Generali Downgraded to Hold by Jefferies After 123% Rally

Jefferies downgraded Italian insurer Generali to "hold" from "buy" on Wednesday, citing the stock's powerful rally that has left limited room for further gains. The broker noted that its new price target no longer provides a sufficient total shareholder return to maintain a buy recommendation.

Valuation Reassessment

While Jefferies raised its price target for Generali to €38 from a previous €28.50, this new target sits below the stock's Tuesday closing price of €43.07. The adjustment comes after analysts rolled their valuation model forward to normalized 2027 earnings.

Analysts at the firm highlighted Generali's exceptional performance, with shares soaring 123% since January 2024. This significantly outpaced the 52% gain of the broader European insurance sector index (SXIP) over the same period. The stock's forward price-to-earnings multiple has also expanded from under eight times to more than 12 times, according to the note.

Cautious Outlook Despite Strong Fundamentals

Jefferies analysts said they maintain a constructive view on Generali's corporate strategy but believe the current stock price already reflects much of the expected operational improvements. Ahead of the insurer's nine-month results due November 13, the firm identified potential headwinds that could constrain further earnings upgrades.

Key concerns include:

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• Non-Life Insurance: Expectations of deteriorating retail pricing trends and less favorable local weather conditions, despite the company's strong underwriting record.
• Life Insurance: Rising concerns over lapse rates in the existing policy book and competitive pressure on margins for new business.

Despite these concerns, Jefferies increased its own earnings-per-share estimates for Generali, raising its 2026 forecast by 7% to €3.30.

Market Context

Generali's valuation is now on par with peer Allianz, with both trading at over 13 times expected 2026 earnings, according to Jefferies' analysis. In contrast, French insurer AXA trades at a multiple of around 11 times. Jefferies currently rates AXA as a "buy" and Allianz as a "hold."

The broker's base-case valuation of €38 for Generali assumes annual share buybacks of €500 million and a non-life combined ratio of 92.4%. An upside scenario to €50 would require more aggressive buybacks and a stronger combined ratio, while a downside case of €30 assumes no buybacks and a weaker ratio of 95.5%.