CompaniesFeb 11 2016

Zurich profits tumble by 37%

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Zurich profits tumble by 37%

Zurich Insurance has reported full year operating profits of $2.9bn (£2bn), a 37 per cent slide against the previous year.

This follows market challenges from the group’s general insurance business which saw twice the “normal level” of loss and weather-related claims.

Net income attributed after tax to shareholders was down 53 per cent to $1.8bn (£1.25bn), compared with $3.9bn (£2.7bn) in 2014.

Meanwhile, Zurich UK Life saw operating profits dip by 2 per cent in 2015, falling to £113m from £115m.

According to the insurer’s full year results, Zurich’s position strengthened in the latter half of the year due to increased protection profits, leaving the underlying profits in the UK life arm broadly the same as 2014.

In August last year, Zurich UK Life saw business operating profit slump 17 per cent during the first half of 2015, which was blamed on one-off costs and lower bond yields.

Changes to its legacy business, including the sale of its annuity back book, also contributed to positive movements in the second half of 2015.

New business value, however, was up 5 per cent on the previous year, reaching £131m, which Zurich said was helped by growth in its wealth business due to the expansion of its retail platform.

Jim Sykes, interim chief executive of Zurich UK Life, said the provider has been faced with challenging economic conditions, including falls across global stock markets.

He said investments made in new propositions earlier in the year have “started to pay off”, with its Horizon fund range achieving strong sales in the last quarter of 2015.

The firm has also seen growth in its pension drawdown business in light of the retirement reforms.

“We will continue to adapt to the changing market conditions,” Mr Sykes said. “Customer needs are shifting, hastened by landmark reforms such as pension freedom and auto-enrolment, while the ever-increasing use of technology has fundamentally changed the way that advisers and their clients access information and interact with us.

“This backdrop, together with a more complex tax environment and growing responsibility being transferred from the state to the individual, means that our products and services are increasingly needed to help consumers put themselves in greater control of their financial future.”

Meanwhile, the group’s general insurance arm saw business operating profit skrink by a third, hitting £62m in 2015, against 2014’s figure of £213m.

These large losses were due to the flooding at the end of the year, which were as predicted in the group’s announcement in January.

Alex Reynolds, IFA at Advies Private Clients, said the figures were surprising, but added it is a “difficult market” for insurers at the moment.

“Zurich is obviously a multi-talented business in that they do both personal and general insurance, so I assume they would have had a lot of claims to do with weather and have had to absorb that.

“Whether an insurer makes a profit or a loss you are choosing that insurer based on what they are currently offering, so I wouldn’t have any fears about using them for personal or general insurance going forward.”

katherine.denham@ft.com