Business Strategy and Outlook| Henry Heathfield |
While Generali is quite a leveraged company, we view that by and large its operations are of high quality. The company has been building out a strong asset management offering to complement its life division, contributions from fees within life have been growing, and the technical margin remains resilient. The company's non-life division is also one of the best in our list of multilines with technical metrics that exceed peers in most of its markets. For its peripheral operations, such as Asia and South America, there is substantial room for improvement but from those that contribute the most they have been shaped into strong franchises. What tends to hurt Generali and make it an overlooked business, in our opinion, is its lack of exposure and operations in North America. It's predominantly a European insurance company, and so it has missed out on significant revenue and profit potential from North America, and this has led to a market cap lag. However, despite recent turmoil for leadership, we think the current management team has done well. Carving out respectable and good operations in key markets, there is plenty for the business and it can also focus on these periperal markets. Overall, Generali is a largely overlooked European multiline that deserves more attention and versus other larger peers is comparatively better managed.