Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Categorized | Insurance

Generali: splash the cash

Posted on November 23, 2016

Phillipe Donnet was touted as the continuity candidate when he was appointed chief executive at Generali. He has stuck to the plans laid out by his popular predecessor, Mario Greco — yet Generali shares have fallen 12 per cent since he took over. Rival Zurich, now run by Mr Greco, has risen by more than a fifth.

The underperformance is partly down to domicile, which Mr Donnet can do little about. Italy remains the insurer’s largest market, and investors have tired of its volatile politics and slow-motion banking crisis. The imminent referendum on constitutional changes has only added to their aversion.

Like its peers, Generali must deal with low interest rates and uncertain growth prospects. Mr Donnet, however, brings experience of operating in a low interest rate environment from his years spent in Japan.

On Wednesday he reiterated targets announced last year — an annual return on equity of 13 per cent and cumulative free-cash flow of €7bn between 2015-18. Job cuts and other cost savings are expected to harvest an additional €200m per year by 2019. And there will be an extra one-off benefit of €1bn from disposals, mostly from exiting smaller markets.

The cost cuts should contribute to cash flow and underpin dividends rather than paying for pricey acquisitions. Generali has pledged to pay out at least €5bn over four years, equating to €0.83 per share per year.

That sounds a very similar strategy to those adopted by its rivals, yet its promised dividends imply a yield of nearly 8 per cent — well above the 5-6 per cent offered by European rivals.

That difference looks too wide. True, there is the lingering uncertainty surrounding Mediobanca’s intentions. It owns 13 per cent and has appointed several board members but the bank says it plans to trim this stake. For those willing to look past country risk, Generali looks attractive.

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