Zurich Insurance posts $875 million Q1 net profit, beats poll

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Swiss insurer Zurich Insurance returned to profit in the first three months of 2016, helped by better-than-expected earnings at its flagship general insurance (GI) business.

Zurich said on Thursday net profit for the first quarter was $875 million, beating even the most optimistic estimate in a Reuters poll of eight analysts which on average expected $707 million.

This was 28 percent lower than in the same quarter last year but marked a return to profit after a $424 million net loss in the fourth quarter and it will offer encouragement to new group Chief Executive Mario Greco.

Gianluca Colla | Bloomberg | Getty Images

"While it is still early in the process, these results show that the measures we put in place to improve the performance of our general insurance business are taking effect," Chief Financial Officer George Quinn said in a statement.

"Even adjusting for a benign catastrophe claims environment, there has been an underlying improvement and we expect to see this trend continue throughout the year."

A key issue in recent quarters has been the underperformance in GI, Zurich's biggest source of earnings which sells things like property and casualty insurance.

Under new division boss Kristof Terryn, Zurich concluded a GI review late last year, which included cost savings and using more reinsurance to reduce erratic earnings.

Its GI combined ratio for the quarter was 97.7 percent, better than a poll forecast for 99 percent. A level below 100 shows an insurer earned more in premiums than it paid out in claims.

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Greco joined Zurich in March from Italian insurer Generali, replacing Martin Senn who quit in December following a botched takeover bid for Britain's RSA and the weak GI performance.

He is expected to give a detailed blueprint at a Nov. 17 investor day, along with financial targets beyond 2016, but investors are hoping for hints of what his strategy will entail.

With insurance companies struggling to find profitable growth at a time of negative interest rates, Greco is likely to focus on bringing Zurich's cost base under control.

The company's administrative and other operating expenses have remained fairly stable over the past four years.

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