MILAN (Reuters) - Italian insurer Generali (GASI.MI) missed 2014 profit forecasts on Thursday, hit by a weaker-than-expected performance in property and casualty insurance and one-off charges, taking some of the shine off recent turnaround successes.
Europe's No. 3 insurer has strengthened its balance sheet by cutting costs and selling assets, and has met a series of recovery targets early.
But like rivals, it is under pressure to boost profitability as low interest rates eat away at investment returns.
"Generali's fourth quarter operating result ... is 30 percent behind (our) estimates. The miss is mainly driven by P&C (property and casualty)," said Bernstein analysts, who have an "underperform" rating on Generali shares.
They added cost levels were also disappointing, and could lead to reductions in earnings forecasts.
Generali shares fell as much as 3.4 percent, though by 7.20 a.m. EDT were down just 0.6 percent at 18.48 euros, within a flat Italian blue-chip index .FTMIB.
The company said net profit fell 12.5 percent to 1.67 billion euros ($1.8 billion) last year, missing analysts' average forecast of 1.98 billion euros.
That was due in part to charges of around 400 million euros for a possible fine involving its former Swiss private banking unit BSI and an impairment on Russian insurer Ingosstrakh.
Chief Executive Mario Greco said the group hoped to close out the tax dispute with U.S. authorities over BSI by the end of March, but gave no details.
He struck an upbeat tone as the company focuses on its core life and non-life insurance operations in Italy, Germany, France and eastern Europe.
"The transformation of Generali has been achieved ... I am proud to confirm that the targets set out in January 2013 have been met one year in advance," he said.
Generali's closely-watched Solvency I ratio stood at 164 percent at the end of 2014, above its 2015 target of 160 percent.
The insurer proposed a dividend of 0.6 euros a share, up from 0.45 euros the previous year, and Greco said he was looking to increase the payout in the coming years.
"Underlying we see the core trends in the group as solid and broadly supportive of our earnings forecasts," said Credit Suisse analysts, who have an "neutral" rating on Generali stock.
"However, management will need to convince that the legacy clean-up is now complete and net income will begin to reflect the operational developments," it said.
Greco has previously said a new business plan in May will be based on growing existing businesses and not acquisitions.
Editing by Biju Dwarakanath and Mark Potter