Turnaround costs eat into Zurich first half profit

Zurich reported a 22% drop in profit after tax in the first half of 2016 as the costs from its turnaround plans hit.

The Swiss insurance group’s net profit fell to $1.6bn (£1.2bn) in the first half this year from $2.2bn in the same period last year.

The company said the fall was down to “a lower level of realized capital gains, restructuring charges related to the Group’s turnaround plans and a higher effective tax rate.”

Zurich, which has been run by Mario Greco (pictured) since March, has made wide-ranging changes to improve profitability, including cutting around 8,000 jobs by 2018, applying new technology and shifting functions offshore.

Greco said: “We have made significant progress over the last six months, with consistent improvement in our underlying performance in the second quarter, in the context of an ongoing challenging market environment.”

He added: “As we prepare for the next strategy cycle, we have already taken steps to simplify our management and operating structures, which will allow us to better serve our customers and respond more easily to external developments.”

General insurance improves

While group profit fell, the general insurance business improved. The unit’s operating profit increased 3% to $1.21bn (H1 2015: $1.17bn) and the combined operating ratio was almost unchanged at 98.4% (H1 2015: 98.3%) despite higher weather claims.

Zurich said an improvement in the underlying result in the general insurance unit offset a decrease in investment income and a higher level of catastrophe and weather-related claims. The result also got a $92m boost from foreign currency gains.

Gross written premiums fell 1% to $18.5bn (H1 2015: $18.7bn), which Zurich said was caused by the re-underwriting it had done to improve performance.