infrastructure in Europe and overall. And the third one, for sure, will be also in allowing us to have a better mix between the subordinate debt and the senior debt, which is not necessary now as required as capital as in the past. And fourth is, for sure, capital deployment, be it for growth, for M&A or for sure, returning capital to shareholders.

The next question is from William Hawkins at KBW.

Just one topic with a few questions, please. Could you just talk a bit more about your view of the outlook for the new business value? You printed this very strong, in my view, 1.89 billion. So just very short term, can we annualize it? Or could there be some variance in the second half? And then what are you kind of thinking about the longer-term drivers? I always think a big company like you should be growing that number 5% to 10%, but I don't know if I'm kind of off base to the upside or downside. And if you could talk a bit about the drivers because I noticed in the detail, Asia seems to have had a huge step up, which is great. Germany is a bit weaker and Italy and France or in the middle. So yes, just help me on the outlook for new business value, please?

Thank you very much, William. The first question is for Giulio. The second is for both Giulio and Marco.

Thank you, William. So on the new business value, I wouldn't say you can take the number [ do ] times 2 because actually, especially in China, we have a stronger -- much stronger production in the first part of the year. Part of it is always happening because it's linked to the Chinese New Year. So there is a lot of production basically happened in the first quarter. And then also in this situation, there was some [ fire sale ] effect because of a change in the illustration rates in the second quarter. So from that point of view, you need to normalize China from a growth point of view. Otherwise, the rest of the portfolio is evolving actually pretty normally. There is also one other element to consider. It's true. This is not the highest business margin business that we have, but also the protection business of France, which is delivering business value is particularly skewed to the first part of the year. So from that point of view, I wouldn't take a number and [ do ] a times 2. But I can assure to you that we are going to have a much stronger growth in VNB than last year. And definitely, we're going to meet, this year, your objective of 5% to 10% value new business growth is going to be most likely much more for this year. Moving forward, I will say, clearly, one driver of growth in our value new business is going to be Asia. By the way, Asia is not only China. We're also growing our franchise in India. I don't know if you remember, but basically, last year, we found a new joint venture partner. This joint venture partner is a bank. So even if in India, there is not exclusive bancassurance, clearly, we get access to the branches of this bank. And I can tell you that in India, we had also a nice increase in present major business profit and also in value new business. The marginality in India is about 7% right now. And we are doing like, for the 6 months, of about EUR 250 million present value new business premium. So that's also something to consider because I expect this to grow moving forward. And then we go back to Europe, definitely, we see a good dynamic in France. I cannot tell you this is going to go forever, but I would expect to see strong results coming from France also in the coming in the coming months or next year. Italy is doing very nicely from a VNB point of view. If you look at Italy, even if the present value new business premium is down, the value of business growth is 5%, which is definitely a good starting point. And then eventually, clearly, the situation in Germany is going to normalize. So from that point of view, I would say, Asia, clearly leading in terms of growth, but also in Europe, I think we have a strong franchise and we're going to push to have quality value new business growth.

Yes. A couple of points that I think is worth mentioning. So the first is, really, we see the development of Asia, but also coming back to Europe, the dynamics of the demographic in pension and the need of people in this segment are going to be an important driver for us in the future, both, I would say, Germany, Italy, but also the CE is going to be important. The second point that I want to mention is that type of articulation of product that we have developed over the year, we always mention our multi -- our hybrid products, so multiline product. And the ability and the sustained growth of protection inside this product is going to be a driver of sustaining of the new business margin and therefore, of new business value. So we -- as Julie already point out, we always have done choices. And when we have a trade-off, we have done choices on value. And so for example, you see how good was the development of value in Italy, notwithstanding the decrease of volume. So there is always this choice that we make. And so to recap, demographic, pension and also the type of -- that we put on the market will be a core driver of sustained growth of value for the future.

The next question is from Andrew Baker, Goldman Sachs.

First one, I guess, just given the strong investment performance in the second quarter, is there any change to either operating investment guidance on the life side or the investment result guidance you previously given on the P&C side? And then secondly, I guess just taking a step back, the adjusted EPS grew 16% last year, it's up 14% in the first half of this year. There's obviously no change to your targets at this point. But is it fair to assume that you'll come in materially above the top end of the target range for both '26 and, I guess, a 3-year target as well just based on where we sit today?

Thank you Andrew, both questions are for Cristiano.

Andrew, so I would say, speaking about first, the P&C effect in the second quarter, you have observed very positive recurring growth of the investment result where there was a reduction dividend from our private equity side, while the -- but we confirm the guidance given of EUR 1.1 billion so far, but this is a proof point of the very good reinvestment activity done there, together with the growth of the business. The Life side, I think, especially in the second quarter in isolation, there were EUR 25 million more, while in the P&C, there were EUR 24 million less. Here, there are EUR 25 million more on [ Lion River ] dividends and kind of EUR 20 million more of dividends from the funds in China, which are more kind of a timing shift. That's why we still stick to the EUR 900 million operating investment results for Life as well. Going back -- going to the second question related to adjusted EPS. We are not changing target, but we are hinting that we are confident that given this momentum, we will overachieve our target. And I think that this is the most important thing out of it, and it is not the first time we are saying it.

The next question is from Andrea Lisi, Equita.

The first one on the rumors we have read newspapers about a possible merger between the Generali Italian network and Allianz. If you can provide any thoughts on this? And if you think that this can accelerate the synergies and development of the business as well as potentially extend the perimeter of collaboration with Banca Generali? The second question is on new business margin. We have seen a really nice development. And if you think that we can go ahead of the guidance you have provided them so far? And the other is if you -- if there is any possibility if you can provide us an indication how your expectation on net other and operating expenses that have declined quite materially year-on-year. And so any thoughts on this can be -- is appreciated.

Thank you very much, Andrea. On your first question, as always, we never comment on article rumors or speculations. So the second question on the new business margin will be taken by Giulio, while the third one on the nonoperating items is going to be taken by Cristiano.

Sorry, guys. Yes, on the new business margin, clearly, is a nice development. By the way, I want to point out is driven also by a nice increase on new business margin in Italy and also the new business margin development in [ age ] is really favorable. For this year, I would say, definitely, we're going to be at the guidance that we gave you. But we said also many times in the last calls that we are not really focused necessarily on the 6% of business margin. For us, it's more important, also coming back to what William was saying before, to look at the value of new business growth. So if we need to, in some cases, have a little bit of less new business margin to add growth and new business value growth, we are going to do that. I want to give you an example. If you have a target of 6% new business margin, everything, which is below 6% of new business margin can be dilutive from that point of view. So in theory, we should be in a situation where we had to [ forgive ] maybe business at 4%, 5% of business margin just to keep this 6%. So from that point of view, this is not necessarily the best course of action. So yes, we are basically at a 6% level. We might maintain it. But if we see the possibilities to grow the value of new business stronger, then we are going to be happy also to drift away a bit from the 6% level.

Yes, Andrea, regarding the net other nonoperating expenses, as probably you may recall, we had the exploring Generali event on financing in March. We were giving some, let's say, range guidance of EUR 200 million to EUR 300 million on the specific other nonoperating net expenses. Clearly, be -- please mindful that this kind of item is pretty erratic in nature, usually also with seasonality skewed towards the fourth quarter. As well as don't forget that we are also working, and that is the reason why we are -- you are seeing this reducing for allocation, and we did already in the past moved from that item more than EUR 80 million of costs, which are now being split evenly between life and life operating. And we are continuing this journey of extreme rigor around that to really keep a higher, let's say, a much lower capability to use that item in order to concentrate all the operating results impact of all the loading and charges apart from very, very specific topic. There are also other parts, which are -- and parallel to that, would like the amortization of intangibles, and you know, but the more you do activity of growing the business like we did last year, purchasing asset management company MGG, we have amortization of intangible for the client value part, which is a part also of the nonoperating overall results.

The next question is from Gian Luca Ferrari from Mediobanca.

Sorry to go back to Andrea's question on the net other nonoperating expenses. If I recall, probably fourth quarter last year, you had a lot of early retirement plans that affected this line. Are we expecting another kind of round of early retirement in Q4 this year? The second is on cat losses. If you can give a bit more detail on the EUR 300 million you mentioned? And if you can have some kind of guidance for the cat budget for full year 2026?

Thank you, Gian Luca. The first question is for Cristiano, while the second one is for Marco.

Yes. So Gian Luca, first of all, I recall what I was mentioning before was the subcategory other net and operating expenses adjusted the EUR 200 million to EUR 300 million. In the same event of Generali -- Experience Generali, we were hinting between EUR 100 million to EUR 150 million of restructuring charges throughout the year. So far, we are trying to find any possible opportunity. But I think we will have more detail eventually in the 9-month result. If we can accelerate further. I mean for example, the pension reform in Germany is allowing us to work on further accelerating efficiencies, and we are seeing whether this is something that can happen in '26 or in '27. In any case, there is an opportunity that this reform is bringing to streamline further, and so we will be more precise by 9 months.