Generali Profit Drops on $718 Million Virus-Linked Writedown

(Bloomberg) --

Assicurazoni Generali SpA booked a-first quarter writedown of 655 million euros ($718 million) as the coronavirus outbreak hits insurers with rising claims and weighs on their investments.

Net income dropped to 113 million euros from 744 million euros a year earlier due to the virus’s impact on markets and the company’s contribution to an international fund to fight the crisis, Italy’s biggest insurer said on Thursday.

Insurance companies are being hurt by higher claims and falling asset values as the pandemic causes event cancellations, interrupts businesses and roils financial markets. Most have either revised their earnings targets or dropped them altogether as the full impact of the crisis remains uncertain.

U.K. insurer Aviva Plc said Thursday it expects around 160 million pounds ($195 million) in virus-related claims. The firm sees about 200 million pounds in claims from business interruption policies, though that will be offset by other areas, including auto insurance.

Insurance firms can expect to face at least $203 billion in losses this year as a result of the virus, according to Lloyd’s of London. Claims relating to business interruption and event cancellations have already begun, and firms including Allianz SE, Munich Re and Swiss Re AG, have all warned that their profits will be hit.

Generali said operating profit is likely to decline this year and the company is working to reduce costs to mitigate an expected fall in revenue. Aviva said it’s still committed to achieving its 2022 targets, though the virus will present “additional challenges.”

Exposure Limited

“It is too early to measure the overall effect on the global insurance sector of the pandemic crisis,” Generali General Manager Frederic de Courtois told reporters on a conference call. “However, our business mix is less exposed to segments most affected by the crisis than our peers.”

The results included some positives. Generali’s first quarter operating profit of 1.45 billion euros beat analyst estimates and profitability improved at its property and casualty business.

Profitability in the Italian company’s non-life business improved, boosted by the recent acquisition of Seguradoras Unidas in Portugal. Aviva said life insurance new business sales rose by 28% and the value of new business grew 18%. Citigroup called Aviva’s update “relatively reassuring.”

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