Posted on 16 Nov 2012 by Neilson
Zurich's third-quarter net profit dropped 62 percent to $477 million, trailing an average estimate of $756 million in a Reuters poll of analysts.
A weak investment result also weighed on the bottom line. The reassessment of loss reserves in Germany reduced third-quarter profit after tax by $400 million, Zurich said.
Pierre Wauthier, CFO of Zurich Insurance Group, told CNBC that the results had to be put into context: "The miss was relative to analysts' expectation on the net income and that was mainly due to the fact that we have fairly few realized capital gains in the quarter, compared to last year where we had strong capital gains, so therefore we got a reduction," he told CNBC Europe's "Squawk Box" on Thursday.
"If you look at the underlying performance it continues to be strong with a further improvement in our underlying loss ratio...If you look at our business operating profit at 3.2 billion euros it's in line with expectations," Wauthier added.
"We also increased shareholders equity by 2 billion euros to 34 billion euros which I believe is also in line with expectations."
Zurich doesn't expects further big hits like that suffered by its German general insurance business in the third quarter, contributing to a fall in the company's net profit for the period, Wauthier said.
"Zurich is confident that there are no similar issues of significance elsewhere in general insurance," he said.
A review showed Zurich's German arm had not set aside enough money aside to cover claims from long-expired policies, the firm said last month, causing it to suffer a $550 million pretax hit to profit for the third quarter.
Insurance claims, such as cases involving long-term illness or medical negligence, are sometimes not made for years after a policy has expired. Zurich had to set more money aside to cover these so-called "long tail" liabilities.
Wauthier attempted to reassure investors that the company had enough reserves.
"First of all, if you look at the overall reserves, there is 57 billion and if you look at the development over the year so far the reserve development has been positive despite what has happened in Germany."
"We feel that Germany is an isolated case as Germany was really an unique convergence of events."
General insurance is Zurich's biggest area of business. In that segment its combined ratio - a measure of underwriting profitability - worsened to 102.8 percent in the third quarter.
That means Zurich's general insurance underwriting business was not profitable during the period.