Zurich Insurance $1.07 Bn Q4 Profit Misses Estimates after Restructuring

By Carolyn Bandel | February 13, 2014

Zurich Insurance Group AG, the biggest Swiss insurer, reported fourth-quarter profit that missed analysts’ estimates after restructuring charges following a business review.

Net income rose 9 percent to $1.07 billion, the company said in an e-mailed statement from Zurich today. Profit was expected at $1.26 billion, according to the average estimate of 14 analysts surveyed by Bloomberg. The insurer will keep its dividend unchanged at a 12-year high of 17 Swiss francs ($18.94) a share, after increasing the payout to that level for 2010, it said.

Zurich Insurance signaled it was ready to sell businesses to bolster earnings after lowering its profit goal in December and announcing restructuring charges of $400 million to $600 million over the next year. Charges in the fourth quarter were $318 million and the firm will probably book another $300 million in the first half, interim Chief Financial Officer Vibhu Sharma said on a conference call today.

“It is a slight miss on net profit but with a high dividend,” Stefan Schuermann, a Zurich-based analyst with Vontobel Holding AG, said in e-mailed comments to investors. Restructuring charges were higher than expected, he said.

The shares dropped as much as 0.9 percent in Zurich trading, and fell 0.6 percent to 266.5 francs at 9:03 a.m., valuing the company at 39.6 billion Swiss francs. The shares have risen 3.1 percent this year.

Business Performance

Zurich Insurance is seeking return on equity, a key measure of profitability, of 12 percent to 14 percent in the three years through 2016, down from a previous 16 percent target, it said in December.

“Much of our business performs very well and we are taking action to address areas where we need to improve,” said CEO Martin Senn in today’s statement.

Operating profit in general insurance, the company’s biggest unit, was $736 million in the quarter, increasing from $27 million the year before, after fewer catastrophe losses and higher prices, according to a presentation on its website.

The group said it expects an improved combined ratio, a measure of profitability within general insurance. It also estimated a first-quarter pension gain of as much as $200 million.

–Editors: Mark Bentley, Dylan Griffiths

 

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