(Bloomberg) -- AssicurazioniGenerali SpA, Italy’s biggest insurer, said second-quarterprofit fell 6 percent as low interest rates and volatile equitymarkets hurt investment gains.

Net income declined to 590 million euros ($654 million) from 626million euros a year earlier, the Trieste-based company said in astatement on Friday. That compares with 594 million euros, theaverage of four analyst estimates compiled by Bloomberg.

“Financial performance continues to be impacted by volatilemarkets and low interest rates,” the company said in the statement.Despite the challenging environment in financial markets, Generalisaid it expects to improve shareholder remuneration in 2016.

Focusing on cash generation and cost cutting

European insurers like Generali are struggling to sustain earningsgrowth as investment returns fall and competition puts pressure onprices. Chief Executive Office Philippe Donnet, appointed in Marchto replace Mario Greco, is seeking to boost the retail business inEurope while focusing on cash generation and cost cutting. Theinsurer targets an operating return on equity of more than 13percent this year.

The top management reshuffle “has re-introduced a governancediscount that we expect to weigh on share price performance mediumterm,” Ralph Hebgen and Michele Ballatore, analysts at Keefe,Bruyette & Woods, wrote in a note July 8. Generali “has thecapacity to grow operating earnings through efficiency gains.”

Generali’s regulatory solvency ratio fell to 161 percent from171 percent at the end of 2015.

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