Zurich Financial seeking to boost growth
Zurich Financial Services says it is on the lookout for more acquisitions after reporting a 41 per cent increase in net profit, taking it to a record level in 2006.
The insurance-based firm beat expectations with a profit of $4.53 billion (SFr5.6 billion), helped by healthy results in its non-life insurance business and growing premiums in life insurance.
Zurich, which is Switzerland’s biggest insurer, plans to launch a share buyback programme of up to SFr1.25 billion and hand out a higher dividend.
“We have a much stronger balance sheet,” Zurich chief executive James Schiro told journalists.
The company’s 2006 figures come a day after it announced a majority stake in Russia’s Nasta insurance company, based in Moscow.
“We are a hunter for those types of acquisition that fit our strategy,” added Schiro.
Russian acquisition
In combination with Zurich’s existing Russian businesses, the acquisition positions Zurich as the largest foreign general insurer in the Russian market.
Nasta is a leading personal lines insurer in Russia, with approximately SFr230 million of gross written premiums in 2006.
With over 140 million consumers, Russia represents the largest future personal lines market in Europe.
In a statement on Thursday, Zurich raised its dividend to SFr11, up 57 per cent from 2005.
The company’s combined ratio – a key measure of performance in the insurance business – improved to 94.2 per cent from 100.8 per cent, with insurers being helped by the low number of natural catastrophes last year.
Quality profit
“What’s positive is the quality of the profit, which is very high,” commented analyst Andreas Frick at Bank Vontobel.
Zurich has divested billions of dollars worth of non-core businesses, heavily cutting costs in a long restructuring process that brought it back to profitability after heavy loses at the beginning of the decade.
The company’s shares have long lagged those of its peers, with analysts criticising a lack of clarity about future strategy and saying some rivals were more aggressive in making acquisitions to counter weak growth in Europe’s saturated markets.
The Zurich group expects earnings to improve by $2 billion until 2009 through a series of measures aimed at making more money from its underwriting business, better use of its sales force and distribution network, and cutting costs.
But it is now also showing signs of resuming growth. The new business volume in life insurance was up 15 per cent and gross written premiums in the unit rose eight per cent to $21 billion. Non-life premiums were up a more modest two per cent.
swissinfo with agencies
2006 results:
Net income: $4.5 billion (+41% compared with 2005)
Business operating profit: $5.9 billion (+48%)
General Insurance gross written premiums and policy fees of $34.2 billion
Global Line new business volume growth of 15%
Proposed gross dividend of SFr11 (+57%)
Zurich employs about 55,000 people serving customers in more than 120 countries.
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