The Swiss insurer Baloise is setting new goals after coming under pressure from investor Cevian Capital earlier this week. These were published on Thursday ahead of today's investor update. The new so-called «refocusing strategy» includes measures to enhance «technical profitability,» «operational efficiency,» «growth in target segments,» and «capital productivity,» as stated in the announcement.

«After a careful analysis of our business operations, we see substantial potential for efficiency improvements, along with cost savings and growth opportunities in all our business units,» says CEO Michael Müller.

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-generation capability of the core business. This forms the foundation for continuing Baloise's attractive shareholder policy.

Dividends and share buybacks

For the years 2024 to 2027, a higher cash payout ratio of 80 percent or more is anticipated. The payouts are to be complemented by a new payout logic for share buybacks. The company is considering launching its first share buyback program in the coming spring, as further stated.

In the non-life business, profitability is to be ensured. With a combined ratio consistently below 95 percent since 2012, it has been «persistently strong.» On average, over the past 10 years, it has been 2 percentage points better than the market average.

250 jobs to be cut

To achieve the cost targets, job cuts are also planned. «The corresponding measures include reducing 250 positions across the group, optimizing material costs, and making improvements through the use of new technologies,» the company writes. This is intended to improve efficiency and reduce the cost ratio in the non-life business by 2 to 3 percentage points. The group currently employs around 8,000 people, according to its own data.

Baloise further defines Switzerland, Belgium, Germany, and Luxembourg as target markets. In these countries, the goal is to be among the «leading insurers.» «To achieve this, we need to increase our cost discipline and achieve sustainable, profitable growth in the target segments above the respective market growth.»

The currently ongoing strategy program «Simply Safe,» including its associated goals, will be immediately replaced by the new plans. Ambitions to develop an innovative ecosystem will be abandoned.

With the introduction of the IFRS 17/9 accounting standard, the calculation has changed, leading to an increase in the cost ratio and the combined ratio by 2 to 3 percentage points.

Despite this change, the insurer continues to target a combined ratio of 90 percent in an average interest rate and claims environment.

Sustainable EBIT contribution in the life business

The life insurance business is expected to generate a sustainable EBIT contribution of at least 200 million francs. The plan includes the continuous optimization of insurance portfolios, for example, through reinsurance solutions. Additionally, the focus will be on capital-efficient new business and a selective approach in the Swiss group life insurance business. The range of products and services will not be limited.

The portfolio optimization announced in the spring for the Belgian life insurance business will result in a one-time cash flow of 62 million francs. Together with operational cash generation, Baloise expects a high cash flow of more than 500 million francs for 2024.

Just a few days ago, Swedish activist investor Cevian Capital increased its stake in Baloise and simultaneously called for higher returns for shareholders and a strategic realignment.