Major insurer sees profit plunge 20% in fourth quarter

Lower income precipitated a major plunge in profits for a prominent international insurer during Q4 of last year.

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Lower income precipitated a major plunge in profits for a prominent international insurer during the fourth quarter of 2014, it was announced today.

Zurich Insurance Group AG saw its net income fall from $107 billion in Q4 2013 to $858 million in the same period this past year. This was driven largely by a 30% decline in operating profit from general insurance—Zurich’s biggest unit—which fell to $518 million.

Shares of the Swiss company dropped 3% on the news to 303.4 francs.

Zurich CEO Martin Senn said the company is not satisfied with its results, adding that business operating profit return on equity was “below our target range” at 11%.

“While we made good progress last year in executing the strategy we set out in December 2013, we cannot be satisfied with our 2014 earnings,” Senn said.

He added that "we need to do more to improve our profitability," and said the company has "actions under way across the business."

Zurich is already planning to generate annual cost savings of $250m by the end of this year, including making 300 redundancies. The company did not spell out any additional cost saving plans on Thursday, although it has pledged to deliver more “efficiencies”, such as through better procurement.

Zurich made headlines last year after it slashed 670 jobs in an effort to lower costs by $250 million annually by the end of 2014. Other cost-cutting measures included selling its lagging businesses, including the sale of a Russian general insurance company to Olma Group and the dispersal of various "back books" of past life insurance policies, which have offered policyholders guaranteed returns.

Despite this, Zurich’s fourth-quarter net income beat the $785 million average estimate of five analysts questioned by Bloomberg. Senn also stressed that Zurich is just one year into a three-year strategy to improve profitability.

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