Switzerland’s second-largest insurance group, Zurich Financial Services, has reported a net annual profit of $2.59 billion (SFr3.07 billion) – up 29 per cent on 2003.This content was published on February 17, 2005 - 12:11
The improved result, which comes despite a series of natural catastrophes and the ongoing need to plug holes in financial reserves, clearly beat market expectations.
Analysts had estimated $2.41 billion in net profit for the company.
ZFS said in a statement on Thursday that business operating profit rose 36 per cent to $3.14 billion, on revenue (gross written premiums plus policy fees) of $49.3 billion – up one per cent.
Return on equity – the effective return to shareholders – also rose by 1.2 per cent to 13.3 per cent.
The major disappointment was the combined ratio in the general insurance business, which rose from 97.9 per cent to 101.6 per cent as a result of the additional costs.
The ratio is a key operating performance benchmark for insurance companies, which relates total expenses to total premium income. A combined ratio under 100 per cent indicates the business is profitable from underwriting activities alone.
Dealing with legacies
The improved results reflect a "well-diversified portfolio and the strong underlying profitability of our businesses," said chief executive James Schiro. "Current operations in general insurance were strong in all regions."
"I am particularly pleased with the ongoing improvements of our life insurance operations," Schiro added.
The CEO said the company had further strengthened its balance sheet by adding a further ten per cent to financial reserves and increasing the equity base by 17 per cent.
He added that ZFS would not need to set aside such large amounts in future and expressed confidence that the company had "dealt with the legacy areas of the past in that area".
ZFS pointed out that 2004 marked the end of an "unprecedented" two-year period characterised by the absence of large-scale catastrophes.
A series of hurricanes in the United States and Caribbean in August and September led to record insurance losses of more than $22 billion, while the December tsunami in southeast Asia resulted in claims worth $585 million (after reinsurance and taxes).
Two in a row
The latest results appear to confirm the turnaround at ZFS, which has now reported healthy profits for two years in a row, following a $3.4-billion loss in 2002.
But it has come at the cost of a savings plan totalling more than SFr1 billion, a series of divestments and the loss of some 4,500 jobs – roughly ten per cent of the workforce.
With regard to the ongoing investigation into allegations of insurance market bid rigging in the US, the company said it was continuing to comply with both external standards and internal guidelines.
Two US-based executives pleaded guilty in November to violating anti-trust law and Schiro said at the time that the outcome of the industry-wide investigation "cannot be predicted".
swissinfo with agencies
Founded in 1872, Zurich Financial Services is the insurance provider for the majority of Fortune’s Global 100 companies.
In 1912, the company was the first European insurer in the United States.
The group, which employs about 57,000 employees, is the second largest insurer in Switzerland and the seventh in Europe.
ZFS reported a net profit of $2.59 billion in 2004, up 29% compared with the previous year.
Operating profit rose 36% to $3.14 billion.
Gross written premiums plus policy fees were up 1% at $49.3 billion.
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