An Impairment Charge Drives Generali’s Net Profit Lower


Generali delivered a mixed set of results for the fourth quarter. In life insurance, operating profit dropped 18% to EUR 462 million, as the business unit suffered from unfavorable claims experience and weaker-than-expected investment income. For the full year, life insurance operating profit increased to EUR 2.7 billion, as repricing actions and product enhancements started to take effect.

Property and casualty insurance’s combined ratio improved by approximately 1% to 95.7%, despite the impact of natural catastrophes. P&C’s full-year operating income was EUR 1.7 billion, representing a 5% increase from last year. The company took an asset impairment charge of EUR 1.3 billion in the quarter (EUR 1.7 billion for the full year) within its investment portfolio.

Much of the impairments were related to the markdown of available-for-sale (AFS) securities and mortgage loans. The company was pressured to take the hit as these assets have lost more than 30% in value during a 12-month period. The impairment charge took the net profit significantly lower to EUR 90 million, compared with EUR 895 million for 2011. The net impact of the fourth-quarter impairments on book value was EUR 505 million, but the impairments have no material impact on the company’s economic capital surplus (as AFS assets were market to market), which remained unchanged at 159%.

Free cash flow generation remains strong within the insurance group, and the company maintained a dividend of EUR 0.2 per share, same as that for 2011.


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