First-half profits rise 35% at Zurich Life

PAMELA NEWENHAM

Operating profits at Zurich Life, the Irish arm of the Zurich Insurance Group surged 35 per cent to €20.5 million in the first half of the year, compared to the same period last year.

Profits at Zurich Insurance however declined 18 per cent after floods in central Europe in May and June cost about $140 million, while tornadoes in the US produced claims of $52 million. However, the group still reported profits of $2.3 billion in the period.

Zurich Life’s new business, Annual Premium Equivalent, increased 13 per cent to €74.3 million in the first six months of the year, ahead of an overall market increase of 7 per cent.

The company’s cross-border new business also performed strongly, increasing by 38 per cent to €66.3 million, from €48 million in 2012.

The Ireland Life market recovered some ground having seen severe decreases in business levels over the last few years, according to Zurich Life chief executive Anthony Brennan.

The business, which holds an overall Irish market share of 16 per cent, benefited from an upturn in the pensions market caused by increased demand for annuities and trustee investment plans.

“The pensions landscape in Ireland is undergoing significant change, with many pension schemes restructuring and moving away from traditional Defined Benefit arrangements,” Mr Brennan said.

Zurich Insurance Group said the target for its general insurance business was “challenging” after natural catastrophe losses cut second-quarter profit by 27 per cent.

Net income dropped to $789 million from $1.09 billion a year ago, the company said in a statement today.

“Overall it was a difficult quarter for Zurich, and slightly disappointing because of the investment income in general insurance and the impact of catastrophes at Farmers Re,” said Daniel Bischof, a Zurich-based analyst with Helvea, who has a neutral recommendation on the stock.

“There is no threat to the dividend though, and there were strong price increases in general insurance, which could offset some of the negative news in that unit.”

Zurich Insurance fell as much as 3.6 per cent and was down 3.5 per cent at 243.40 francs as of 9.30am in Swiss trading.

The insurer pushed through price increases of 3 per cent in personal lines, which includes home and car insurance, while the price of policies sold to businesses rose 5 per cent in the second quarter. In Europe, some price increases resulted in a decline in gross written premiums, chief financial officer Pierre Wauthier said during a conference call.

Allianz SE, Europe’s biggest insurer, shrugged off flood losses of about €330 million to report higher second-quarter profit last week as earnings increased at its non-life and asset management units.

Zurich Insurance’s combined ratio - spending on claims and costs as a percentage of premiums - worsened to 96.2 per cent in the quarter from 95.1 per cent in the year-earlier period. The company wants to improve the ratio by as much as 4 percentage points compared with its peers by the end of this year.

Zurich Insurance will give an update on its business targets at the end of the year, Mr Senn said on a conference call, while declining to elaborate. The company’s Farmers unit saw its second-quarter operating loss narrow to $73 million, from $128 million a year earlier.

“We delivered these results in a period characterised by natural catastrophes and large weather-related events, including severe flooding in eastern and central Europe, tornadoes in Oklahoma as well an unusual number of mid-sized, weather-related events in the US, Canada and Europe,” chief executive Martin Senn said.

“The economic environment remains challenging with continued low interest rates exerting pressure on our investment income.”

The insurer reported a business operating profit after-tax return on equity of 8.8 per cent in the quarter, down from 11.2 per cent a year earlier. Zurich Insurance has a long-term target of 16 per cent. Investments lost 0.9 per cent of their value in the second quarter as the insurer booked a $58 million of impairments on its equity and debt holdings.

Additional reporting: Bloomberg