Zurich Insurance Group has issued a profit warning to investors for the fourth quarter of 2015 after admitting it is facing up to $275m of aggregate losses owing to the storms that have battered the UK and Ireland in recent months.
In addition to the impact of storms Desmond, Eva and Frank, which brought heavy rainfall and caused severe flooding in parts of northern England, Scotland and Ireland, Zurich said it was facing further losses from other natural catastrophe events during the fourth quarter such as a tornado in Australia.
On top of the $275m UK and Ireland storm loss, which is net of reinsurance and before tax, Zurich said it has also continued to suffer from a very high level of large current accident year claims during 2015’s final quarter.
“These large losses mainly relate to a large credit and surety loss, and several significant property claims, principally impacting global corporate and certain European countries,” the insurer explained, adding: “The profitability of business underwritten in 2015 continues to impact results but this will improve over the course of 2016 as the steps taken to reduce exposure to large losses take effect.”
“As a result of the adverse natural catastrophe experience and the high level of large current accident year claims, Zurich now expects the General Insurance business to report a business operating loss of approximately $100m for the fourth quarter of 2015,” the company said in a statement.
If Zurich’s estimates are correct and the company does post a business operating loss of circa $100m, it will be the second consecutive quarter that the firm will have recorded a sizeable deficit.
At the beginning of December, Zurich’s chief executive, Martin Senn, stepped down after the company ended the third quarter with an operating loss of $183m. That poor result owed much to the $275m hit the company has taken from the blasts that shook the Chinese port of Tianjin back in August.
In the aftermath of the latest profit warning, Zurich once again highlighted the steps it has taken to correct its recent poor performance.
“This should result in charges of around $475m in the fourth quarter, primarily within General Insurance. The group also anticipates incurring a one-time impairment charge attributable to the write-off of its German life business goodwill of approximately $230m. These charges will be recorded outside of fourth quarter business operating profit.”