Zurich Insurance Falls to Bigger-Than-Expected Loss -- Update
February 11 2016 - 2:37AM
Dow Jones News
By John Letzing
ZURICH--Zurich Insurance Group AG has set its new chief
executive up for a considerable challenge.
The company reported a worse-than-anticipated net loss of $424
million for the fourth quarter on Thursday, as its largest business
unit continued to suffer. Analysts had been expecting a loss of
$218 million.
"This is a disappointing result," said Chairman Tom de Swaan in
a statement. Following the departure Martin Senn as CEO in
December, Mr. de Swaan has been serving as CEO on an interim
basis.
Zurich Insurance recently announced it had poached Mario Greco
from Italian insurer Assicurazioni Generali SpA to serve as CEO.
Mr. Greco, whose first day on the job is slated for March 7, is a
former Zurich Insurance executive who once oversaw its largest
business, general insurance. Zurich Insurance is now struggling to
revamp that unit.
The company said on Thursday that the general-insurance unit
recorded a 71% fall in operating profit last year compared with
2014, to $864 million. The unit posted a combined ratio--a measure
of how much is paid on claims and costs for every dollar earned--of
103.6%. A ratio of less than 100% means that an underwriting
business is profitable.
Overall, Zurich Insurance said total business volumes, which
include gross written premiums and fees, fell 18% in the fourth
quarter compared with the same period a year earlier, to $16.2
billion. Total return on investments was 0.5% in the quarter, down
from 2.2%.
Due to its troubles with general insurance, Zurich Insurance
said it is unlikely to hit its stated target of an operating profit
after tax return on equity of between 12% and 14% this year.
Zurich Insurance also said it now has no plans to return excess
capital shareholders, beyond sticking to an unchanged dividend of
17 Swiss francs ($17.50) a share.
The company had previously flagged plans to make use of billions
of dollars in excess capital by pursuing acquisitions, and
returning the remainder to shareholders.
Last September, Zurich Insurance called off a potential $8.8
billion acquisition of U.K.-based RSA Insurance Group PLC. The deal
would have contributed to a swell of mergers in the insurance
industry, which is faced with weak profit growth and low investment
returns.
Zurich Insurance said at that time that it was ending its
pursuit of the acquisition due to mounting difficulties at its
general-insurance business.
On Thursday, Zurich Insurance said turning around the general
insurance business is a priority for this year. It plans to stop
writing new business for the unit for retail and commercial
customers in the Middle East by the end of the year, "or as soon as
possible."
The company also said it aims to cut more than $1 billion in
costs by the end of 2018, by using new technology and "the
offshoring and near offshoring of some activities."
Write to John Letzing at john.letzing@wsj.com
(END) Dow Jones Newswires
February 11, 2016 02:22 ET (07:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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