(For a more comprehensive set of financial highlights covering the three months ended March 31, see page 8 of the News Release)
Business operating profit (BOP)Net income after tax attributable to shareholders (NIAS)1Net investment return on Group investmentsTotal return on Group investmentsDiluted earnings per share (in CHF)Book value per share (in CHF) 3Return on common shareholders’ equity (ROE)4Business operating profit (after tax) return on common shareholders’ equity (BOPAT ROE) 4Zurich, May 16, 2013 – Zurich Insurance Group (Zurich) today reported a business operating profit (BOP) of USD 1.4 billion and net income attributable to shareholders (NIAS)1 of USD 1.1 billion for the three months ended March 31, 2013.
“I am pleased with this result as it demonstrates the continued success of our strategy. All our core businesses delivered a high quality operating performance while maintaining focus on underwriting discipline and expense management. We continue to operate in a challenging economic environment with persisting low interest rates against which we have posted strong, high quality underlying profits,” said Chief Executive Officer Martin Senn.
“We remain on track to deliver our 2013 targets. We continue to grow in our Global Life business and in target markets, where our acquisitions and alliances have strengthened our position in several key countries, contributing to the robust insurance performance across the Group. In Latin America, Zurich Santander continues to contribute significantly to our performance, complementing strong organic growth in this strategically important region.”
General Insurance recorded a strong BOP of USD 807 million, despite persistent lower yields and less favorable development of reserves established in prior years, and achieved a 1.5 point improvement in the underlying loss ratio in the first three months of 2013 compared with 2012.
Global Life delivered a resilient set of results with an increasing contribution from insurance businesses acquired from Banco Santander S.A. (Zurich Santander) in Latin America and improvements in Europe, which benefited from expense savings, compensating for reductions in North America, Asia Pacific and the Middle East.
Farmers saw a strong increase in BOP of USD 51 million to USD 420 million reflecting an improved underwriting result in the reinsurance operation and a slightly reduced contribution from the management services company.
The non-core businesses recorded a business operating profit of USD 37 million compared with a business operating profit of USD 81 million in the same period of 2012, which had benefited from one-off gains. Other Operating Businesses reported an improvement in its business operating result of USD 7 million, reducing the loss to USD 221 million during the first three months of 2013.
The Group preserved a strong capital position with shareholders’ equity increasing to USD 34.8 billion. This does not reflect the 2012 accrual for the dividend, totaling USD 2.7 billion, which will be reported in the second quarter since the AGM took place in April. If shareholders’ equity were adjusted by the amount of the 2012 dividend, paid in the second quarter 2013, return on equity ratios would have increased by approximately 50 basis points. Solvency remains strong with the capitalization ratio under the Swiss Solvency Test (SST), as filed with the regulator as of January 1, 2013, at 185% compared with 178% as filed as of July 1, 2012.
(for the three months ended March 31, 2013)
General Insurance gross written premiums and policy feesGeneral Insurance business operating profitGeneral Insurance combined ratio (in %)General Insurance maintained focus on disciplined underwriting and expense management. The business continued to achieve savings objectives in mature markets while investing selectively in target growth markets.
General Insurance business operating profit decreased by USD 51 million to USD 807 million, or by 6% in U.S. dollar terms or 5% on a local currency basis. This result in the first three months reflects the sustained focus on disciplined underwriting and expense management as the underlying loss ratio improved by 1.5 points, the best recorded since we have reported this figure. The segment also benefited from favorable weather conditions and the absence of significant catastrophes for the second consecutive year. Lower investment income as a result of persistent lower investment yields, lower net releases of reserves established in prior years and higher commissions offset these improvements, resulting in an overall combined ratio of 94.9%.
General Insurance gross written premiums and policy fees increased by USD 216 million to USD 10.7 billion, or by 2% in U.S. dollar terms and 3% on a local currency basis. Growth compared with the same period of 2012 was maintained in all businesses except in Europe where economic and competitive pressures continued. Double digit growth in International Markets, both organic and in Zurich Santander, was complemented by strong premium growth, particularly in North America Commercial and Global Corporate where improving economic conditions and the market environment continued to support rate increases and exposure growth.
The net underwriting result decreased by USD 17 million to USD 367 million, reflected in a slight increase of 0.3 percentage points in the combined ratio to 94.9%.
Global Life gross written premiums, policy fees and insurance depositsGlobal Life business operating profitGlobal Life new business annual premium equivalent (APE)Global Life new business margin, after tax (as % of APE)Global Life new business value, after taxGlobal Life continued to make progress in its strategic objectives of increasing geographic diversification outside Europe and growth, both organic and through Zurich Santander, in target markets, while maintaining focus on shifting its product mix from traditional savings business towards protection and fee-based products.
Global Life business operating profit increased by USD 18 million to USD 308 million or by 6% in U.S. dollar terms and 10% on a local currency basis. Improvements in the expense margin from expense savings in mature European markets and lower policy acquisition expenses, together with a higher contribution from Zurich Santander, were partly offset by reductions in the investment margin.
Gross written premiums and policy fees increased by USD 295 million to USD 3.7 billion or by 9% in U. S. dollar terms or 11% on a local currency basis, driven primarily by increased volumes of protection business. Lower margin insurance deposits decreased by USD 975 million to USD 3.0 billion or by 25% in U.S. dollar terms and 24% on a local currency basis. This decrease occurred primarily in the UK following the expected reduction in insurance deposits from single premium Private Banking Client Solutions products as well as lower initial portfolio transfers in Corporate Life & Pensions savings business compared with the same period in 2012.
Overall new business value (NBV) of USD 332 million increased by 69% in U.S. dollar terms or 71% on a local currency basis driven by the inclusion of the Zurich Santander result and strong performance in all regions. New business annual premium equivalent (APE) increased by USD 123 million or by 13% in U.S. dollar terms and 14% on a local currency basis.
Farmers Management Services management fees and other related revenuesFarmers Re gross written premiums and policy feesFarmers business operating profitFarmers Management Services gross management resultFarmers Management Services managed gross earned premium marginFarmers business operating profit increased by USD 51 million to USD 420 million or by 14%, driven by an improved underwriting result in Farmers Re. Farmers Management Services business operating profit decreased by USD 14 million to USD 338 million or by 4%, driven by lower revenues from new business generated by the Farmers Exchanges which are owned by their policyholders and managed by Farmers Group, Inc., a wholly owned subsidiary of the Group. Farmers Re business operating profit increased by USD 64 million to USD 82 million, driven by an improved underlying loss ratio and lower weather-related losses.
Farmers Management Services management fees and other related revenues decreased by USD 8 million to USD 702 million or by 1%, which was driven by a decrease in other related revenues arising from lower levels of new policies. The 8% decrease to USD 971 million in gross written premiums and policy fees of Farmers Re reflected mainly a decrease in the quota share reinsurance agreements as well as a 1% drop in gross written premiums in the Farmers Exchanges. The changes were a reduction in the All Lines quota share agreement with the Farmers Exchanges from 20% to 18.5% effective December 31, 2012, and a reduction in the Auto Physical Damage quota share reinsurance agreement with the Farmers Exchanges from USD 1 billion per year to USD 925 million per year effective January 1, 2013.
Other Operating Businesses: Other Operating Businesses, predominantly consisting of the headquarters’ expenses and financing activities, reported a decreased operating loss of USD 221 million, down USD 7 million from the same period in 2012. This was primarily driven by a reduction in the headquarters business operating loss to USD 3 million, some USD 24 million lower than in the same period of 2012.
Non-Core Businesses: Non-Core Businesses reported a business operating profit of USD 37 million compared with a business operating profit of USD 81 million in the same period of 2012. An improvement in centrally managed businesses was mainly driven by the recognition of profit arising from the reinsurance of a UK general insurance run-off portfolio. The reduction in Other run-off as compared with the same period of 2012 was mainly driven by the 2012 one-off gain from the reassessment of liabilities on certain life run-off policies.
Net investment result on Group investmentsNet investment return on Group investments (not annualized and calculated on average Group investments)Total return on Group investments (not annualized and calculated on average Group investments)The net investment result on Group investments, which includes investment income, realized gains and losses and impairments, contributed USD 1.7 billion to the Group’s total revenues for the three months ended March 31, 2013, a net return of 0.8% (not annualized). The decline was driven by investing cash flow during a prolonged period of persistently low interest rates. Net capital gains on investments and impairments amounted to USD 120 million, mainly driven by sales of debt and equity securities. Net unrealized gains reported in shareholders’ equity decreased by USD 879 million since December 31, 2012, mainly driven by the widening of credit spreads in the eurozone and the slight increase in yields on government securities in some markets. Total return on Group investments, which includes investment income, realized gains and losses and impairments as well as changes in unrealized gains and losses reported in shareholders’ equity, was 0.4% (not annualized), a decrease of 1.6 points compared with the same period of 2012.
1Net income after tax attributable to shareholders2Total Group business volumes comprises gross written premiums, policy fees, insurance deposits and management fees generated within General Insurance, Global Life and Farmers.
3As of March 31, 2013 and March 31, 2012, respectively
4Calculated based on the discrete quarter result and annualized. See the Financial Supplement and the Operating and Financial Review on the Investor Relations’ page of our website www.zurich.com/.
5March 31, 2012 and December 31, 2012 have been restated as set out in note 1 of the unaudited Consolidated financial statements.
6Does not include any contribution from the insurance businesses acquired from Banco Santander S.A. (Zurich Santander) or from the acquisition of Zurich Insurance Malaysia Berhad.
Financial Highlights (unaudited)
