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ZURICH INSURANCE GROUP
NEW YORK - Die US-Bank JPMorgan hat die Einstufung für die Zurich Insurance Group im Vorfeld der Bilanzzahlen für das dritte Quartal 2014 auf "Neutral" mit einem Kursziel von 315 Franken belassen. Analyst Michael Huttner rechnete in einer Studie vom Mittwoch zwar mit einem Gewinnwachstum. Rivalen wie die Allianz böten jedoch mehr Potenzial für Anleger.
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18-10-2014 06:05 DJ Zurich Insurance: Time For Growth -- Barron's By Jonathan Buck
Pierre Wauthier's death sent shock waves through Zurich, a global multi-line insurer formerly known as Zurich Financial Services. Chairman Josef Ackermann quit to protect Zurich's reputation. A probe ultimately absolved Ackermann, but the episode cast a shadow over the company. However, Zurich quickly replenished its ranks -- promoting Tom de Swaan from vice chairman to chairman and hiring George Quinn from Swiss Re (SREN.Switzerland) as CFO -- and its performance has barely skipped a beat. Its shares (ZURN.Switzerland) have climbed 5.2% in 2014, surpassing the European insurance group's average 1.9% gain, even as European equities fell 4%. The stock is still attractive. Based on Friday's close of 271.90 Swiss francs ($287.36), Zurich trades at just 9.7 times projected 2015 earnings. Its American depositary receipts (ZURVY), which traded Friday at $28.75, offer a similar multiple. Some U.S. rivals that have underperformed this year still trade at higher multiples. ACE's (ACE) shares are about flat since Jan. 1, but command 11 times forecast 2015 earnings. At the same P/E, Zurich would be worth CHF311, or 14% more. Some analysts say Zurich could be worth as much as CHF330. For Zurich shareholders, the bonus is a 6% dividend, pushing potential total returns in the next 12 months to 20% or more. It's a huge yield when the coupon on Swiss government 10-year bonds is 0.4%. But the CHF17-a-share payout has been flat for four years, so investors will be looking for more as performance improves. Zurich, which traces its roots to 1872, has been a consistent performer lately. But in the 1990s, it branched into banking and asset management, and its insurance-underwriting discipline slipped. Former PricewaterhouseCoopers CEO James Schiro, an American, joined in 2002 and sold ancillary businesses, cut costs, tightened underwriting, and sacrificed market share for profits. Zurich was in good shape when the financial crisis hit. Last year, Zurich reported a 4% rise in net income, to $4 billion, or $25.63 a share, on $72 billion in revenue. General insurance provided a base, benefiting from a decline in catastrophe and weather-related claims. Its U.S.-based Farmers Insurance, which earns fees providing management services to policyholder-owned Farmers Exchanges, is delivering resilient margins by focusing on consumers. A venture with Banco Santander (SAN) to sell insurance in bank branches in Latin America is also promising. Zurich has continued its conservative approach under Martin Senn, a Swiss former banker who succeeded Schiro in 2010 (Schiro passed away in August). But Zurich is switching gears. "The big difference in our strategy now is to not only run a stable company, but to grow the company, to grow earnings. . .and to sustain the attractive dividend," Senn tells Barron's. Barring disaster, analysts see net income this year edging up to $4.09 billion, or $27.15 per share, and in 2015 to $4.42 billion, or $29.42. On Nov. 6, Zurich is likely to give more earnings guidance -- a potentially bullish event. Zurich is prioritizing markets for investment, such as its corporate business, where it can leverage its global footprint in nearly 200 countries. It is managing profitable businesses more efficiently, and exiting underperformers, such as its Russian retail business. And it is cutting costs. In 2014 through 2016, Zurich aims for a return on equity of 12% to 14%. The goal looks attainable and should help deliver generous rewards to investors. "They are addressing things that other companies have already done, so the execution risk should be relatively low, and the likelihood of success relatively high," says Raj Shant, manager of the Newton Continental European Fund, which owns Zurich shares. Still, the progress is encouraging. In its half-year report, Zurich put ROE at 12.5% and said cash remittances should exceed $3.5 billion in 2014. The company has set a $9 billion goal over the next three years. Senn, however, cautions against extrapolating, citing seasonality and potential underwriting losses. "It would be too simplistic to multiply that [$3.5 billion figure] by three," he says. The Swiss insurer's capital position is robust. On June 30, its measure of capital adequacy under Swiss guidelines was 128%, surpassing its targeted 100% to 120%. That has sparked suggestions that Zurich is overcapitalized and should return more cash to shareholders; some suggest $1 billion. Zurich isn't ready to take that step. Analysts are watching Zurich's investment income. Because of low interest rates, the investments, worth more than $200 billion, returned just 1.3% last year, versus 7% in 2012. Some 85% of the money is invested in fixed income. Zurich is taking a bit more risk, raising its equity holdings to 5% from below 4%. Senn warns against fixating on investment income. "The investment fund is very important, but it is not the sole driver of the profitability of the firm. It cannot be," he says. "Otherwise, we would not be an insurance company anymore, but a hedge fund." Zurich won't set the world on fire, but it could be a key stock for risk-averse investors.
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