Zurich Insurance Profit Increases 82% After Investment Gains

Zurich Insurance Group AG, Switzerland’s biggest insurer, said fourth-quarter profit rose 82 percent after capital gains on debt and equity investments.

Net income increased to $983 million from $540 million a year earlier, the Zurich-based company said today. That beat the $521.1 million average estimate of 13 analysts surveyed by Bloomberg. Net capital gains on investments were $1.04 billion after a year-earlier loss of $78 million.

While bond sales boosted net income, business operating profit declined after about $700 million of losses from Superstorm Sandy, which hit the U.S. Northeast coast on Oct. 29. Zurich Insurance will keep its dividend unchanged at an 11-year high of 17 Swiss francs ($18.46) a share, after increasing the payout to that level in 2010.

“Results were better than expected, but only on the bottom line, which was clearly due to higher realized capital gains,” said Daniel Bischof, a Zurich-based analyst with Helvea. “The operating profit is more important and there they were rather disappointing because of the general insurance business.”

Zurich Insurance rose as much as 0.6 percent and was up 0.2 percent to 259.60 francs at 9:08 a.m. in Zurich trading. That gave the company a market value of 38.5 billion francs.

Capital Gains

Business operating profit declined 42 percent to $569 million in the fourth quarter, with the contribution from general insurance, the company’s biggest unit, slumping to $21 million from $515 million a year earlier. Operating profit at its life business rose 9.2 percent to $380 million.

The fourth-quarter capital gains came after adjustments to the insurer’s bond portfolio, Chief Executive Officer Martin Senn said on a conference call.

“The realizations are not part of our business strategy, it happens as a function of managing assets relative to liabilities,” he said, adding that the company’s underlying profitability also improved.

“This strong underlying profitability ensures we remain well positioned to continue to deliver for our customers, employees and shareholders in 2013,” Senn said in a statement.

(Updates with comment from CEO in seventh paragraph.)
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