Zurich 1H Net up 9% to $1.957 Billion

August 17, 2006

Zurich Financial Services Group turned in a strong operating performance in all business segments for the first half of 2006, posting net income of $1.957 billion, a 9 percent rise, and business operating profit of $2.847 billion, a 24 percent increase.

Other performance highlights include the following:
— The net income figure includes the previously announced US regulatory settlement charges, net of tax, of $ 262 million);
— Annualized return on equity (ROE) of 19.0 percent
— Annualized business operating profit after tax of 18.8 percent
— General Insurance gross written premiums of $ 18.5 billion declined 1 percent as reported (an increase of 2 percent in local currency), with a combined ratio of 94.8 percent, an improvement of 2.1 percentage points
— Global Life insurance new business volume growth of 20 percent in local currency, with new business profit margin of 17.7 percent4
— Farmers Management Services’ management fees and other related revenues increased 3 percent to $ 1.054 billion

“Strong operational gains from across our businesses generated another excellent performance,” remarked CEO James J. Schiro. “The success of our three-year operational improvement program, combined with the improving quality of our general insurance portfolio and consistent profitable growth in the life business, gives us confidence about Zurich’s continued operational momentum.”

The bulletin noted: “The Group’s operational improvement program, known as The Zurich Way, has been driving transformational improvements since 2003, establishing best practice processes and procedures for all core functions, including underwriting, claims, reserving, distribution management, finance and talent management. As previously announced, the Group established a $ 500 million target for operational improvements from The Zurich Way initiatives in both 2006 and 2007, with positive impacts on the Group’s combined ratio anticipated. The Group is well on track to achieve its target this year. ”

The earnings announcement indicated that Zurich’s North American operations saw “property rates increasing substantially in regions prone to natural catastrophes, while liability rates declined. In Europe, the greatest rate pressure has been in UK motor and liability lines. Elsewhere in Europe, rates have been stable overall. We expect this general rate climate to persist through to the end of 2006. Zurich actively manages the effects of these market conditions, as well as accumulation exposures, through an ongoing rebalancing of its portfolio in line with risk management and profitability objectives.”

Zurich also commented that the Farmers Management Services (FMS) “continued to successfully manage the Farmers Exchanges, which Zurich manages but does not own, demonstrating consistent growth and profitability. As part of the Group’s growth initiatives, FMS significantly increased its investment in sales-related and IT enhancements, yet still grew business operating profit by 1 percent to $615 million.

“The Farmers Exchanges remain well positioned for profitable growth, as reflected in their 2 percent premium increase in an otherwise flat personal lines market.”

The full press release may be obtained on the Company’s Website at: www.zurich.com. Zurich hosted a media conference at 10:15 a.m. CET at the Zurich Development Center, Keltenstrasse 48, Zurich. The presentation to analysts and investors will be video webcast on the Website at 1:30 p.m. CET, followed by a webcast playback available after 5 p.m. CET. Presentations for analysts and media, as well as supplemental information including information on the business divisions, are also available on the Website.

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