Zurich Insurance Group AG rose to the highest in eight months on higher profit at its largest unit, adding to signs that an overhaul at Switzerland’s biggest insurer is starting to bear fruit.

General Insurance, Zurich’s biggest source of premium income, saw first-half profit rise 3 percent to $1.2 billion, the company said in a statement on Thursday. Group net income declined and all the company’s other units reported a decrease in earnings.

“One can see from quarter to quarter how the restructuring is probably going to be successful, even though they said the main part of it would only take effect in the second half,” said Daniel Bischof, a Baader Helvea analyst with a buy rating on the stock.

Chief Executive Officer Mario Greco, who took over in March, is trying to improve profitability by cutting jobs, selling assets, being pickier on what the company insures and combining the biggest units, global life and general insurance. European insurers are struggling to boost earnings because of slow economic growth, stricter regulatory requirements and record-low interest rates that hurt investment income.

Group net income fell to $739 million from $840 million a year earlier on restructuring charges and claims for natural disasters, beating the $646 million average of eight analysts’ estimates compiled by Bloomberg. Zurich climbed as much as 4.1 percent in Zurich trading, while the Bloomberg Europe 500 Insurance Index fell as much as 0.5 percent.

Costs, Claims

“Measures taken in the non-life segment start to feed through on the claims as well as the cost side,” Vontobel analyst Stefan Schuermann said in a note to investors. He has a hold rating on the stock.

Zurich said it would continue to review its general-insurance portfolio. The acquisition of Rural Community Insurance Services, one of the leading providers of crop insurance in the U.S., boosted profit at the unit by $7 million in the quarter.

The company reiterated an earlier estimate of $500 million of restructuring charges this year, with most of it coming in the second half. Zurich has been exiting business lines and sold units in Taiwan, Morocco and South Africa this year.

“We have made significant progress over the last six months, with consistent improvement in our underlying performance in the second quarter in the context of an ongoing challenging market environment,” Greco said in the statement. “Our efficiency program is beginning to deliver results.”

Combined Ratio

The combined ratio in the second quarter rose to 99 percent from 97.7 percent in the previous three months. Analysts expected a ratio of 101.4 percent in the quarter. A measure above 100 means that the company is paying out more for claims and costs than it earns through premiums. Natural catastrophes including Canadian wildfires, European floods and hail storms in Texas had an impact of about $200 million on the quarterly results.

Operating profit at the Global Life unit fell 1 percent to $667 million in the first six months on higher claims in North America.

Farmers, the unit that manages insurance services for Farmers Exchanges, posted an operating profit of $678 million, 6 percent lower than a year earlier, driven by a loss at Farmers RE, the reinsurance unit.

“Encouraging improvement in the underlying performance of the P&C business,” said Charles Graham, a Bloomberg Intelligence analyst. “Nothing turns out to be a negative surprise, which is good news for Zurich, but there is evidence that there is more work to be done in improving the performance of the Farmers unit, which should be a source of earnings stability.”

Topics Profit Loss Europe Agribusiness