(Bloomberg) --
Zurich Insurance Group AG said profit fell 79 percent in the third quarter after it booked US$275 million in losses from the Tianjin disaster and set aside US$367 million more in reserves to cover mainly North American auto and construction liabilities.
Net income declined to US$207 million from US$966 million a year earlier, Switzerland’s biggest insurance company said in a statement on Thursday.
That beat US$195 million, the average of five analyst estimates compiled by Bloomberg. General insurance posted an operating loss of US$183 million in the quarter.
The company said it has taken first steps to improve the profitability of its general insurance unit, including job cuts and an exit from part of the U.S.
transportation business. It is also considering adding more reinsurance coverage for the unit and may exit a number of under-performing portfolios.
“A comprehensive review of the business has led to an action plan to improve performance,” Chief Executive Officer Martin Senn said about general insurance in the statement. “This includes the reshaping of the management team, re-underwriting and exit of underperforming portfolios and additional measures to improve efficiency.”
The company in September abandoned its proposed bid for British insurer RSA Insurance Group Plc after forecasting losses at its general insurance business from the mid-August explosions in the Chinese city of Tianjin and increased reserves for U.S. auto liabilities. It put the non-life unit under the direction of Kristof Terryn, who also heads global life, and said it would conduct a review of its profitability.
Zurich said Thursday it would give more information in February on what it plans to do with a projected $3 billion in excess capital. Analysts have said they expect the company to pay out the money after it abandoned its bid for RSA.
“We have also informed our employees about a planned headcount reduction in global corporate and general insurance center, as we look to address expense challenges and to streamline our organization,” Senn said.
Zurich will change the way it prices business and evaluate which risks it wants to take on the books, he said. “We expect to see a significant improvement in profitability in 2016,” he said.
Zurich shares have fallen 15 percent this year, compared with a 14 percent gain in the Stoxx Europe 600 Insurance index.
