|
Article Excerpt
OPERATOR: (Spoken in foreign language.)
PAOLA BURATTI, HEAD OF INVESTOR RELATIONS, ASSICURAZIONI GENERALI: Thank you. Good morning, everybody. I am Paola Buratti, Head of Investor Relations at Assicurazioni Generali. I'd like to welcome you all to the presentation of the merger of our Alleanza and Generali and the combination of the insurance activities of Alleanza and Toro.
Let me first introduce Generali Group Chief Executive Officer, Giovanni Perissinotto, and CFO, Raffaele Agrusti. Together with the Chairman of the new Company, Luigi Amato Molinari, and its Chief Executive Officer, Luigi De Puppi.
At the end of the presentation, we will be glad to take your questions. Now, I'll hand you over to Giovanni Perissinotto.
GIOVANNI PERISSINOTTO, CEO, GENERALI GROUP: Thank you, Paola, and good morning to everybody. Thank you for attending our presentation.
I believe that this transaction we are discussing today has a strong increased strategic rationale for the Generali Group. The transaction will lead to the creation of a new entity that will combine Alleanza and Toro to create a unique (inaudible) insurance company thanks to the complementarity of the two distribution networks, one based on agents and the other one on salaried sales force, and to their respective competencies on the product side.
We believe such a combination will create substantial growth due to the excellent cross selling opportunities. The transaction will enforce our local footprint in our core Italian market. It involves the merger reincorporation of Alleanza and Generali at an exchange rate of 033 Generali shares for each Alleanza share.
The rationale of the transaction relies on the possibility of streamlining the governance processes in Italy, obtaining substantial synergies for a combined effect of roughly 200 million Euro also via the enhancement and extended implementation of group initiatives on both the revenue and the cost sides, improving the quality of Generali capital base by replacing minorities with own new capital. The transaction will also clearly improve the capital fundability within the group.
Moving to the next slide, this slide gives an overview of the organizational stages. In practical terms, the transaction implies the following steps. Toro and Alleanza will contribute their insurance activities into a new co. Following the two contributions of the insurance activities, Alleanza and Toro will demerge by being incorporated into Generali. All of the above will happen simultaneously.
Alleanza and Toro net technical reserves, asset backing the reserves and other assets and liabilities related to the insurance activities will be transferred to the new co so that the solvency capital requirements will be met. The merger of Generali and Alleanza will not trigger a withdrawal right for the Alleanza minority shareholders, given that the scope of the activity insurance does not change and Alleanza minority shareholders will receive shares of at least its company.
Moving to the next slide, we strongly believe that the transaction has a solid and strategic rationale based on the possibility for both networks to leverage on their common target clients, Italian families, and to build on their complementarities. Toro with superior know how in P&C, Alleanza in life, Toro with skilled agent base network, Alleanza with a vast salaried sales force, Toro stronger in the northern regions, Alleanza in the southern ones, a new significant player will be born with unique distribution strengths and distinctive commercial capabilities.
Such transaction will also lead to substantial value creation with 200 million pretax synergies. Cross selling of P&C products on Alleanza customer base and of life products on Toro customer base will drive 100 million revenue synergies. Improvement in efficiency, thanks to consolidation of duplicated functions and the full integration into the group's operating model will create 60 million of cost synergies.
Also, the transaction will bring significant tax savings, leveraging on an option introduced by a recent Italian law decree. One off integration costs are estimated to be around 90 million Euro.
The next slide shows how the combined entity Alleanza and Toro will look with respect to the Italian insurance market. Thanks to the transaction, the new co will become the fourth largest composite player, excluding [Back Assurance] with over 5 million Euro of premium and 300 million Euro of operating profit as of 2007 figures.
Now, let me stop here and hand over the presentation to Luigi De Puppi, who will lead the combined entity. I strongly believe that Luigi is the best person to lead the new combined company, given his strong execution skills and his proven capability to reach challenging targets in competitive environments.
LUIGI DE PUPPI, CEO, NEW COMPANY: Thank you, Mr. Perissinotto. The slide is number 8, leadership organizational logic at sales network. The slide outlines the industrial vision for the new entity, a unique one which will unlock substantial growth potential to the benefit of our clients, our agents, our salaried sales forces, our employees and our shareholders.
The leadership of the new group has been defined in order to ensure immediate control of the new co and protect the commercial momentum. On the product factory side, the combination will create two pools, one for P&C and product base on Toro excellence, and one for life building on Alleanza's strengths. The combined entity will leverage on the group share service to benefit from the group's global volumes and pooling of activities.
On the distribution side, the two brands and network will be kept separate, in line with the group's multi brand strategy. And coordination will be ensured through specific commercial processes that will enhance (inaudible) transfer and prevent potential frictions.
Slide number 9 - let me be more specific here in describing how the two networks will operate. The Alleanza direct sales forces will be equipped with simple retail P&C products such as motor, household, etc. This will allow them to best address the insurance needs of their existing client base, building on the deep existing customer relationship, thus progressively evolving into an integrated provider of household protection.
The successful Toro agent network will be paired up with the direct sales force to support it in life. The life reps will operate in close coordination with agents with mutual benefit. It is a win/win proposition, as Generali has proven over a long period of time.
We firmly believe that this operating structure will also reinforce both Toro and Alleanza's competitive advantage, given to first the possibility for Toro to sell life product to further differentiate versus low cost motor provider, and second, the possibility for Alleanza to sell P&C products, thus evolving into a full fledge family insurance for its clients.
Slide number 10 - the two networks have a good complementary with respect to their geographical positioning. The resulting entity will have a pervasive geographical coverage thanks to its 2,000 point of sales. At the end of the day, some 18,000 salesmen will operate throughout the country in a commercially coordinated way, as you see in slide number 10. Thank you, Mr. Perissinotto. Let me stop here and hand back the presentation to you.
GIOVANNI PERISSINOTTO: Thank you, Luigi. Slide 11 - the scope for the creation of revenue synergies is material. I believe that this consideration is particularly sound, given that Alleanza network is very well trained and effective and this is confirmed by the fact that Alleanza customer base is extremely loyal.
On the other side, the Toro network has a good concentration in the wealthiest Italian regions. And consequently, there is a significant potential for the sale of the life products.
Moving to the next slide, the potential deriving from cost synergies will also be relevant. This consideration results from the fact that Alleanza is not yet completely integrated within the Generali group model, also due to the fact that Alleanza is not a fully controlled subsidiary. It is important to point out that the merger would also allow for further rationalization and economies of scale at the group shared services level, which would not be otherwise possible.
Slide number 13 - of course, in addition to the mentioned benefits, the merger would also allow for the consolidation of the overlapping central functions, both of Alleanza and Toro. Moving to the next one, as already anticipated, the transaction will lead to significant revenue and cost synergies in addition to some tax savings. The revenue synergies will stem from Alleanza's sales of property and casualty products and the introduction of specialized life salesmen in the Toro agencies.
We forecast these synergies at full to reach 100 million...
|
