By Oliver Hirt and Paul Arnold
ZURICH (Reuters) – Swiss insurer Baloise is under pressure to heed shareholder demands to shake up its portfolio and boost returns since activist investor Cevian Capital said it held over 9% of the company’s stock, becoming its biggest stakeholder.
Over the past decade, returns on Baloise’s shares, including dividends, have lagged peers active in Switzerland such as Allianz, Zurich, Axa, Generali and Swiss Life.
Critics believe that performance is linked to statutes at Baloise, Switzerland’s sixth biggest non-life and third biggest life insurer by premium volumes, which made it hard for activist investors to effect change. With around 8,000 employees, Baloise also has a bank and an asset management business.
In April, investors backed a plan by shareholder zCapital to lift voting rights restrictions.
“They must become more shareholder friendly,” a senior representative for a top 20 shareholder told Reuters. “They must send a signal they’re ready to change something,” pointing to the need to sell businesses not generating cash.
One shareholder demand is for Baloise to exit Germany. There, the firm is number 28 in non-life insurance, according to German financial market regulator BaFin.
“Baloise must get out of there. That’s the most urgent issue,” said the shareholder, also noting that Baloise did not need a bank.
Shareholders say Baloise’s capital markets day on Thursday, when it will present its latest mid-term targets, will be crucial in convincing investors it has got the message.
A spokesperson for Baloise said it would detail its strategic plans on Thursday.
Since April, shareholders have been able to enact changes much more easily. Under the old rules, the Baloise board was living in an “oasis of well-being”, said another major shareholder.
In March, Baloise CEO Michael Mueller said the firm would focus on its core business and that investment in start-ups offering repair, removal or cleaning services should end.
Analysts expect Baloise to set out new savings targets on Thursday. So far, the firm has avoided a big overhaul.
Andreas Brun, an equity analyst at Vontobel Investments, said investors would want more than moderate savings and details of the exit from start-ups. “The share price shows the market expects more, a major shake-up,” he said.
Vontobel says it is a top-10 Baloise shareholder.
If nothing major is forthcoming, Baloise could come under more pressure from Cevian, Brun said.
Cevian, which announced its holding on Monday, has not yet said what it wants for Baloise.
But it has previously proved able to push through asset sales or shake up management not to its liking, according to Daniel Bosshard, an analyst at Luzerner Kantonalbank.
(Reporting by Oliver Hirt and Paul Arnold; writing by Dave Graham; editing by Jason Neely and David Evans)
