Roma - Sistema bancario, audizione Sironi e Donnet, Assicurazioni Generali (31.05.22)

🎥 May 31, 2022 📺 Pupia News ⏱ 73m 👁 64 views

https://www.pupia.tv - Roma - Sistema bancario, audizione Sironi e Donnet, Assicurazioni Generali Alle ore 13, presso la Sala del Refettorio di Palazzo San Macuto, la Commissione parlamentare di inchiesta sul sistema bancario e finanziario ha svolto l'audizione del presidente, Andrea Sironi, e dell’amministratore delegato, Philippe Donnet, di Assicurazioni Generali. (31.05.22)

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Transcript (33 segments)

Moderator0:01

Ladies and gentlemen. I recall that the Bureau of the Parliamentary Commission of Inquiry into the Banking and Financial System, which I have the honor of chairing, following the shareholders' meeting of April 29, 2022, has deemed it appropriate to conduct an investigative activity regarding the recent governance and shareholder dynamics that have involved Assicurazioni Generali S.p.A. The Commission is particularly interested in a deeper understanding of the economic, financial, and patrimonial situation over the last three years, including dividends distributed to shareholders, a description of the business areas and strategic positioning of the company — also considering that on December 15, 2021, the new 2021–2024 strategic plan was presented, particularly highlighting the interest in the Italian market — and an update on corporate governance dynamics in light of the establishment of the new Board of Directors. Present today are the CEO of Assicurazioni Generali S.p.A., Dr. Philippe Donnet, and the Chairman, Dr. Andrea Sironi, whom I thank for accepting the Commission's invitation. They are accompanied by Ms. Mina Mavjo, Head of Institutional Relations Coordination, and Dr. Simone Bemporad, Director of Communications. I therefore give the floor to Dr. Donnet, who has requested to deliver the presentation with the projection of some slides. Please, go ahead.

Philippe Donnet1:38

Thank you, Chairman. Good morning everyone, and thank you for this opportunity to present... I need to put on the mask. Let me try to speak with the mask on. So I was thanking you for the opportunity to present the activities of our Generali Group in this country and beyond, and I will use some slides.

This slide represents the size and importance of our activities worldwide. We are present in 50 countries, serving 67 million clients globally, thanks to the work of 75,000 employees. We have a turnover of nearly 76 billion euros in insurance premiums, of which about 20 billion are social and environmental insurance premiums. We manage 710 billion euros in financial assets. As you can see on the chart, one-third of our insurance activity is done in Italy, and 90% is done in Europe. The two markets immediately after Italy are Germany and France, followed by a significant presence in Austria and Eastern Europe at 9% of turnover, 7% in the rest of Europe, and 5% in some Asian countries.

This makes us the leader in insurance in Europe. We are the first insurance group in Europe and have been for a long time. We write nearly 70 billion euros in insurance premiums in Europe, whereas our two main competitors, Allianz and AXA, write about 55 billion. So there is a difference of nearly 15 billion in turnover in Europe. The others — CNP in France, Munich Re in Germany, Talanx in Germany, Zurich in Switzerland, NN in the Netherlands, Mapfre in Spain — have a much less significant presence compared to ours in Europe. I insist on this point because I'm not sure everyone knows that Generali today is the leader in insurance in Europe, and we don't see this as a weakness but as a strength. In recent years, we have worked to further strengthen our presence and leadership in Europe, becoming, for example, the second insurance player in Portugal and the second in Greece. We are obviously number one in Italy.

Let me focus on Italy, which as I said is our first market. We are number one in life insurance in Italy, number one in non-life insurance, and also number one in asset management activities. We have nearly 25 billion euros in insurance premiums in Italy, an operating result of nearly 2 billion, almost 14,000 employees, and 14 million clients. We have a very powerful, highly capillary distribution force deeply rooted in the Italian territory, with 40,000 agents. One in three families is insured with us, one in four businesses is insured by us. We have an important portfolio of brands in Italy: obviously Generali, but also Banca Generali, Cattolica, Alleanza, Genertel, and also Genagricola, which is a very important agricultural enterprise with 10,000 hectares cultivated in Italy and 7,000 hectares in Romania. Outside Italy, Genagricola is actually the first agricultural company in Europe.

Next slide, please. I would like to describe what we have done over the last six years to reach this position of success. We have implemented two strategic plans, both successfully. The first plan, from 2016 to 2018, was a turnaround plan — a restructuring of the group with a significant review of our life coverage, a review of our operating model, and our geographical presence. Essentially, we exited small markets or markets where we didn't see a future or potential. We transformed Generali Germany and Generali France, which were underperforming, and we launched a new strategy for asset management, because paradoxically, Generali, which had always been a leader in life insurance, had never had an asset management strategy before 2018. This was a true paradox because doing life insurance without doing asset management means giving up value and giving up significant profitability.

After that, thanks to this successful turnaround plan, over the last three years we implemented an optimization plan. After restructuring, we optimized, meaning we improved performance across all business areas. We worked on growth — growth of premiums, growth of profits — we reduced not only the level of debt of our group but also the cost of this debt. We also invested 3 billion euros of capital in acquisition operations in Europe and Asia, dedicating nearly 10% of our market capitalization to these acquisitions. We also grew and developed our asset management business.

This optimization plan allowed us to reach all the plan's targets, which were very ambitious. Despite two years of COVID crisis, we achieved an earnings per share growth of nearly 8% over the 2019–2021 period. We reached our dividend distribution target of over 4.5 billion over the three-year period, and we also achieved our return on capital target. All management indicators — financial management indicators and qualitative indicators of client relationships — were significantly improved.

Looking at the financial indicators, as you can see, we distributed 1.9 billion in dividends between 2013 and 2015. From 2016 to 2018, we doubled the dividend paid to shareholders with 3.7 billion, and in the latest three-year period, we further increased the dividend with 4.5 billion. This substantial dividend distribution was not at the expense of the company's capital strength or solvency, because during the same period, the solvency ratio — a European regulatory indicator — rose from 194% to 227%. At the same time, debt dropped from nearly 12 billion to less than 10 billion, and the annual cost of debt decreased from 723 million to 470 million euros.

Looking at what is very important — the relationship with our clients — you can see that we went from 55 million clients to 67 million clients. So this rationalization, restructuring, and optimization of the group was not done without growth — quite the opposite. We grew organically and through acquisitions. From a qualitative standpoint, there is a very important indicator: the Customer Relationship Net Promoter Score, which measures client satisfaction across the entire sector. At the beginning of 2016, we were last among our peers, and by the end of 2021, we were the best, with a score improvement of more than 14 points. This is what our clients say.

At the beginning of the three-year period, we had a digitalization rate of our distribution network below 10%, and by the end it was nearly 99%. The COVID crisis accelerated the adoption of digital tools by our distributors and agents. We continue to strengthen our market positions and have gone from 8 market positions among the top six operators in Europe to 13.

Our technical and operational performance demonstrates that thanks to this optimization plan, we achieved a level of technical and operational excellence, with a doubling of the margin on new life business and a drop of more than three percentage points in our loss ratio. We also significantly reduced costs — about 300 million in the first three-year period and another 300 million in the second. There is a very important figure reflecting our reduced dependence on financial results: the non-financial component of our profits went from 37% to 55%. And we multiplied by 5 the profit from asset management activities — from 115 million to over 500 million euros in net profit from asset management.

These results are obviously very positive. I shouldn't be the one to say it — the shareholders and the market should. The market's judgment has been a recognition of this operational excellence, the quality of our financial management, and our new credibility. In the last six months, we have earned great credibility on the market, and this is a historic change in the history of Generali. Because as you can see, between 2000 and 2016, Generali consistently underperformed the market and peers. Instead, from 2016 onward, thanks to the results achieved, for the first time Generali has consistently outperformed the market and all peers.

Looking at total return — the overall return for shareholders including share price evolution and dividends — in the first period of 16 years, Generali returned 52% less to shareholders when Allianz returned 28% less, AXA 18% less, and Zurich 30% less. But from November 2016 to December 2021, Generali offered a total shareholder return of more than 112%, while Allianz offered 71.8%, AXA 49%, Munich Re 77%, and Zurich 100%.

Now we've talked about the past — let me say a few words about the future, because perhaps the future is more interesting than the past, even though the past has value in terms of credibility. We presented to the market a new strategic plan for the next three years on December 15, 2021. This new plan, called Lifetime Partner 24: Driving Growth, is once again a very ambitious plan. This time it is neither a restructuring nor an optimization plan — it is truly an aggressive plan, a growth plan, and a transformation plan.

There are three convictions at the base of this new plan. First, the importance of our social contribution and sustainability. We must help our clients build a safer and more sustainable future by taking care of their lives and dreams — this is the true mission of our group. Second, and very important, is reaffirming our business model, which is a lifetime partnership with our clients. We want to be and already have begun to be a lifetime partner for our clients. What does this mean? It means offering our clients a 360-degree consultation on their protection needs, personalized because no two clients have the same protection needs, leveraging digital technologies and the quality of our distribution network. There is no contradiction for us between using the quality and capillarity of our physical distribution and leveraging digital technologies. And we want to project Generali into a sustainable and digital future, including investment in our people and their training, because without investing in human capital, no ambition can be realized.

In the context of this plan, we have a very clear vision of what we want to become by 2024. We want to be the leading insurance company in Europe with integrated asset management activities. We want to maintain our financial excellence and strength to withstand any negative market scenario. We wrote this plan on December 15, 2021 — we were still in the middle of the pandemic and didn't expect to face a war scenario in Europe. Maintaining financial strength is extremely important. When comparing with peers, Generali navigated the COVID crisis much better than all peers. It was the opposite in 2008 — Generali was severely damaged by the 2008 crisis, and it took nearly 10 years to recover. When a company navigates a crisis badly, it takes enormous time to recover and loses ground to competitors. We lived through the COVID crisis better than others and improved our strong position. However, we know new challenges await us, like the war and its economic consequences, and we want to be prepared.

We also want to be a champion of sustainability. We were awarded the most sustainable company in Italy in 2021 and received many awards internationally for our sustainability commitment and innovation capacity. Today, to have true international standing as a company, dividends and return on capital are not enough — the company must also demonstrate its social commitment, its environmental commitment, and its commitment to sustainability with sincerity and tangible actions. The markets are not satisfied with words alone; they want to see actions, and we have delivered.

Now let me focus on the pillars of the strategy that enable the implementation and achievement of our objectives. We have very ambitious financial objectives: earnings per share growth of 6 to 8%, greater cash generation exceeding 8.5 billion, and growing dividend distribution of 5.2 to 5.6 billion euros per year for the next three years. Beyond these dividends, we have decided to invest 1.1 billion euros in digital transformation and have again dedicated 3 billion euros of capital for acquisition operations over the next three years.

This plan description would not be complete without emphasizing again the importance of social and environmental impact. We have a dual role — as an insurer and, by being an insurer, as a long-term investor. Our investments must also be directed toward sustainable assets.

I also emphasize the importance of our commitment to all the communities in which we operate. This was particularly evident during COVID. When the pandemic hit Italy — one of the first and hardest-hit European countries — we immediately established an international emergency fund of 100 million euros. More than half of this fund — 55 million out of 100 — was dedicated to Italy. The fund supported our distribution network, helped clients in difficulty, and provided community support for the health emergency. Italy was particularly proactive in managing this emergency, both to help healthcare structures face the crisis and to help our clients, agents, and employees. It was not easy to move more than 70,000 employees from office work to working from home in two weeks, but we succeeded.

Today we are facing another emergency — the war in Ukraine and the refugees. We immediately allocated 3 million euros to the United Nations High Commissioner for Refugees. We also launched a fundraising campaign among our employees and collected another million euros for Ukrainian refugees. We also closed our operations in Russia.

I also want to say a few words about our social activities, which are part of our sustainability commitment. Five years ago we launched our Human Safety Net project, which is now the activity of our foundation — a global, international network open to everyone of people who want to help people in difficulty. After five years, Human Safety Net has become very operational. We have helped over 3,800 people, working in 23 countries with a network of 61 NGOs — a very important activity. We have dedicated significant resources both financially and in terms of time from our employees and agents.

This foundation has two priorities. The first is helping disadvantaged families with children aged 0 to 6, because these children have fewer chances in life compared to children from families in better social positions. We help these families give more attention and love to their children. The second priority, decided five years ago, was helping refugees rebuild a professional life in their new country. We didn't expect that five years later this project would become so important with this war breaking out near our home. We also decided to give these social activities a home — the Procuratie Vecchie in Piazza San Marco in Venice, which we began restoring six years ago. For the first time in 500 years, this building is open to the public, and anyone who visits San Marco can enter, visit, and participate in the social activities of the foundation. In perhaps the most iconic square in the world, this is also a way to demonstrate the reality and sincerity of our commitment to sustainability. Thank you for your attention — perhaps I spoke a bit too long.

Moderator37:07

Thank you. Now, I give the floor to our colleague Senator De Bertoldi, who has registered to speak. Please go ahead.

Senator De Bertoldi37:14

First of all, thank you — I believe on behalf of all of us — for your thorough presentation. Let me start by saying that Generali represents for all of us, and certainly for me and for the political force Fratelli d'Italia that I have the pleasure and honor of representing, a pearl of the Italian economic and entrepreneurial system. You are a point of reference for every policyholder, but also for every saver, and doubly so for the Italian entrepreneurial system. That is precisely why I want to ask you for some clarifications, as is often done with those we care about most — precisely because we care about the prospects. So, first of all, best wishes and congratulations on your new mandate, because we need companies like yours that you are now leading. I won't hide that the outcome of the assembly, compared to the past, resulted in a narrower majority than we were accustomed to. On one hand, one could say it's a good thing in a certain sense, because when you see families — and permit me to say especially families of Italian entrepreneurs who...

Investments in Italian companies are positive news, but they raise concerns. I request answers on several points: first, recalling COPASIR's reflections on the Italian-ness of strategic companies like yours and warnings about foreign financial interference, especially French finance. What do you intend to do to ensure and protect the Italian-ness of Assicurazioni Generali? Also, comparing with competitors like Allianz, AXA, and Zurich, I note a slowdown in capitalization growth while shareholder remuneration remains high. What is the administrative body's strategy? Italian funds have reduced their presence while international funds are more prominent; I seek your opinion on this. Finally, regarding the significant Italian minority shareholders, how will the administrative body engage with them? On sustainability and ESG investments, what percentage might be allocated? And on the multi-mandate for insurance agents, what is your view?

Philippe Donnet43:16

Thank you; I'll try to answer all questions and may need the chairman's help. Regarding the assembly results, we cannot compare with previous assemblies because something important happened two years ago: the board unanimously decided to allow the board to present its list at the next assembly, a governance practice common in international companies. This was approved by the last assembly with 99% support, so the board decided to proceed. When discussing ESG, governance matters too; we've improved governance at Generali to align with international standards. As a public company, Generali is a common good for all, not owned by specific families or entrepreneurs. The shareholders made a clear choice for this governance. As for concerns about French finance, I am French and Italian, and I came to manage Generali Italia ten years ago; there is no reality to French interference—it's a journalistic invention. The real threats to independence and Italian-ness have come from within Italy. On capitalization, we lost ground until 2016, but since then, we have regained ground against competitors; these are facts. Regarding Italian vs. foreign funds, all shareholders are equally important, and the board represents everyone.

Andrea Sironi50:35

First, thank you, Chairman. Regarding minorities, we proposed a solution aligned with national and international best practices, including minority presence in all committees and presidency of the related parties committee for minorities. This was positively received, except for the issue of strategic operations. I underestimated the sensitivity on this topic. The proposal provided for these operations to be reviewed directly by the board, as in major Italian banks. Having them reviewed by a committee in advance is also an option, with advantages and disadvantages. We are working on a mediation solution, and I am optimistic we can reach an agreement satisfying both minorities and the majority. We have made important commitments on sustainable investment, aiming for a zero net emissions portfolio by 2050, with an interim target to reduce emissions by 25% by 2024. We also plan to invest an additional €8.5 to €9.5 billion in green and sustainable investments between 2021 and 2025, and €3.5 billion for sustainable recovery plans in European countries. On insurance agents, I have always been close to them and value the agency distribution model. I am not a defender of multi-mandate because it confuses competition with multi-mandate; I support exclusive agency representation as the best, most cost-effective system for customers. The insurance sector needs more digitalization to reduce bureaucracy and improve customer interaction.

Senator De Bertoldi56:33

Just a quick clarification: on foreign financial interference, I didn't get it from a tabloid but from COPASIR declarations. Your reassurances are important, but they stem from objective topics like those covered in recent articles by Ferruccio de Bortoli in Corriere della Sera. These are not scandalous sources, and I appreciate your answers.

Senator57:40

Thank you, President, and thank you to the chairman. I have two simple questions: Could we ever see the creation of a European-sized entity, a universal bank with strong presence in all relevant sectors from classic intermediation to insurance, payments, savings management, consulting, and corporate finance? Diversified dimensions and operating lines guarantee income stability and economies of scale. This could be achieved by combining the largest Italian bank with European traditions and the largest insurance group in the country. How current is this aggregation project between UniCredit and Generali? Also, what are the employment impacts of the industrial plan for Italy? And in Generali's vision, will the relationship with the territory be protected as today?

Andrea Sironi1:02:56

There is no hypothesis of aggregation with UniCredit; it doesn't enter our strategy because it makes no sense. Insurance and banking are completely different businesses with no synergies—it would weaken both companies. This applies to any bank. Banca Generali is part of our group but focuses on wealth management, not lending. Italy is core in our strategy; if it weren't, we wouldn't have acquired Cattolica. We want to grow organically in Italy and properly integrate Cattolica, respecting its identity and developing its presence in Verona. The impacts for Italy will be positive, with growth and respect for employment and territory. The Cattolica Foundation should have an increasingly important role in wealth redistribution on the territory. We will manage the integration with synergies while respecting people, employment, and the territory.

Moderator1:13:24

I have no other speakers registered. I thank the chairman for his exhaustive report and for answering all questions. The hearing is declared concluded. Thank you and goodbye.