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The Zurich Insurance Group AG's headquarters stand in Zurich, Switzerland.

(bloomberg)

(Bloomberg) -- Zurich Insurance Group AG got a boost from its property & casualty business, putting the company on track to meet Chief Executive Officer Mario Greco’s three-year restructuring goals.

The Swiss insurer’s biggest unit saw higher profit and posted a lower combined ratio, a key metric for insurers. Reserve releases helped lift group profit even as competition in the commercial business weighs on the bottom line. Net income jumped 19 percent to $1.8 billion, beating analyst estimates.

Greco initiated a portfolio review when he took over as CEO in 2016 after the company posted losses related to auto claims in the U.S. The former Assicurazioni Generali SpA chief exited units across the globe and business lines while also increasing the use of reinsurance to reduce earnings volatility.

As part of its restructuring, Zurich has also made a flurry of acquisitions in recent years diversifying its business and re-balancing the weighting of corporate and retail clients.

Dividend Watch

The dividend payout is a key focus for Zurich investors. Greco boosted the payout for last year and said that the 18 francs would be the new floor for future increases. On a conference call, the CEO said he didn’t want to talk about specifics ahead of the hurricane season though he suggested that it’s part of Zurich’s strategy to increase the dividend.

Zurich shares were little changed at 299.40 francs as of 9:37 a.m. The stock is little changed this year, giving the company a market value of 45.2 billion francs ($45.5 billion).

Greco said that future cost cuts will be focused on IT spending and that the company isn’t currently considering further disposals. The commercial business remains a headache for the CEO. The unit posted a combined ratio above 100 percent in the first half, according Chief Financial Officer George Quinn.

“The commercial business is operating in a very competitive market, however it’s a bit disappointing that the combined ratio is still so high,” said Baader Helvea analyst Daniel Bischof. He said that higher-than-expected reserve releases in the property & casualty business explain the results. “Headline figures are good but the higher reserve releases relativize the results a bit."

The company has also struggled to boost investment income, with Chief Financial Officer George Quinn saying on a call that he hopes the result will at least be flat this year after declining previously.

Zurich has been looking outside Europe for growth, acquiring the life-insurance business of Australia & New Zealand Banking Group Ltd. in December. Other purchases included the life unit of Macquarie Group and Australian travel insurer Cover-More.

(Updates with share price in sixth paragraph, analyst comment in eighth. An earlier verson of this story was corrected to remove an erroneous reference to disaster claims.)

To contact the reporter on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Christian Baumgaertel

©2018 Bloomberg L.P.

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