Generali Earnings: Very Strong Earnings and Profitability; Balance Sheet Remains Weak but Improving

Generali G has reported good earnings for the first quarter of 2023, in our opinion. While we still don’t like the balance sheet, we believe the firm’s capital position is improving. Further, on the higher shareholders equity number under the new accounting rules, the company is currently on track to deliver around a 17% return on equity and higher margins going forward. In this quarter’s results, the better earnings have predominantly been driven by the property and casualty segment where growth has been reinforced with good standards of underwriting. While there is a small increase in life insurance earnings, the asset management division has reported lower numbers due to a nonrecurring one-off in the prior year as well as some current period investment. Yet with a 6.2% fall in holding expenses, we currently like the profit outlook but remain cautious on the capital position—predominantly because debt remains elevated, and we think the company has high sensitivities.