Generali chief will not be ‘distracted’ by billionaire shareholders
Philippe Donnet says insurer is focused on all investors as it announces new 3-year strategy
The head of Italy’s biggest insurer Generali has insisted he will not be “distracted” by the criticism of billionaire shareholders, as the company announced its first share buyback in more than a decade and a new three-year strategy.
The 190-year-old insurer has been at the centre of a drama gripping corporate Italy since Leonardo Del Vecchio and Francesco Gaetano Caltagirone, Generali’s second and third-largest shareholders, in September launched a campaign to shake up the group’s management and improve its performance.
The move by Del Vecchio and Caltagirone has also put them at odds with Generali’s largest shareholder, Mediobanca. Their critique centres on a perceived lack of ambition in dealmaking at Generali over the past couple of decades, according to people familiar with the matter.
But as Generali on Wednesday laid out a strategy focused on investment and better cash generation, chief executive Philippe Donnet said the management team was “not focused on answering the concerns [and] criticism” levelled against the group, which is valued at €29bn.
“The management team is not distracted, the management team is fully focused on doing what we have to do for the best interest of all shareholders,” he told the Financial Times. Generali has an “independent management team” that is not pursuing the interest of any particular shareholder, he added.
The strategy announcement has been seen as key to whether Generali’s management can keep other investors onside ahead of a scheduled leadership vote at next year’s annual shareholder meeting.
Generali said in a statement that it was on track to meet or exceed the yardsticks set under its 2018-21 plan, paving the way for a €500m buyback — its first in a decade and a half.
The newly minted plan for 2022 to 2024 aims for net cash generation of more than €8.5bn over the period, and cumulative cash dividends of €5.2bn to €5.6bn, both an improvement on the previous period.
Generali also plans to pour €1.1bn into a digital transformation programme, which management hopes will enhance its interaction with customers and reduce its headcount through automation.
“This is part of where we can reduce cost and mitigate the impact of the salary inflation which might be significant in the next few years,” Donnet said.
The company will also create a €250m venture fund to invest in insurance start-ups. A person close to Delfin, Del Vecchio’s holding company, has previously criticised Generali as a “fintech laggard”.
Generali has jettisoned its return-on-equity target, which group chief financial officer Cristiano Borean said was because of volatility created by a change in accounting standards, whereas he expects the company’s earnings and cash generation to be smoother.
The insurer also aims to generate €2.5bn to €3bn of cumulative free cash flow that could be redeployed to fund mergers and acquisitions in insurance and asset management, a reduction from the €3bn to €4bn target in the last three-year plan. The earlier figure was boosted by disposals, whereas the current target did not include any planned divestitures, said Donnet.
The three-year plan was “not a response to an alternative plan that does not exist”, he said, but was the “most ambitious possible” strategy for the group. “It would be very dangerous for a company to have a plan relying only on M&A, which by definition is the only thing that you cannot plan,” he said.
Donnet added that the economic threat of the Omicron variant of coronavirus should not affect the earnings targets. He was “much more concerned”, he said, about the broader risks posed by climate change or the possibility of a widespread global cyber attack.