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Zurich Financial reported a 3 percent first-quarter net profit on Thursday, beating expectations despite higher claims as Europe's fourth-largest insurer by market value
continues to cut costs.
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Net profit was $1.427 billion, beating 12 analysts' average forecast of $1.3 billion, and up from $1.390 billion a year earlier.
Zurich has earned itself a reputation as a cash cow, announcing a 2.2 billion Swiss franc ($2.10 billion) share buy-back this year, and raising its dividend by more than a third.
Zurich said it was on track to cut costs by $800 million each year up to 2010, the latest step in Chief Executive Jim Schiro's efficiency program after he brought the group back to profitability from heavy losses in the early 2000s.
The combined ratio, which measures costs and claims as a percentage of premium income, deteriorated to 94.6 percent from 93.3 percent a year ago, because of higher claims. Analysts in the Reuters poll had expected the ratio to be 95.4 percent.
"The group continues to have no material exposure to U.S. subprime debt or CDO's in its investment portfolio," Zurich said in a statement.
It had incurred $7 million in impairments on U.S. mortgage-backed securities since the end of December 2007, including a $1 million write-down on U.S. subprime.
Analysts have praised Zurich for cautiously starting to buy rivals to boost growth, such as a 50 percent stake in Caixa Sabadell's insurance arm in April and Turkish general insurer TEB Sigorta A.S in January.
General insurance gross written premiums rose 10 percent to $11.2 billion, while premiums in its life business inched up 3 percent to $5.4 billion.
Because of its defensive status, Zurich stock has outperformed the Dow Jones Stoxx insurance index, dropping 6 percent so far this year versus a 10 percent drop in the index. Last year it gained 1.4 percent, compared to a 12 percent drop in the index.
Shares of Zurich Financial closed 3.3 percent higher on Thursday.
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