(Reuters) – Zurich Insurance Group Ltd. set more ambitious financial targets for the next three years on Wednesday as insurers benefit from rising premium rates.
Insurance companies globally have suffered losses from unexpected events such as the covid-19 pandemic, the war in Ukraine and major natural disasters.
But they have responded by raising prices and limiting coverage, seeking to protect their profits.
“We are extremely adaptable and we are extremely flexible and quick to respond and we are resilient,” CEO Mario Greco told Reuters.
“We know things aren’t going to go as we planned in the next three years… we know how to shift gears.”;
Zurich aims to raise its operating profit after tax on equity to above 20% by 2025 and generate compound organic growth in earnings per share of 8% a year in new targets for 2023-2025, Europe’s fifth-largest insurer said ahead of an investor day .
The insurer is on track to beat its previous three-year targets and its new BOPAT ROE target is higher than its previous target of over 14%.
However, the latest targets were set with reference to the new international accounting standard for insurance companies IFRS 17, which Greco said provided an increase of around 2.5 percentage points to return on equity.
Zurich is also targeting cumulative cash transfers of over USD 13.5 billion and a Swiss Solvency Test (SST) ratio of at least 160%.
Zurich maintained its dividend policy, which aims for a dividend payout ratio of around 75% of net profit attributable to shareholders, it said. Greco said higher earnings would lead to higher dividends but there was little liquidity room to change policy.
The targets do not foresee any need for M&A, chief financial officer George Quinn told a media conference, although he said the group had “the opportunity, if things come up that make sense.”
Greco told the same call that he believed Zurich’s goal was unlikely to be replicated by many other insurers.
Rival Allianz SE set three-year targets last year, targeting 5-7% annual growth in earnings per share and a minimum 13% return on equity.
AXA SA said earlier this year that it expected underlying earnings per share to grow in the upper end of its target range of 3-7% to 2023, and accumulated cash to exceed its target of 14 billion euros (14.56 billion USD) in 2021 to 2023 .
The Zurich stock was up 1.4% by 0833 GMT, outperforming European insurance shares. Zuercher Kantonalbank analyst Georg Marti described the targets as “beneficial” for the insurer’s shares. Marti has an overweight rating on the stock.