Shares of Italy's biggest insurer Generali fell on Friday after its updated business plan failed to shore up the already highly valued stock.

Generali's new 3.8-billion-euro ($5.38 billion) net profit target for 2009, up 58 percent from 2006, came in above analysts' expectations. But some analysts described the updated plan as unsurprising as the market was poised for an ambitious goal. The insurer also appointed the first chief financial officer in its 176-year history in a bid to boost corporate governance. It also vowed to manage its capital better, invest more in alternative assets and set up real estate funds.

This is all very commendable but not particularly surprising, Merrill Lynch said in a research note. The brokerage added Generali shares were already highly valued.

Shares in Generali, Europe's third-largest insurer by market value, were down 1.2 percent to 30.61 euros at 0820 GMT in Milan. It underperformed Milan's S&P/MIB index, which was down 0.25 percent.

Shares of its unit Alleanza Assicurazioni were down 3.1 percent to 9.5 euros. The stock had rallied on Thursday on hopes Generali could announce a buyout of minority shareholdings in Alleanza, which did not materialise.

DEFENSIVE STOCK

Investors have considered Generali as a defensive stock throughout the recent market turbulence. The insurer has outperformed the DJ Stoxx European banks index by about 8 percent in the last five weeks.

Given the recent rally and the rumbling optimism ahead of this plan update and Generali's valuation against its European closest peers, we believe the stock lacks relative valuation support with the European insurance sector and we continue to see better value elsewhere, Citigroup said.

The insurer has no plans to hike its roughly 5 percent stake in bank Intesa Sanpaolo, Generali Chief Executive Giovanni Perissinotto said in an interview with Il Sole 24 Ore newspaper on Friday.

The remark contradicts comments by Chairman Antoine Bernheim, who said he wants a larger stake in Intesa Sanpaolo.

The Trieste-based insurer is, together with its largest investor Mediobanca, at the centre of the web of cross-shareholdings that characterise Italy's financial world.

The insurer is Intesa Sanpaolo's second-largest shareholder. Intesa Sanpaolo, Italy's biggest bank by number of branches, is is in turn a key investor in Generali with a 2.3 percent stake, according to data from regulator Consob.

(Additional reporting by Mathias Wildt and Cristina Carlevaro)

Merrill Lynch