GWP and profit lower but combined ratio improves

Zurich reported lower GI profits down from $3,535m to $3,463m on a fall in premiums from £37,151m to $34,157m, partially offset by a rise in premiums at its Farmers subsidiary.

Financial Highlights (2008 in brackets)

  • Business operating profit $5,593m ($5,186m)
  • Net income attributable to shareholders $3,215m ($3,039m)
  • GI GWP and policy fees $34,157m ($37,151)
  • Farmers revenues $2,690m ($2,458m)
  • Farmers Re GWP and policy fees $6,615m ($3,381m)
  • General Insurance business operating profit $3,463m ($3,535m)
  • General Insurance combined ratio 96.8% (98.1%)
  • Farmers business operating profit $1,554m ($1,356m)

Zurich’s chief executive officer Martin Senn said: “2009 was an excellent year for Zurich. We generated a strong operating performance across all our core businesses and emerged from a challenging year with one of our strongest balance sheets ever.

“It is that proven ability to generate consistent earnings and achieve growth in targeted market segments that underpins my confidence looking forward, as it enables Zurich to face both challenges and opportunities from a position of strength.”

General Insurance

The company said: “General Insurance continued to focus on maintaining strong profit margins through successful rate actions, delivering a robust operating performance against the backdrop of contracting insurance markets.

“The Group’s continued focus on underwriting discipline, portfolio management and differentiated pricing proved successful in maintaining margins, though also negatively impacting volumes in a competitive market environment.

“Business operating profit was $3.5bn, down 2% in USD but up 1% in local currencies, as an improved underwriting result partially offset lower investment income.

“The combined ratio improved to 96.8% as a result of careful underwriting practices and lower levels of natural catastrophe losses.

Currency changes

“Gross written premiums and policy fees decreased 4% in local currencies, mainly driven by lower volumes in North America and difficult market conditions in Western Europe.

“Across the segment’s commercial businesses, comprising large corporate customers as well as small and mid-sized commercial firms, a continued focus on differentiated rate actions and underwriting discipline generated strong operating performances, with average rate increases of 4%.

Commercial solid

“Global Corporate achieved a significant improvement in profitability, with the remaining commercial businesses maintaining a solid operating performance.

“The ability to capitalize on growth opportunities in targeted market segments helped to mitigate the impact of pricing discipline and lower economic activity on volumes, which particularly affected certain market segments in North America.

“Underwriting results and profitability also benefited from a more favourable loss experience, including lower levels of natural catastrophe losses.

Personal lines

“The segment’s personal lines businesses generally performed well, while operating in a continually competitive environment.

“Profitability was impacted by industry-wide weak results in the motor business in Italy and the UK, reflecting the challenges posed by the economic and competitive market environment in these two European markets. Decisive underwriting actions across these areas also impacted the ability to grow volumes.

“Latin America achieved significant growth in local currency terms through both organic growth and as a result of an acquisition in Brazil in 2008.

Farmers Re

Farmers Re nearly doubled its premium volume due to an increase of the existing All Lines quota share reinsurance treaty, executed in various steps, from 5% to 35% as of December 31, 2009 in connection with the acquisition of 21st Century.

In combination with a higher investment income as a result of the increased participation in the All Lines quota share reinsurance treaty, Farmers Re’s business operating profit rose to $228m, contributing thereby to an increased business operating profit for the Farmers segment of $1.6bn.