Profit surges at Zurich

Zurich has bounced back after a huge loss in 2002 Keystone

Switzerland’s largest insurer, Zurich Financial Services (ZFS), has reported its third consecutive quarterly profit, after making a huge loss last year.

The company posted a $701 million (SFr908.1 million) net profit for the third quarter, pushing net income for the first nine months to just over $1.4 billion.

Analysts had been predicting third-quarter net profit of around $450 million. However, operating profit at $206 million was about half the forecast level.

ZFS made a loss of $763 million for the same period last year and a total loss for the year of $3.4 billion.

Announcing the figures on Wednesday, the company said that profit this year had been boosted by selling off businesses, cutting costs, raising premiums and by a modest recovery in global equity markets.

“These results demonstrate that Zurich has come a long way over the last year,” commented CEO James Schiro.

“Our challenge is to maintain the momentum and further develop our framework for sustainable and profitable growth.”

“We are well positioned to do so, and I am confident that we will continue to make good progress,” he added.

Underlying profitability disappointing

Analyst Richard Schreuder at Barclays Private Clients was not so upbeat in his comments on the performance.

“The figures were quite good if you just look at net profit. But if you look at the underlying profitability of the company, I think the numbers disappointed somewhat,” he told swissinfo.

However, Schreuder believes that the company is on the mend after two years of disappointing results.

“Overall, I think you can really see that this company is succeeding in turning itself around. The only question is the long-term profitability of the life business. We will need some convincing on that still,” he commented.

Unit sale

Third-quarter income included a gain from the sale of the London-based Threadneedle Asset Management company to American Express.

Threadneedle was one of eight divestments announced or completed in the past year as Schiro trimmed the insurer to meet his financial goals.

The £340 million (SFr750.6 million) Threadneedle deal was completed on October 1.

In August, Zurich announced the sale of its British life insurance arm to the Swiss Reinsurance company for about $240 million.

Earlier, the company sold its US life insurance business to Bank One for about $500 million.

Weakness

One weakness in Zurich’s third-quarter figures was its Centre unit, which showed a loss of $488 million. This niche financial services division is one of the last remaining problem areas at Zurich.

Business operating profit increased to $1.47 billion for the first nine months of the year, from $490 million in 2002.

The company reported premium growth in non-life insurance of 26 per cent over the comparable period last year to $27.8 billion.

Growth in life insurance premiums and deposits was up by nine per cent to $15 billion.

ZFS shares have gained more than 30 per cent this year, after plunging 58 per cent last year and 61 per cent in 2001.

swissinfo with agencies

ZFS1

Zurich Financial Services made a third-quarter net profit of $701 million, bringing its profit for the first nine months to $1.4 billion.

Third-quarter profit was boosted by unit sales, as the group focused on its core business.

Analysts had been predicting a third-quarter net profit of around $450 million. However, operating profit at $206 million was about half the forecast level.

The company said it was “well positioned” to further develop a framework for sustainable and profitable growth.

ZFS2

James Schiro has cut 4,500 jobs and sold off more than $1.3 billion of businesses since taking over as CEO in May last year.
He has been focusing on the insurance business and reversing the expansionist course into banking of former CEO Rolf Hüppi.
The stock market slump and claims from the September 11, 2001, terrorist attacks led to losses at Zurich in both 2002 and 2003.