Generali to exit weaker markets, cut costs

Italy's biggest insurer Generali is looking to raise at least 1 billion euros ($1.06 billion) by selling businesses in unattractive markets and is to cut costs in an effort to boost profit and capital.
Reiterating 2018 targets on Wednesday, Generali said it is reviewing its presence in 13-15 countries and aims to cut operating costs in mature markets by 200 million euros over the 2016-19 period.
These plans provide more evidence of how insurers are having to respond to a squeeze on margins between investment income and policyholder returns as a result of low interest rates. This has prompted the likes of Europe's biggest players Allianz and Axa to rethink their business models.
European insurers got a boost this month from rising bond yields triggered by Donald Trump's victory in the US presidential elections. But uncertainty over a referendum that could unseat prime minister Matteo Renzi is weighing on Italian shares.
Generali shares, which rose sharply on Tuesday after reports by Reuters and business newspaper Il Sole 24 Ore of potential job losses, dropped by nearly 4 percent on Wednesday, with some analysts expressing concern over the insurer's dividends.
The company denied that it was considering laying off 8,000 workers outside Italy.
"This number does not exist. There are no redundancies or restructuring plans," CEO Philippe Donnet told reporters on Wednesday.
Donnet later told analysts there could be a reduction in headcount in coming years in countries without strong enough growth rates but by a process of natural attrition.
The group's headcount of about 76,000 had already fallen by 1,500 since March from slower hiring rates and staff departures, he said.
Generali, which generates most of its revenue and earnings in Italy, France and Germany, did not specify the markets it is considering leaving, though broker Intermonte said that South American or Benelux countries could be among the candidates.
Donnet, who took the helm when Mario Greco left to join rival Zurich Insurance in March, said Generali is aiming for a 15 percent productivity boost by 2019.
"Our goal is leadership in our chosen markets, not measured by size but by profitability," he said.