Update: Generali’s CEO Bets on Buyback, Dividend Hike, Bold Profit Goals to Keep Job

Italy’s biggest insurer Generali said it would stick to bold earnings goals for 2024, hike dividends and launch its first buyback in 15 years as Chief Executive Philippe Donnet’s bid to stay on faces opposition from two billionaire investors.

Donnet’s reappointment as CEO next year is opposed by construction magnate Francesco Gaetano Caltagirone and Leonardo Del Vecchio, founder of eyewear giant Luxottica, who want the insurer to be more ambitious in expanding via acquisitions.

The new strategy, which Donnet outlined in a news briefing on Wednesday, earmarks up to 3 billion euros ($3.4 billion) for mergers and acquisitions (M&A) in insurance and asset management.

When the plan was put to a board vote, Caltagirone opposed it and a representative for Del Vecchio did not attend the meeting after saying they received details too late to study them properly, two sources close to the matter said.

Overall, the plan won 11 out of 13 votes, the sources said. Donnet is backed by Mediobanca, Generali’s biggest shareholder. Caltagirone and Del Vecchio are the second and third largest.

The stock climbed 1% on Wednesday, as analysts gave the new strategy a thumbs up.

“M&A remains a tool to accelerate value creation for shareholders,” Donnet, 61, told a the briefing, saying Europe and Asia would be targets for insurance and asset management, and the United States and Britain just for asset management.

In addition to the buyback over the next 12 months, Generali aims to pay up to 5.6 billion euros in dividends in the next three years, up from 4.5 billion euros in the previous three years. It said it aimed for average earnings per share growth of 6%-8% a year.

‘Positively Surprised’

“New targets for earnings per share growth, cash and dividends … are all more ambitious than we had expected,” Kepler Cheuvreux said.

Jefferies said the buyback and 6%-8% earnings per share target, which was just ahead of Allianz, “positively surprised us.”

Caltagirone, who could not immediately be reached for comment, and Del Vecchio have a consultation pact giving them a combined 15.6% voting stake. They are set to propose a new CEO candidate at a board meeting in April, sources close to the matter said.

Mediobanca, which has a 13% holding, has borrowed shares to reach a 17% voting stake.

In his previous M&A plan, Donnet had spent 85% of a 4 billion euro M&A war chest. He spent almost 1 billion euros buying rival Italian insurer Cattolica.

Under the strategy outlined on Wednesday, the Trieste-based insurer also said it would increase digital investments by 60% versus 2021 to a cumulated 1.1 billion euros by 2024.

The company aimed to boost premiums in non-motor property and casualty by more than 4% a year on average in 2021-2024, it said, adding that it targeted small businesses and senior care in Europe and travel insurance in the United States.

($1 = 0.8879 euros) (Reporting by Gianluca Semeraro; editing by Valentina Za and Edmund Blair)