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Zurich Farmers Group Settles Class Action For $545M 

Nu Online news reported on Oct. 18 The proposed settlement agreement resolves all claims dating back to 1999, including those within the lawsuit filed in August 2003. Under the terms, $455 million will potentially go to 13 million policyholders who may qualify for a payment under the settlement. This averages to about $35 per class member, Zurich said. Up to $90 million will pay plaintiffs' attorney fees, the company said. Plaintiffs agreed to drop all claims against Farmers Group and Zurich.

[Zurich CEO,] Mr. Senn said that to "put to rest" issues brought up in the lawsuit, Zurich has launched new initiatives to educate Exchange policyholders and Farmers agents about the agreement between Farmers and the Exchange.

Zurich Financial Services Group said it earned $751 million during the third quarter as results were affected by a legal settlement involving its Farmers Group subsidiary. Zurich took a charge of $295 million related to a proposed settlement in Fogel vs. Farmers Group Inc., a nationwide class action suit pending in Los Angeles Superior Court that alleges the insurance group overcharged for fees paid by the Farmers Exchanges. Zurich's net income of $2.4 billion for the first nine months is down 18 percent compared with last year at this time, the company said.

Profit in Zurich's general insurance segment is down 22 percent as of Sept. 30 due to weather-related losses and the earthquake in Chile, as well as declines in investment returns. Rate increases and underwriting action during the year thus far helped the company's loss ratio in this segment, but the weather events and lower earned premiums resulted in a combined ratio of 97.8 compared to 96.9 at this time last year. The Farmers segment turned in a $1.3 billion profit for the first nine months compared to about $1.13 in 2009 at Sept. 30.

Zurich Financial To Cut Expenses [Half Billion] By 2013

Zurich Financial Services Group said it is looking to reduce expenses by $500 million in an effort to improve profitability. Zurich's net income of $2.4 billion for the first nine months was down 18 percent compared with last year at this time. Martin Senn, chief executive officer of the insurance provider, told investors Zurich's is "well-positioned to outperform in a challenging environment."

"We believe that our agility, superior financial strength and strategic focus allow us to meet the industry challenges of low investment returns and new regulatory capital regimes," Mr. Senn said. The company's goal is to have an [investor] return on equity of 16 percent "over the medium term."

Of the $500 million in expense reductions by 2013, $350 million is to come from the group's general insurance segment. The combined ratio in this segment looks to improve by 3-4 points by 2013, according to the company, while focusing direct efforts Germany, Italy and Switzerland. Zurich also will accelerate the release of $1.5 billion in capital from non-core business by 2015.

The group's Farmers subsidiary aims to maintain its growth despite tough economic conditions. According to CEO Bob Woudstra, Farmers grew market share 1.1 percent in the last three years, outpacing the top 12 U.S. personal lines insurers.

Based on the improved underwriting and operating performance of the U.S. subsidiaries of Zurich Insurance Company, rating agency A.M. Best recently upgraded the insurer's financial strength rating to "A-plus" from "A," with a stable outlook, to reflect Zurich's strong capitalization and enterprise risk management.