Despite what the company described as a very difficult insurance market in 2007, Zurich Financial Services Group reported net income for the year increased 22 percent through improved business processes and release of reserves.
James J. Schiro, the Zurich, Switzerland-based insurers' chief executive officer, said "clearly today's market environment is a challenging one," but the company's strong balance sheet, diversity of its risk portfolio and execution of its business strategy produced strong results for 2007.
Net income for 2007 rose more than $1 billion to $5.6 billion, or Swiss Franc 46.37 per share ($41.98), an increase of 6.85 Swiss Francs ($6.22).
General insurance gross written premiums and policy fees rose 4 percent, or $1.5 billion, to $36 billion. Global life insurance segment rose 3 percent, or $681 million, to $22 billion. Fees from Farmers Management Services, the Los Angeles insurer Zurich does not own but manages, rose 6 percent, or $133 million, to $2.3 billion.
The company did not report quarterly results.
The impact of winter storm Kyrill and flooding in the United Kingdom had a negative impact on the company's profitability, with the combined ratio rising 2.5 points. That, along with the company's internal reorganization and release of reserves, accounted for a total increase in the company's combined ratio of 1.7 points to 95.6.
During a discussion of the company's results, Mr. Schiro said that aside from the catastrophe losses, the company experienced decreases of between 2- and 3 percent in premium rates. He said the impact was most pronounced in the United States and United Kingdom, and was much less in continental Europe. The company saw pricing increases in other parts of the world, he noted.
On the topic of reserving, he said the company has adopted conservative reserve assumptions. Total reserves net for insurance contracts rose $5 billion to $225 billion.
Dieter Wemmer, the company's chief financial officer, said the reserve level from a year ago "is unchanged in quality" but would not forecast future development.
When asked about reserves for United States business–$29 million net in fourth quarter–he said the action was taken for asbestos exposures and added the move was very small.
Mr. Schiro said the company has no subprime mortgage investment exposure and very little directors and officers liability exposure. Mr. Wemmer said Zurich has been informed of 20 individual cases of D&O claims or notice of claim. He said losses from these claims would not be material.
The company said it will propose to the board of directors a dividend payment of 15 Swiss Francs ($13.59 U.S.), an increase from CHF 11 ($9.96).
The company also has re-authorization to repurchase of CHF 2.2 billion in shares, approximately $2 billion.
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