Zurich Q1 Net up Sharply to $114 Million

May 22, 2003

Zurich Financial Services, joined R&SA in reporting improved first quarter results, posting a net profit for the period of $114 million, compared to $6 million in Q1 2002. The group’s operating profits rose to $785 million from $391 million in the same period last year.

Other highlights noted in the report included:
— Premium growth in Non-life insurance of 32% to USD 9.8 billion over the first quarter of 2002 and 5.9 percentage point improvement in combined ratio to 98.2%.
— Growth in Life insurance premiums and deposits of 17% to USD 5.6 billion while new business premiums increased to USD 503 million, largely due to acquisitions and foreign exchange impacts.
— Business Operating Profit increased to USD 785 million from USD 391 million.
— Total shareholders’ equity of USD 16.4 billion, down from USD 16.8 billion at December 31, 2002 driven by declining equity markets.

ZFS announcement noted that it had achieved the good results in spite of “financial market headwinds, characterized by low interest rates, as well as equity markets declining now for more than three consecutive years, causing impairment charges totaling USD 927 million.” CEO James J. Schiro commented, “We inherited a great franchise as well as significant challenges. I welcome the first quarter result as it underscores the continuing progress in our recovery program. We will continue to deal with future issues as they arise.”

Total gross written premiums, policy fees and deposits for the period totaled $15.5 billion, an increase of 23% over the same period in 2002. ZFS noted that “Including the premiums of the Farmers P&C Group Companies, which Zurich does not own but to which it provides management services, first quarter gross written premiums, policy fees and deposits increased 18% to USD 18.4 billion in 2003.” P/C gross written premiums and policy fees grew by 32% to $ 9.8 billion and the combined ratio improved by 5.9 percentage points to 98.2%. “The Farmers Management Services segment has seen an increase in management fees and related revenues of 7% to USD 468 million and recorded an increase in operating margin,” said ZFS.

The bulletin observed that, “In local currency terms, the growth [in the non-life sector] was lower at 21%, reflecting the strong appreciation of the British pound, Euro and Swiss franc against the US dollar, the Group’s reporting currency.” Nonetheless ZFS said premiums grew in all the regions in which it operates, “primarily driven by rate increases in our key markets as compared with the prior year. These rate increases have, in general, been higher on our commercial lines of business than our personal lines of business.

“Net earned premiums have increased by USD 1.4 billion, or 31%, to USD 5.9 billion as the rate increases on business written in 2002 are recognized as income. Insurance benefits and losses have increased by 24% to USD 4.4 billion in the first quarter of 2003, primarily driven by higher premiums and the weakening dollar. The combined ratio for the quarter ended March 31, 2003 improved by 5.9 points to 98.2% from 104.1% in the same period of the previous year. This improvement was primarily due to underwriting and pricing discipline, coupled with continuous claims improvement. Business Operating Profit increased by 241% to USD 536 million as compared with the first quarter of 2002.”

The report is available on the ZFS Web site at: www.zurich.com.

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