Zurich Insurance Group AG fell in Zurich trading after posting a quarterly profit supported by one-time gains as Chief Executive Officer Mario Greco presses ahead with an overhaul of Switzerlandâ€™s largest insurer.
Net income for the three months through December amounted to $685 million compared with a loss of $424 million a year earlier due to restructuring costs and claims from storms in Britain and Ireland, the Zurich-based company said Thursday in a statement.
Greco is stepping up cost cuts as ultra-low interest rates chip away at investment income and below-average catastrophe claims keep prices for property and casualty insurance on hold. The company said it eliminated $300 million in annual spending in 2016.
â€œWe remain skeptical about Zurichâ€™s turnaround plans,â€ Thomas Seidl, an analyst at Bernstein in London, said in a note to clients. â€œThe track record of past cost-cutting exercises is not strong and the people involved have not changed that much.â€
The shares fell as much as 2 percent, the most since November, to 278.10 francs at 10:37 a.m., while the Bloomberg 500 Europe Insurance Index was up 0.1 percent. Full-year net income rose 74 percent to $3.2 billion, matching the average of 10 analyst estimates compiled by Bloomberg. As last year, Zurich proposed a dividend of 17 Swiss francs. â€œIt was a turbulent year,â€ Greco said in an interview with Bloomberg Television. â€œMarkets were tough. We made lots of changes, but results came out very strong. They give us optimism for â€˜17 and the next years.â€
General insurance recorded an operating profit of $611 million, after a loss of $120 million a year ago. The global corporate unit, under restructuring for more than a year, â€œhas not yet achieved a satisfactory level of profitability, and the focus remains on further improvement in the portfolio,â€ Zurich said. The combined ratio in general insurance was 98.5 percent for the quarter. A measure of more than 100 means the unit is paying out more in claims and costs than itâ€™s collecting in premiums. Zurich said in prepared remarks the combined ratio would improve this year as the company continues cutting costs.
The unit benefited from $34 million in proceeds from a sale of German real estate and $13 million of â€œfavorableâ€ foreign exchange movements, said Barclays Plc analyst Claudia Gaspari, adding that the expense ratio came in higher than expected.
â€œWe downgraded Zurich to sell last month due to concerns about its premium valuation, which isnâ€™t justified in view of its constrained growth prospects,â€ said Nick Holmes, a Societe Generale analyst.
Zurich paid out $47 million to cover claims on damages caused by Hurricane Matthew, Chief Financial Officer George Quinn told reporters in Zurich. Operating profit at the global life unit rose 4.3 percent to $312 million as higher profit in the Asia Pacific region and from Latin America offset a decline in Europe, the Middle East and Africa. â€œOnce again, headwinds mean insurers need to cut more costs â€” and faster â€” to stand still,â€ Gaspari said.