September 11 hammers Zurich bottom line

Rolf Hüppi is to step down as CEO later this year swissinfo.ch

Insurance claims for the September 11 attacks have pushed Zurich Financial Services into the red - the company lost $387 million (SFr651 million) last year.

The group, whose controversial chairman and CEO Rolf Hüppi is to step down as CEO later this year, said in a statement that its results were affected by insurance losses of $706 million after the terrorist attacks in the United States six months ago.

The news sent the company’s share price falling to SFr351 in morning trading on Monday, more than five per cent down from Friday’s closing figure. The share value climbed back to SFr357 by the end of the day.

Zurich’s share price has dropped by almost 50 per cent over the past year.

The company said normalised net income reached $348 million in 2001, while total premium volume increased by 13 per cent to $56 billion.

Normalised net profit, which discounts investment gains and losses at a fixed rate, is the company’s preferred profit figure.

Reduced dividend

The board of directors is to propose a reduced gross dividend of SFr8 (SFr17.15 in the previous year) at the shareholders’ meeting in May.

The Zurich statement said higher than expected claims, increased charges for specific exposures such as asbestos, and lower results from discontinued operations adversely affected net income, according to International Accounting Standards’ and normalised results.

It added that the prevailing market conditions reduced life insurance and asset management results.

Further details on the 2001 results will be presented on Thursday next week.

Starting 2002 with a clean sheet?

Commenting on the performance, Barclays insurance analyst Richard Schreuder in London told swissinfo that the figures were slightly on the lower side of a loss range that management had indicated after the last profit warning.

“It’s maybe a case of getting all the bad news of 2001 out of the way and starting 2002 with a clean sheet,” he said.

He agreed with other observers that Zurich had lost its way in the past years but he added that the company had started a restructuring programme in the second half of 2001, which included the sale of its reinsurance unit and its US asset management subsidiary, Scudder.

“I think it’s a good thing that they’ve sold these businesses and try to focus on their core operations, which are now general insurance and life insurance, the latter especially in Europe,” he said.

“I think management has to improve the performance in particular on the general insurance side because there is still a sign that the underwriting is not going as well as it should,” he added.

Zurich Financial Services announced last month that Hüppi was to step down from his post by the middle of the year.

However, Hüppi, who announced a series of profit warnings last year, is to stay on as chairman of the board of directors.

The company has said it will name a successor “at the appropriate time”.

Hüppi joined the Zurich group in 1963. He became CEO in 1991 and has been the board’s chairman since 1995.

The dual mandate as both CEO and chairman of the board had been heavily criticised and Hüppi survived a vote of “no confidence” at last year’s shareholders’ meeting.

swissinfo with agencies