Zurich Insurance: Profit Growth In All Divisions, Buy Confirmed

Core Viewpoint - Zurich Insurance Group reported a record operating profit in H1 2024, exceeding the company's 2025 KPIs, despite a negative stock price reaction, presenting an opportunity for investment [1][10]. Financial Performance - H1 operating profit reached nearly $4 billion, beating consensus by 2%, driven by the Life division and the Farmers segment [2][3]. - Net profit increased by 21% to $3 billion, surpassing the 3% consensus expectation [3]. - The company maintained a solid Solvency II ratio of 232% and reported a combined ratio increase of 60 basis points due to natural catastrophe losses, totaling 2.4% compared to 1.8% in H1 2023 [3]. Segment Performance - The Farmers division achieved the highest EBIT profit at $1.1 billion, showing significant improvement in the combined ratio excluding natural catastrophe events [4]. - The Life & Health segment's operating profit exceeded $1 billion for the first time, aided by the release of the Contractual Service Margin [4]. Market Outlook - Zurich increased its pricing outlook for the North American region, reporting a 6% year-to-date increase, accelerating to 8% in Q2 [4]. - The company confirmed a 10% EPS CAGR over 2023-2025, with a pre-tax operational income projection of $8 billion and a net income estimate of $6 billion [5]. Valuation and Capital Management - The company continues to apply a 12x P/E target, aligned with the sector median, supporting an overweight rating at CHF 502 per share ($58 in ADR) [5]. - Zurich's capital allocation priorities include the acquisition of AIG's global travel insurance segment, expected to enhance travel Gross Written Premium and generate cost synergies [4]. Conclusion - Zurich Insurance Group's strong financial performance and strategic initiatives position it favorably for future growth, with an attractive valuation and solid management [10].