Generali cushioned from 2nd-order effects of Ukraine war, says CEO

Assicurazioni Generali SpA's mix of life and nonlife insurance will help cushion it from the secondary effects of the Russia-Ukraine war, according to CEO Philippe Donnet.

The knock-on effects of the conflict on consumer spending could slow down the higher level of growth the company was expecting in its property and casualty business as the COVID-19 pandemic subsides, the CEO told analysts on a call for Generali's 2021 earnings. But he added that this would be positive for the company's savings business as consumers spend less. "This is the reason why our company is quite immune and protected," Donnet said.

The current conflict is likely to boost inflation, which will allow Generali to increase property and casualty prices, Donnet said. And while interest rates may rise to compensate, Donnet noted that levels of public debt in many countries could limit interest rate rises. The resulting "slight" interest rate increase is a "very positive scenario" for the profitability and value of new business on the life side, Donnet said, and it is also positive for the company's solvency ratio.

Generali revealed in its investor presentation that it had €683 million of investment exposure to Russia and Ukraine through its general account, including its 38.5% stake in Russian insurer Ingosstrakh, which Generali said was worth €384 million on a fair-value basis and €231 million on an amortized cost basis as of the end of 2021.

In addition, Generali's exposure includes €117 million of unit-linked assets; €530 million of third-party assets under management in its asset management arm; €14 million of property and casualty premiums; and €9 million of revenues at Europ Assistance, Generali's roadside assistance and travel insurance subsidiary.

Donnet said the company's direct exposure to the conflict was "very low."

Generali made a profit of €2.85 billion in 2021, up 63.3% on the €1.74 billion it made during the pandemic-hit 2020. Operating profit was up 12.4% to €5.85 billion from €5.21 billion. Analysts' average expectation was a net profit of €2.82 billion and an operating profit of €5.69 billion, according to figures provided by Generali.