Zurich 2007 Net Profit Rises 22% to $5.6 Billion


Net profit at Zurich Financial rose by a fifth in 2007, outstripping expectations, on the back of cost cuts and the Swiss insurer said on Thursday it would continue to scoop up rivals.

The group also said it was confident about the quality of its credit portfolio and that its exposure to troubled U.S. monoline insurers -- who risk losing vital credit ratings because of a review by rating agencies -- was "immaterial".

Zurich's Shares Rise on Strong Earnings

"We have a strong balance sheet and we're prepared to participate in the market," Chief Financial Officer Dieter Wemmer told journalists on a conference call.

Global market turbulence was making it easier to buy rivals, Wemmer said, because some prices were coming down.

Zurich, worth some $40 billion and competing with other major European insurers such as Italy's Generali and France's AXA made a string of small acquisitions last year to counter weak market growth.

In a sign of its strong capital position, Zurich also announced a 2.2 billion Swiss franc ($2 billion) share buy-back and raised its dividend to 15 francs per share.

Traders welcomed the strong results, and Zurich shares closed 4.4 percent higher. 

Net profit was $5.6 billion in the full year, up 22 percent, the group said, just above the $5.4 billion average forecast in a Reuters poll of 10 analysts.

The group's combined ratio, which measures costs and claims as a percentage of premium income, stood at 95.6 percent, up from 94 percent a year ago.

The lower the benchmark stands, the higher underwriting profitability.

Winter storm Kyrill and floods in Britain added 2.5 percentage points to the ratio.

Chief Executive Jim Schiro has sometimes drawn criticism for a lack of growth plans after years of cutting costs. Zurich is targeting $800 million in operational improvements for 2008.

At 7.3 times expected 2008 earnings, Zurich is trading roughly in line with its main rivals. 

France's Axa is trading at a multiple of 7.1, ING Groep at 5.8 times and Germany's Allianz at some 6.1 times.