The profit warning issued by Zurich Insurance in September today was born out by facts: The company earned 80 percent less in the third quarter than in the same period a year ago.
Zurich had net income of $207 million in the three months through September compared with $966 million a year earlier, the company said in a statement on Thursday. Analysts on average expected net of $228 million.
The massive drop in earnings is mainly due to the substantial costs incurred by the explosion at a storage facility in Tianjin, China, in April and an increase in reserves at the U.S. auto liability business.
The combined ratio, claims and costs compared with premiums, was 108.9 percent in the third quarter, in line with analysts' expectations.
Comprehensive Business Review
«These results are in line with the preliminary update that we released in September in response to the underperformance in parts of our General Insurance business,» said Chief Executive Martin Senn in the release on Thursday.
«A comprehensive review of the business has led to an action plan to improve performance, reduce volatility and deliver a rapid recovery in profitability. This includes the reshaping of the management team, re-underwriting and exit of underperforming portfolios and additional measures to improve efficiency,» Senn added.
$3 Billion Excess Capital
Zurich still has a «very strong capital position,» according to the statement. The groups' solvency as measured by the Swiss Solvency Test was 203 percent and the Zurich-Economic Capital Model ratio was 123 percent.
The company plans to say in February 2016 what it wants to do with the $3 billion excess capital – organic investments, acquisitions or cash returns to investors in excess of the normal dividends.
