P&C Top Line Growth: 8.6% increase, driven by pricing and non-motor volume growth. Average Annual Premium Growth: Approximately 6%, with motor premiums growing around 8%. Combined Ratio: Reported below 90%, with a target of around 94.5% by 2027. Life Net Flows: EUR3 billion in the first quarter, with EUR1.4 billion in protection & health and EUR1.2 billion in hybrid & unit-linked. Surrenders in Italy: Down 20% year-on-year in the first quarter. New Business Margin: Increased by 26 basis points compared to last year. CSM Release Ratio: 2.5%, with full-year 2025 guidance at the mid-high end of 8% to 10%. P&C Operating Insurance Service Result: EUR180 million growth quarter-on-quarter, a 25% increase year-on-year. Solvency 2 Ratio: 210%, reflecting strong capital generation and disciplined asset allocation. Adjusted Earnings Per Share Growth: 9.4% year-on-year.

Warning! GuruFocus has detected 3 Warning Sign with ARZGF.

Release Date: May 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Generali (ARZGF) reported strong growth in its Property & Casualty (P&C) segment, with an 8.6% increase in the top line, driven by pricing and volume growth in non-motor segments. The company achieved a reported combined ratio below 90%, indicating strong underwriting performance and cost management. Life net flows reached EUR 3 billion in the first quarter, with significant contributions from protection & health and hybrid & unit-linked products. Generali (ARZGF) maintained a robust capital position with a Solvency 2 ratio of 210%, reflecting strong capital generation and disciplined asset allocation. The company is on track with its Lifetime Partner 27: Driving Excellence plan, focusing on strategic growth areas such as health, climate, and SME markets.

Negative Points

Generali (ARZGF) experienced negative operating variances of EUR 77 million due to a regulation change on stamp duty in Italy, impacting the Solvency 2 ratio. The company faced challenges in its Life segment with surrenders in Italy not yet returning to normal levels, although they are on a positive trajectory. The P&C segment's combined ratio benefited from positive seasonality, which may not be sustainable throughout the year. Economic variances were only moderately positive due to negative returns from non-European equities and currency depreciation. The company anticipates project costs related to strategic initiatives, which could increase expenses by EUR 25 million to EUR 50 million compared to 2024.

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Q & A Highlights

Q: Can you provide details on the P&C combined ratio and any man-made losses in the quarter? A: Cristiano Borean, Group CFO, explained that the first quarter saw EUR35 million in man-made losses compared to EUR54 million in the first quarter of 2024. The impact of man-made losses is expected to be around 0.7% of the attritional loss ratio, with some volatility expected. The company maintains a strict underwriting discipline to manage this volatility.

Q: Could you elaborate on pricing trends across different geographies, particularly in Germany and Spain? A: Giulio Terzariol, CEO of Insurance, noted that the average premium in the motor line is increasing by about 8%, with a risk premium increase of 3%, resulting in a favorable spread. In Germany, rate increases are in double digits, and Spain has seen significant improvements with double-digit rate increases and a 5 percentage-point spread over the risk premium.

Q: What are the key focus areas for non-motor products, and how do they compare to motor in terms of combined ratio? A: Marco Maria Sesana, General Manager, stated that the focus is on traditional products like family and house protection, with growth in health and SME cyber risk protection. Non-motor products have a better combined ratio, around 62%, compared to motor at 70%.

Q: Can you provide guidance on the full-year investment result for the non-life business? A: Cristiano Borean confirmed a full-year guidance of EUR950 million for the P&C investment result, with expectations of improvement in the remainder of the year due to factors like the Argentina effect and dividend distributions.

Q: How are lapses in Italy affecting the new business margin, and what is the outlook for commercial incentives? A: Marco Maria Sesana indicated that lapses are decreasing but not yet at 2020 levels due to the current interest rate environment. The new business margin guidance remains between 5.25% and 5.75%. Commercial incentives are being scaled back to focus on quality volume.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.