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Can Generali's Greco wake up Italy's sleeping giant?

By Lisa Jucca

MILAN (Reuters) - Generali's boss Mario Greco next week unveils an eagerly-awaited road map to put Europe's third-biggest insurer on a path to profits via asset sales and a greater focus on its core business.

Analysts expect Greco to spell out where the company sees growth and how it plans to improve its solvency ratio.

The long-awaited reorganization of Italy's biggest insurer is the latest in a European sector battered by plunging stock and bond prices and squeezed returns because of a euro zone crisis that has resulted in rock-bottom interest rates.

Over the past three years rivals Axa , Old Mutual , and Aviva have all launched plans to strengthen their finances and shore up their flagging shares by cutting costs, selling unprofitable businesses, and cutting debt.

Greco, a much-respected outsider previously at Swiss insurer Zurich , was called in to replace ousted chief Giovanni Perissinotto in August and has wasted no time since he took the top job at Italy's biggest financial group.

In fewer than five months he has appointed new management, unveiled a plan to revamp activities in core Italy and clinched a 2.5 billion euro ($3.26 billion) deal to buy out eastern European joint venture GPH, removing uncertainty over this large asset.

"We believe in Greco's leadership and ability to improve profitability at Generali through a greater focus on the core insurance business," said PierGiacomo Braganti, a portfolio manager at Banca Aletti Syz.

"Of course he has been helped by the markets but he is a very pragmatic executive who can put some order in Generali's vast investment portfolio," said Braganti, who had direct experience of Greco's leadership in the mid-1990s at Italian insurer RAS, now part of Germany's Allianz.

A rally in Italy's bond market that shortly followed Greco's arrival at Generali helped him in his task. The insurer had taken a beating during the euro zone financial storm due to its vast domestic bond holdings.

Shares in Generali have gained 45 percent since the arrival of Greco on August 1, outperforming a 25 percent rise in the STXE 600 index of European insurers <.SXIP> as well as immediate rivals Allianz and Axa.

Expectations of a new course at Generali have also triggered a flurry of 'buy' ratings following Greco's arrival.

PATH TO GROWTH

Generali is expected to focus on eastern European markets with high-growth potential and little insurance penetration while continuing to keep a strong grip on western Europe.

Italy represents Generali's biggest market with nearly 30 percent of total premiums, followed by France and Germany. Eastern Europe, though representing only 6 percent of total premiums, is growing at a healthy 5.5 percent.

Generali exited some activities in Russia, Ukraine, Belarus and Kazakhstan as part of the GPH deal. It said on Thursday it is not in talks to buy Turkey's Yapi Kredi Sigorta .

Analysts also hope Greco will shed light on cost-savings and steps to improve Generali's solvency ratio. At an estimated 150-155 percent it is well below those of Axa and Allianz.

However, said one insider who preferred to remain anonymous: "It's not going to be all about numbers, but rather about a strategic vision."

Generali has already announced it is in talks to sell Swiss private bank BSI - for which bankers say it hopes to fetch 2 billion euros - and its own U.S. reinsurance business. The group expects non-binding offers within weeks.

But other asset disposals could be on the cards as Greco continues a thorough review of Generali's portfolio of assets.

The insurer needs to raise cash to pay a second, 1.2 billion euro tranche for the acquisition of the eastern European JV at the end of next year and could use the rest to pay down debt. Greco has ruled out a capital increase.

"We have a very high regard for Mr Greco's track record at both Zurich and RAS," Barclays said earlier this week.

"The strength of the Italian financial markets and economy remain important to the stock performance, but for further upside, the investor day next Monday needs to clearly outline improving margins and returns."

(Writing by Lisa Jucca, Additional reporting by Myles Neligan; Editing by Sophie Walker)

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