Zurich Financial weathers floods

Zurich Financial Services has done better in the first half of the year than expected RDB

First-half net profit at Zurich Financial Services soared by 33 per cent to $2.684 billion (SFr3.27 billion), beating expectations despite British flood claims.

Switzerland’s largest insurer said on Thursday that the subprime mortgage crisis in the United States had not hurt its business.

“The group has no material exposure to US subprime debt or CDO [collateralised debt obligations] equity tranches in its investment portfolio and did not incur any impairment on these for the half year,” Zurich said in a statement.

The subprime mortgage crisis refers to the sharp rise in foreclosures in the subprime mortgage market that began in the US in 2006. It became a global financial crisis in July 2007 as rising interest rates increased newly popular variable rate mortgage payments and property values suffered declines from the bursting of the housing bubble.

This left home owners unable to meet financial commitments and lenders without a means to recoup their losses.

Zurich, whose first-half net profit exceeded analysts’ expectations of SFr2.493 billion, raised its targets in May, saying it wanted to be one of the world’s top-five insurers.

But markets are questioning its growth plans and the company has so far been hesitant acquiring rivals. Zurich itself is the subject of takeover talk.

“We are not commenting on specific rumours or transitions,” Zurich’s chief financial officer Dieter Wemmer said on Thursday.

“We are looking at growth opportunities of organic or inorganic nature and all these new endeavours have to meet our hurdle rates.”

Wemmer added that claims from British floods in July would be “clearly below” the number in June, which was around $400 million.

Looking up

Premiums in Zurich’s general insurance were $19 billion, up three per cent, but flat in local currencies.

Life insurance premiums – on an annual premiums equivalent basis – rose 12 per cent, or five per cent in local currencies.

The combined ratio, which measures costs and claims as a percentage of premium income, stood at 96.5 per cent, up from 94.8 per cent a year ago. The higher the ratio, the lower underwriting profitability.

Zurich CEO James Schiro has turned the group around, cutting costs and boosting profits, but its shares are still lagging behind those of its main rivals.

swissinfo with agencies

In brief

Zurich Financial Services has offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.

It was founded in 1872 and has its headquarters in Zurich, Switzerland. It employs approximately 55,000 people and has customers in more than 120 countries.