(Reuters) — Italian insurer Assicurazioni Generali S.p.A. plans to more than double its dividend, showing its confidence in a turnaround drive that helped it to deliver the highest annual net profit in six years, even as its home market struggles to emerge from recession.

Under the leadership of CEO Mario Greco, Europe's third-biggest insurer has been shedding noncore assets to boost its capital base and focus on its most profitable business lines.

Yet, 2013 earnings came in slightly below analyst expectations after Generali's nonlife business was hit by floods and storms in France and Germany, as well as regulatory changes in France.

Net profit rose to €1.92 billion ($2.64 billion) from €94 million ($124.0 million) a year earlier.

Following steps taken by some peers, Generali proposed hiking its dividend to €0.45 (63 cents) a share from €0.20 (28 cents) previously, bringing the dividend yield to 2.8% at current prices.

The yield for French rival Axa S.A. and Germany's Allianz S.E. stands at 4.4%, while it is 6.4% for Switzerland's Zurich Insurance Group Ltd., according to Reuters data.

"The main positive is the dividend," said Berenberg analyst Peter Eliot, noting results were below expectations.

"While we had expected the payout ratio to rise as Generali progressed through its three-year plan, this has happened quicker than we thought," he added, referring to the proportion of earnings that the firm pays out as dividends.

Net profit for the fourth quarter was €324 million ($445.3 million), rebounding from a loss of more than €1 billion ($1.32 billion) in 2012.

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Shares in Generali rose 1.1% at the open. By 1020 GMT, the stock was up 0.1% at €16.42 ($22.79), just ahead of a flat European insurance index.

Mr. Greco, who promised to shake-up Generali to improve profitability when he took over in August 2012, said the insurer was on track to meet its target of delivering a 13% return on equity by 2015.

"These results and the more than doubling of our dividend confirm we are on the right track," Mr. Greco said.

The company said its earnings were entirely attributable to an improved operating performance rather than one-off items, because gains made on its stake in the Bank of Italy and from disposals in the United States and Mexico were offset by writedowns on Swiss private banking arm BSI and financial holding Telco as well as other items.

Europe's third-largest insurer by market capitalization said its Solvency I ratio — a measure of financial strength — stood at about 150% at the end of February, below an average of around 200% for rivals Allianz, Axa and Zurich. The company is targeting a Solvency I ratio of 160% by 2015.

"Capital remains the main issue for the group," analysts at Banca IMI said in a note to clients ahead of the results.

The insurer has not yet been able to find a buyer for Swiss banking unit BSI, one of its largest noncore assets.

It said it had taken a €217 million ($301.1 million) writedown on BSI, a move that is likely to facilitate a sale.

Mr. Greco did not disclose the new book value of BSI and said a sale of Generali's stake in Telco, the top investor in telecoms group Telecom Italia, could happen as early as June.