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Zurich chief says rivals will struggle ‘to replicate’ new profit targets

Zurich’s chief executive Mario Greco has thrown down the gauntlet to rivals, issuing a three-year profit target for the European insurance group that he said peers would struggle “to replicate or imitate”.

The insurer, one of Europe’s biggest by market value, increased its targets at an investor day on Wednesday, including delivering a return on equity of more than 20 per cent between 2023 and 2025.

“We frankly think that this will be record profitability in the insurance industry and this is something that it will not be easy for others to replicate or imitate,” he told the Financial Times.

The target for the previous three-year period was to exceed 14 per cent return on equity — an annualised measure based on operating profit after tax. But that is equivalent to close to 18 per cent under new accounting rules.

Greco, who joined the group in 2016, said the potential for acquisitions was not baked into the plan, but the insurer had the firepower to pursue this if needed: “If we find something which is worth considering and it is accretive to our return on equity target, we go for it, and we definitely have the financial lever to do that.”

Zurich’s shares rose more than 2 per cent in morning trading, against a slight fall in the Stoxx Europe 600 benchmark.

The insurer is now targeting earnings growth of 8 per cent a year, an enhancement on its more than 5 per cent target for the previous three-year term. It highlighted margins in its property & casualty business and profits in the life division as areas for growth.

At a time of rising commercial insurance prices, Greco said he thought its growth in retail insurance would actually outpace commercial business over the next few years: Zurich has added 4.6mn retail customers since 2019.

The insurer said it was on track to exceed its 2020-22 targets. It also increased its cash generation target, aiming to generate more than $13.5bn of cash by 2025, an enhancement on its previous $11.5bn goal but below the around $15bn analysts were hoping for.

Zurich has retained a target solvency ratio — capital as a percentage of the regulatory requirement — of at least 160 per cent.

A surge in natural catastrophe payouts after the destruction wrought by Hurricane Ian has added to pressure on this area of insurance. Zurich currently estimates a net pre-tax impact from the storm of $550mn. 

Greco said the group’s exposure to the hurricane would have been 15 per cent bigger, were it not for efforts to reduce its exposure to wind and water claims in Florida.

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