GLOBAL - The asset management group of Swiss banking arm Zurich Financial Services posted substantial gains in operating profits in 2002 compared to to the previous year.
The division went from a loss of US$39m in 2001 to a profit of US$24m in 2002.
Zurich attributed the figures to last year’s sale of Zurich Scudder Investments – excluding the Threadneedle businesses in the UK and the asset management operations in Italy and Germany - to Deutsche Bank in May 2002. In January 2002, Zurich also agreed the sale of private banking arm Rüd Blass to Deutsche Bank .
Other changes included Zurich Capital Markets exiting non-core activities. And the firm’s finite risk, insurance and reinsurance units being integrated into the North American office.
But the group registered an overall loss of US$3.4bn in 2002, compared with -US$387m for the previous year. Zurich said that strong premium growth in 2002 was offset by US$3.5bn of special provisions as part of the company’s strategic refocus.
Zurich’s investment portfolio was also hit by continued market weakness, experiencing a 24% reduction in net investment income to US$5bn, leading to a return of 2.4% on total average investments (2.7% : 2001).
James Schiro, Zurich’s chief executive officer, said: “While our non-life business is benefiting from the best pricing environment we have seen in 15 years, weak and fragile equity markets and record low interest rates are negatively affecting our life business and investment result.
“However, we are beginning to see the impact of the action program announced on September 5. New processes and structures are in place, and our restructuring is laying the foundation for achieving strong and sustainable earnings.“
On September 2002, Zurich said that it would reduce staff by 4,500 by the end of 2003. Some 2,500 jobs were cut by December, 2002.
Schiro added: “Delivering on the action program announced is not merely an exercise in cost cutting and harnessing efficiency gains. It’s a project that is driving performance and bringing fundamental changes to our operational and financial processes throughout the entire organisation.”
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