Combined ratio flat at 101.3% on lower claims and higher expenses

Zurich’s UK general insurance business made a business operating profit of $32m (£19.8m) in the first quarter of 2012, down 20% on the $40m profit it made in the same period last year.

Gross written premiums and policy fees were 7% down at $502m (Q1 2011:$540m), indicating that the company is continuing to pare back unprofitable business.

The company said that while efforts to improve profitability, particularly in personal lines motor, had resulted in lower UK premium volumes, customer retention levels improved.

Despite the efforts, the UK general insurance division made an $8m underwriting loss in the quarter, unchanged from last year’s first quarter, resulting in an almost flat combined ratio of 101.3% (Q1 2011: 101.2%).

The breakdown of the combined ratio reveals that Zurich’s UK general insurance division paid fewer claims in the first quarter this year than it did in the same period last year, but this improvement was cancelled out by higher expenses. The loss ratio dropped 3.2 percentage points to 69.8% (Q1 2011: 73%), and the expense ratio increased 3.4 percentage points to 31.5% (Q1 2011: 28.1%).

Zurich attributed the higher expense ratio to increased UK pension expenses and higher commissions, reflecting changes in its business mix. The improving loss ratio was a result of lower winter weather claims than last year coupled with reserve releases from old underwriting years.

On 25 April, Zurich revealed plans to shed almost 400 jobs from its UK personal lines division in a bid to run it at lower cost.

Group-wide, Zurich made a net profit of $1.14bn in the first quarter of 2012, up 78% on the $640m profit it made in the same period of 2011.

The group’s  general insurance combined ratio improved by nine percentage points to 94.6% (Q1 2011: 103.6%). The company said the improved performance was thanks to lower catastrophe and large losses, and “excellent underwriting performance”.

Zurich UK general insurance Q1 2012 results in $m (compared with Q1 2011)

  • Gross written premiums and policy fees: 502 (540)
  • Net earned premiums and policy fees: 637 (669)
  • Net underwriting result: -8 (-8)
  • Business operating profit: 32 (40)
  • Combined ratio: 101.3% (101.2%)