Zurich has rounded off a bad year by posting a fourth quarter loss of some $424m net after tax, down from an $860m profit in the prior year quarter.
Full year net profit was $1.8bn, amounting to only 53% of the $3.9bn posted by the Swiss insurer for 2014.
Chairman and temporary chief executive Tom de Swaan said the result was “disappointing”, despite “rigorous actions” the firm has taken to turn its profitability around.
Zurich reported business operating profit of $2.9bn in 2015, down 37% from $4.6bn in 2014.
For the final quarter, the business operating result for its general insurance business fell to a $120m loss, down from a $511m profit for the same quarter the previous year.
“This is a disappointing result, reflecting the previously announced challenges in our general insurance business and restructuring charges, and we have taken rigorous actions to improve profitability,” said chairman and interim CEO Tom de Swaan.
“This includes re-underwriting or exiting unprofitable portfolios, increasing cost efficiency and further simplifying the organisation. The remainder of the group continues to perform well, with both global life and Farmers making further progress in the execution of their strategies,” de Swaan said.
In spite of the profit falls and losses, Zurich’s management has decided to uphold its $17.53 dividend to shareholders, a gift to encourage shareholders following falls in the pricing of the insurer’s stock.
In January Zurich warned it would not make a profit for the fourth quarter, following $275m in expected losses from storms Desmond, Eva and Frank in the UK and Ireland.
That was not the first profit warning of the year for the insurer, which in September had to abandon its bid to buy UK rival RSA in September, warning then of a $200m third quarter loss, after $275m of expected losses to China’s Tianjin port explosion in August.
The general insurance combined ratio was 103.6%, with “ongoing actions underway to restore profitability”.
Problems have been pinpointed within Zurich’s global corporate property, North American commercial construction liability and US auto liability lines of business.
De Swaan was cautious about Zurich’s 2016 prospects.
“Given the challenges within general insurance, it is unlikely that the group will achieve its target of a business operating profit after tax return on equity of 12-14% in 2016. Nevertheless, Zurich is on track to achieve its other targets for 2014 to 2016,” he said.
“We have accelerated our efficiency programme and now aim to exceed the previously communicated cost savings target for 2016 of $300m, and are on our way to achieving group-wide cost savings of more than $1bn by the end of 2018. These savings will be achieved through the application of new technology, lean processes and the offshoring and near shoring of some activities.
This means an 8,000 reduction in headcount within the next three years, he warned.
“We estimate that as a result of these necessary measures around 8,000 roles across Zurich will be affected by the end of 2018. This figure includes initiatives completed or announced in 2015,” said de Swaan
“Our key priorities in 2016 will be turning around our general insurance business and continuing actions to position the group for 2017 and beyond, including enhancing efficiency and sharpening the group’s retail footprint,” he said.
“We have an excellent management team in place that will be further strengthened with the arrival of Mario Greco