(Bloomberg) -- Swiss insurer Baloise Holding AG pledged to “refocus” its business in a strategy update that stopped short of the asset disposals expected by activist investor Cevian Capital AB, its largest shareholder.
Cevian, which is known to push for bold management actions at its target firms, wanted Baloise to focus on its core Swiss market and sell other assets, such as its German unit and the regional lender Solothurner Bank, Bloomberg reported Wednesday.
Baloise on Thursday said it would increase its payout ratio to 80% or more, from a current level of about 70%. It will also end investments in non-core sectors and cut 250 jobs as part of broader cost-saving measures, it said.
While this delivers on some of Cevian’s expectations, the Swedish activist investor will now weigh ramping up pressure on management by increasing its stake and potentially installing a board member. Baloise has hired Morgan Stanley and UBS Group AG to defend against Cevian.
“For Baloise to become a great Swiss insurance company, real focus and real ambition are needed,” said Robert Schuchna, a partner at Cevian said in a statement shared by a spokesperson via SMS. “Today’s announcements are insufficient on both accounts.”
Baloise shares gained 0.56% at market close in Zurich.
Activist Pressure
Cevian has built a 9.4% stake in Baloise, according to a Cevian spokesman, making it the insurer’s largest shareholder - just ahead of UBS’s 9.3%. The stake-building followed a change in Baloise’s bylaws in April, which abolished curbs on investors’ voting rights.
At a press conference on Thursday, Chief Executive Officer Michael Mueller said Solothurner Bank is an integral part of the Baloise business. He added that regional businesses are vital parts of Baloise future, even though the German unit must improve its cash generation.
Earlier on Thursday, the insurer posted new mid-term targets, including a return on equity of 12% to 15% until 2027. It also proposed buybacks of at least 100 million Swiss francs ($117 million) by next year, pending shareholder approval. The Swiss insurer reported a profit of 220 million francs for the first half of 2024, up almost 7% from a year earlier.
--With assistance from Allegra Catelli.
(Update with comment from Cevian partner, share move in fifth paragraph.)
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