12 May 2016 Insurance

Zurich’s profits slide in Q1 as de-risking actions kick-in

Zurich has posted a dramatic fall in its net income for the first three months of 2016 as the company felt the effects of initiatives designed to de-risk its portfolio and cut costs.

The insurer’s profits fell to $875 million in the quarter compared with $1.2 billion in the first quarter of 2015.

The insurance form’s gross written premiums also declined by 5 percent in local currency or 10 percent in US dollar terms, largely due to re-underwriting and de-risking actions to improve performance, which were announced last year.

Zurich said, however, that these initiatives contributed to rate increases on renewal business of 3 percent in the quarter and an improvement in the accident year loss ratio ex-catastrophes to 66.5 percent in the period, from 69.5 percent in the previous quarter.

It is expected that further benefits from these and other measures to reduce costs will continue to flow through to results towards the latter half of this year, Zurich said.

Its general insurance unit’s combined ratio was 97.7 percent in the first quarter of the year, one percentage point higher than in the same period in the previous year.

Its business operating profit also fell in the quarter by 16 percent to $1.1 billion, compared with $1.3 billion in the first quarter of last year.
Net investment return on group investments was down 0.2 points to 0.9 percent in the quarter, compared with 1 percent in the first quarter of 2015.

George Quinn, chief financial officer, said: “While it is still early in the process, these results show that the measures we put in place to improve the performance of our general insurance business are taking effect.

“Even adjusting for a benign catastrophe claims environment, there has been an underlying improvement and we expect to see this trend continue throughout the year.”

He added: “The rest of the Group continues to perform well, with solid underlying growth at Global Life and in continuing operations of the Farmers Exchanges. Zurich remains very strongly capitalised with solvency well within our target range.”

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