Zurich Insurance raises return on equity targets, shares hit 23-year high

Zurich Insurance ZURN on Thursday raised return on equity targets and committed to achieving average annual growth of more than 9% in core earnings per share, sending its shares to a 23-year high.

Announcing new three-year targets a year early, Europe's fifth-largest insurer said it was aiming for a core return on equity of more than 23% between 2025 and 2027 and for cumulative cash generation of above $19 billion between 2025 and 2027.

CEO Mario Greco said Zurich was performing exceptionally well but saw new opportunities to boost growth.

"To reflect our growing confidence, we are launching a new three-year plan with the most ambitious targets in Zurich's history," he said ahead of an investor day.

Insurers have enjoyed strong profits in the past few years as they pushed up premiums in response to inflation and to losses from the COVID-19 pandemic, wars and natural disasters.

Zurich had previously aimed to raise its business operating profit after tax return on equity (BOPAT ROE) to above 20% by 2025, and to generate compound organic growth in earnings per share of 8% per year in its 2023-2025 targets.

The company's stock rose as much as 2.2% in early trading, briefly hitting its highest value since March 2001, and topping Switzerland's blue-chip index SMI.

On commercial insurance, Zurich aimed for business operating profit to exceed $4.2 billion and middle market gross written premiums to surpass $10 billion by the end of 2027.

On life insurance, protection gross written premiums should increase to a compound annual growth rate of 8%, Zurich said, aiming for further growth in capital-light unit-linked business.

Zurich's protection business, which represents almost 60% of its life business operating profit, will be consolidated under a single global unit, the company added.

On retail and SME business, the group said it planned to improve long-term profitability through a combination of strengthened underwriting, improvements in the portfolio mix and by leveraging scale and technology assets.

Zurich had previously targeted cumulative cash generation above $13.5 billion. Its dividend policy targeted a pay-out ratio of around 75% of net income attributable to shareholders.