Zurich seeks turnaround after dismal third quarter

Zurich Insurance Group/ REUTERS

Third-quarter net income at Zurich Insurance Group Ltd. plunged 78.6% to $207 million amid losses in its U.S. transportation business as well as the Tianjin, China, port explosions, the insurer said Thursday.

Quarterly revenue dropped 47.5% to $9.46 billion while net written premiums and policy fees declined 5.4% to $10.82 billion.

Financial difficulties, including Zurich's previously disclosed $275 million loss in the mid-August Tianjin explosions and backing out of its plans to take over British insurer RSA Insurance Group P.L.C., have triggered a strategic review of the company.

“North America and the impact of Tianjin are main drivers of poor results,” Zurich CEO Martin Senn said Thursday during a conference call with analysts.

Zurich said the losses pushed its third-quarter combined ratio for its general insurance business up 12.2 percentage points to 108.9%

Measures underway to turn around the U.S business include exiting underperforming portfolios as well as “expense actions,” Mr. Senn said. Specifics include paring Zurich's U.S transportation business and the elimination of about 200 jobs.

The company also discussed the review it has underway to address the profitability issues, which includes cost targets for 2016 and an ongoing search for additional savings.

“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, reunderwriting and exit of underperforming portfolios and additional measures to improve efficiency,” Mr. Senn said in a statement announcing the results.

For the nine months ended Sept. 30, Zurich had net income of $2.27 billion, down 26.6% from the same period last year. Total revenue declined 23.0% to $40.84 billion while net written premiums fell 12.8% to $37.47 billion.

Zurich's combined ratio climbed 5.9 percentage points to 101.9%.