Zurich 1st Half Net up 21% to $1.799 Billion; Farmers Profit Up

August 18, 2005

Zurich Financial Services Group joined the parade of insurers reporting strong first half results. The Swiss-based Company, which also manages the Farmers Exchanges in the U.S., posted a net income of $1.799 billion, an increase of 21 percent over the $1.484 billion it earned in the same period of 2004.

Zurich’s return on equity (ROE) was a very healthy 18.4 percent (on an annualized basis); earnings per share (diluted) were Sw. Frs. 14.77 ($11.72), an increase of 15 percent. The earnings announcement said: “Robust underwriting management, tight expense controls and a strong balance sheet underpin the Group’s ability to deliver on its strategy and generate attractive shareholder returns.”

Other highlights cited in the report included:
— Business operating profit (BOP) of $2.305 billion, an increase of 17 percent and an annualized BOP ROE after tax of 16.5 percent.
— Gross written premiums in General Insurance of $18.6 billion, an increase of 1 percent and a combined ratio of 96.9 percent.
— Gross written premiums and policy fees in Life Insurance stable at $5.5 billion; new premiums written (APE) of $1.1 billion, an increase of 4 percent, and new business profit margin of 10.9 percent, an increase of 1.2 percentage points.
— Management fees and other related revenue at Farmers Management Services of $1.0 billion, an increase of 4 percent, and business operating profit of $609 million, an increase of 10 percent.
— Group investments achieved net investment income of $4.0 billion, an increase of 10 percent, and total investment return of 3.4 percent (not annualized).

CEO James J. Schiro commented: “We are pleased to see that the quality of our results has improved with all core businesses and Group investments contributing to the bottom line. Key drivers of our strong performance were customer focus, operational excellence, and talent development.”

The bulletin noted that the Group “achieved a strong underwriting performance in Europe General Insurance, which focuses on personal lines, and North America Commercial with its primary focus on small and medium enterprises. In line with the Group’s profitable growth strategy, the overall General Insurance portfolio has been rebalanced to expand Zurich’s presence in lines of business with more attractive returns.”

It also noted that The Farmers Exchanges “improved their combined ratio 3.3 percentage points to 94.4 percent. They contributed $320 million to surplus in the first half year, bringing total surplus growth to $783 million since January 1, 2004, which is more than three quarters of their three-year $1 billion commitment.”

The full report and additional comments are available on the Group’s Website at: http://www.zurich.com.

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