Zurich Financial Services, the Anglo-Swiss group ranked as Europe’s 6th largest insurer, reported “normalized” net profits of $2.096 billion for last year, 5.5 percent lower than 1999’s $2.218 billion, and worse than the “less than five percent” decrease the company acknowledged in a profit warning last month.
While gross premiums rose to $50.044 billion and and asset management fee income rose to $1.557 billion, lower than expected capital gains, increased reserve strengthening and one time only charges connected with restructuring the company hit the bottom line hard.
Zurich’s “normalized” net profit figure is an accounting technique aimed at smoothing earnings flow from by taking into account the volatility of the financial markets. Unadjusted net profits fell by 28.7 percent to $2.328 billion from $3.264 billion the previous year.
CEO Rolf Hueppi stated “These results did not meet our expectations and 2001 will be another challenging year.” He estimated that normalized net income this year would be between $1.8 and $2 billion.
Zurich’s U.S. subsidiary Farmers Group’s alliance with the Bank of America should help boost earnings in the U.S., and Zurich plans on implementing a number of cost cutting measures in an attempt to improve profitability. Hueppi indicated that it had decided to exit the reinsurance business and would spin off its Zurich Re division.
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