Zurich Insurance Falls to Bigger-Than-Expected Loss -- 2nd Update

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.

The general-insurance business was hit by natural catastrophe claims stemming from severe flooding in the U.K. and Ireland, and deadly explosions at the Tianjin port in China, Zurich Insurance said. The company also said it is scrambling to "re-underwrite or exit under-performing portfolios."

Total business volumes, which include gross written premiums and fees, fell 18% in the fourth quarter compared with a year earlier, to $16.2 billion. The 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 03:00 ET (08:00 GMT)

Zurich Insurance (QX) (USOTC:ZURVY)
Historical Stock Chart
From Sep 2024 to Oct 2024