Baloise's profit surge shows refocusing is working: CEO

By Aidan Gregory

March 25 - (The Insurer) - Baloise’s refocusing strategy is on track after the Swiss insurer reported a 60.6% uplift in profit in 2024, although the company still has “work to do” according to CEO Michael Müller.

In an interview with The Insurer on Tuesday afternoon, Müller said that the firm's 2024 results highlight the material progress that Baloise has made since unveiling its new strategy. At an investor day in September last year, the Basel-headquartered insurer lifted its dividend and announced a 100 million Swiss franc ($113 million) share buyback.

“It shows that the refocusing strategy is working,” said Müller. “We have done quite a step, starting with our non-life result, which is higher, and the combined ratio which is better despite the big claims we had in Switzerland in the first half of 2024.”

Baloise’s profit grew 60.6% last year to 384.8 million francs, despite the company’s volume of business remaining almost flat at 8.6 billion francs. Baloise’s combined ratio was 92.9%, an improvement from 94.6% in 2023.

The insurer’s return on equity was 13.9%, up from 7.2% in 2023, despite the impact of a 92 million franc charge relating to the sale of its digital P&C insurer Friday to Allianz.

Baloise’s life business grew its EBIT by 39% last year to 382.3 million, while its non-life business’ Ebit was 261.1 million francs, up 94.9% from 2023, despite the elevated claims volume in the first half of 2024.

“Overall, on the operational parts, and on the technical profitability, it's really a step in the right direction,” said Müller. “I also want to say clearly, we also have some work to do, but the start is good. We are well on track to also reach our targets.”

Under its new financial targets to 2027, Baloise is targeting a return on equity of 12% to 15%, and a payout ratio of at least 80% over the next three years, with an ambition to return at least 2 billion francs to shareholders over the course of the current cycle.

To achieve these targets, Baloise has cut costs, shed non-core assets such as Friday, and recommitted itself to its key insurance businesses in Switzerland, Belgium, Luxembourg and Germany.

“At the end, it's all about our core business, which is the insurance business and having a profitable view on that,” said Müller. “And then also the growth. I think it's also now about looking for growth in our target segments.”

Müller added that after the sale of Friday and ending its strategy of investing in its ecosystem of start-ups, Baloise does not plan any further major asset sales.

“At the moment, there is nothing on that side,” said Müller.

After underwhelming results in 2023, Baloise has been under pressure to lift its returns on equity and shareholder distributions, particularly after Cevian Capital, the Swedish activist hedge fund, built a 9.4% stake in Baloise, becoming its largest shareholder in September.

Cevian Capital is due to join the board of Baloise at the company’s annual general meeting on Friday, April 25, giving it a platform to influence decision making at the insurer.

“Overall, we have done our strategic review and there’s always work to be done together with the board of directors,” said Müller. “That’s our refocusing strategy that we are in, and we have our clear view on what goals we want to reach. That is where we are executing.

“It’s always good to look at where we have to do more to reach our ambitious goals,” added Müller.

A representative for Cevian Capital declined to comment on Baloise’s results. The activist investor told the Financial Times in September last year that it does not believe Baloise’s current strategy goes far enough.

The involvement of one of Europe’s most prolific activist investors has also led to Baloise becoming the subject of takeover speculation, with domestic and international rivals reportedly studying bids for all or parts of the company. There were also reports last week that Baloise had held merger talks with Helvetia, a rival Swiss insurer.

Müller declined to comment on “market rumours” such as the Helvetia talks.

Baloise’s boss said that the insurer always has always had “a view on what’s possible for M&A” as part of its existing strategies and would not consider any opportunities outside of its core markets.

“There has to be a clear strategic fit to do a transaction,” said Müller. “Overall, we are executing our own strategy which involves making our own portfolios better, which is an organic view.”

Baloise’s shares hit an all-time high in intraday trading on Tuesday morning after the Swiss insurer reported its 2024 results, with the stock gaining 7.3% to trade at 194.50 francs as of 9:45 a.m. (08:45 GMT) in Zurich.

The stock closed at 189 francs, up 4.3% from the previous close, giving Baloise a market capitalisation of 8.66 billion francs on the SIX Swiss Exchange.