Generali: a farce

Last friday, conference held by Mr Francesco Gaetano Caltagirone (not initiated by Generali) took place in Milan, gathering the so-called “Finance community” to promote to investors, both Mr Costamagna and Mr Cirina, respectively as the Chairman and CEO candidates backed by Mr Caltagirone.

The conference’s content seemed a farce. Shareholders may end up being the ultimate victims of the battle for board control between Mr Donnet (current CEO) and active shareholders (Caltagirone and del Vecchio). This needs to end.

For months, Generali’s share price has been the witness of a Titans’ battle within its shareholding structure, with CEO Phillipe Donnet being at the heart of the conflict. On the one hand, the main shareholder Mediobanca wants to keep the Frenchman as the group’s head while on the other a group of historical Italian investors led by Leonardo del Vecchio and Gaetano Caltagirone have a different view of the strategy.

The subsequent action to increase their respective weights in voting right terms have triggered a speculative wave and propelled the share price to dizzying highs (please see “_A bloody game of thrones_”).

We believe that the proposed plan is not credible, while Mr Cirina has shown an irritating attitude. In fact, the new ambition would be to deliver an EPS organic CAGR of more than 11% over 2021 to 2024 (while CEO Donnet’s plan targets a 6-8% CAGR; note that Allianz’ is 5-7% over the same period).

Accounting for acquisitions, Mr Costamagna and Cirina’s plan would hope for an EPS CAGR of more than 14%.
How? 2.5-3% via a change in perimeter/ other adjustments, 2.5-3.5% via costs and operational excellence and 6-6.5% via “Business enhancement”.

Many buzz-words were left unanswered when questions about the sequence of such growth over the years, the accounting of inflation into assumptions and the true levers to implement such changes concretely were vaguely addressed.

We grant the fact that, not being currently at the group’s head places impediments to drafting a plan accurately; however, in such a context, these ambitions sound like a fairy tale.

We are of the view that there is more than the willingness to replace current CEO Donnet behind the conflict between shareholders. But the primary matter remains that the shareholders are the victims of the pointless infighting. From CEO Donnet’s outstanding plan (which we believed challenging to execute even before the current war and inflation context) to today’s joke of a proposition, we believe that shareholders, are going to pay for the damage over the medium to long term.

This instability is not worthy of an insurance major play. We would recommend investors to invest their clients’ assets elsewhere while we wait for the dust to settle…

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