Swiss insurer Zurich Financial Services AG reported a below-forecast 15 per cent drop in its nine-month business operating profit to $4.2 billion (€3.36 billion), hit by hurricane claims and capital losses, and suspended share buybacks.
The insurer said its underlying performance was resilient despite "particularly adverse circumstances" in the third quarter that forced it to write down $595 million for claim payments related to hurricanes Gustav and Ike and record capital losses for shareholders of $1.1 billion.
The last week has seen a raft of disappointing results from European insurers hit by the financial crisis. Swiss Life warned on profits yesterday and cut its dividend, while Dutch group ING posted its first quarterly loss.
Zurich Financial's share price dipped almost 6 per cent at the open but later pared losses and was down 1 per cent at 213.80 Swiss francs at 8.39am, when the DJ Stoxx European insurance sector index was down 0.4 per cent.
"It's a good result compared to other European insurers," said Sal. Oppenheim analyst Rene Locher. "I have a 'buy' rating on the share and it remains one of my favourite stocks in the insurance sector."
Zurich Financial, Europe's fifth-largest insurer by market value, said gross written premiums for the nine-month period rose 7 per cent to $29.2 billion.
Citing current market volatility, Zurich Financial said for the time being it will not buy back shares as part of its previously announced 2.2 billion Swiss franc ($1.86 billion) buyback programme.
The company has bought back $1.045 billion so far under the programme and it will consider resuming buybacks when markets stabilise, Chief Financial Officer Dieter Wemmer said, adding that the company needs to remain prudent on acquisitions too.
"You have to balance at this time between prudence and opportunity even if prices are low, and I think prudence comes first as we don't know how long this financial crisis will last," Mr Wemmer told a journalist conference call.
Nine-month net income fell 32 per cent to $2.8 billion, in line with average analyst forecasts in a Reuters poll, giving a return on equity of 14.5 per cent. Analysts had forecast nine-month business operating profit of $4.5 billion.
The company confirmed its medium-term goal of a 16 per cent return on equity. Its return on equity target relates to business operating profit after tax, which strips out investments and extraordinary effects.
The company said its solvency position was 159 per cent at the end of October and that it is well positioned to weather the current financial storm. The lower the solvency number, the more likely a company is to default on its debt obligations.