Zurich Q1 Net up 3% to $1.4 Billion

The Zurich Financial Services Group reported good first quarter results across all business segments, “driven,” the Group said, “by a continued focus on financial discipline, operating efficiency and risk management, coupled with the benefits of its diversified business.”

Performance highlights included the following:
— Net income of $ 1.4 billion, an increase of 3 percent. Annualized return on equity (ROE) of 19.9 percent
— Business operating profit (BOP) of $ 1.8 billion, an increase of 1 percent. Annualized BOP ROE after tax of 18.6 percent
— General Insurance gross written premiums and policy fees of $11.2 billion, up 10 percent or 2 percent in local currencies, and a combined ratio of 94.6 percent
— Global Life new business value, after tax up 10 percent, with new business margin, after tax (as percent of APE) of 22.2 percent and APE up 15 percent or 8 percent in local currencies
— Farmers Management Services’ management fees and other related revenues up 9 percent to $ 0.6 billion; [however, Farmers operating profit fell 9 percent to $300 million].
— Shareholders equity of $ 29.4 billion, an increase of 1 percent in the quarter

CEO James J. Schiro commented: “In the face of today’s market challenges, I am proud of our ability to stay focused on our strategy and drive such strong results. Going forward, I am confident we will continue to execute on our dual focus of profitable growth and operational transformation, turning these challenging times into opportunities for the creation of long-term shareholder value.”

Zurich seems to have largely escaped the fallout from the subprime mortgage crisis that has caused many companies to declare significant losses on write downs in the value of their investments. These include AIG, Swiss RE, Citicorp, Merrill Lynch and a number of others.

Zurich said: “The net investment result for Group investments amounted to $ 2.2 billion, down 8 percent. Net capital gains were positive at $10 million despite very challenging financial markets in the first quarter 2008. Net investment return on Group investments decreased slightly by 0.1 percentage points to 1.1 percent (not annualized), a robust result, which continues to reflect the Group’s disciplined approach to managing its assets relative to liabilities on a risk-adjusted basis.

“Furthermore, the Group continues to have no material exposure to US sub-prime debt or CDOs in its investment portfolio and incurred only $7 million impairments on US mortgage-backed securities (MBS) since end of December 2007, including a $1 million write-down on US sub-prime.”

Zurich’s CFO Dieter Wemmer noted: “We continue to reap the benefits of the continuous improvements embedded through The Zurich Way initiatives and the steady progress in areas such as capital management, tax efficiency and the further streamlining of our corporate structure. The sustained strength of our balance sheet and our determination to protect the performance of the Group give us confidence when looking forward.”

Zurich said its restructuring program, the “The Zurich Way” stresses the use of “best practices to core functions such as under-writing, claims, reserving, distribution management and finance.” The bulletin added that the “Group targets, as previously announced, $800 million of after-tax benefits for each year until 2010, and the company is well on track to achieve its goal.”

The full report, as well as supplemental information and an audio web cast of the analysts’ presentation may be obtained on the Group’s web site at: www.zurich.com.

Source: Zurich

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