“Our growth is built on sustainability”

“Kleine Zeitung” Generali Group CEO Philippe Donnet Interview

Philippe Donnet provided an interview to Austrian Kleine Zeitung, a regional Austrian daily newspaper. In the discussion with journalist Adolf Winkler, Donnet´s focus was primarily on sustainability and what does it mean for the Generali Group to grow in a sustainable way.

Read the original article from Kleine Zeitung (Source: Kleine Zeitung, page 42, 11.03.2020)

Climate change and its consequences for the financial world were the focus of attention at the World Economic Forum in Davos. Interview with the head of Europe's biggest insurance company, Philippe Donnet, CEO of Generali, about security, climate protection and sustainable growth.

by Adolf Winkler
 

photo by Ansa Andrea Merola
 

How is the global risk of climate change changing the insurance business?

PHILIPPE DONNET: If we do not stop the pace of climate change, it will have consequences for everyone. For insurance companies, the risk is currently still manageable, but in the long term, not only reinsurance companies will feel the impact, but also insurance companies. Climate change leads to more and more severe natural catastrophes. At present, insurance companies still have the financial risks under control, and reinsurers have been able to absorb the increased costs. But we are now reaching a point where we have to act. Insurance companies can also contribute to a more sustainable environment.

In 2019, natural disasters caused damages of 140 billion euros worldwide. Only 56 billion euros of those were covered by insurance. Is it necessary to change the rules for insuring natural risks such as flood, fire and storm?

No, but it is important to increase insurance coverage for disasters. In many countries, there is no coverage for these risks. In Italy, only one in four people has insurance for his homes and in a disaster situation, the Italian state does not pay for the damage to these houses. The state is unable to budget for such expenses, but insurance companies are experienced in helping people quickly in the event of a catastrophe. In countries like Italy, therefore, insurance companies play a significant role in the management of disasters.

At the World Economic Forum in Davos, the financial world focused on sustainability. What can insurance companies contribute to slow climate change?

Insurance companies have the task of limiting risks and investing capital. On both sides, insurance companies can make a positive contribution to sustainable growth. Not only do we need sustainability, but also sustainable growth if the quality of life is to be improved for more people. Generali is increasingly withdrawing from carbon intensive sectors and is expanding its involvement in social and environmental products. We want to increase the volume of "green and social premiums" by seven to nine percent by 2021.

What exactly does this mean?

When we are talking about "green and social premiums," we are talking about nearly 20 percent of all premiums at the end of 2018. Further, we no longer insure new coal-related activities. We are supporting the energy transformation by engaging with companies in the countries that are heavily dependent on coal, such as Poland. On the investment side, we will invest 4.5 billion Euro in green and sustainable assets by 2021.

With the "Green Deal", the European Union wants to activate 1000 billion euros against climate change. How should the European Commission define "Green Investments?"

Generali supports the “Green Deal” initiative with full conviction. It is the only way to ensure the survival of our planet. A few weeks ago, I went to the European Commission and the European Parliament in Brussels to discuss this issue. Green investments should in any case serve one or more of the 17 SDGs, the sustainability targets of the United Nations. However, the financial rules should also take into account the transformation of each individual company because not every company is sufficiently sustainable yet.

In the last September´s Financial Report, Generali stated an investment of 33 billion euros that also takes the ESGs, which are investments for environmental, social and governance aspects, into account. Where are you headed?

We want to grow in this area. As a matter of fact, we acquired the majority of Sycomore, a leading asset management company specialized in this area. This will be a fantastic tool for green investments for us but also for other insurance companies.

How does Generali integrate sustainable growth into its daily business?

The bases of our strategy “Generali 2021” are empowered employees, a strong brand and a commitment to sustainability. We were the first European insurance group to issue a “Green Bond.” We are part of the “Dow Jones Sustainability” Index and have created a global sustainable social program called "The Human Safety Net." Everything we do is aimed towards sustainability as it is part of our lives. This is what customers, employees and our society expect from us.

Generali is making a major change with the acquisition of CM Investment Solutions (now called Lumyna Investments) from Merrill Lynch Bank of America. What are your goals behind this?

In fact, this is one example of a greater change in our asset management strategy. We are no longer exclusively an insurance company, but also an asset management group. This change is historical. Low interest rates have completely changed the life insurance business, which accounts for two thirds of our business volume. In order to face this scenario, we are increasingly offering our clients a wider range of hybrid products. Through our 16 boutiques, which are already managing assets of over 500 billion euros, we have launched our asset management strategy very successfully. A large part of this still consists of assets from our Group, but we are also managing assets of other insurance groups.

Low interest rates are also forcing insurance companies into new investment classes. Where to?

We are investing in the real economy. And in order to increase returns, preferably in illiquid asset classes such as infrastructure, private equity or real estate.

Nevertheless, the Italian government bonds of 60 billion euros in the portfolio of Generali let you sleep well?

Yes. These are only 12 percent of our portfolio, and we have an excellent solvency ratio. Of course, we have a broader geographical reach, but Italy remains our strong home market with solid profitability.

What makes you confident about Europe as a growth market?

Ninety percent of our business is in Europe, and we are first in premiums. Demographic trends and the ageing of the population will lead to an increasing demand for health and assistance solutions. There is also significant growth in Central and Eastern Europe, where we are historically strong. We see Europe as an opportunity, and we also want to expand our position in Austria and Germany.

How important are the roots of Generali with Austria, to whose monarchy it belonged when it was founded in Trieste in 1831?

We face the future, never forgetting our history, heritage and DNA. Our Group Academy has just been launched in Trieste, which is still home to one of our most important office locations. Further, Austria remains a strategically important country for us.

About the person

Philippe Donnet (59), born in France, studied at the École Polytechnique and started his career at AXA.

From 2013 CEO Generali Italy. From March 2016 CEO Generali Group.

Generali Group, founded in Trieste in 1831. Results of 2018:

Premiums: 66.691 billion euros (+4.9 %), thereof life: 46.084 billion euros
Operating profit: 4.857 billion euros (+3.0 %), net profit: 2.309 billion euros (+9.4 %).
Solvency II ratio: 216 %.
71,000 employees, 50 countries