Baloise of Switzerland Profit Jumps on Life Insurance Sales

Aug 28, 2014 3:59 am ET

(Updates with analyst comment in the sixth paragraph, inflows in seventh.)

Aug. 28 (Bloomberg) -- Baloise Holding AG, Switzerland’s third-biggest insurer, said first-half profit jumped 43 percent, boosted by earnings from life insurance. The shares rose on expectations for a higher dividend.

Net income increased to 349.9 million Swiss francs ($383 million) from 244.8 million francs a year earlier, the Basel, Switzerland-based company said in an e-mailed statement today. Baloise said on Aug. 5 that it saw profit exceeding 340 million francs in the period.

The company, which last year cut its target for return on equity, or net income as a percentage of shareholders’ equity, to between 8 percent and 12 percent from a previous 15 percent, generates more than half its revenue in Switzerland. In March, it raised its dividend for the first time in six years after full-year profit climbed on sales of life insurance policies.

“We are growing encouragingly, our profit has risen sharply and we are focusing on attractive business segments,” Chief Executive Officer Martin Strobel said in a briefing with reporters. “This helps to explain why we are one of the most profitable insurance companies in Europe.”

Baloise rose 1.6 percent to 118.70 francs at 9:54 a.m. in Zurich trading, valuing the company at 5.92 billion francs. The shares have climbed 4.5 percent this year, compared with a 3.3 percent advance for the 32-member Bloomberg Europe 500 Insurance Index.

Dividend Bets

Cash inflows due in the second half could “spur expectations for a higher dividend,” Stefan Schuermann, a Zurich-based analyst with Vontobel who has a hold rating on the stock, wrote in an e-mailed note to investors.

Baloise expects a contribution to operating income in the second half from the sale of a stake in Nationale Suisse, Chief Financial Officer German Egloff told journalists today. Baloise also agreed to sell its Austrian business to Helvetia Holding AG for 130 million euros ($172 million) in May, with the transaction scheduled to be completed in the second half.

Life insurance operating profit rose to 249.2 million francs from 99.4 million francs. Returns were boosted by gains on interest hedging instruments and the strengthening of reserves that had already taken place in previous periods due to the low level of interest rates, Baloise said earlier this month.

Non-life operating profit declined 14 percent to 193.1 million francs. The combined ratio, a measure of profitability in non-life, improved to 93.2 percent from 94.5 percent due to a low level of claims in Switzerland, the company said.