The Zurich Financial Services Group reported a strong performance for the three months ended March 31, 2010.
First quarter performance highlights included the following:
• Business operating profit (BOP) of $1.3 billion, an increase of 19 percent. Annualized BOP ROE after tax of 13.5 percent
• Net income of $935 million, an increase of 76 percent. Annualized return on equity (ROE) of 13.2 percent
• Total Group business volumes, comprising gross written premiums, policy fees, insurance deposits and management fees, of $19.0 billion, an increase of 11 percent or 6 percent on a local currency basis
• Shareholders’ equity of $28.2 billion, a 4 percent decrease over year end after deduction of the $ 2.2 billion dividend. Solvency I ratio up 17 percentage points to 212 percent
Zurich managed to achieve the strong results despite the quarter’s natural catastrophes, which resulted in a 30 percent decrease in its general insurance business operating profit from $889 million in Q1, 2009 to $621 million in Q1 2010. The combined ratio for the period rose to 99 percent from 95.8 percent in Q1, 2009.
While the earthquake in Chile was the principle cause of the decline, Zurich also noted that the results were “impacted by the worst winter weather in many years in Europe and parts of the U.S. as well as a high incidence of hail and storm damage in Australia, all of which contributed to a deterioration in the combined ratio. Gross written premiums and policy fees overall decreased by 4 percent in local currency as selective growth in some European corporate lines, in Asia and in Latin America was offset by lower volumes elsewhere. The lower volumes were driven by both a continued decline in insured customer exposure and a competitive market environment.”
CEO Martin Senn commented: “Our General Insurance business successfully maintained its focus on protecting profit margins, managing to absorb both the significant impact from the Chilean earthquake as well as the top-line pressures driven by reduced economic activity among our customers.”
“Our Global Life business continued to show growth in all its key indicators for top and bottom line performance. This reflects the successful execution of our distribution and proposition-oriented strategy, coupled with a strong focus on expense management and risk margins.”
“At Farmers, we continued to achieve strong operating margins, while increasing the surplus position of the Exchanges, which we manage but do not own, as a result of continued cost discipline and a strong contribution from the acquired 21st Century business.”
CFO Dieter Wemmer added: “Contributing further to the strong operating performance are the continuous operational improvements embedded through The Zurich Way initiatives, which also underpin the ongoing successful integration process of our recent acquisitions in the U.S. and emerging markets.”
“After paying a highly attractive and competitive dividend of $2.2 billion, our equity position continues at a strong level. Our book value per share increased by 10 percent to CHF 200.95 [$191.38], even after accounting for the gross dividend of CHF 16 [$15.23]. Moreover, the Group’s regulatory solvency margin improved by 17 percentage points to 212 percent, providing a desirable buffer going forward as we continue to observe persisting uncertainty regarding the macroeconomic environment.”
Farmers Management Services (FMS) good first quarter featured a13 percent increase in management fees and other related revenues to $703 million, “driven by an 11 percent earned premium increase at the Farmers Exchanges (Exchanges), which Zurich manages but does not own,” the bulletin explained.
“Contributing to this growth was the acquired 21st Century business, whose integration into Farmers is progressing successfully and on schedule. In conjunction with continued cost discipline, FMS’ gross management result improved by 10 percent, resulting in a 9 percent higher business operating profit of $351 million and a gross earned premium margin of 7.4 percent.
“Farmers Re increased its premium volume compared to the same prior year period, driven by a higher participation in the quota share reinsurance (35 percent against 25 percent in the prior year quarter) and premium growth at the Exchanges. Benefiting further from higher investment income and lower levels of catastrophe losses, Farmers Re’s business operating profit rose to $111 million, resulting in an increased business operating profit for the Farmers segment of $462 million.”
The complete report, supplemental information and recordings of the Q&A session with Zurich Executives may be obtained on the Group’s web site at www.zurich.com.
Source: Zurich Financial Services
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