Analysts suggest company will weather the profits cut
ZURICH, SWITZERLAND – Zurich Insurance had bad news for its investors late Wednesday, announcing a $390 million post-tax cut in profits ($550 before taxes) from a “financial adjustment” prompted by unexpectedly large claims in its German business. The claims stem from what insurers call their long-tail business, made long after a contract has expired, for example related to a long illness or fallout from an accident.
Zurich is Switzerland’s largest insurance company.
The cause of the problem appears to have been lack of adequate data, with Reuters citing the company in reporting that “the provision shortfall stemmed mainly from policies taken out by high earners including doctors, engineers and architects. Spokesman Riccardo Moretto said the problem was that, in the past, data quality in Germany had not been as detailed as needed.”
Reuters also notes, however, that the adjustment is being made “in a year of almost no major payouts for, for example, natural catastrophes, which means overall profitability and Zurich’s ability to pay a dividend isn’t jeopardized,” citing Kepler Capital Markets analyst Fabrizio Croce.
The company fell 4.3 percent at one point in trading Wednesday, on the news, the most it has gone down in six months. reports Bloomberg.