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--Zurich Insurance's 2018 net profit increased despite U.S. natural catastrophes, beating analyst expectations
--The chief executive cited the performance of life and property-and-casualty units for the beat
--The Swiss insurer said it is on course to meet its net savings target of $1.5 billion by 2019
By Brian Blackstone and Cristina Roca
ZURICH--Zurich Insurance Group AG (ZURN.EB) said Thursday that its net profit rose in 2018, driven by strong performance in its life and property-and-casualty units.
The gains came despite a series of natural catastrophes last year including hurricanes in the eastern U.S. and California wildfires.
The company reported a net profit of $3.72 billion for 2018, up 24% from $3 billion in 2017. Analysts had seen Zurich's net profit for the year dropping to $2.98 billion, according to a consensus estimate provided by FactSet. Business operating profit rose 20% to $4.57 billion for the year, Zurich said.
In an interview, Chief Executive Mario Greco credited underwriting and cost reductions in the property-and-casualty unit, where the business operating profit rose 35% from 2017 to $2.1 billion. He cited a "sweet spot" in the life-insurance division and the company's strong distribution channels through banks and brokers. The unit saw a 23% rise in operating profit last year, to $1.6 billion.
The share price was little changed on Thursday, with Zurich's shares up 0.6% mid-afternoon in Europe. "We believe good news is priced into the stock," said analysts at Vontobel Research.
Gross written premiums--the total premium before deductions for reinsurance or ceding commissions--for the year at the Swiss insurer's property-and-casualty division came to $33.51 billion for 2018, compared with $33.02 billion the year before. In Zurich's life division, gross written premiums, policy fees and insurance deposits for the year came to $33.45 billion, compared with $33.24 billion the year before.
The company proposed a dividend of CHF19 a share from CHF18 a share in 2017.
Zurich said it is on track to meet its target of $1.5 billion in net savings by 2019, having already reached $1.1 billion in cumulative net cost savings.
Mr. Greco said the insurance industry has also benefited from higher bond yields and an end to the period when some government bond yields had dipped into negative territory, eroding the value of fixed-income securities.
"If I compare with two or three years ago, today we feel much better because rates have moved into positive territory and this is much more viable for us than what it was two or three years ago," Mr. Greco said.
Negative interest rates were "devastating for the health of the industry and it's good that it's over," he said.
Write to Brian Blackstone at email@example.com and Cristina Roca at firstname.lastname@example.org