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Generali betting on China to defend itself by growing

by Laura Galvagni

In 2020, Asia will produce 28% of all new business for insurer Assicurazioni Generali and in 15 years its operations there may be the biggest in its portfolio.

Beyond its four pillars—Italy, France, Germany and the countries of Central and Eastern Europe, Brazil and Argentina remain strategic, as do Austria, Switzerland and Spain. Generali's future growth will be driven international expansion. Frédéric de Courtois, CEO of Global Business Lines & International at Generali, is sure of it.

In an interview with Il Sole 24 Ore-ItalyEurope24 he explains why overseas activity must be nurtured and enhanced: “Overseas markets are key. They currently account for 66% of our premiums and just under 60% of operating profit, and that could grow.”

A few weeks ago, when a takeover of the group by Intesa Sanpaolo seemed imminent, the shadow of a possible breakup of the company pushed General to defend itself by itself acquiring a 3.4% stake in Intesa Sanpaolo. It wanted to avoid unsolicited bids that risked altering the size of the company.

While Generali's geographical footprint is in a restructuring phase just now, the hope is that it will become a base on which to build revenues from here through 2030. “We will stay in the countries where we see the greatest potential,” promised de Courtois.

GALVAGNI: In the strategic plan presented in London last November, Generali announced that it wanted to exit 13 to 15 countries. So which areas do you see as fundamental for growth?

De COURTOIS: Generali operates in 60 countries, in 38 of them we are consolidating our insurance activities and we will leave those areas where we are not one of the market leaders. That means we'll be staying in more or less 25 countries and, where we do stay, we will commit to organic and inorganic growth.

GALVAGNI: How will you finance that?

De COURTOIS: With asset sales already underway that we hope will raise at least €1 billion.

GALVAGNI: Do you think that's enough to support your plans or would you also consider using other instruments to pursue significant deals?

De COURTOIS: That depends on the opportunity. We are ready to invest in those countries and will evaluate things on a case by case basis.

GALVAGNI: What point are you at with asset sales?

De COURTOIS: It's going well. The program will be completed for 2018 and talks we're having currently, while at various stages in the process, make us confident that we'll hit our goal.

GALVAGNI: Could you tell us the countries that are least interesting to you?

De COURTOIS: I'd rather not. But I can say that in the EMEA area, Austria, Switzerland, Spain and Turkey, we have high-quality companies. In Asia, we have consolidated our presence in China, India, Vietnam and Indonesia, where we entered more recently. In Thailand, we signed a banking and insurance agreement. China is certainly a key nation where we have one of the three biggest international companies.

GALVAGNI: China can be a complicated place.

De COURTOIS: We have an ideal joint venture partnership there with a major local player, CNPC. In 15 years, the Chinese company may be Generali's biggest. We are working towards that, thanks to our partnership and two profitable businesses. Meanwhile, even before then, by 2020, we expect 28% of Generali's new business to come from Asia.

GALVAGNI: What are your plans in Latin America?

DE COURTIS: In Argentina we are the market leader and in Brazil, where we've worked for some time, we plan to invest to grow the business. A few months ago we signed a deal with a local bank, Bng, and more recently with phone company Tim Brasil. The plan is to grow and the goal is to break even in 2017.

GALVAGNI: Will growth abroad be driven by M&A?

De COURTOIS: In many countries the important thing is to have the right partner. You can decide to make acquisitions or, as we did in India and China, to create joint ventures. Alternatively, you can enter long-term partnerships, like in Brazil, that don't absorb capital.

GALVAGNI: There's been talk lately, however, of a possible sale in France or of other key European assets.

De COURTOIS: CEO Philippe Donnet addressed that recently, clarifying that there are no plans to sell.

GALVAGNI: Do you fear, or anticipate, another move by Intesa Sanpaolo?

De COURTOIS: I won't discuss that.