Reduced catastrophe losses help counter dollar changes

Zurich announced Q3 operating profit up 138% to $1.5bn and net profit up 490% to $909m from growth in its life and US Farmers business but also reduced catastrophe losses in general insurance.

General insurance highlights – nine months (2008 in brackets)

  • Gross written premiums and policy fees $26,321m ($29,207m)
  • Operating profit $2,508m ($2,578m)
  • Combined ratio 96.90% (98.70%)

Zurich’s chief executive officer James Schiro said: “In this period of ongoing economic uncertainty, our focus remains on maintaining our strong balance sheet, driving operational excellence and delivering sustained profitable growth.

“By effectively balancing these levers, we have generated excellent quarterly results and ensured that Zurich is well positioned for the future under any economic scenario.”

General insurance

Zurich said general insurance continued to deliver a robust operating performance against the backdrop of challenging market conditions, characterised by contracting economic activity in both North America and Europe.

The Group’s continued focus on underwriting discipline, portfolio management and differentiated rate actions has proven successful in marking a turning point in the underlying loss trend.

The combined ratio improved to 96.9%, supported by a benign catastrophe experience and strict expense management. Business operating profit was $ 2.5bn, down 3% in USD but up 4% in local currencies, as an improved underwriting result was partially offset by lower investment income.

A little local difficulty

Gross written premiums and policy fees decreased 3% in local currencies, mainly reflecting lower volumes in North America and difficult market conditions across Western Europe.

In Europe general insurance, premium volumes in local currencies were down 1%. A lower underwriting result and the drop in investment income reduced profitability.

North America Commercial posted an improved underwriting result and profitability, reflecting improved rates and lower catastrophe losses, while the ability to capitalise on growth opportunities in targeted market segments helped to partially mitigate the impact on volume.

Global Corporate also markedly improved its profitability, demonstrating its continued focus on underwriting and pricing discipline, with average rate increases of 5.8% on business written during the first nine months of 2009.

International Markets reported a 5% volume growth on a local currency basis, with the successful integration of last year’s acquisition in Brazil underpinning a 22% increase in Latin America.

Farmers Re

Farmers Re, which provides reinsurance to the Exchanges, reported gross written premiums and policy fees of $4,964m ($2,346).

Zurich said it more than doubled its premium volume compared with the same period last year due to an increase of the existing All Lines quota share reinsurance treaty, first from 5% to 25% as of September 30, 2008, and then from 25% to 37.5% in connection with the acquisition of 21st Century, effective June 30, 2009.

In combination with improved loss trends in some core underlying businesses of the Exchanges and a higher investment income, Farmers Re’s business operating profit rose to $141m, contributing thereby to an increased business operating profit for the Farmers segment of $1.1bn.