Zurich Financial Services shrugged off US hurricanes and European floods to report record results, demonstrating the impact of operational improvements at the once-troubled insurance group. "My priority has been not to over-promise, but over-deliver," said James Schiro, the chief executive app-ointed three years ago to steer ZFS out of crisis.
Mr Schiro declined to comment on the outlook for profitability. But he remarked that recent trends in claims and signals from the reinsurance industry allayed fears of softer pricing. "We are seeing a firming in pricing for 2006 and 2007 and that's good news for us," he said. Net profits rose 21 per cent to Dollars 2.26bn in the first nine months, thanks to strong investment income and improvements on the life assurance side.
Business operating profits, a key internal measure, climbed 15 per cent to Dollars 2.86bn. Net profits in the third quarter reached Dollars 1.06bn, well ahead of market expectations. "ZFS released a very strong set of figures . . . the increase was driven by improvements in all segments," noted Andreas Frick at Sarasin, the private bank.
The rise in profits, also evident at other big insurers such as Allianz of Germany, came in spite of Dollars 1.1bn in losses linked to this year's uncommonly severe hurricanes in the US and flooding in Europe. ZFS's combined ratio in general insurance - an industry benchmark that measures costs and claims as a proportion of premiums - reached 100.9 per cent. The figure, which was lower than analysts had feared, in-cluded a catastrophe impact of 4.9 percentage points.
Mr Schiro attributed the containment of natural catastrophe claims to improvements in assessing risks and modelling damage, leading to more accurate pricing and the renunciation of unattractive business. "The set-up for that has taken us a couple of years," he said. Mr Schiro denied the boost in investment income, and especially capital gains, reflected adversely on the quality of earnings, and noted many insurers had used stronger stock markets to take profits recently.
Life assurance continued to improve its margin on new business, with a rise of 1.4 percentage points to 11.9 per cent in the first nine months. The pick-up was particularly evident in the UK, where ZFS has been restructuring to improve profitability, and where its margin on new business reached 11.1 per cent. Analysts were also re-lieved to see few surprises in reserving policy after massive provisions in 2003 and 2004.
ZFS set aside Dollars 64m in the quarter, taking the full-year figure to about Dollars 160m. Investors were also impressedby plans for additional cost cuts of Dollars 1bn in the nexttwo years. Shares in ZFS, which have performed strongly this year but lagged behind many rivals, surged by 5.6 per cent to SFr251.00.
Mr Schiro declined to comment on the outlook for profitability. But he remarked that recent trends in claims and signals from the reinsurance industry allayed fears of softer pricing. "We are seeing a firming in pricing for 2006 and 2007 and that's good news for us," he said. Net profits rose 21 per cent to Dollars 2.26bn in the first nine months, thanks to strong investment income and improvements on the life assurance side.
Business operating profits, a key internal measure, climbed 15 per cent to Dollars 2.86bn. Net profits in the third quarter reached Dollars 1.06bn, well ahead of market expectations. "ZFS released a very strong set of figures . . . the increase was driven by improvements in all segments," noted Andreas Frick at Sarasin, the private bank.
The rise in profits, also evident at other big insurers such as Allianz of Germany, came in spite of Dollars 1.1bn in losses linked to this year's uncommonly severe hurricanes in the US and flooding in Europe. ZFS's combined ratio in general insurance - an industry benchmark that measures costs and claims as a proportion of premiums - reached 100.9 per cent. The figure, which was lower than analysts had feared, in-cluded a catastrophe impact of 4.9 percentage points.
Mr Schiro attributed the containment of natural catastrophe claims to improvements in assessing risks and modelling damage, leading to more accurate pricing and the renunciation of unattractive business. "The set-up for that has taken us a couple of years," he said. Mr Schiro denied the boost in investment income, and especially capital gains, reflected adversely on the quality of earnings, and noted many insurers had used stronger stock markets to take profits recently.
Life assurance continued to improve its margin on new business, with a rise of 1.4 percentage points to 11.9 per cent in the first nine months. The pick-up was particularly evident in the UK, where ZFS has been restructuring to improve profitability, and where its margin on new business reached 11.1 per cent. Analysts were also re-lieved to see few surprises in reserving policy after massive provisions in 2003 and 2004.
ZFS set aside Dollars 64m in the quarter, taking the full-year figure to about Dollars 160m. Investors were also impressedby plans for additional cost cuts of Dollars 1bn in the nexttwo years. Shares in ZFS, which have performed strongly this year but lagged behind many rivals, surged by 5.6 per cent to SFr251.00.
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