ZFS shrugs off hurricanes, but legacies linger
Zurich Financial Services (ZFS) shrugged off the impact of the most severe hurricane season in memory to post net income of $1.902bn for the first nine months of 2004 – a 35 percent increase over the same period last year.
But doubts persist over deterioration of prior-year legacy losses, as the insurer revealed a further $303mn charge for the quarter, taking the total for the year-to-date to $962mn, and to $2.8bn since the start of 2003.
Operating profit of $2.522bn represented a 65 percent increase on the equivalent figure last year, and included a $525mn pretax charge for hurricanes.
ZFS CEO James Schiro commented: “Our job is to deliver consistent operating performance and to strengthen our balance sheet enabling us to absorb volatility inherent in the insurance business wile achieving attractive returns for shareholders.
“This year’s unparalleled hurricane season, which caused tragic losses in life and property, put our endeavour to a severe test. But Zurich delivered. Our claims people were out in force helping our customers put their lives and businesses back together. Despite hurricane claims payments we achieved an underwriting profit in General Insurance with a combined ratio of 98.8 percent of which 2.3 percentage points represent the charge for the hurricane.”
In its results release, the Swiss insurer said its good performance was down to “solid” underwriting returns from its general insurance business, boosted by improved performance in its life sector and continued strong income contribution by Farmers Management Services in the US.
The group’s general insurance segment booked $29bn in gross written premiums and policy fees, a rise of 5 percent on the first nine months of 2003. Net income derived from the division dropped marginally from $1.233bn to $1.206bn, with operating profit down 2.3 percent to $1.508bn.
Net income in the life operation rose sharply however, by 35 percent to $653mn, on gross written premiums that fell 4 percent to $8.1bn. Operating profit was up 28 percent to $738mn.
Management fees and other revenue from Farmers P&C Group, the US insurer managed by ZFS, were up 11 percent to $528mn.
Separately, the Swiss insurer announced last Tuesday (16 November) that it had been subpoenaed by the SEC and the office of Eliot Spitzer over “non-traditional” or finite (re)insurance products.
It also confirmed that two of its former employees have pleaded guilty to charges of violating New York State antitrust law resulting from the Spitzer inquiry. ZFS had previously suspended the underwriters, who worked in the insurer’s excess casualty unit in its North American operation.