ZURICH Zurich Insurance (ZURN.VX), rocked by the suicide of its finance chief less than three months ago, said on Thursday it would miss a year-end profitability target in its largest unit General Insurance.
Zurich's targets were at the heart of a disagreement between the insurer's ex-chairman Josef Ackermann and Chief Financial Officer Pierre Wauthier, who sources said wrote about the friction in a note before taking his life in August.
Zurich said the unit, which includes property, car and other non-life areas, would miss its goal of improving its combined ratio, a measure of profitability, by 3 to 4 percentage points compared with competitors.
"We have made significant progress in our underlying performance in General Insurance, yet this goal, very ambitious, (of achieving) an improvement relative to our peers ... will be missed," Chief Executive Martin Senn said on a call with journalists.
The unit's combined ratio improved to 94.7 percent in the third quarter, while German rival Allianz SE (ALVG.DE) reported the measure improved during the same period to 94.8 percent for property and casualty insurance. The German insurer was more upbeat on its goals, saying last week it expected to beat its 2013 operating profit target.
Analysts at banking group J.Safra Sarasin said Zurich's 2013 profitability goal in General Insurance had been clearly too optimistic, given damage claims following severe weather, and hoped new targets set to be announced at Zurich's investor day on December 5 would be more realistic.
Senn said the insurer would also miss growth targets in its U.S. business Farmers, but it remained on track to achieve the three-year targets it set in 2010 for Global Life and expense management.
The insurer had flagged the likelihood it would miss the targets with its second-quarter results in August, saying low interest rates were weighing on investment income.
Though Zurich failed to deliver on some targets, it posted a 64 percent jump in third-quarter net profit. The robust results helped lift its shares after months of turbulence marked by the suicide of Wauthier and the subsequent resignation of Ackermann, which had sent the stock to a nine-month low.
Zurich's shares rose 2.5 percent to a six-month high on Thursday. The stock also outpaced a 2.3 percent rise in the European sector .SXIP.
"Overall (it was) a very solid set of numbers which will give the market confidence that the tragic events of August are not a guide to the group financial performance," analysts at JPMorgan said in a note.
The results of an investigation into Wauthier's suicide, overseen by financial watchdog FINMA, showed the CFO did not come under undue pressure before his death, the insurer said earlier this month, effectively clearing Ackermann of any blame.
Ackermann had himself rejected blame for what he termed a surprise tragedy.
Net profit rose to $1.103 billion (687.5 million pounds), above the $1.048 billion forecast in a Reuters poll of analysts.
The prior-year period had seen Zurich take a $550 million hit to profit after a review showed its German arm had not set enough money aside to cover claims made years after policies expired.
An improved underwriting result and expense management helped business operating profit in General Insurance, compensating for reduced investment income and losses from natural catastrophes, including floods and hail in Europe, the firm said.
"After several quarters of poor results, Zurich is finally delivering solid results with very solid capital position," said analyst Atanasio Pantarrotas at brokerage Kepler Cheuvreux.
(Aditional reporting by Paul Arnold; Editing by John Stonestreet and David Holmes)