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Generali considers sale of German life portfolio to fund expansion

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Generali considers sale of German life portfolio to fund expansion

(Reuters) — Assicurazioni Generali S.p.A. is open to selling its €40 billion ($47 billion) German life insurance portfolio to free up capital and accelerate growth in its second-biggest market, the company said on Thursday.

The Italian insurer said it would gradually wind down its Generali Leben life business from the first quarter next year in a "run-off" process that will honor existing policies but not issue new ones.

"This reorganization does not exclude a potential future disposal of the Generali Leben portfolio," the company said.

Insurers are struggling to pay guaranteed returns because of record-low interest rates and European capital rules that have become more stringent for some life policies, prompting some companies to consider selling their life insurance portfolios.

"We see this move as a further step towards potentially selling the German life business as Generali seeks to restructure its European footprint," UBS A.G. analysts said, adding that a sale could generate between €700 million and €900 million.

After fending off a possible takeover from Italy's biggest retail bank, Intesa Sanpaolo, this year, Generali is leaving some smaller markets to focus on core markets such as Germany.

The company, headed by Frenchman Philippe Donnet, said the runoff process would boost its economic solvency ratio, a measure of financial strength, by 1.7 percentage points — and by 26 percentage points in Germany, where it is the second-largest insurer by premium income.

Generali's German head, Giovanni Leverani, said in a conference call that no decision had yet been made whether to do the runoff alone or sell the entire portfolio.

"We are keeping the door open," he said, adding that talks are ongoing and several buyers had shown interest.

Generali Leben would be by far the biggest runoff operation in Germany, though Munich Reinsurance Co.’s Ergo is considering a sale of an even bigger portfolio.

The option of selling its German life portfolio is part of a broader reorganization of Generali's operations in the country.

The insurer said on Thursday that it had agreed an extension of its joint venture with German financial adviser DVAG to distribute its products exclusively. Generali holds 40% of DVAG.

Generali will also be investing more in its CosmosDirekt business in the country for online insurance policies.

"(We) reaped the low-hanging fruits. Now it’s time to go deeper, reshuffling the business model completely ... to create a growth story in a stagnating market," Mr. Leverani said.

At 1236 GMT, Generali shares were up 0.1% percent, in line with the broader European insurance sector.

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