Geronzi eyes ambitious growth path for insurer
Financial Times
Chairman explains reasons behind a shake-up at the Italian group.
The location of Cesare Geronzi’s office in Rome gives a sense of his status. It sits high above Piazza Venezia, opposite a balcony on the other side of the square from which the dictator Benito Mussolini frequently addressed the Italian people. Prime Minister Silvio Berlusconi’s residence is around the corner. From Mr Geronzi’s window, he can see the Colosseum. Here Mr Geronzi, who turns 74 this month, chairs Generali, Italy’s largest multinational. The insurer, one of the top three in Europe, has €400bn ($540bn) of assets under management, operates in 68 countries and owns stakes in Italy’s most significant companies.
His rise to the chair, with a momentum hardly affected by convictions for fraud – all of which he has appealed against – has cemented his reputation as one of the main power brokers in Mr Berlusconi’s Italy.? In a rare interview, Mr Geronzi – who has a non-executive role but wields extensive powers over strategic decisions – discussed the insurer’s future plans and laid out his reasons for reshaping its top management since his arrival.
Generali’s board in the past six months has approved the appointment of a country manager for Italy, as well as a chief investment officer and chief risk officer for the insurer, a major shake-up in its management structure.
“We must improve profitability,” Mr Geronzi says. With that in mind, the main aim of the shake-up “was to consolidate collective decision-making in order to operate with greater efficiency and effectiveness”.
He denies speculation that the shake-up has given rise to tension with the chief executive, Giovanni Perissinotto, by diminishing the latter’s role, saying instead it has allowed the chief executive “greater scope to steer the course and [improve] co-ordination of strategy”.
While Generali this week expanded its already strong presence in central and eastern Europe, becoming a cornerstone investor in Russian state-controlled bank VTB, Mr Geronzi says the insurer has bigger ambitions in growth markets where it has little or no representation.
“Our fundamental objective is to invest in South America, alongside any other opportunities we are evaluating,” he says, adding that the insurer would consider making acquisitions to achieve this.
He also sees opportunities within Italy, where Generali’s business is 50 per cent non-life, to expand the group’s asset management business, Banca Generali. In Italy savings are among the highest in Europe and competition is diminishing as foreign houses, hit by the crisis, pull out.
Italy’s financial sector remained relatively unscathed by the financial crisis due to conservative lending and low exposure to toxic assets. However, investors’ concerns have since risen about the sovereign debt exposure of the financial sector in the wake of euro debt crisis. Generali’s Italian sovereign debt exposure stood at around €50bn at the end of the first half of 2010.
Generali has said it intends to begin a de-risking process for its investment portfolio by lowering equities and real estate exposure ahead of future Solvency II capital requirements. Mr Geronzi says he disagrees with the analysts and he says this risk is “absolutely marginal”.
“We have spoken about it at board level and do not consider it a source of concern,” he says.
Moreover, he does not rule out making further investments in Italy’s financial sector, saying Generali “could consider investing further in Italian banks” should they seek to raise capital, as expected, during the implementation of the new Basel III requirements.
He also could consider backing government infrastructure projects, such as the much-vaunted bridge to Sicily.
One role he does not see for the insurer is as a potential consolidator in the Italian system through its web of cross-shareholdings that give Mr Geronzi representation on the boards of Intesa Sanpaolo bank, RCS Mediagroup and Telecom Italia.
While Mr Geronzi says he sees opportunities for mergers among smaller financial institutions, he rules out deals among the larger groups including the much-speculated tie-up between Mediobanca, the investment bank which owns 14 per cent of Generali, and UniCredit. A merger with Mediobanca and Generali, another mooted deal, is also “out of the question”, he says.
Rachel Sanderson
His rise to the chair, with a momentum hardly affected by convictions for fraud – all of which he has appealed against – has cemented his reputation as one of the main power brokers in Mr Berlusconi’s Italy.? In a rare interview, Mr Geronzi – who has a non-executive role but wields extensive powers over strategic decisions – discussed the insurer’s future plans and laid out his reasons for reshaping its top management since his arrival.
Generali’s board in the past six months has approved the appointment of a country manager for Italy, as well as a chief investment officer and chief risk officer for the insurer, a major shake-up in its management structure.
“We must improve profitability,” Mr Geronzi says. With that in mind, the main aim of the shake-up “was to consolidate collective decision-making in order to operate with greater efficiency and effectiveness”.
He denies speculation that the shake-up has given rise to tension with the chief executive, Giovanni Perissinotto, by diminishing the latter’s role, saying instead it has allowed the chief executive “greater scope to steer the course and [improve] co-ordination of strategy”.
While Generali this week expanded its already strong presence in central and eastern Europe, becoming a cornerstone investor in Russian state-controlled bank VTB, Mr Geronzi says the insurer has bigger ambitions in growth markets where it has little or no representation.
“Our fundamental objective is to invest in South America, alongside any other opportunities we are evaluating,” he says, adding that the insurer would consider making acquisitions to achieve this.
He also sees opportunities within Italy, where Generali’s business is 50 per cent non-life, to expand the group’s asset management business, Banca Generali. In Italy savings are among the highest in Europe and competition is diminishing as foreign houses, hit by the crisis, pull out.
Italy’s financial sector remained relatively unscathed by the financial crisis due to conservative lending and low exposure to toxic assets. However, investors’ concerns have since risen about the sovereign debt exposure of the financial sector in the wake of euro debt crisis. Generali’s Italian sovereign debt exposure stood at around €50bn at the end of the first half of 2010.
Generali has said it intends to begin a de-risking process for its investment portfolio by lowering equities and real estate exposure ahead of future Solvency II capital requirements. Mr Geronzi says he disagrees with the analysts and he says this risk is “absolutely marginal”.
“We have spoken about it at board level and do not consider it a source of concern,” he says.
Moreover, he does not rule out making further investments in Italy’s financial sector, saying Generali “could consider investing further in Italian banks” should they seek to raise capital, as expected, during the implementation of the new Basel III requirements.
He also could consider backing government infrastructure projects, such as the much-vaunted bridge to Sicily.
One role he does not see for the insurer is as a potential consolidator in the Italian system through its web of cross-shareholdings that give Mr Geronzi representation on the boards of Intesa Sanpaolo bank, RCS Mediagroup and Telecom Italia.
While Mr Geronzi says he sees opportunities for mergers among smaller financial institutions, he rules out deals among the larger groups including the much-speculated tie-up between Mediobanca, the investment bank which owns 14 per cent of Generali, and UniCredit. A merger with Mediobanca and Generali, another mooted deal, is also “out of the question”, he says.
Rachel Sanderson