Generali tries to project itself after its next decisive AG

Generali’s big family celebration for the inauguration in Venice of the future residence of his foundation did not hide the tensions that drive the group for long. The Italian insurer has filed a complaint with the Consob, the policeman of the Italian Stock Exchange, against its former head of the Eastern Europe region who hopes to become general manager in April, Luciano Cirinà. He is accused of “incorrect and defamatory statements” held in an interview given to the Italian press which questions about possible “violations of the obligation to provide accurate information to shareholders, investors and the market, which threaten to alter market dynamics and the correct determination of the vote at the general meeting“.

List versus list

Because it is there that lies the heart of the battle which agitates Italian capitalism: the governance of Generali. The shareholders must choose, during the general meeting of April 29, between two lists to form the future board of directors of the insurer. Luciano Cirinà is the candidate for the post of general manager of an alternative list, presented by the second shareholder of the group, the magnate of the construction Francesco Gaetano Caltagirone. Believing that the insurer is losing ground against its rivals, he hears “wake the lionand offers a 100% Italian list, in which Claudio Costamagna, a former Goldman Sachs banker, would be chairman.

The other list, drawn up by the board of directors and supported by the first shareholder, Mediobanca, proposes the renewal of the French Philippe Donnet for a third mandate at the head of the insurer, and the president of the Italian Stock Exchange, Andrea Sironi , as president.

To convince investors, the two men have multiplied meetings in recent weeks. Philippe Donnet defends the strategic plan presented on December 15 by Generali in the continuity of the first two that he led. It is aiming for annual profit growth of between 6% and 8% for the period 2022-2024 by accelerating on commercial insurance and asset management, in particular. “The first plan was a recovery plan, the second an optimization plan, the third must lead Generali towards a sustainable future“, explains Philippe Donnet to The Agefi.

Plan against plan

To achieve annual profit growth of 14% over the period, Luciano Cirina and Claudio Costamagna want to rationalize Generali’s activities and aim for a cost-to-revenue ratio of 54% against 65% at present. But also adopt a more aggressive acquisition policy by devoting 7 billion euros to it, compared to 2.5 to 3 billion in Philippe Donnet’s plan and 4 billion euros provided for in the previous 2019-2021 plan. The idea is to increase the leverage of the group, currently around 20%, to 25%, the level of its competitor Allianz.

In this opposition, Philippe Donnet can count on valuable support. “The dissident’s plan is indeed more ambitious than the company’s, but it’s uncertain whether it offers a superior path after considering factors such as execution skills, feasibility and risk.“Judges the voting advisory agency ISS which advises, like Glass Lewis, to support the list of Philippe Donnet. Some fear that the increase in debt will hamper the insurer’s ability to withstand shocks and thus make it difficult to pay dividends, while the plan defended by Philippe Donnet promises to redistribute to shareholders between 5.2 and 5 .6 billion euros. The potential consequences of the promised cost reductions, the equivalent of 600 million euros per year, led First Cisl, the Italian trade union in the sector, to support Philippe Donnet’s list.

Working with Caltagirone

The result could still be tight. Philippe Donnet’s list is supported by Generali’s leading shareholder, Mediobanca, which holds 12.9% of the capital but 17.2% of the voting rights, De Agostini, which holds 1.4% of the capital, and Union Investment, 16th shareholder who holds less than 0.5% of the capital. Caltagirone Group and Del Vecchio Group, formerly allies in a pact, and second and third shareholder with 9.49% and 6.59% of the capital, will vote for the Cirinà list, as will the CRT foundation (1.7 % of capital). Some sources say, however, that the two groups could rise to 9.99% of the capital before April 29. Institutional investors (35.2% of capital) should follow the advice of proxies, but the vote of individual shareholders (22.2% of capital) or Benetton Group (3.96%) will be scrutinized.

In the event of victory, the list of Philippe Donnet will have a large majority on the board of directors, nine or ten members, against three or four administrators for the dissidents including Caltagirone, which placed itself first on the alternative list. “I have held this position for six years and have successfully completed two strategic plans. We will do it again, with a new board that both challenges and supports management.“says Philippe Donnet.

But the two critical shareholders could also sell their stake in the insurer, or change the fight. More than Philippe Donnet, it is the alleged stranglehold of Mediobanca on Generali that they criticize. However, Leonardo Del Vecchio holds 19.4% of Mediobanca and Caltagirone 3.1% of the Italian bank. The latter will be all the more attentive to the result of the vote as it derives 10% of its income and 30% of its profits from its stake in Generali.

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