Zurich Insurance posts 'disappointing' 53% net profit plunge

GMT 10:58 2016 Thursday ,11 February

Arab Today, arab today Zurich Insurance posts 'disappointing' 53% net profit plunge

Zurich Insurance plans to save more than $1.0bn
Zurich - AFP

Zurich Insurance on Thursday reported "disappointing" 2015 results hit by costs linked to the industrial disaster in Tianjin, China, and said thousands of jobs would be affected as it tries to rein in costs.

Switzerland's largest insurance provider posted a net profit down 53 percent last year at $1.8 billion (1.6 billion euros).

"This is a disappointing result," acknowledged company chief Tom de Swaan in the earnings release.

Investors seemed to agree, sending Zurich's share price down 3.89 percent in morning trading to 197.50 Swiss francs a piece, as the Swiss stock exchange's main SMI index slumped 2.55 percent.

The sharp profit drop was partially due to "large losses and natural catastrophe claims" in its general insurance unit, Zurich said.

That unit saw its operating profit plunge 71 percent to $864 million for the year, and recorded a $120-million loss in the fourth quarter, as it was hit by the massive explosions at a hazardous goods storage firm in Tianjin, in northeastern China on August 12 that killed 161 people, and severe flooding in Britain and Ireland in December.

The company had issued a profit warning last month on its fourth quarter earnings, saying the UK storms Desmond, Eva and Frank would saddle it with heavy losses.

The general insurance unit's combined ratio -- a measure of how effective insurers are at balancing administrative costs and payouts to clients against premiums paid in -- meanwhile deteriorated 6.7 points to 103.6 percent.

Anything above 100 percent means payouts exceed premiums and the insurer is losing money.

The results fell far short of the expectations of analysts polled by the AWP financial news agency, who had anticipated a group net profit of $2.0 billion and a combined ratio of 100.3 percent.

"Ongoing actions (are) underway to restore profitability," the company said.

In a bid to turn things around, de Swaan said the company was accelerating a restructuring programme and now aimed to rake in more than the previously announced cost-saving target of $300 million this year.

He said the group planned to save more than $1.0 billion by the end of 2018, and that some 8,000 positions across the company would be affected.

The company also voiced caution about its outlook, warning it was "unlikely" to achieve its target of a business operating profit after tax return on equity of 12 to 14 percent this year.

But de Swaan stressed the group was "on track" to achieve its other targets for the 2014 to 2016 period.

Despite its difficulties, Zurich said Thursday it intended to pay out an unchanged dividend to share holders of 17 Swiss francs per share.

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