Zurich’s Third-Quarter Net Rises 64% on Underwriting Improvement
November 14, 2013 by David Pilla, international editor, BestWeek: David.Pilla@ambest.com
ZURICH – Higher catastrophe losses and lower investment income failed to deter Zurich Insurance Group Ltd. from posting a 64% rise in third-quarter net income as the group reported improved underwriting performances across all lines.
“We delivered a solid operating profit in all core segments for the first nine months of 2013,” said Chief Executive Officer Martin Senn in a statement. “Against the backdrop of a fragile global economic recovery and persisting low interest rates, we remained focused on our strategy, growing our business in emerging markets while delivering a resilient performance in mature markets.”
Third-quarter net income rose to US$1.1 billion from $672 million a year earlier. For the first nine months, net income rose 2% to $2.95 billion.
In a video interview from the company, Senn also acknowledged fallout from the suicide of the company’s chief financial officer and the subsequent investigation, which had cleared the company of causing an “undue influence” in his death. (Best’s News Service, Nov. 4, 2013). “The last few months have been very difficult, and Pierre’s death has caused a lot of sadness, for me and all colleagues at Zurich,” he said.
“The uncertainty over the last few months has had an impact on the company’s reputation, and it was important for us to be at all times very open and honest, and to communicate with all our stakeholders,” he added.
General insurance operating profit rose 2% to $2.12 billion for the first nine months, as an improved underwriting result and expense management compensated for a continued reduction in investment income and losses from severe weather-related events and other large losses. The combined ratio improved by 1 percentage point to 95.3.
Gross premiums rose 3% as growth was achieved in all markets except Europe, where according to Zurich, “economic pressures in key markets and focused underwriting actions” resulted in a premiums decline.
Zurich reported $127 million in major catastrophe losses for the first nine months this year, against negligible losses for the same period a year earlier, mainly on floods in the second quarter, according to the group’s results presentation.
“Global Corporate delivered strong premium growth in Europe and North America, where the improving market environment continued to support premium and rate increases,” the company said. Premiums in international markets increased through growth strategies.
Global life insurance profitability improved, as Zurich said “a growing contribution from Zurich Santander offset a decrease in other regions while Europe was largely flat.”
Life operating profit rose 1% to $978 million in the first nine months. Net expense and risk margins improved but the net investment margin “fell significantly” due to persistently low investment yields in all regions, especially in North America and the larger European operations of the United Kingdom, Germany and Switzerland, Zurich said.
Global life gross written premiums, policy fees and insurance deposits fell 7% to $19.6 billion. “Continued growth in gross written premiums in the higher margin protection business, particularly in Zurich Santander and the U.K., was more than offset by an expected reduction in insurance deposits in the U.K. from single premium Private Banking Client Solutions products,” Zurich said.
Overall life new business value $935 million rose 47% in U.S. dollar terms or 49% on a local currency basis, of which $207 million came from the first time inclusion of Zurich Santander. “All regions performed strongly, led by growth in the protection business,” said Zurich.
The Farmers U.S. operating profit increased, driven by an improved underwriting result at Farmers Re.
Zurich said it “remains on track to achieve some of its three-year targets set in 2010, such as those for global life and expense savings, while some in General Insurance and for Farmers remain challenging and, as of now, will not be achieved.”
Zurich Insurance Co. Ltd. currently has a Best’s Financial Strength Rating of A+ (Superior).
