Large commercial claims cut Zurich UK GI profit by 46%

Zurich’s UK general insurance operating profit for 2012 fell 46% to £85.3m after a “significant” increase in large commercial losses and pension costs.

The combined operating ratio (COR) increased by 3.3 points to 100.3%. Within this, the expense ratio rose 2.6 points to 30.4%, reflecting the effect of higher pension costs.

Gross written premiums and policy fees dropped 2% to £1.7bn, which the company said reflected “continued challenging market conditions in personal lines”.

Zurich UK GI chief executive Steve Lewis said 2012 performance had been affected by an exceptional level of adverse factors, including the wettest summer in the UK for 100 years.

He said: “On top of that, we’ve had a significant increase in large commercial losses, and the impact of higher pensions charges that taken together added more than five points to the COR.”

Commenting on the 2% dip in gross written premiums, Lewis said: “Our overall top-line results are not where we would want them to be, however, this continues to reflect the underwriting discipline that is necessary to appropriately respond to prevailing market conditions, in particular the combined impact of claims inflation and a low yield environment.”

Improving attritional claims ratio

On a positive note, Lewis said Zurich’s UK GI attritional claims ratio, which reflects how the company is handling normal, non-exceptional claims, is improving following “strong performance” in 2011.

He attributed the improvement to Zurich’s strategy to tackle the tough economic environment –  emphasising underwriting discipline while pursuing what it feels are the right opportunities for its core business.

Summing up the year’s performance, Lewis said: “The large losses of 2012 especially demonstrated our commitment to customers – we are here to support them when they need it most.

“It’s the response we provide during those times which makes me confident that we have the right foundations in place for 2013.”