Generali Posts $800M 2002 Loss

Italy’s Generali joined the growing list of big insurance companies – it’s Europe’s 4th largest in terms of net premiums written – posting big losses with yesterday’s announcement that the company would record a full year 2002 loss of 754 million Euros ($800 million), compared to a net profit of 1.1 billion Euros ($1.17 billion) in 2001.

The company’s losses stemmed from the same combination of depressed equity values and falling investment returns that have hit a number of other big European insurers, notably, Allianz, AXA, ZFS, Aegon, and most recently ING (See IJ Website Mar. 17).

Generali is still in sound financial condition, however. Despite the approximately 4 billion Euros ($4.25 billion) in equity values it wrote down last year – 1.8 billion ($1.91 billion) from its stake in Germany’s Commerzbank – it still has an estimated 1.5 billion Euros (1.6 billion) in excess capital, and is generally considered to be very conservative in making investment decisions.

There’s also the hoped-for possibility that equities have now hit their lowest levels, and that the values of share stakes the company holds could actually increase in the future.

The loss news overshadowed a general improvement in Generali’s operations last year. Total premiums rose to 46.894 billion Euros ($49.8 billion) in 2002, compared to 45.563 billion Euros ($48.4 billion) in 2001, while its combined ratio improved to 107.9 percent from 108.4 percent. Its goal is to reduce the ratio even further to around 100 percent by 2005.

The loss had been widely anticipated by analysts and fell within their forecasted parameters. It may nonetheless increase pressure on Italy’s Mediobanca to cede some of its control over Generali to a group of other insurers and banks that have been steadily building their stakes in Italy’s largest insurance company in an effort to reduce the investment bank’s influence. (See IJ Website Mar.14)