* Sets out strategy goals for 2014-2016 period
* Will invest in priority markets, exit where underperforming
* Promises sustainable and attractive dividend
* Share up 2.2 pct vs flat European insurance index (Adds CEO, analyst comment)
By Jonathan Gould and Paul Arnold
FRANKFURT/ZURICH, Dec 5 (Reuters) - Zurich Insurance lowered a key profit target but promised to keep paying an attractive dividend over the next three years as it overhauls its business by investing in high margin units and selling underperforming lines.
In a presentation to investors on Thursday, Zurich lowered its target for return on equity (RoE) of 12 to 14 percent through 2016, from 16 percent. The move was broadly expected as the company said recently damage from low interest rates meant it could be two percentage points below target.
Chief Executive Martin Senn said the insurer aimed to pay an attractive and sustainable dividend as it worked to hone profitability. Zurich shares consequently rose 2.2 percent to 250.10 Swiss francs by 1210 GMT, outperforming a flat STOXX Europe 600 insurance index.
Senn told investors Zurich would build its global corporate and mid-market business, as well as its high-margin retail insurance lines, while either turning around or exiting non-core insurance businesses that were underperforming.
"We are very strong in some areas but we lack scale or profitability in others," he said, promising to issue a "report card" every six months on progress towards its 2016 goals.
The Swiss insurer's profitability targets have been under scrutiny since its finance chief Pierre Wauthier committed suicide in August. Sources said he wrote about friction between himself and Zurich chairman Josef Ackermann in a note before taking his life. Ackermann subsequently quit.
The new RoE goal now excludes unrealised gains and losses, aimed at bringing Zurich into line with peers' targets.
Senn said that Zurich did not plan to stay at that level of RoE for long.
"If three years from now we are still at 12 percent, then it has not been a success," he told a conference call later.
Kepler analysts said the new goals differed little from the strategy Zurich has pursued over the last 10 years, noting the lack of any external growth initiative such as further expansion in emerging markets, was "somewhat unsatisfactory."
However, the group's strong dividend would offer some investors some protection, they added.
Zurich has the highest dividend yield among the stocks in the Swiss large cap index, with a payout of 6.95 percent against Swisscom's 4.84 percent and 4.47 percent for Swiss Re.
"The sustainable 7 percent yield underpins our buy rating," Kepler analysts said.
The average of analysts forecasts is for a dividend of 18.63 euros for 2013, compared with 17.00 euros paid for 2012, according to Thomson Reuters I/B/E/S.
Zurich said there was still no news on the appointment of a new chief financial officer and a head of operations.
The insurer conducted a review after Wauthier's death that found he did not come under "undue pressure" before his suicide, lifting any blame from Ackermann. (Additional reporting by Katharina Bart and Ruppert Pretterklieber; Editing by Sophie Walker)