Zurich profits rise despite US settlement

Zurich Financial Services, one of the world’s leading insurance groups, said profits inched up in the first quarter in spite of adverse currency effects and a costly legal settlement with US regulators.

ZFS said net profits rose by 1 per cent to $785m, in spite of paying $262m after tax to US insurance regulators and legal authorities to settle a number of outstanding investigations.

The deal largely resolves differences between ZFS and US regulators over potential damage to customers from questionable business practices with underwriters. However, the group still has to deal with the US Securities and Exchange Commission and a handful of remaining state authorities.

Business operating profit, the group’s preferred performance measure, jumped 31 per cent to $1.36bn on the back of strong results in core activities and continuing productivity and efficiency gains. ZFS, which has already shaved billions from its cost base by standardising processes and improving practices, said it was well on its achieving this year’s $500m savings target.

“Our first quarter results continue the trend of consistent financial performance, reflecting the resilience of our diversified portfolio and the sustainability of our ongoing operational improvement efforts”, said James Schiro, chief executive.

Total premiums in the first quarter fell by 3 per cent year on year to $13.43bn, largely because of the relative strength of the US dollar in the period.

In non life, premiums dropped by 4 per cent in dollar terms, but climbed 1 per cent in local currencies. Business operating profit in the division jumped by 45 per cent to $886m, while the combined ratio – a crucial industry yardstick measuring claims and costs against premiums, fell by 1.8 percentage points to 95.1 per cent.

Life premiums climbed by 4 per cent in dollar terms and 16 per cent in local currencies. Business operating profit surged by 62 per cent to $275m, while the profit margin on new business – which the company has been striving to improve - rose further to 14.5 per cent.

Mr Schiro, who never makes specific profits forecasts, nevertheless set an upbeat tone for the future:

“Thanks to our relentless focus on underwriting and financial discipline, we remain confident in our ability to continue to write profitable business”, he said.

ZFS shares were up marginally at SwF289 in early trading on Thursday.

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