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

Hi, everyone, and thanks for being on our call about the results for the first nine months of 2026. Joining us today are Giulio Terzariol, our Deputy Group CEO, and Cristiano Borean, our Group CFO. Before we open things up for Q&A, I'll turn it over to Giulio and Cristiano for a few opening remarks.

Fabio, thanks. Greetings to all of you, and good afternoon or good morning—we appreciate your joining us. Our nine-month figures show that we continue to carry out the Lifetime Partner 27: Driving Excellence strategy with success. Across our businesses we turned in a very solid performance: operating results kept rising, technical profitability was strong, and results held up despite a volatile environment, particularly regarding large losses. Crucially, the quality of what we delivered is still high. Turning in an 8.5% year-over-year improvement in operating results—even after taking on an extra EUR 1.1 billion of Nat Cat and manmade losses—is a robust outcome and shows the underlying earnings power; we are growing while keeping our underwriting discipline, improving our business mix, and continuing to invest in the initiative that will sustain profitable growth over the coming years. Let me briefly comment on how our main businesses developed. Beginning with property and casualty, we continue to see high-quality and healthy top-line growth, supported by both pricing and volumes. We mentioned earlier this year that growth has been steadily shifting toward a more balanced mix, and volume now plays a larger, more visible role in top-line growth—especially in non-motor, health, accident, and disability. Meanwhile, motor growth has come mainly from pricing, since we are intentionally holding back on expanding motor right now, a point when pricing is decelerating and claims inflation could be rising. Technical profitability stays our clear priority. We intend to expand wherever market conditions support solid returns, and we will stay highly disciplined in underwriting and in controlling our exposure in areas where pricing looks less appealing. Our traditional loss ratio's performance keeps showing that the underwriting steps we've taken are working, and we're still taking a cautious stance on reserves. Disciplined pricing, solid claims handling, and thoughtful risk selection—together these make us confident about how good and how durable our P&C results are. We've said it all along: another goal of ours is to keep the P&C business's built-in swings under control, especially when it comes to how natural catastrophe losses and prior year development affect each other, and what we're doing now lines up with the principle we talked through with you twelve months back. Nat Cat, PYDs, and discount benefit are handled as one package, and we aim to keep their combined contribution to profitability steady. All in all, results to this point leave us more convinced than ever that we are on the path toward the P&C goals built into our strategic plan. A brief comment on large losses is worthwhile. The 2026 Nat Cat tally of roughly EUR 1.5 billion thus far was shaped above all by storm Kristin, an exceptional event in the first quarter. Absent that EUR 300 million loss, 2026 would have looked like a fairly ordinary year, even with the very sizable Nat Cat losses sustained in Italy. Our Cat aggregate insurance is in force now, so expect the net Nat Cat effect in the fourth quarter to be minimal. Regarding the manmade category, the EUR 323 million recorded in Q3 came primarily from French wildfires, which accounted for approximately EUR 50 million, plus a few additional events. As for Q4, specifically October, we expect roughly EUR 25 million in impact stemming from the riots in France, while the recent train crash in Spain should generate claims of about EUR 16 million prior to any possible recovery. Moving toward 2027, our focus will be on further growing the preferred profit pools in P&C, maintaining the excellent loss ratio we have delivered, and keeping up the effort to bring the expense ratio down progressively. On the life side, conditions continue to look very favorable. Inflows remain robust, and what matters more is that their makeup keeps mirroring our strategic priorities, with an even split across all three business lines. This inflow result shows how relevant our product lineup is and how capable our distribution network is in the main markets. I should add that Italy has gone from net outflows exceeding EUR 0.5 billion at the half-year mark to roughly break-even right now, and typically November and December are quite strong months for new production in Italy. Our life business strategy is still centered on the segment offering the best mix of customer demand, profitability, and capital efficiency. That focus underpins both how much new business we produce and the economics of what we write, with new business value up 13% year-on-year and a new business margin of 5.9%. We have strong confidence in where the life business is heading and in our capacity to generate sustainable growth in future profit. Naturally, we’re keeping a close eye on the recent rise in interest rates so that we can assess any possible danger of higher lapse levels, although up to now we haven’t observed any significant increase in surrender rates. Turning to assets and wealth management, Banca Generali released its numbers last Tuesday. As you saw, those results were extremely robust, featuring a current profit of about EUR 300 million along with a solid variable element. Over nine months, Banca Generali’s total operating results climbed 34%, hitting EUR 557 million. The recurring portion proved quite strong, with net interest income continuing to improve. Net inflows came to EUR 6.3 billion year to date, and the bank saw a significant contribution from in-house products, which accounted for 53% of managed solutions across the nine months. Asset management had a strong year as well, bringing in more than EUR 14 billion of total net inflows, and EUR 8.8 billion of that total was contributed by third-party clients. Revenue in asset management grew 12% compared with a year earlier, reaching EUR 1.2 billion, and roughly half of that figure was generated by third-party clients. Notably, the average fee margin on third-party assets and management widened by 3 basis points relative to the same period last year. Looking at the bottom line, net result after minorities for asset management increased by almost 20% against the nine months of 2025. To sum up, the results we delivered at nine months 2026 demonstrate the payoff from the actions we have taken to strengthen the business and broaden our capabilities. Across all of our operations, the benefits of the strategic choices we have made are becoming evident. Execution remains our focus, enabling us to achieve profitable growth, maintain rigorous technical discipline, and continue improving both the quality and the diversification of our earnings. Simultaneously, we are directing investment toward the businesses and capabilities that we believe hold the greatest promise for Generali over the medium term. Next week, at our Investor Day in London, we will have the opportunity — and the pleasure — to examine this in greater depth. Thank you for listening, and I will now hand things over to Cristiano.

Thanks, Giulio, and good morning, everyone. I’d like to give you a bit more detail on how the group performed financially across the nine months of 2026, to add to the picture Giulio just gave of the trends in the underlying business. Results have been strong, which demonstrates how much our earnings diversification contributes. The nine-month figures also show that this group can hold up under very extreme events. Delivering 12% growth in the bottom line even with EUR 1.8 billion of Nat Cat and manmade losses is really quite an achievement. In life, the operating result rose 7.4% versus a year earlier, and that comes in spite of the negative one-off we booked during the second quarter. If you compare the third quarter life operating result of EUR 1.13 billion with the third quarter of 2025, the operating insurance service result is better by EUR 89 million, whereas the investment result is EUR 37 million lower, which mirrors the timing difference on private equity and investment funds dividends that we flagged to you at the half year. On the third quarter operating insurance service results, the CSM release came in almost EUR 50 million higher year on year. The combined total of loss component, experience variance, other technical result, and other operating income and expenses was EUR 41 million better in the third quarter than in the same period a year earlier, which reflects both recurring and temporary effects, partly from volatile factors as well. Even with the considerable turbulence in financial markets, the CSM has risen since the start of the year, and we remain well on track to beat our guidance of above 3.5% normalized CSM growth. Looking forward, for the full year 2026 I expect we could book negative operating variances of roughly 1.5% of the current CSM stock of EUR 34.5 billion, in the context of the annual model and assumption updates that we will finish by December. Turning to P&C. If you look at how the P&C figures evolved during 2026, our dynamic approach to prior year development for Nat Cat has worked very effectively, giving a more stable and more predictable path for the overall P&C operating result. I would also point out that our initial loss picks have stayed conservative, as always, and also take into account uncertainty about where inflation will go in the future. Because of the protection from our Cat aggregate, you should expect only a minimal Nat Cat impact in the fourth quarter and, consistently, a marginal contribution from prior year development. With that in mind, given where interest rates stand now and with the information we have today, I would expect the P&C operating result to come in at around EUR 3.85 billion at year-end 2026. On Asset & Wealth Management, Giulio Terzariol has already spoken about the nine-month figures. In projecting the fourth quarter, let me remind you that asset management receives about EUR 35 million of Lion River dividend in the final quarter of the year. Turning to the non-operating result, I want to flag upfront that you should be expecting restructuring charges in the fourth quarter that are higher than what we saw in the third quarter, particularly in Germany, along with some capital losses being realized from sales of fixed income assets as we reinvest those proceeds at higher yields. Taking all of these effects together, my sense is that, based on what we know as of today, a good ballpark figure for an adjusted net result projection for year-end 2026 would be around EUR 4.85 billion. Let me summarize before we close. We run this business with a long-term view, concentrating on creating sustainable value and on resilient, diversified earnings growth for our investors, which is also reflected in an EPS growing above 12% year-on-year. What we have delivered across these nine months gives us even more confidence that we can exceed every target in our Lifetime Partner 27: Driving Excellence Plan. Thank you for your attention. Operator, we are now ready to open for Q&A.

Well, this is my lucky day, which gives me a chance to offer a big thank you to Marco and Susanna. Many thanks for everything you've done over the years and for the fantastic contribution to Generali's excellent results. My first question is really directed at you. The attritional improved. I don't actually have the exact number in mind, but I believe it's roughly 101%. I just wondered whether you could explain how that was achieved, and what the moving parts were. The second is probably Cristiano's tax. We had the tax budget law. Unipol earlier said it might cost them about just under EUR 100 million a year. I just wondered what your figure would be. The last item, once more, is simply returning to the topic of life. Giulio, you mentioned that life is flat at present. It showed a net outflow of half a billion. Could you refresh my memory, since I have entirely forgotten, what made it negative to begin with? There we have it. Many thanks.

Thanks a lot, Michael. Giulio will handle the first and third questions, and Cristiano will take the second.

On the attritional combined ratio or loss ratio side, yes — when you look at the loss ratio, if it includes man-made, it's essentially flat versus the prior period, and once you adjust for man-made, you can see an improvement of basically 50 basis points. That improvement is mostly driven by the motor business, while on non-motor we're relatively flat. On motor, I can tell you that in the nine months we actually saw a wider spread than what we had at six months. At six months, the gap between the average price increase and the loss trend — which is essentially the risk premium — was about 50 basis points. Looking at the nine-month figures, that delta has widened to basically 100 basis points, if not more. What we're seeing is some moderation on the average price increase, as we expected, but in the nine months we have lower inflation than we had at six months, and frequency continued to be positive. So from that standpoint, the performance on the motor side came in stronger, if you will, in nine months than at six months. Clearly, we're not necessarily extrapolating the inflation we saw in the last, let's say, in recent months as an indication of future inflation. So from that perspective, as we've said, on the motor side we continue to place a prevalence on making sure we have strong marginality, so we will clearly keep pricing with inflation in mind that is north of 4%, with some improvement in frequency. I think we're very well positioned, because, I tell you, the motor portfolio is performing extremely nicely; also, when you look at risk in force, we have an overall positive movement on risk in force, so we're maintaining the financial discipline. On average across the portfolio, we're also able to grow our risk in force, albeit selectively. The last question concerned the Italian situation. I would say that if you look at the third quarter, the numbers are actually pretty good. If you adjust for Chronos, by the way, we're at EUR 140 million of positive inflows. I'd look more at the delta in the quarter, because basically in the quarter we have EUR 400 million of positive inflow, so you see a change in trajectory versus the first six months of the year. Just to give an idea, if you take the first six months of the year and divide by two to get the quarterly run rate, we were more like EUR -200 million per quarter on average, and now we're at EUR +400 million. You're also aware that typically we have a really strong close to the year, so we feel good about the fact that strong momentum is going to show up in Italy as well. Keep in mind that in Italy new business value is up 7%, and marginality is quite high; right now we're even a bit above 6%. We might be nearer to 6% by year-end, but our starting point is one of strength, since we have solid VNB growth, which is the thing that matters, along with strong marginality, so there's some flexibility on our side. I can also say that our networks, Generali Italia and particularly Alleanza too, are truly doing very well even in this environment.

Hi Michael. On the elements of Italy's 2027 budget law that have been proposed so far but are not yet final, if we look at where things stand today, we should be looking at roughly a EUR 100 million impact on the P&L. That said, keep in mind that ANIA, the association representing Italian insurers, is in discussions with the government to find a different form that could alter that figure without undermining the objective the government is pursuing there. I would also emphasize that life would have been far, far simpler if we had already aligned our local GAAP accounting rule in Italy with the IFRS that currently exists, which would have delivered more money into the Italian government budget without creating measures like these, which could be inflationary, because at some point that then has to be managed through the company's profitability.

Thank you.

Thank you, Michael. Next question, please.

Thanks. Appreciate you taking my questions. So the first one is just to go back to Cristiano's remark about that 1.5% negative operating variance in the CSM for the full year. I suppose that looks like a fairly large number. Could you provide a little more detail on precisely what's behind it? And second, on P&C, what impact did the aggregate cover commission adjustment mechanism have in 3Q on the attritional, if any, and should we be looking for anything more there in 4Q? Thank you.

Thanks so much, Andrew. Cristiano will take both of those questions.

Right. Thanks, Andrew. If you run the numbers, what we're looking at is a figure somewhere between EUR 400 million and EUR 500 million. Bear in mind that this includes the catch-up from our internal model methodology on the historical average of the experience surrender rate, so as to adjust for projected expected future lapses. Still, as Giulio mentioned, we aren't seeing that, but it adjusts mechanically. On top of that there are anticipated expected effects relating to the potential small churn we could see in Germany as a result of the pension reform, plus minor model refinements in France, Germany, and Switzerland. Adding all of those together brings us to that level of expected number. On the Cat aggregate, let me try to explain it in fairly simple terms, because the mechanism involves a kind of profit sharing that you need in order to make the evaluation. Put simply, the positive P&L contribution from the Cat aggregate will begin above EUR 1.275 billion, since we have protection of EUR 1.2 billion, but there's a kind of EUR 75 million of, let's say, profit-sharing catch-up. Until that is depleted, it doesn't come into practice. So basically, we've already used up almost half of it, of this EUR 75 million. With the next couple of experiences so far already in Nat Cat, we're already there, and nothing more should be expected beyond this, let's say, roughly EUR 40 million to be loaded in eventually to fully deplete it. I hope I've simplified it, but just to keep it simple and understandable.

That's quite clear, thanks.

Thanks, Andrew. Let's take the next question, please.

Yes. Thanks, and good morning, everyone. Appreciate you taking my questions. I've got two regarding solvency. I'm not sure whether you've covered this already. If so, apologies — I had some trouble with my line. I was curious about what drove the moving parts of Solvency II during the third quarter. Then, given a possible overhaul of solvency risk across Europe — particularly since there were some press articles about the volatility adjustment — could you remind us of how that mechanism operates? My impression is that we're quite a distance from activation, but I just want to be certain about the mechanics. Many thanks.

Yes, Elena. I'd say the shift from a 260% Solvency II ratio to the 211%, 216% shown here — 211% at nine months — is largely accounted for by market variances. Within the capital generation component, you have 4.1 points of capital generation, then 4.9 negative points from market variances and -1.3 from non-economic variances. Taking an almost negligible M&A effect of + 0.2, the capital movement from the foreseeable dividend deducts a further 2.5, and that brings you from 216% down to 211%. I hope that provides clarity. On your second question regarding the country VA from Italy, two figures. At the end of September, the opening spread required would have been 204 basis points. At the end of October, activation would have required an opening of 171 basis points. For those, let's say, more interested in this topic, I'd note that the Solvency II review is lowering the activation points somewhat. The 204 basis points of spread needed to activate today would become 123 at the end of September, though the net benefit would shrink. In practice, it opens earlier, but your net benefit is somewhat lower. The mechanism differs slightly from the one in place today.

Thank you, Elena. Moving on to the following question.

Hi. I really appreciate you taking my questions. I'm hoping all three will be brief. Cristiano Borean, that remark regarding negative variances for life caught me off guard; that's the situation, but could you make it clearer whether this is a mechanical matter — are you basically saying it occurs this year and nothing more, or ought we to be factoring in further negative variances for 2027 and 2028 since this mechanical matter is still working its way through? That's my first question, if you would. Moving to the second question — I don’t want to overanalyze the combined ratio, and I take your point on smoothing, and I fully recognize the third quarter included very large Nat Cats, yet the third-quarter combined ratio doesn’t really look smoothed to me. In the first half we had a 93% undiscounted combined ratio, and now it sits at 95%, with 98% in the third quarter. That’s an unusual degree of volatility. So my question from that is: I believe when we last spoke, you said 94% was achievable for the full year. If I’m remembering that correctly, are we still around that level, or should we be thinking about it differently? And then just finally, thank you. Fourth quarter new business value can swing quite a bit. Looking back over the history, it can rise a great deal or barely budge at all, and I realize there are several different pieces in play. You had positive things to say about Italy, but my sense is that Asia is working against you. Could you give us any indication of how you're thinking about new business value in the fourth quarter compared with the third quarter, please? Thank you very much.

Many thanks, William Hawkins. My view is that the first three questions should go to Cristiano Borean, and the fourth one to Giulio Terzariol.

Hi, William. This year is pretty much wrapping things up almost entirely. Next year there would be a really small impact to finish the full catch-up, so to speak, of the average five years of experience that the internal model uses. You should expect a much, much lower figure next year. What made this different from something ordinary was the pension reform change in Germany, where we are trying to get ahead of potential client movement toward different products, and so we are already factoring that in proactively. You should not, in a sense, reproject this any further out. Certainly not for 2028, and we will see in time whether some differences might come up further out in 2027. I hope this clarifies the negative variance; we have almost fully closed it, and if you look at the first nine months, operating variances are basically zero, and that is something we are watching very closely. On the second point about smoothening, I read and I also hear what you said on this. I think that when you take the mechanism into account, it is not only a Nat Cat to prior year. We also have to take into account the amount of Nat Cat in this quarter, which was EUR 800 million, but despite that, there is a higher discounting. Overall, the mechanism is designed to smoothen the operating P&C result. That's why we also gave you the guidance for year-end Attaching expected at 3.85, or we hope to be slightly better, but in the end, the recurring investment income is there. By the way, we are also hinting that the non-operating expected losses we are projecting for the fourth quarter are just about rotating the portfolio, because we think this could be a good entry point to accrue higher recurring revenues further; for the undiscounted core guidance, clearly, if you take the evolution of the underlying business, so what the current-year evolution of the business really is, we are perfectly in line with what the guidance we gave you would have been. Because of the topic I mentioned before on the smoothening, so taking into account the better discounting, the better investment result, probably the 94 would be closer to a 94.5, if not a few bips higher, because of how consistent this number is with the EUR 385 billion I gave you as guidance. I hope this clarifies how we are managing things. I don't want you to forget that compared with last year, we had EUR 1.1 billion more Nat Cat and manmade. Despite that, the third quarter operating result of P&C posted positive growth, which I hope you will keep in mind and be able to compare. On the last question, I hand over to Giulio.

No, thank you, William. Regarding your question on where new business value is heading, as you're aware, after nine months we stand at EUR 2.6 billion. Looking at the quarter on its own, it came in at essentially EUR 700 million, which, incidentally, isn't greatly different from the third quarter of last year. At least on that point, when compared with last year, the swings aren't particularly noteworthy. As we all know, the third quarter usually runs somewhat slower than the fourth, since the fourth quarter always brings a bit more commercial activity; we essentially expect to close at, let's say, close to EUR 3.5 billion in new business value. That's the position we're in. We will clearly see a great deal of production in Italy. On the other hand, margins in Italy could be somewhat lower in Q4 than the margin level we've seen so far this year in China. I'd anticipate something comparable to what we saw during the fourth quarter; in other countries, typically there is, as I mentioned earlier, additional momentum as we move through the final two months. The best estimate right now for where we'll finish at year end is EUR 3.5 billion, which is certainly a good development, and so we keep growing our VNB value. Thank you.

Thanks a lot for the color, everyone. I appreciate it.

Thanks, William. Let's take the next question, please.

Good afternoon, and thanks for taking my questions. First, could you bring us up to date on the investment yield for the current year in both Life and P&C, and also update us on the guidance for the investment result in both of those businesses? Second, can you give us some indication of the performance fees, if any, in Asset and Wealth Management? The last one is more strategic in nature. We've heard UniCredit again talking about interest in expanding the collaboration with you. From your side, I just want to ask what your view is on that, whether there are talks underway, and what you're thinking about it. Thank you.