Zurich Insurance Chief Set to End Revamp Ahead of All Goals

(Bloomberg) --

Zurich Insurance Group AG said it will exceed all of its financial targets as the global insurer benefits from a three-year turnaround plan that slashed costs.

The combined ratio, a key measure of underwriting performance, declined to 95.1%, the company said on Thursday. That beat analyst estimates of 96.3% and was the lowest level in the past decade. The stock rose as much as 4.3%, the most in four and a half months.

When Chief Executive Officer Mario Greco joined in 2016, Zurich was suffering from internal underwriting problems and insurance losses that forced the company to abandon a takeover of U.K. rival RSA Group Ltd. He initiated a portfolio review, simplified the cost structure, removed management layers and gave more power to regional heads.

“He made it clear to the company that we were just too expensive," Chief Financial Officer George Quinn said in an interview. “The company has been on a journey for last three years to achieve a level of cost competitiveness that is in line with the market," he said.

Zurich was up 3.9% at 344.8 francs as of 13:45 p.m. The stock has gained 18% this year.

New Plan

Greco is planning to present his strategy for the next three years at an investor day in November. The first plan called for reducing costs by $1.5 billion through 2019. The company had achieved $1.3 billion of that by the end of June.

The portfolio review also included the commercial insurance business, which protects corporate clients against potential losses like floods and fires. By contrast, peers scaled up in that market even as it weakened, Quinn said.

At rival Axa, Chief Executive Officer Thomas Buberl oversaw the $15 billion acquisition of XL Group Ltd., a commercial-insurance company. The transaction made Axa the top provider of commercial casualty coverage, leaving it exposed to unpredictable natural-disaster claims.

Zurich surpassed UBS Group AG in market value for the first time in February, making it Switzerland’s largest financial services company. The gap between the market value of the two companies has since widened. Zurich is now worth $10 billion more than Switzerland’s largest bank.

Key numbers from today’s results:

  • Gross written premiums at Property & Casualty, the insurer’s biggest unit, grew 4% like-for-like in the first half to $18.6 billion with underlying growth across all regions.
  • First-half net income after tax rose 14% to $2 billion as Greco’s cost initiatives took hold and like-for-like sales grew slightly.

©2019 Bloomberg L.P.

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