Having turned Zurich Financial around in the past three years, chief executive Jim Schiro now has to prove that the former basket-case can sustain growth in profits. The insurer’s first-half results, well above expectations, are certainly encouraging in this respect.

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Business operating profit management’s favoured measure because it excludes volatile investment returns rose 17 per cent to $2.3bn. A one-off pension gain helped. But the real star was the life insurance division, responsible for a third of group premiums, where profits were strong and the new business margin virtually doubled in the second quarter. In general insurance, the combined operating ratio (premiums minus claims and expenses) was disappointingly flat at 96.9 per cent. But that figure included exceptional claims worth some 2 percentage points.

As a former boss of PwC and hence an outsider, Mr Schiro thinks of insurance as a normal business one where constant pricing pressure must be offset by cost control rather than reliance on investment gains, and where focusing on profits makes more sense than pursuing market share. Hence, Zurich saw a 4 per cent underlying decline in gross premiums, but managed a 16.5 per cent return on equity, well above its 12 per cent target. Mr Schiro hopes to make Zurich a boringly profitable company. If he succeeds, that should narrow the stock’s 25 per cent discount to the sector in terms of price-to-book value and make it an exciting ride for shareholders.

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