Reshaping Generali: Discipline, simplicity and focus

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Morgan Stanley – European Financials Conference
London, 19.03.2013
Mario Greco – Group CEO

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Reshaping Generali: Discipline, simplicity and focus

  1. 1. Morgan Stanley European Financials ConferenceReshaping Generali:Discipline, simplicity and focusMario GrecoGroup Chief Executive Officer Milan, March xxx, 2010 March 19, 2013
  2. 2. Agenda 2 I. Reshaping Generali Page 3 II. Update on strategy & results Page 14 III. Key take-aways Page 20Morgan Stanley European Financials Conference, March 2013
  3. 3. Agenda 3 I. Reshaping GeneraliMorgan Stanley European Financials Conference, March 2013
  4. 4. My mandate 4 One simple mission: to significantly improve shareholder returns 250 Generali total shareholder returns(1), relative to peers 200 150 100 50 (2) Generali Average peers 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(1) Total return index (data as at 10/01/2013)(2) Allianz, AXA, Zurich Morgan Stanley European Financials Conference, March 2013
  5. 5. Key findings 5 Strengths Identified priorities  Highly regarded brand  Strong core franchise 1 Enhance management team and  leadership in key mature European markets governance structure  distinctive presence in high growth CEE and China 2 Remove uncertainty on GPH  Strong agency network and well positioned direct distribution platform 3 Refocus on core business  Growing P&C business with sound underlying operating profitability 4 Strengthen capital and balance sheet  Robust life operating profitability despite 5 Introduce tighter control of the cost base challenging financial environmentMorgan Stanley European Financials Conference, March 2013
  6. 6. First steps taken/Early actions 6 Appointment of a cohesive and effective management team and implementation of a rigorous corporate governance framework1.a  10 representatives: CEO, CFO, Chief Insurance Officer, CIO, CRO, COO, Creation of international Head of Global Business Lines and country heads for Italy, France and Group Management Germany Committee (GMC)  In charge of sharing and discussing the main topics of the Group1.b  Enhancement of the management structure. Internal talent complemented by external hires (Alberto Minali as new Group CFO, Nikhil Srinivasan as new Group CIO and Carsten Schildknecht as new Group COO) Management structure  Redefinition of the CFO, CIO and CRO roles review  Definition of new functions: Chief Insurance Officer, COO, Global Business Lines, Strategy & Business development, integrated Legal / Compliance / Corporate Affairs functions1.c  Introduction of three new management committees: product, capital management / ALM, finance Rigorous decision process  Identification of six key processes: capital management, annual planning, implemented performance management, ALM, product development and M&A  Reinforcing these committees and processes with strict documentation procedures (proposer, approval rationale, approver)Morgan Stanley European Financials Conference, March 2013
  7. 7. First steps taken/Early actions 7 Areas for development Actions already taken2 The GPH transaction removes uncertainty  Fixed price, with clear timing  Significant reduction in contractual complexity  Two-tranche payment giving funding flexibility Remove Clear strategic benefits uncertainty on GPH  CEE is an area of strategic focus – significantly higher growth expected than in Western Europe  GPH well positioned in the market  Full management control from first tranche allows us to better integrate into Generali and extract more valueMorgan Stanley European Financials Conference, March 2013
  8. 8. Focus on GPH: strategic rationale 8 CEE has a robust growth outlook, and historically solid profitability GDP growth Insurance penetration GWP growth Profitability CAGR 11-’17, %, real terms GWP/ GDP, 2011, % CAGR 11-‘17, % PAT/GWP, avg 07-11,% x3 x2 x2.5 1/3 8.8% 8.3% 2.6% 5.8% 3.2% 3.3% 3.2% 0.9% Western CEE Western CEE Western CEE Western CEE Europe Europe Europe EuropeNote: Western Europe includes Austria, Belgium, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Switzerland, UKNote: For Croatia and Czech Rep. PAT/GWP relates to 2007-10, Montenegro based on major players dataNote: CEE includes 10 countries in Central Europe and South-Eastern Europe: Czech Republic, Hungary, Poland, Slovakia, Slovenia, Serbia, Romania, Bulgaria, Croatia and MontenegroSource: Regulators / Supervisors and Insurance associations of the respective countries, internal analysis, EIU Morgan Stanley European Financials Conference, March 2013
  9. 9. First steps taken/Early actions 9 Areas for development Actions already taken3  Approved plan to restructure Italian operations Refocus on core  Renegotiated and completed sale of Migdal business  Launched disposal of selected non core businesses4  Euro 1.25 bn LT2 issuance successfully completed in December 2012 Strengthen capital and balance sheet  Detailed review of balance sheet items completed5  Simplify group structures and remove duplication Tighter control of the  Centralised reinsurance policy cost base  Group-wide expense program to enhance operational efficiencyMorgan Stanley European Financials Conference, March 2013
  10. 10. Generali: our vision for 2015 10 Reshaped approach to maximise value creation1 Focused on core insurance business, with greater contribution from P&C2 Stronger capital position and disciplined balance sheet management3 Superior customer acquisition and retention, with focus on retail and affluent space4 Consistent technical excellence and tight control of costs The mission is to deliver top quartile shareholder returns and profitabilityMorgan Stanley European Financials Conference, March 2013
  11. 11. Key execution guidelines 11 Key actions Execution plan 1 Focus on core business  Insurance focus  Optimise geographic reach  Run-off / disposal of non core businesses  Shift mix in the direction of P&C 2 Restore capital strength  Introduce risk adjusted profitability and cash creation targets for each line of business  Business/geographical rebalancing to reduce capital absorption  Balance sheet optimisation  Target >160% Solvency 1 ratio, “AA” philosophy 3 Change approach to  Better client segmentation and product innovation to drive a more targeted approach to clients clients and improve retention  Achieve a true multi-channel distribution model, with increased contribution from bancassurance and direct channels  Tap unexploited demand from affluent clients in life, and corporate clients in P&C 4 Consistent technical  Business restructuring and simplification (incl. Italy) excellence and tight control of costs  Improvement/centralisation of IT and non IT procurement costs  Embed technical best practice, led from centre  Euro 0.6 bn cost reduction by 2015 Target > 13% operating return on equity(1)(1) Operating profit after interest expense, tax and minorities / average shareholders equity excluding gains and losses included in other comprehensive income. Over thecycle target. Morgan Stanley European Financials Conference, March 2013
  12. 12. Consistent technical excellence and tight control of costs (1/2) 12 Italian restructuringIndustrial case Pre restructuring Post restructuring Brand 10 brands 3 brands  Creation of a strong new player in the Italian market  Full consolidation of businesses / brands with similar characteristics in terms of target Sole integrated 6 distinct customers, products and distribution models distribution network Distribution indipendent (Generali, Ina-Assitalia, Toro, Fata with shared mandate distribution networks Assicurazioni) and brand  Three insurance brands with a distinctive market positioning and proposition Overlapping of Simplification and Products product offer within rationalisation of the 1. Generali: focus on retail and middle the Group product portfolio market business, Life and P&C; dedicated Commercial & Corporate business unit IT and operations 2. Alleanza: Italian families strongly loyal to Operations only partially Integrated platform Alleanza brand; Life and P&C; centralised distinctive distribution network Indicative timetable 3. Genertel: Life and P&C through  2013 Legal entity reorganisation (split between holding alternative channels (phone, web, and operating company, creation of bancassurance) Assicurazioni Generali Italia)  Enhanced efficiency  2014 Integration of operational structures, product ranges  Full integration of the operating models and and information systems streamlining of overlapping services  2015 Commercial integrationMorgan Stanley European Financials Conference, March 2013
  13. 13. Consistent technical excellence and tight control of costs (2/2) 13 Identified actions to reduce expenses* by Euro 600 m in 2015 Main drivers Structure  Simplification of processes simplification  Removal of duplication  Merger of entities  Optimisation of sales networks IT efficiency  Centralised procurement of IT hardware, software  More efficient / centralised data warehousing solutions  Telecommunication costs Non-IT  Creation of centralised Group procurement procurement function * Administrative expenses and non commission related acquisition costsMorgan Stanley European Financials Conference, March 2013
  14. 14. Agenda 14 II. 2012 Results & Strategy updateMorgan Stanley European Financials Conference, March 2013
  15. 15. FY 2012 results at a glance 15 Operating result (Euro m) Operating RoE (%) +10.5%(1) +1.1%pts Target 2015: Euro >5 bn Target 2015: >13% 11.9 10.8 FY11 FY12 FY11 FY12 (1) On like for like basis Solvency ratios (%) Cash flow (Euro bn) Solvency I Target 2015: >160% +17.0% Target 2015: Euro >2 bn Solvency I Economic solvency FY11 FY12 FY11 FY12 FY11 FY12Morgan Stanley European Financials Conference, March 2013
  16. 16. Results of balance sheet review: focus on Q4 impairments 16(Euro m) Asset AFS Telco Real Estate Loans and Other assets TOTAL investments receivablesKPIOperating profit (45) (1) (3) 0 (2) (52)Net Income (792) (148) (56) (118) (156) (1,271)Shareholders’Equity (47) (148) (55) (118) (136) (505)Solvency I -0.3%pts. -0.8%pts. -0.3%pts. -0.7%pts. -0.6%pts. -2.7%pts. Table shows impact of impairment charges taken in Q4 2012 No material impact on Economic Solvency Impairment triggers for AFS securities changed from 3 years or 50% fall in value on average (differing by sector), to 1 year or 30% decline in value (with no differentiation between sectors)  Better aligns Generali with European peers Morgan Stanley European Financials Conference, March 2013
  17. 17. Net result hit by balance sheet review and extraordinary tax charge 17(Euro m) 4,219 (1,363) (668) (465) (307) 90 (1,326) Operating Non Interest Other non Income Discontinued Net Result result operating costs operating taxes operations & investment expenses minorities incomeMorgan Stanley European Financials Conference, March 2013
  18. 18. Strategy update 18 Restructuring underway  Group Management Committee in place  Italian re-organisation commenced  Cost saving initiatives underway Asset review completed  Detailed review of all asset positions to ensure proper valuation  Euro 1.7 bn impact on net Income in 2012 (Euro 1.3 bn in Q4)  Limited impact on capital adequacy (-2.7%pts. impact on Solvency I; negligible from economic and rating capital perspective)  Impairment criteria aligned with European insurance peers New remuneration structure in place  Aligns incentives for senior management with new strategy and the delivery of enhanced shareholder value Positive start to mix shift to P&C  Strong performance provides solid base for further growth in operating profitabilityMorgan Stanley European Financials Conference, March 2013
  19. 19. New incentive plans align strategic objectives to reward 19 The mission is to deliver top quartile shareholder returns and profitability Short term incentive Long term incentive  Operating and net result drive  Top 160 managers eligible overall funding  Based on operating RoE, and  Individual awards based on Total Shareholder Return personal targets relative to peer group  Paid in cash  Paid in shares after 3 years; A portion cannot be sold for a further 1-2 yearsMorgan Stanley European Financials Conference, March 2013
  20. 20. Agenda 20 III. Key take-awaysMorgan Stanley European Financials Conference, March 2013
  21. 21. Key take-aways 21 1 Be disciplined, focused and more simple in executing our strategy 2 Improve client experience across our business 3 Introduce consistent technical excellence 4 Strengthen our balance sheet and capital position and enhance cash flow and value generationMorgan Stanley European Financials Conference, March 2013
  22. 22. What’s next 22 April 30, 2013 - General Shareholders’ Meeting May 10, 2013 - 1Q 2013 Results August 2, 2013 - 1H 2013 Results November 8, 2013 - 9M 2013 Results November 27, 2013 - Investor DayMorgan Stanley European Financials Conference, March 2013
  23. 23. Investor Relations Team 23 Spencer Horgan (Tel.: +44-20-72656480) Head of Investor Relations Email: spencer_horgan@generali.com Stefano Burrino (Tel.: +39-040-671202) Email: stefano_burrino@generali.com Emanuele Marciante (Tel.: +39-040-671347) Assicurazioni Generali Email: emanuele_marciante@generali.com P.za Duca degli Abruzzi 2 Veronica Cherini (Tel.: +39-040-671488) 34132 Trieste, Italy Email: veronica_cherini@generali.com Fax: +39 040 671338 Rodolfo Svara (Tel.: +39-040-671823) e-mail: generali_ir@generali.com Email: rodolfo_svara@generali.com www.generali.com Martina Vono (Tel.: +39-040-671402) IR Events Email: martina_vono@generali.comMorgan Stanley European Financials Conference, March 2013
  24. 24. Disclaimer 24 Certain of the statements contained herein are statements of future expectations and other forward-looking statements. These expectations are based on managements current views and assumptions and involve known and unknown risks and uncertainties. The user of such information should recognise that actual results, performance or events may differ materially from such expectations because they relate to future events and circumstances which are beyond our control including, among other things, general economic and sector conditions. Neither Assicurazioni Generali S.p.A. nor any of its affiliates, directors, officers employees or agents owe any duty of care towards any user of the information provided herein nor any obligation to update any forward-looking information contained in this document. The manager charged with preparing the company’s financial reports, Alberto Minali, declares, pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Financial Intermediation, that the accounting information contained in this presentation corresponds to document results, books and accounts records.Morgan Stanley European Financials Conference, March 2013
  25. 25. Morgan Stanley European Financials ConferenceReshaping Generali:Discipline, simplicity and focusMario GrecoGroup Chief Executive Officer Milan, March xxx, 2010 March 19, 2013

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