Assicurazioni Generali S.p.A. (G) Earnings Call Transcript & Summary

Good afternoon. I'm the conference operator for Chorus Call. Welcome, and thanks for being with us on the Generali Group nine month 2025 results presentation. Just a reminder that everyone is in listen-only mode right now. Following the presentation, there will be a chance to ask questions. If anyone requires help during the conference call, they can signal an operator by pressing star and zero on their telephone. At this point, I'd like to hand the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir.

Hi everybody, and thanks for being on the call. Joining us today are Group General Manager Marco Sesana, Insurance CEO Giulio Terzariol, and Group CFO Cristiano Borean. Before we open things up for Q&A, I'll turn it over to Marco and Cristiano for a few opening remarks.

Good morning, everyone, and thank you for joining us today. This set of results confirms that the Lifetime Partner 27: Driving Excellence plan is off to a very strong start, thanks especially to how well our P&C business has performed. The whole group is focused above all on putting the strategy and its workstreams into practice. One of the most important changes we introduced under this strategic plan is a stronger role for the center in coordinating strategic business initiatives in a more organic way. Every member of the Group Management Committee sponsors one of the planned strategic initiatives, and the key head office function works closely together with our business unit. We are gaining the advantages of operating as a group. Within this approach, the entire GMC is strongly focused on exchanging best practices and expanding local initiatives to a larger scale. I could name many exciting developments I have observed during the last nine months through this interaction, but let me point to just three that struck me as especially compelling. First, sophisticated NATCAT modeling in major countries including Italy, France, and Czech Republic. We built a machine learning model for windstorms and severe convective storms, one that combines internal claims data with external weather data via a machine learning system.

We'll be extending this model to additional countries before long. Next, claims automation in Austria — a strong illustration of how quickly automated health claims reimbursement can work — where invoice processing has now hit 56% automation, and pharmacy invoices get settled in a mere 18 seconds. Last, the Group geospatial platform, which delivers sophisticated geospatial tools for underwriting. It's already operating in Italy, France, and Spain, as well as worldwide throughout our global corporate and commercial business, and we plan to roll it out to more business units in 2026. Seeing this initiative produce concrete results on the ground gives me real confidence in our path toward delivering excellence. Now let's turn to our nine-month results. P&C keeps building positive momentum on both fronts — top line, which is up more than 7%, and margin expansion, as the undiscounted combined ratio improved by more than 2 percentage points versus last year. Early in the year, we shared that we felt highly confident about our trajectory, given the mix of greater volume flowing in and decisive portfolio repricing, in a setting where frequency is falling and claims inflation remains contained. As you can tell, we're firmly on course to reach our undiscounted combined ratio goal considerably sooner than planned.

Our senior leadership is approaching cycle management from a strategic standpoint, so that the combined ratio keeps improving — underpinned by our technical excellence, both historical and strengthened — and so that today's underwriting margin stays resilient going forward. That shows up in how disciplined we are with underwriting. It shows up in our pricing approach specific to each country, and you'll see it more and more in the benefits we expect new digitalization and automation to deliver throughout the P&C value chain. As Cristiano will detail later, this quarter it also shows up in a more conservative stance on initial loss peaks and is even more evident in prior year development. Our view is of an insurance sector that has stayed disciplined and keeps doing so. Let me assure you that Generali, as part of that sector, will act as a force for discipline as the cycle moves on. Our P&C top line keeps expanding, largely on the back of the price effect, which we gauge as the rise in the average annual premium across retail and SME. That pricing effect was still very substantial at nine months: +6.4% for motor and +5.2% for non-motor retail and SME.

On the technical margin side, we saw ongoing gains in average earned premium relative to the risk premium, and that came from how claim frequency and claim severity combined. In motor — roughly 1/3 of our P&C portfolio — the average earned premium for our top 10 market was up more than 10% at nine months, whereas the risk premium increased about 1%, helped by lower claims frequency across most countries along with claims inflation that stayed well contained. On the non-motor side, the industrial KPIs indicate an improvement of roughly 1.2 percentage points in the current year attrition and loss ratio, and it's broadly distributed across the majority of the business unit. At nine months 2025, the non-motor combined ratio stands at 91.4%. Those dynamics sit at the heart of the substantial gain in our P&C profitability and will keep driving the combined ratio improvement. I figured this context would be useful to you, and in the Q&A we're glad to help you bridge the P&C industrial KPI with the combined ratio we report. Turning now to Life, allow me to remind you of our target of between EUR 25 billion and EUR 30 billion in cumulative Life net inflow under our Lifetime Partner 27 plan.

At nine months, we’ve surpassed EUR 10 billion, with a very strong result in protection & health at EUR 3.7 billion and in hybrid & unit-linked at EUR 4.7 billion. The gain in Life net inflow reflects both how well our distribution is working and how our product offering has evolved. Life net inflow was also helped by fewer surrenders. To give you a sense of it, surrenders in the first nine months versus the same period a year earlier fell by nearly EUR 2.6 billion in Italy and by more than EUR 500 million in France, which is in line with what we said before about improving lapses. On the first-quarter call, we provided new business margin guidance for the rest of the year of between 5.25% and 5.75%. In the second quarter, our new business margin was 5.64%, and in this quarter we posted a new business margin of 5.74%. That shows we have performed quite well not only on volume but also on margin. You will have noticed that at nine months, growth in new business value has also turned positive year on year. Beyond volume and margin, let me also reaffirm the underwriting discipline behind this new business with a few key data points on quality.

More than 73% of what we're putting into new production carries no guarantees, versus 66.4% during the same stretch last year. Nearly 85% of new production stems from capitalized product. So in summary, net flows remain solid, margin is improving, and we're upholding our underwriting discipline so the in-force book stays resilient over the long term — which the continuing quality of new business also supports. Turning now to the investment portfolio. As you're aware, our private market allocation is around 18%, smaller than what our main peers hold. We see value in a diversified portfolio, so we keep working to raise our allocation to alternatives, doing so in a disciplined way. Our alternative portfolio is balanced and comes with strong safeguards, making sure it satisfies our strict criteria. Looking at the private debt portfolio of roughly EUR 19 billion, close to half sits in real estate debt and infrastructure debt, and both carry high-grade credit quality. Roughly 3/4 of our private debt portfolio is collateral-secured, and our exposure to any single borrower is quite limited. Direct lending, which the market has focused on lately, accounts for about half of our private credit portfolio and is thus under 3% of our general account.

In addition, the bulk of it is held in the live portfolio, where policyholders share in the results and guarantees are very low. Just 23% of our private debt portfolio sits in the U.S., and our strict investment guidelines mean we have had almost no exposure to the credits that have been in the news lately. With such a strong framework in place, we feel very comfortable with our portfolio. We still believe there is value in gradually diversifying our government bond exposure into credit, as I explained at our investor day in January. Our strategic asset allocation move is also well informed by the trends we are seeing in the government debt market, where there were some downgrades recently as well. To summarize, the very strong start of our strategic plan, combined with the prudence we are exercising across the board, gives us confidence that this trajectory will be maintained and will prove its resilience to a volatile external context. Thank you for your attention, and let me now hand over to Cristiano.

Thanks, Marco, and good morning, everyone. I'd like to give you a bit more detail on how we performed financially, along with some signals regarding where things are headed in Q4. I'll begin with P&C. As Marco explained, the business is doing very well, and we're focused on ensuring that the healthy margins reflected in this year's attritional combined ratio carry on strengthening going forward. Over the past 2 years, both the insurance sector and Generali have faced heavy NATCAT losses. In 2023 and 2024, our pre-insurance NATCAT hits came in far above the yearly losses we expect. Historically, as you've observed, Q2 and Q3 matter most when it comes to NATCAT seasonality across our portfolio. Through 2025 so far, conditions have been fairly benign and considerably under our ex-ante 2.8 percentage points NATCAT budget. Given that, we considered it wise to apply still greater prudence to reserving, always staying inside the reasonable best estimate range. That resulted in a significantly reduced prior year development, plus initial loss picks that are even more cautious for the attritional component and the NATCAT component alike. So we've reinforced our balance sheet further, which leaves Generali highly resilient in the years ahead.

Combined with the faster pace we're seeing in P&C versus the plan, this approach gives us more confidence that we'll beat the Lifetime Partner 27: Driving Excellence key financial target. There's an old saying in financial markets: "The income statement is your past; the balance sheet is your future." A balance sheet with low debt, solid solvency, high quality of capital, and reserving makes me very comfortable that Generali is well positioned to prove its resilience. The fourth quarter NATCAT experience has been benign so far too. If that continues through the end of the year, then in the fourth quarter you should expect a prior year development pattern similar to this quarter. That would imply a full year 2025 P&C operating results of around EUR 3.6 billion. A more dynamic interplay between NATCAT and prior year development is, in our mind, the sensible thing to do when managing the business for the long term. So, looking ahead in 2026 and beyond, we will calibrate our prior year development dynamically, always within the boundaries of the best estimate approach. I hope this clarifies the very low prior year development contribution of this quarter and gives you a perspective on our thought process, which will always prioritize long-term sustainability of results versus short-term impacts from volatile components.

This method additionally makes earnings more predictable and reduces P&L swings. Now let me turn quickly to the Life segment. If you compare the nine months 2025 results with the prior year, the 1.8 percentage point increase in the operating result ought to be viewed as 4 percentage points of growth once you factor in tighter discipline in cost allocation shifting roughly EUR 30 million from non-operating to operating result, and once you set aside the reduced investment income from Argentina. By the close of September 2025, the group had solid new business volumes and favorable economic variances, and both of these underpinned our CSM development. Only partly offsetting that were certain operating variances of about EUR 200 million, stemming from a tax regulation change in Germany that impacts health business profit sharing, along with some model refinements. Going forward, as I told you before, in the fourth quarter we carried out the complete annual review of every actuarial assumption covering longevity, morbidity, lapses, expenses, and model refinements as well. Those discussions are still under way and will wrap up by year-end. To give you a sense of it, I would anticipate negative operating variances amounting to under 1% of the Life CSM stock we report.

Turning to the non-operating result, I want to flag up front that we're anticipating further restructuring charges during Q4, and there could also be some impairments showing up in the real estate portfolio. Partly offsetting that, we expect a lower tax rate, since we have certain positive one-off tax items anticipated in the fourth quarter. Once you factor in all of these one-off effects, my view is that, based on what we know as of today, a projection for the adjusted net result at year-end 2025 of roughly EUR 4.25 billion would likely be a reasonable ballpark. Shifting to capital, the group solvency ratio is still solid at 214%, supported by healthy normalized capital generation and with the EUR 500 million share buyback program already fully embedded. Going forward, I'd like to walk you through several key items we expect to affect solvency in Q4, beyond the usual actuarial model and assumption review. First, the MGG acquisition should carry a solvency impact of -2 percentage points. In addition, as we noted in our half-year presentation and as should already be clear, Q4 will include a temporary effect stemming from the loss of the internal model application for Spain connected to the Liberty integration — a reverse merger, as we described — with an impact of approximately -4 percentage points.

This is supposed to reverse in 2027, and it's entirely temporary. In Q4, you should also take into account non-economic variances with roughly a -1 to -2 percentage point effect on solvency, chiefly arising from the SAA optimization implementation that Marco mentioned, which is still underway. Beyond that, the October downgrade of the Republic of France's rating is anticipated to cut our group solvency ratio by close to 1 percentage point. On subordinated debt activity, the EUR 500 million redemption coming in November will be balanced out by EUR 500 million from the issuance of our inaugural restricted T1 bond. Let me wrap up before we close. We run the business with a long-term view, centered on creating sustainable value for our investors, which also shows up in an EPS growing 16% year on year. The Lifetime Partner 27: Driving Excellence plan is off to a very strong start, and the entire management team is concentrated on carrying that momentum forward, with a clear goal of doing our utmost to surpass all our key financial targets. Thank you for listening. Operator, we're now ready for Q&A.

Thank you. This is the Chorus Call Conference operator. The question and answer session will now begin. Anybody who would like to ask a question can press star and one on their touchstone telephone. To take yourself out of the question queue, please press star and two. When asking questions, please pick up the receiver. Anyone who has a question may press star and one at this time. The first question comes from David Barma, Bank of America. Please go ahead.

Good morning, and thanks for taking my questions. First, on P&C, could you revisit the average gap between written premium growth and loss trends, please? I'm not entirely sure I caught the figures you provided in the opening remarks, Marco. It would be great if you could point out the main country drivers within that. Remaining on P&C and turning to the expense side, particularly administration expenses, could you give some color on how that developed during the quarter and on whether you expect some of the measures that you discussed in the intro, Marco, to already benefit the expense ratio in 2026, please? Finally, on the Life business, sales were obviously really strong, and the mix too. You're already getting close to your 2027 new business margin target. Are expenses the main piece missing to bridge that to 6%? Thank you.

Thanks a lot, David. The opening question is obviously directed at Marco. The next one goes to Giulio, and Cristiano gets the third.

Hi, David. Good morning. Let me return to something I said during the speech. What I referred to was non-motor average premium growth, or premium, at 7%, and risk premium growth at 1%. Let me clarify briefly what these measures mean when we present them. In motor, we are measuring what we observe coming through as the average premium of the single risk, correct? That is what we see appearing. We measure the risk present in the portfolio. When we present these two measures, the important thing is to see that a margin exists, a gap between how much the risk is growing and how much the average earned premium is growing. In this case, 6% is very significant in terms of spread, in terms of margin. That means that within the portfolio we hold across the different business units, there is underlying potential to deliver further improvement in the loss ratio. Where do we see this? I would say we could go into the different detail, but I would say this is very spread across the top geographies. In some cases, it is more, I would say, more pronounced.

In other instances it’s less noticeable, yet I can hardly think of any situations where we aren’t facing this. Two geographies come to mind that I find interesting. The first is Germany, since over the last three years — and we really concentrated during this call on demonstrating how much repricing of the portfolio we were doing — the effort made by the German business unit has been truly significant, and by the way, I want to thank my colleague for that. We’ve delivered three consecutive years of double-digit price increases, and I believe the results are now visible, and we truly do see a substantial improvement in the portfolio. The second geography is clearly Italy, which is performing really well when it comes to repricing relative to the rise in risk, and there too we see margin in the portfolio that is truly significant. If you’d like, we can then go into more detail, but that’s the picture we see for motor, and I think this is what I referred to, and I think it’s genuinely positive news for the future.

No, thank you, David. Regarding the expenses question, perhaps we should begin with the expense ratio. For the nine months, that ratio is rising by 50 basis points. Here, we have to remember that we are seeing the effect of the purchase price allocation stemming from the Liberty acquisition, and also that we reclassified certain expenses from non-operating to operating. If you adjust the expense ratio—essentially the expense—for these effects, the ratio is flat. Now, on your question about the admin expense ratio, what we track is the GEX ratio, which is essentially the portion of the expense ratio that is neither commission nor incentive, and that figure is declining by 50 basis points. That represents an improvement. We are not seeing the same improvement in the expense ratio, partly because of a bit of mix, but also because there is some conservative provisioning from the business unit. Going forward, we would clearly like to see better alignment between the improvement in the admin expense ratio, the expense ratio, and also at the end of the year annual, we will report the admin expense ratio as well so that you can see how the KPI is developing, and then clearly we will also give you more transparency regarding the movement of the other line items going into it.

On the efficiency side, we're clearly getting better, and that will also help drive further improvement as we look ahead to 2026 and 2027.

Hi, David. About the live sale and the driver — yes, I’d say that in the first nine months already, growth that’s higher than the acquisition cost is contributing 16 basis points to this improvement. When projecting further ahead, you should also factor in our emphasis on the protection business, which is running at an almost double-digit present value new business margin, and that supports significantly better marginality. That, combined with product features — where you can even simply enhance the features, add extra value, and not only manage on the cost side — is what’s driving it. We’re already on that trajectory. There will be additional emphasis on this topic as well, but it won’t be the sole driver for getting there.

Thanks.

Appreciate it, David. Let's take the next question.

Michael Huttner from Berenberg has the next question. Go ahead, please.

Great. Thanks very much for the wonderful results and the wonderful disclosure. I had just two. One is on solvency — there were so many negative numbers. I came away with a conclusion; I didn't add them up, but clearly it will be down quite a bit. I mean, just rounding it. I just wanted to hear, can you remind us, are there any positive offsets? Clearly operating capital generation, probably 5 points a quarter. I have no idea, maybe you can say whether some of this resiliency or prudency you are building in, whether that is included in operating capital generation or not. Of course, the solvency too of you. Just a little bit would be lovely. On cash, I always like cash, and here everything is doing so nicely. I'm just wondering whether Switzerland is returning your EUR 400 million now. The final one is on net inflows, which is an outstanding number. Even positive does not have such a good number. I just wondered whether you can talk a little bit about what's driving this and what it could mean for earnings growth going forward, because clearly this is not in earnings. It is in OCG, but not in earnings.

Thanks.

Thanks a lot, Michael. So, Cristiano will take the first question about the solvency movements as well as the one on the Switzerland remittance, and Giulio will handle the question on Life net inflows.

Hi, Michael. To begin with, let me frame things from one starting point. What has already taken place is that Spain, as of October 1st, 2025, has temporarily lost — as I mentioned before, through 2027 — its internal model eligibility. That carries a 4 percentage points impact on the group solvency, which was already flagged at half year, so it isn't new. I also see that your projections for year-end largely incorporate everything I've already described. The two points related to MGG were likewise flagged in the press release, so that is known as well. The only point, which I'll repeat, is that in 2027 Spain will reverse this 4 point. The France downgrade, at slightly less than 1 percentage point, is probably something not included, but it has already occurred. If I look at the November the 10th solvency ratio, the most recent updated figure, we are essentially at 210%, and that already embeds both the MGG acquisition, the France downgrade, and the 4 points from Spain. What I was clearly emphasizing is that you need to add one to two points on the SAA further asset allocation improvement for the coming year. It is not a huge number, and I think you are perfectly in line, and I think giving you the November figure is giving you that.

I'd like to touch briefly on solvency as well, and also on the review ahead. As we've consistently stated, one point I consider pertinent to the solvency two review is that we sat within a benefit of 10 to 15 percentage points. In my view, the most recent iteration of the delegated acts — which has been approved and still requires, in any event, discussion with the college of supervisors on a very minor matter that carries some uncertainty — takes us, I would say, to the upper end of that 10 to 15 range, which I'd also call positive in that it lets us carry out our EPS accretion investment. Turning to cash for Switzerland — for Switzerland, the two of us are intensely focused on this, and not just you and me, but many colleagues across our company. I can assure you that under the plan, we will begin to see repatriation of excess capital, including remittances and capital support carried out. This will be gradual, and I think you should expect more of it toward the end of the plan, from 2027 onward. Some positive potential expectations in 2026 will support our cash flow, but the process is a gradual one.

Right now the company is putting all of its attention toward improving the business result, and that is going to provide additional support coming out of this.

Excellent. Thanks so much.

No, thank you, Michael. On your question about net inflows — yes, the development is actually pretty good, and it's better than our plan, since we weren't planning to cross the EUR 10 billion threshold this year, but as you can see right now, at nine months we're already at about EUR 10 billion, so you can imagine that we'll also have positive inflows in the last quarter. From a composition and inflows standpoint, we see basically growth across all the different lines of business. Geographically, I can tell you that Italy is up EUR 1.3 billion-EUR 1.4 billion compared to last year. What we see in Italy, actually, is not so much premium up, it's more surrenders down significantly. In France, we are about EUR 300 million better. Here too, we have a similar situation. From a premium point of view, we are relatively flat, but disarraya much down. In Germany, we're also up, and here we have growth in premium and less disarraya. We see a similar dynamic in the different markets. If you look at the last quarter, there was a good dynamic on the inflows, quarter over quarter.

You can also observe that the present value in the business premium during the third quarter came in ahead of last year. Present value in the business premium moved from negative growth to positive growth. On top of that, new business value is turning into a positive figure. Things are genuinely moving in the right direction. From a profit standpoint, you know Cristiano's TAB concept — if you fill the TAB, you'll get more profit. Basically, this is showing up anyway in a better mix between the release of the CSM and what the increase of the CSM from new business can be, as well as how lapses are coming down. Keep in mind that last year we had negative variation, negative experience variances because of lapses, and this year the negative variances due to lapses are nonexistent. That is a positive that eventually translates into better CSM release.

That's a great explanation—just one thing, France, what was that figure? You mentioned something lower, EUR 300 million or EUR 900 million?

So that comes to roughly EUR 300+ million in inflows — over EUR 300 million flowing in from hybrid and unit-linked products. That's essentially how we describe it in France, and protection also contributes nicely.

Great, thanks a lot.

Glad to have you with us.

Thanks, Michael. Let’s take the next question.

Our following question comes from Iain Pearce at BNP Paribas. You have the floor.

Hi, just one question from me. In the opening remarks, I believe you noted some advantages related to frequency. I was wondering whether you could say more about what you're observing on frequency — for instance, if you're seeing different trends across markets — and also whether you see this as a longer-term trend of lower frequency or whether anything unusual is showing up in frequency right now.

Thanks a lot. This question is, naturally, directed at Marco.

To begin with, the overall picture: we are indeed seeing frequency decline quite widely across the various markets. There is no single market I could point to as an outlier. It is genuinely evident in every market. Whether that becomes a trend going forward is another matter. Allow me to expand. My view is that we will see this again down the road, and here is why. I would describe it as two sets of drivers. First, frequency has been declining historically in every market. Across all the Western European markets we observe a long-term downward trend in frequency, and I would add the Eastern European markets as well. It is consistent, so my expectation is that this will continue in the future. There is a second driver, and it deserves a mention because we sometimes assume frequency is purely an external factor, yet we have put substantial work into portfolio quality. We have put substantial work into a handful of initiatives. One of them is loss prevention, where we are trying to deploy tools on the ground so that we correctly evaluate each and every risk we take.

The second item is pruning. We've cleared out the entire tail portion of the portfolio — the parts that were unprofitable, or that on a forward-looking basis would appear unprofitable. This is an action we've pushed forward, and we believe it will deliver future benefit where frequency is concerned. When it comes to frequency, you should always keep a long-term trend in mind, but also the kind of active work we've been doing on quality over the past month. Incidentally, if you'd like a proof point on this, take a look at the trend in man-made losses, which truly declined in the last quarter owing to all the initiatives we've undertaken. That's it.

If I could just ask a quick follow-up, do you have a sense of how much the combined ratio has gained over nine months from lower frequency compared with what you expected?

When it comes to industrial KPIs, as we've mentioned, there's always a connection between the industrial KPI and the financial KPI, but obviously you then have to consider the various prudence that's been applied and all of that. In the risk premium we have, this has probably been the main beneficial factor that we're seeing in the risk premium.