Zurich Insurance Takes Out Savings Drive Policy -- 2nd Update

(Adds share price move and comments from CEO and CFO)

By John Letzing

ZURICH--Zurich Insurance Group AG (ZURVY) unveiled a plan Thursday to cut more costs, boost payouts for shareholders and become even more conservative as an investor.

The Switzerland-based insurer said it planned to realize $1.5 billion in savings by 2019, primarily by reducing its IT operations. This will result in restructuring charges of about $500 million in both 2017 and 2018, the company said.

Zurich shares rose 2.4% Thursday.

Zurich Insurance Chief Financial Officer George Quinn said the company, already seen as among the more cautious investors in the industry, aimed to shift its asset allocation away from stocks and more heavily into bonds over the next 18 months.

"It's not that we perceive that there's tons of value in any particular sector," Mr. Quinn said. "But there's quite a lot of volatility to be found in certain sectors."

Chief Executive Mario Greco said at the company's investor event Thursday that Zurich didn't need "fundamental restructuring," but "the machine has to be refocused."

Operating profit after tax return on equity--a measure of profitability--could exceed 12% by 2017 and increase in subsequent years, Zurich said.

Mr. Greco said the company planned to maintain its longstanding annual dividend of 17 Swiss francs ($16.97) for at least the next year. Ultimately, Mr. Greco said Zurich aimed to hit a payout ratio equal to about 75% of its net profit.

The planned savings highlighted Thursday are in addition to the roughly 8,000 job cuts previously flagged by the company, which, like other insurers, has struggled amid tepid economic growth and weak investment returns tied to low and negative interest rates.

Mr. Greco was formerly CEO of Assicurazioni Generali SpA and took the helm of Zurich Insurance in March after a difficult period under his predecessor.

Write to John Letzing at john.letzing@wsj.com

(END) Dow Jones Newswires

November 17, 2016 06:13 ET (11:13 GMT)

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