UK chief Lewis hails better underlying loss ratio despite 101% COR

Steven Lewis Zurich UK chief executive

Year-to-date operating profit at Zurich’s UK general insurance business is down 56% because of continued flood losses, pension costs and “an exceptionally large commercial claim” in the third quarter.

Zurich’s UK GI business operating profit fell to £57m in the first nine months of 2012, from £129m in the same period last year: a drop of £72m.

The flooding, commercial claim and pension costs added five points to Zurich UK’s nine month combined ratio, taking it to 101.1% (9M 2011: 96.4%).

The exceptional commercial loss was caused by a fire destroying the premises of one of Zurich’s clients.

Despite this, Zurich said its UK GI attritional loss ratio, which it deems the best indicator of core trading performance, had improved by approximately three percentage points compared with the prior year.

Zurich UK chief executive Steve Lewis said: “As with our half-year results, we have to recognise the continuing impact of the wettest summer in the UK for 100 years and the higher pension charges we talked about in the first half of the year. In addition, we have recently experienced an exceptionally large commercial claim.”

Underlying improvement

However, Lewis insisted progress was otherwise strong. He said: “With these specific factors taken into account, we continue to achieve an underlying improvement on our loss ratio. This is down to the disciplined underwriting and pricing actions we have taken to face the tough economic environment and improve our core trading result. These steps are a clear indication that we are still making the correct decisions on which business to write.”

He added: “Of course we would prefer to be announcing a stronger set of results and we appreciate that the market continues to be challenging with rates not strengthening fast enough. Despite the operating environment, we are confident that we will continue to deliver successfully on our strategy. Our underlying business performance is sound and will provide the necessary foundation to respond effectively to the economic conditions we face as we head into 2013.”

GWP dip

Zurich’s UK GI gross written premium (GWP) was down 2.2%, to £1.3bn in the first nine months of 2012, which the company said was because of an anticipated dip in contribution from personal lines.

The personal lines decrease was caused in part by action taken to improve profitability in personal motor, but also by a reduction in motor rates over the nine-month period.

However, commercial GWP increased 3% across commercial broker and the Zurich Municipal business.

The company said: “Both have continued their strategy of maintaining rate through underwriting action to offset claims inflation and lower investment yields, with Zurich Municipal continuing to focus on providing support to the public sector across a number of segments.”

Group performance

The Zurich group as a whole posted an operating profit of $3.2bn (£2bn) for the first nine months of 2012, unchanged from the same period last year. Third-quarter operating profit at the group level was down 34% to $733m as a result of financial adjustments to Zurich’s German general insurance business.

Zurich UK GI nine-months 2012 results in $m (compared with nine-month 2011)


  • GWP: 2,003 (2,096)
  • Net underwriting result: -21 (+73)
  • Operating profit: 91 (210)
  • Loss ratio (%): 70.3 (69.5)
  • Expense ratio (%): 30.8 (26.9)
  • Combined ratio (%): 101.1 (96.4)