Zurich Insurance announces $1.25 billion buyback after record profit

LONDON (Reuters) -Zurich Insurance posted a better than expected annual operating profit on Thursday and announced a share buyback of up to 1.1 billion Swiss francs ($1.25 billion), as insurers ride out the impact of a global pandemic, wars and climate disasters.

Operating profit at Europe's fifth-largest insurer rose 21% to a record $7.4 billion for the year to Dec. 31, beating the $7.1 billion average estimate in an analyst poll compiled by the company.

Insurers have coped well with unexpected claims in recent years from issues such as COVID-19, natural catastrophes and the war in Ukraine, mainly by raising premiums and excluding some business.

However, they face further risks of war or damage-related losses this year from any broader fall-out from the Israel-Gaza conflict and from elections in many countries, including the United States. Climate change is also contributing to greater losses from hurricanes and wildfires.

"It's been a pretty unstable world for quite a long time, the group has been very resilient through that," Chief Financial Officer George Quinn told a media call.

"There's no reason to expect any of that to change."

Zurich last year set more ambitious three-year financial targets, including a 2025 goal for business operating profit after tax return on equity (BOPAT ROE) of more than 20%. BOPAT ROE for 2023 came in at 23.1%.

"One year into the three-year plan we are beating or running to beat all the targets for 2025," Chief Executive Mario Greco said on a media call.

Zurich raised its guidance for compound annual EPS growth to more than 10%, compared with its original target of 8%.

Rival AXA on Thursday set new targets, including estimated compound annual growth in underlying earnings per share of 6-8% for the 2023-2026 period.

Greco said that Zurich would "reconsider the opportunities" for its German life back book after its plan to offload the $20 billion portfolio to Viridium Holding fell through last month.

Zurich's shares were up 2% at 0834 GMT, outperforming a 1.4% rise in European insurance stocks.

Zurich said it planned to increase its dividend by 8% to 26 Swiss francs per share.

($1 = 0.8778 Swiss francs)

(Reporting by Carolyn Cohn and Miranda Murray; Editing by Bartosz Dabrowski, Rashmi Aich, David Goodman and Hugh Lawson)

By Carolyn Cohn and Miranda Murray