* Zurich books $318 million in restructuring costs in Q4
* Insurer expects a further $300 million in costs in H1 2014
* Group proposes dividend of 17 Sfr, unchanged from 2012
* Dividend yield key attraction, further growth limited -
(Adds detail on charges, CFO, analyst)
By Alice Baghdjian
ZURICH, Feb 13 Zurich Insurance missed
profit expectations in the fourth quarter due to restructuring
charges, and said the total cost of an overhaul of its business
would be about $600 million - the upper end of its forecast
The Swiss company is revamping its strategy by investing in
high-margin units and selling underperforming lines.
It took a hit of $318 million in the final quarter of 2013
due to costs of restructuring, including a goodwill writedown at
its underperforming Russian retail arm and its exit from a
business in Hong Kong.
The total costs of Zurich's strategic overhaul will reach
the upper end of the $400 million to $600 million range set out
at the insurer's investor day in December, acting Chief
Financial Officer Vibhu Sharma said on Thursday.
"We've taken about $300 million of the $600 million in Q4
and expect the remainder into 2014," he said. That remainder
would be booked in the first half of the year, the firm said.
Chief Executive Martin Senn said the firm was exploring
options for its retail operations in Russia, which had not met
the company's standards. He did not elaborate.
Net profit at the Swiss insurer rose 9 percent to $1.07
billion in the fourth quarter, thanks to fewer large claims
compared with the same period of 2012 when damage claims related
to Superstorm Sandy in the United States amounted to about $700
However, the profit figure was below the average forecast of
$1.28 billion in a Reuters poll of analysts.
Shares in Zurich were 0.3 percent higher at 269.2 Swiss
francs by 1135 GMT, lagging a 0.6 percent advance in the
European insurance sector index.
Zurich, whose 6.3 percent dividend yield is already the
highest among the companies in Switzerland's large cap index,
said it would pay a dividend of 17 Swiss francs per share for
2013, unchanged from the previous year.
Its dividend yield also outstrips German rival Allianz
, at 3.5 percent, and Paris-listed Axa, which
offers 3.7 percent.
"The dividend yield in our view is the key attraction of the
shares," said Michael van Wegen, an analyst at Bank of America
Merrill Lynch, which has a neutral rating on the stock.
"But we only see limited room for the company to grow
dividend for the next two years, despite a solid capital
position," he said.
CEO Senn said the company was in a good position to deliver
on its targets having replenished its top ranks after losing
several executives last year.
The company has poached Swiss Re's George Quinn
for the position of finance chief, after Zurich's chief
financial officer Pierre Wauthier committed suicide in August.
Low interest rates, slashed close to zero by central banks
in Europe and the United States to kick-start sluggish
economies, have weighed on the investment income of insurers.
Sharma said he expected headwinds in Europe to continue this
year, particularly in Spain and Portugal.
Net investment income declined 3 percent in the three months
to December, but this was a slower rate than previous quarters
in 2013, he said.
"We expect this trend (of a slowing rate of decline) to
continue for 2014," he said, but added new money yields would
continue to fall short of the overall running yield. "Thus some
pressure on net investment income will persist."
Zurich's combined ratio for the fourth quarter, a measure of
underwriting profitability, was 96 percent, an 8.1 point
improvement from the same period in 2012. Sharma said investors
could expect more improvement in combined ratio this year.
(Editing by Pravin Char)