Zurich Overhaul Produces First Dividend in 7 Years

By Jan-Henrik Förster and Patrick Winters | February 9, 2018

Zurich Insurance Group AG overcame a record year for natural-disaster claims in the industry to deliver its first dividend increase since 2011. The shares rose the most since August 2016.

Switzerland’s biggest insurer raised its dividend for 2017 by 6 percent to 18 Swiss francs ($19.10) a share, after signaling higher investor payouts in November. This will now become the new floor for payouts, Chief Executive Officer Mario Greco said in a Bloomberg TV interview Thursday. Zurich Insurance also announced a share buyback of roughly $1 billion.

When Greco took over as CEO almost two years ago, he pledged to simplify the insurer, slash costs and improve shareholder returns. Now his overhaul is bearing fruit with almost half the planned cost savings for 2019 achieved.

“We are progressing steadily on every target we announced,” Greco said in the interview. “Of course our ambition is to exceed the targets, not just to deliver on them.”

Despite the measures to increase profitability, full-year net income dropped 6 percent to $3 billion. That beat the average analyst estimate of $2.58 billion.

Zurich has been looking outside Europe for growth, acquiring the life-insurance business of Australia & New Zealand Banking Group Ltd. in December. The company then signaled possible higher dividend payments to investors because the deal will be earnings-accretive from the start. Other purchases included the life unit of Macquarie Group and Australian travel insurer Cover-More.

Analysts had expected a dividend of 17.90 francs, according to the Bloomberg Dividend Forecast. Commenting on the new floor for shareholder payouts, Greco said he’s “confident we will be able over time to move it further.”

Business operating profit at the property and casualty unit, Zurich’s main business, dropped by $892 million to $1.5 billion, heavily affected by catastrophe losses – in particular hurricanes Harvey, Irma and Maria.

These are some of the other highlights from Zurich Insurance’s annual earnings:

  • Full-year business operating profit $3.8 billion vs $4.5 billion.
  • $700 million savings achieved to date.
  • Combined ratio was 100.9 percent.
  • $700 million losses from Hurricanes Harvey, Irma and Maria.

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