Swiss-based Zurich Financial Services (ZFS) confirmed previous indications that 2002 was a very bad year by posting a $3.4 billion net loss. The losses were mainly due to special writeoffs and the decline in equity values, which amounted to around $3.5 billion, and the need to increase claims reserves by $2 billion, rather than operations.
The company in fact earned an operating profit of $1.1 billion, compared to $217 million in 2001. ZFS has embarked on a substantial restructuring and cost savings effort under its new CEO James Schiro, and the efforts are beginning to show results.
A.M. Best commented on the results with a statement that “the financial strength rating of A (Excellent) of Zurich Financial Services Group, Switzerland and core subsidiaries remain unchanged. The outlook remains positive following the company’s announcement of the 2002 year-end results. ”
“As expected, 2002 year-end results are negatively impacted by the write-off of USD 950 million of intangible assets and a USD 1.8 billion reserve strengthening, as well as asset impairments and the restructuring charges announced in September,” Best continued.
“Technical results already indicate an underlying improvement, but the main benefits of ZFS’ aggressive global profit and capital management improvement programs (divestment of non-core operations, improved claim management, portfolio pruning, substantial non-life price increases, strict cost controls and reduction of equity exposure) are expected to materialize in 2003. ”
“ZFS, a leading and diversified provider of insurance and financial services products, continues to enjoy an excellent business position in its selected core markets (Switzerland, Germany, Italy, Spain, United Kingdom and North America). ZFS maintains an excellent risk-based capital base in line with its business strategy. This is likely to be further strengthened after exiting some businesses and a USD 500 million hybrid issue planned for 2003,” Best concluded.
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