On Monday, Citi updated its outlook on Zurich Insurance Group AG (ZURN:SW) (OTC: OTC:ZURVY), increasing the price target to CHF550.00 from CHF488.00. The firm maintained its Neutral rating on the stock. The adjustment follows the company's Capital Markets Day (CMD) held last week, which prompted a review of the financial model used by the analysts.
In the review, Citi revised its 2024 earnings per share (EPS) prediction for Zurich Insurance downward by 7% due to the anticipated impact of natural catastrophes (Nat Cats). However, the firm introduced its 2027 estimates for the first time. The projections for 2025 and 2026 remained mostly stable, with only minor adjustments of plus or minus 1%. These slight revisions account for improved combined operating ratio (COR) expectations, which are balanced against the removal of a presumed $1 billion annual buyback, as Citi now believes such buybacks will be discretionary rather than regular.
Citi's report included insights on capital deployment by Zurich Insurance, suggesting that there is potential for upside risks to their estimates over time. The firm's current estimates factor in a 9% compound annual growth rate (CAGR) for US dollar-denominated EPS. Additionally, Citi forecasts an implied Business Operating Profit (BOP) target of $9.8 billion by 2027.
The firm also provided updated COR estimates, which are central to insurance company performance metrics. Citi now expects a COR of 93.3% in 2025, improving to 92.8% in 2026 and 92.6% in 2027. The revised price target represents a 13% increase from the previous target, while the Neutral rating was reiterated, signaling a stance of watchful optimism on the stock's future performance.
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