By Pietro Lombardi

Assicurazioni Generali SpA vowed to slash costs to mitigate the effect of the coronavirus pandemic, which is expected to hit its bottom line this year after impairments related to the virus led to an 85% drop in first-quarter profit.

Generali is the latest insurer to warn that the pandemic will take a toll on its results. The crisis is a significant challenge for the industry which has to face claims related to event cancellations, other costs related to the disruption brought about by the pandemic, as well as hits to insurers' investment portfolios.

Executives at the Italian insurance giant said in a call with journalists Thursday that the company will hold an investor day in November to asses the progress of the 2021 plan. They are confident the company has the right strategy in place and added that, thanks to its business mix, it is less exposed than some peers to the business areas most affected by the pandemic, such as cancellation of events.

However, although it is still too early to estimate the full effect of the virus, the insurer forecast lower operating profit this year. It expects the pandemic to hit revenue, with travel insurance among the hardest-hit business lines. Generali didn't give an outlook for the effect of the pandemic on claims, but said it "can rely on a favorable business mix and robust standard policy terms."

In response to the difficult situation, the company will cut costs significantly this year. The cost reduction doesn't include job cuts, the executives said in the call.

Net profit for the year is likely to take a hit from the pandemic, in particular due to impairments which already dragged the results in the first quarter.

The company booked 655 million euros ($717.9 million) in impairments on investments due to disruption in financial markets sparked by the coronavirus pandemic. This amount could change until the end of June based on the value of the assets at that time.

Net profit for the period fell almost 85% to EUR113 million.

The impairments offset a solid operating performance. Operating profit rose 7.6%, boosted by the property-and-casualty division and the asset-management operations.

"While the reassuringly high 1Q operating result should please investors, the non-operating impacts are somewhat higher than expected," U.S. bank Jefferies said.

Shares in Generali fell 1.1% at 0755 GMT.

Insurance market Lloyd's of London recently estimated that the coronavirus pandemic could deal a $203 billion blow to the global insurance industry this year, as underwriting claims are expected to reach levels seen after some of the worst natural catastrophes in recent years and as insurers' investment portfolios get hammered. Underwriting losses related to the pandemic should account for roughly $107 billion of the expected hit, with falls in investment portfolios expected to make up the remaining $96 billion.

Big European insurers such as Germany's Allianz SE and France's AXA SA have warned about the effect of the pandemic. The German insurer, which like reinsurer Munich Re has scrapped guidance for the year, said the virus had an overall hit on its operating profits of around EUR700 million in the first three months of the year.

This is "one of the most difficult and uncertain periods in recent decades," Generali Chief Financial Officer Cristiano Borean said.

"The first three months of the year showed a good operating performance and confirmed the group's solid capital position," he added.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com