November 17, 2016 / 7:15 AM / 3 years ago

UPDATE 2-Zurich Insurance dividend pledge boosts shares

* Zurich Ins targets dividend payout around 75 pct of net profit

* Will keep minimum dividend of 17 Sfr/shr until reaching goal

* Raises cost-cutting goal to $1.5 bln by 2019 versus 2015

* Softens ROE target to over 12 pct for 2017-2019

* Targets $9.5 bln net cash remittances, up from over $9 bln

* Holds investor day in London (Recasts with CEO comments, market reaction)

By Brenna Hughes Neghaiwi and Carolyn Cohn

ZURICH/LONDON, Nov 17 (Reuters) - New Zurich Insurance Chief Executive Mario Greco pledged on Thursday to keep dividends at least steady through 2019 and stepped up cost cuts, dispelling investor fears that the Swiss insurer could curtail payouts under his watch.

The executive brought in from Generali in March to engineer a turnaround for the troubled group promised to make the company more efficient while trimming the group’s main profitability goal to a more achievable level.

“We have a complex business model that needs to be simplified, we have a high cost basis that can be reduced, and we have an accountability weakness that we are tracking through organisational changes,” Greco told journalists ahead of the group’s investor day in London.

Zurich, which was already in the midst of a $1 billion-plus cost-cutting drive when Greco came on board, now aims to generate net savings of $1.5 billion by 2019.

It will maintain a dividend of at least 17 Swiss francs ($16.95) per share as part of its 2017-2019 targets while growing towards a more ambitious goal of paying out around 75 percent of net profit.

The shares were up 2 percent by 1230 GMT, the biggest gainer by far in an easier European insurance sector index.

After two cycles in which the Swiss group has missed or is expected to miss profitability targets, its newly lowered target for return on equity (RoE) of more than 12 percent of business operating profit after tax represented a more achievable goal, analysts said. It had targeted 12-14 percent for the prior three years, missing that range through September 2016.

“It will take time to assess feasibility,” Bernstein analysts said in a note. “We have to see the action plan today in order to assess whether Zurich will achieve its further reduced RoE target in 2017 (for the first time since 2010).”

Greco is widely seen as the architect of a rapid turnaround at Generali that helped almost double the Italian group’s share price. He has so far combined Zurich’s life and general businesses as well as its corporate and commercial businesses, and introduced a new regional structure to continue untangling a famously complicated organisation.

Restructuring steps would cost an expected $500 million per year on average in 2017 and 2018, Zurich said. Additional savings would be achieved mainly by reviewing technology systems and contracts as well as shared services procurement processes.

$1 = 1.0030 Swiss francs Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields and Elaine Hardcastle

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