Baloise has set itself new financial goals. The newly formulated strategy promises greater profitability, efficiency and growth. This also includes job cuts. A higher cash payout ratio is also promised.
The Swiss insurance company Baloise has set itself new targets after the financial services provider came under pressure from investor Cevian Capital at the beginning of the week. These were announced on Thursday in Released ahead of today’s investor updateThe new so-called “refocusing strategy” includes measures on “technical profitability”, “operational efficiency”, “growth in target segments” and “capital productivity”, as it is called.
“After a careful analysis of our business activities, we see substantial potential for improving efficiency with associated cost savings and growth opportunities in all our business units,” says CEO Michael Mueller.
The new financial targets include a return on equity of 12 to 15 percent and strong cash generation of more than 2 billion francs. The focus is on the performance and value-generating ability of the core business. This forms the basis for the continuation of Baloise’s attractive shareholder policy.
Distribution and share buybacks
A higher cash payout ratio of 80 percent or more is expected for the years 2024 to 2027. The payouts are to be supplemented by a new payout logic for share buybacks. The company is considering launching its first share buyback program next spring, it said.
The aim is to ensure profitability in the non-life business. With a combined ratio that has always been below 95 percent since 2012, it has been “sustainably strong.” On average, it has been 2 percentage points better than the market average over the past 10 years.
250 jobs to be cut
In order to achieve the cost targets, job cuts are also planned. “The corresponding measures include the elimination of 250 jobs across the group, optimization of material costs and improvements through the use of new technologies,” the company writes. This will significantly improve efficiency and reduce the cost ratio in the non-life business by between 2 and 3 percentage points. According to the company’s own information, a total of around 8,000 people work for the group.
Baloise defines Switzerland, Belgium, Germany and Luxembourg as its target markets. The company wants to be one of the “leading insurance companies” in these markets. “To achieve this, we must increase our cost discipline and achieve sustainable, profitable growth in the target segments above the respective market growth.”
The current strategic program “Simply Safe”, including the associated goals, will be replaced by the new plans with immediate effect. The ambitions to develop an innovative ecosystem will be abandoned.
With the introduction of the accounting standard IFRS 17/9, the calculation has changed and led to the expense ratio and thus also the combined ratio increasing by 2 to 3 percentage points.
Despite this change, the insurance company continues to set a target of 90 percent for the combined ratio in an average interest rate and loss environment.
Sustainable EBIT contribution in the life business
The life business is expected to generate a sustainable EBIT contribution of at least 200 million francs, it continues. The plan is to continuously optimize the insurance portfolios, for example by securing them through reinsurance solutions. In addition, the focus will be on capital-efficient new business and a selective approach in the Swiss group life business. The range of products and services will not be limited.
The portfolio optimization in the Belgian life business announced in the spring will result in a one-off cash flow of 62 million francs. Together with the operating cash generation, Baloise expects a high cash flow of more than 500 million francs for 2024.
Only a few days ago, the activist Swedish investor Cevian Capital increased its stake in Baloise and at the same time demanded a higher return for shareholders and a strategic realignment.
