On Wednesday, CFRA analyst raised the rating of Assicurazioni Generali (BIT:GASI) SpA (G:IM) (OTC: ARZGY) from Hold to Buy and increased the price target to €25.00 from €21.00. The upgrade follows Generali's announcement of a record operating profit for 2023, which reached €6.9 billion, a 7.9% year-over-year increase. This performance met consensus estimates and was supported by positive contributions from all business segments, particularly Property-Casualty (P&C).
Generali's gross written premiums saw a 5.6% year-over-year growth, amounting to €82.5 billion. This rise was largely attributed to a significant 12.0% growth in the P&C segment. Additionally, the Life segment's operating profit improved by 1.7%, bolstered by a higher Contractual Service Margin (CSM) release, despite facing some negative one-offs.
In light of these results, Generali has proposed an increased dividend per share (DPS) of €1.28, which marks a 10.3% rise from the previous year. The company also announced a €0.5 billion buyback program. The analyst expressed confidence in Generali's potential to surpass its cash and capital targets set in the Lifetime Partner 24 strategic plan, particularly due to the strong performance in the P&C business.
The CFRA analyst's revised price target of €25.00 is based on a projected 2024 price-to-book (P/B) ratio of 1.4 times, aligning with the average of Generali's peers. Furthermore, CFRA introduced its 2025 earnings per share (EPS) estimate for Generali at €2.58, signaling optimism about the insurer's future financial prospects. The analyst's upgrade to Buy reflects a positive outlook on Generali's improving shareholder remuneration prospects.
InvestingPro Insights
Following the CFRA analyst's upgrade of Assicurazioni Generali SpA (G:IM) (OTC: ARZGY) to Buy, InvestingPro data and insights provide additional context to the insurer's financial health and market position. With a market capitalization of $38.26 billion and a price-to-earnings (P/E) ratio of 8.19, Generali stands as a significant player in the insurance industry. Adjusted for the last twelve months as of Q4 2023, the P/E ratio slightly increases to 9.02, reflecting the company's sustained earnings power relative to its share price.
InvestingPro Tips highlight that Generali's stock typically exhibits low price volatility, an attractive trait for investors seeking stability. Moreover, the company has a track record of maintaining dividend payments for an impressive 32 consecutive years, underscoring its commitment to shareholder returns. This is particularly relevant given Generali's recent proposal to increase its dividend per share (DPS). Additionally, the insurer's liquid assets surpass short-term obligations, indicating a robust liquidity position that supports its operations and strategic initiatives.
While Generali has experienced a decline in revenue growth over the last twelve months, with a decrease of 24.68%, the company's gross profit margin remains at a healthy 17.91%. This suggests that despite revenue challenges, Generali has managed to maintain profitability. The insurer's strong return over the last three months, which is reflected in a price total return of 16.67%, aligns with the CFRA analyst's bullish stance.
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