* FY net profit 856 mln euros, down 49.7 pct y/y
* Dividend drops to 0.20/shr vs 0.45/shr, payout 36 pct
* Solvency I ratio 117 pct end-2011, 132 pct March 1,2012
* Targets strong profit growth in 2012 (Adds details, CEO, analyst comments, background)
By Lisa Jucca
MILAN, March 20 (Reuters) - Full-year net profit at Generali halved from a year earlier on the back of 1 billion euros of writedowns on Greek bonds and equities holdings, forcing Europe's No.3 insurer to cut dividends even as it predicted profit to rebound this year.
The Italian insurer, the last major European player to report 2011 results, offered a dividend payout of 36 percent, equivalent to a dividend per share of 0.20 euros against 0.45 euros a year earlier. Generali has historically focused on a 40 percent payout.
"Our 2011 result was hit by one-off impairments, principally related to Greek sovereign securities and to the stake in Telco, which will not be repeated in 2012," Chief Executive Giovanni Perissinotto said in a statement late on Tuesday. "We are therefore targeting a strong growth in profit for this year."
Europe's biggest "composite" insurers - Allianz, Axa and Zurich Financial, which like Generali operate in both the life and non-life markets - last month reported weaker than expected 2011 profits, hit by a combination of sovereign debt impairments, soaring natural disaster claims, and poor investment performance.
Generali said it had written down 76 percent of its entire portfolio of Greek instruments, broadly reflecting an agreed haircut and in line with European rivals.
Its Solvency I ratio, a measure of capital strength, was broadly stable at 117 percent at the end of December despite the deepening of the euro zone crisis in the last quarter of 2011.
The ratio stood at 118 percent at the end of September. The insurer said it had already rebounded to 132 percent by March 1, 2012, mainly due to tighter spreads on Italian government bonds and better market conditions.
Analysts at Deutsche Bank view a Solvency I ratio of 150 percent as comfort level for the insurer.
"The recovery in financial markets through 2012 will likely see capital positions rebound from critical levels though still below comfort zones," Deutsche Bank said in a note.
European insurers' 2011 dividends have been under close scrutiny amid investor worries that writedowns on sovereign debt, near-record catastrophe claims, and dwindling investment returns might crimp their ability to pay while simultaneously maintaining healthy capital reserves.
Most major players have responded by at least meeting analysts' dividend expectations despite earnings pressure, eager to signal confidence in their future prospects while preserving the the high payout yields that have become a key attraction of their stocks following steep share price declines last year.
Both Germany's Allianz and France's AXA kept their dividend per share steady.
Shares in Generali closed down 2.08 percent at 13.17 euros before results were released. The stock has gained 15 percent since the beginning of the year.
Generali posted operating results of 3.9 billion euros, broadly in line with a year earlier. The insurer reported a 38 percent rise in non-life results to 1.56 billion euros, in the middle of its target range. For the life sector, operating results fell 16 percent to 2.54 billion euros, below its target of between 2.7 to 3.2 billion euros.
Generali's effort to expand its footprint in high-growth emerging markets is making it a more attractive player than some of its rivals, although the outlook for Europe's life market remains uncertain as the crisis eats into household savings.
"We remain cautious on the prospects for European life markets in 2012 as a result of intense competition fom banks and austerity measures putting a squeeze on consumer wealth," analysts from Barclays Capital said in a recent note. (Reporting By Lisa Jucca; additional reporting by Myles Neligan)