Zurich turns around business

Zurich Financial Services has recovered from its record 2002 loss Keystone Archive

Zurich Financial Services (ZFS) achieved a net profit of $2.1 billion (SFr2.6 billion) in 2003, after registering a $3.4 billion loss the previous year.

The turnaround comes after the insurance group launched a drastic streamlining and divestment programme.

ZFS surpassed the expectations of analysts who had predicted a net profit of $2 billion.

The company’s recovery from its record loss in 2002 was helped by the fact that it did not have to absorb large one-off charges and restructuring costs last year.

The insurer said on Thursday that it would give shareholders a payout of SFr2.50 per share in the form of a cut in the nominal share value, dropping it to SFr6.50 from SFr9.00.

First stage

“We have completed the first stage of our turnaround,” said CEO James Schiro.

But the turnaround was not achieved without cost: a savings plan worth SFr1 billion was implemented and around 4,500 jobs – or ten per cent of the group’s workforce – were cut from its payroll.

There was also a series of divestments that meant that ZFS saw personnel numbers drop by 8,000 last year, according to Schiro.

In 2003 premiums and policy fees climbed 18 per cent to $48.9 billion.

The company said it had benefited from better investment markets and rising non-life prices.

Non-life insurance premiums increased by 22 per cent – reaching $36.3 billion – and generated the lion’s share of the net profit ($1.83 billion).

Improved performance

Zurich’s life business also showed improved performance, with a 132 per cent increase in net income to $799 million.

ZFS was able to boost its insurance claims reserves by $6.6 billion to $37 billion.

The only black spot for the firm was its niche financial services operation, Centre. It made a loss of $817 million last year, resulting from large provisions and asset writedowns for its insurance and credit enhancement businesses.

Schiro said the company was well placed to benefit from what he regarded as a still attractive insurance market, which would result in a “favourable earnings trend”.

He added that the non-life business would remain strong in 2004.

Analysts were reasonably upbeat after the results were announced.

“It is looking good, business will continue to go well, but there is still no outlook,” said René Locher at Kepler Equities. “It is positive that after adding to the reserves, Zurich can still show a profit of $2.1billion.”

swissinfo with agencies

Key facts

Zurich Financial Services reported a 2003 net profit of US$2.1 billion.
This result was a turnaround from 2002’s record loss of $3.4 billion.
The improvement came in part from divestments and restructuring.
Around 4,500 people, or ten per cent of the workforce, lost their job with the group last year.