Zurich reports drop in net profits for Q1 2016
By Kirsten Hastings
Zurich Insurance Group reported a drop in net profits for the first quarter, after operating profits fell 23% in general insurance and a marginal decrease in the company’s Global Life business.
Net income attributable to shareholders was $875m (£605.7m, €767.5m), beating analysts’ expectations, but still 28% down on $1.2bn in 1Q15.
Group business operating profit dropped by 16% to $1.09bn, down from $1.3bn a year ago.
“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,” said chief financial officer George Quinn.
“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.”
Earlier, we reported an incredibly sharp drop of 95.5% in its net investment result on unit-linked investments, plunging to $382m in 1Q16 from $8.45bn a year ago.
However, Zurich has since clarified that this result had no impact on its balance sheet.
A spokesperson advised that the unit-linked investments are policyholder investments, with any capital losses or gains going directly to the policyholders on a one-to-one basis. Meaning that, as a result of the market volatility seen in 1Q16, policyholders have seen $8bn less in gains compared with the previous year.
A second spokesperson said: “Equity market volatility in Q1 2016 has impacted the net investment result for unit-linked investments, where the value of the unit linked investments is linked to equity markets in many cases.
“Since the unit-linked policyholders are credited fully with the market performance of their investments Global Life is impacted only by its ability to generate fund based fees on the slower growing fund values.”
New chief executive Mario Greco joined the Swiss insurance giant in March, having defected from Generali.
In a bid to rebuild Zurich’s reputation with investors, following large losses and two profit warnings in 2015, the company is in the process of undergoing a $1bn+ cost-cutting and efficiency drive that will impact around 8,000 of Zurich’s 55,000 employees by the end of 2018.
As part of the company’s realignment, Global Life closed its Singapore business to new customers in December 2015.
Greco is expected to outline the firm’s strategy in the fourth quarter of the year.Category: News