Combined ratio rises 1.1 points despite loss ratio cut

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Zurich’s UK general insurance business made an operating profit of $83m (£53m) in the first half of 2012, down 28% on the $115m it made in last year’s first half.

According to group figures released this morning, Zurich’s UK’ GI division’s combined ratio increased by 1.1 percentage points to 99.5% (H1 2011: 98.4%). The underwriting profit fell 72% to $6m (H1 2011: $22m).

Don’t blame the weather

While Zurich was hit by bad weather claims, such as freezing conditions and the start of the year and the June flooding, the increase in combined ratio was caused by a rise in the company’s expense ratio to 30.9% (H1 2011: 27.9%).

Despite the bad weather claims, Zurich’s loss ratio improved by 2.4 points to 68.6% (H1 2011: 71%).

Zurich said that Europe-wide, weather claims had been offset by improvements in the loss ratio “as profit improvement strategies continue to benefit the result”.

Zurich said the higher UK expenses were caused by increased pension expenses thanks to the tough economic environment, and higher commissions because of changes in the business mix.

Rate rises

Gross written premiums and policy fees dropped 5% to $1.3bn (H1 2011:$1.4bn) amid continued efforts to exit unprofitable business, particularly UK personal lines motor.

However, the company also revealed that rate rises had boosted personal lines GWP by 15% compared with the first half of 2011. However, the effect of rate rises on the commercial book was a more muted 3% uplift.

Group surge

Group-wide, Zurich’s general insurance business improved in the first half of 2012. Business operating profit jumped 46% to $1.6bn (H1 2011: $1.1bn), and the combined ratio improved by 4.4 percentage points to 94.9% (H1 2011: 99.3%).

The business delivered a 20.7% return on equity (H1 2011: 13.6%).

Zurich attributed the better group-level GI performance to sustained underwriting discipline and expense management, coupled with a lower burden of natural catastrophe losses than in the first half of 2011.

General insurance gross written premiums and policy fees at group level increased 1% to $19.2bn ($18.9bn).

Zurich UK H1 2012 results in $m (compared with H1 2011)

  • Gross written premiums and policy fees: 1,334 (1,411)
  • Net earned premiums and policy fees: 1,266 (1,338)
  • Net underwriting result: +6 (+22)
  • Business operating profit: 83 (115)

Ratios (%)

  • Loss ratio: 68.6 (71)
  • Expense ratio: 30.9 (27.4)
  • Combined ratio: 99.5 (98.4)

GWP growth caused by rate increases (%)

  • Personal lines: 15
  • Commercial lines: 3