Zurich Insurance Group AG, Switzerland’s biggest insurer, said it is still “confident” its non-life unit can improve a profitability target with cost cutting after it announced in August it may miss the goal relative to peers.
The combined ratio, or claims and expenses as a percentage of premiums, will “see a substantial improvement” this year compared with 2010, Mike Kerner, chief executive officer of the Zurich-based firm’s general insurance business, said in an interview on Oct. 29.
“We’ve been diligent about the way we manage our expenses and our ability to get rate increases,” Kerner, 47, said. “The simplification in the business is expected to create further improvement in the expenses.”
The insurer said in August that reaching its target to improve the combined ratio by as much as 4 percentage points “relative to competitors” including Germany’s Allianz SE by the end of 2013 could be challenging. The measure for the division rose to 95.6 percent in June from 94.8 percent a year earlier, indicating a deterioration in underwriting amid weather-related losses.
Business from emerging markets and North America will make up a bigger share of premiums in the future, while Europe will decrease relatively, Kerner said. Kerner’s non-life unit contributes about half of the company’s total revenue, according to data compiled by Bloomberg.
Zurich expects to see “substantial growth” from emerging markets including Brazil, Indonesia, Malaysia, Mexico and the United Arab Emirates in the next five to 10 years. The company may make acquisitions, he said.
In the first half of the year, Zurich’s general insurance unit generated 47.4 percent of revenue from Europe, 36.3 percent from North America, and 16.3 percent from countries in Latin America, the Asia-Pacific region, Middle East and Africa, according to company filings.
“We have clear a commitment to Turkey and places like China and there could be some inorganic opportunities to do some things in those countries in particular, though all the emerging markets have potential,” Kerner said.
Sales of insurance to corporate customers is another potential source of growth, Kerner said. The company, which currently targets companies with revenue above $500 million, will offer products to smaller and mid-sized companies particularly in Europe with about $50 million in sales or less, he said.
Shares dropped 0.1 percent in Zurich trading, trimming this year’s gains to 3.1 percent.
Zurich Insurance is due to report third-quarter earnings on Nov. 14 and will hold an investor day on Dec. 5 to update shareholders on new targets.