Zurich Financial Services
16 May 2007
Zurich announces record three month results fueled by continued operating
discipline and selective growth
Zurich Financial Services
Mythenquai 2
8022 Zurich
Switzerland
www.zurich.com
SWX Swiss Exchange/virt-x:
ZURN
Valor: 001107539
Media Relations
Phone +41 (0)44 625 21 00
Fax +41 (0)44 625 26 41
media@zurich.com
Investor Relations
Phone +41 (0)44 625 22 99
Fax +41 (0)44 625 36 18
investor.relations@zurich.com
Zurich, May 16, 2007 - Zurich Financial Services Group (Zurich) reported today
another record set of results for the three months to March 31, 2007, based on
continued strong operating performances with profit improve-ments in all
business segments of the Group.
'These excellent results reflect our ability to balance operating discipline and
selective growth across our well-diversified book of business,' remarked
Zurich's Chief Executive Officer James J. Schiro. 'Going forward, we are
confident this combination will provide further opportunities for profitable
growth, particularly in emerging markets, parts of Europe and in personal lines
in the United States.'
Performance highlights include:
• Net income(1) of USD 1.4 billion, an increase(2) of 71%(3). Annualized
return on equity (ROE) of 23.5%
• Business operating profit (BOP) of USD 1.7 billion, an increase of
25%. Annualized BOP ROE4 after tax of 21.4%
• General Insurance combined ratio of 93.3%, an improvement of 1.5
percentage points. Gross written premiums and policy fees of USD 10.2 billion,
up 4% or -1% in local currency
• Strongly increased Global Life new business value of USD 146 million
up 43%, with new business margin (% of APE) of 23.2%(5) and APE up 8% or 2% in
local currency
• Farmers Management Services' management fees and other related revenues
increased 4% to USD 542 million
• Shareholders' equity continued to increase to USD 26.5 billion net of
share buyback to date of USD 438 million
'Driving these visible profit margin enhancements is our rigorous approach to
operational excellence,' Schiro added. 'Contributing to this is not only our
operational improvement program The Zurich Way but also steady progress in areas
such as capital management, tax efficiency and the further streamlining of our
corporate structure. This, along with selective growth opportunities, gives us
confidence going forward.'
Applying The Zurich Way best practice processes and procedures to all core
functions, including underwriting, claims, reserving, distribution manage-ment,
finance and talent management, the Group targets, as previously announced, USD
700 million of after tax benefits for 2007 alone, and the company is well on
track to achieve its goal.
General Insurance: With business operating profit up 29% over the last year to
USD 1.1 billion, General Insurance had a strong showing in the first quarter,
absorbing both the impact of the Kyrill storm in Europe as well as some
reduction in rates. The operating performance was largely driven by a better
underwriting result, up USD 120 million, and an increase in invest-ment income
by USD 108 million. The combined ratio improved by 1.5 percentage points to
93.3%, in spite of the USD 152 million loss from Kyrill, which was fully
absorbed by the European businesses.
Gross written premiums and policy fees recorded a 4% increase in dollar
equivalent terms. In local currency, this development was slightly down due to
mostly opposing rate and volume movements, both within regional areas as well as
across the Group. The proactive management of targeted business areas and
profitable lines of business through enhanced segmentation techniques proved
successful in limiting the loss in premium volume and even allowed a slight rate
increase on renewed business in most operations. In North America, for example,
these actions were successful in holding our rates in a market where reported
rates continue to fall. Rates in Europe showed overall some signs of
improvements, offsetting continued reductions in the UK and Ireland. While
volumes tended to be flat or slightly reduced across the region, in the UK
volume has stabilized during the quarter following a series of previous
declines. Successful customer retention also marked the performance in Global
Corporate, where the impact of rate reductions in a number of business lines
contributed to a reduced premium volume. Meanwhile International Businesses
managed to increase volumes as well as its profitability.
Global Life: The Global Life segment with its continued focus on its chosen
unit-linked and protection markets posted a strong operating performance with
new business value rising 43% to USD 146 million, a 36% increase in local
currencies, and a business operating profit of USD 317 million, up 11%. All key
regions contributed to this result, which reflects in varying degrees a
combination of Annual Premium Equivalent (APE) growth and higher new business
margins. While certain areas and businesses such as the global expatriate
business located in the Isle of Man, Greater China or Ireland had strong APE
growth as well, increases in new business value in the US, Switzerland and
Germany were more from increased margins.
APE volumes increased by 8% in dollar equivalent terms or 2% in local
currencies. As the implementation of growth initiatives progresses over the
course of the year, we remain confident to be on track for double digit growth
by the year end. The strongest volume increases in local currencies were
recorded in Greater China, up 82%, making our Emerging Markets life business the
second biggest market, accounting for 22% of the first quarter's APE production.
Ireland, up 21%, and Switzerland, up 12%, where the successful introduction of
cross-border products contributed to the improving trend, also had forceful
volume expansions. This was partly offset by a slow start in the UK, Germany and
Spain, due in part to differences in the timing of sales campaigns. The increase
in new business margin from 17.7% to 23.2% reflected continued broad based
margin discipline coupled with structural changes in the US term business,
refinements to the business operations in Switzerland and increases to the risk
free rate in Germany.
Farmers Management Services: Farmers' management fees and other related revenues
grew by 4% to USD 542 million as a result of targeted investments in its
distribution platform and product enhancements that enabled the Farmers
Exchanges, which Zurich manages but does not own, to achieve market-beating
first quarter premium growth of 5%.
While Farmers' business operating profit increased 3% to USD 330 million, the
operating margin was reduced to 47.9%. This margin compression reflects the
continuing impact of investments in growth initiatives as well as expenses
related to the creation of the North America shared services platform, which
will drive operating efficiencies.
Other Businesses: The Other Businesses segment delivered its expected
contribution to the Group's overall profitability and achieved a business
operating profit of USD 143 million, up 32%. Of this, USD 44 million is
attributable to business ceded by the Farmers Exchanges. The contribution of the
other operations in this segment was largely due to higher profits from run-off
businesses other than Centre, while Centre's profitability remained in line with
previously indicated profitability levels.
Group investments: The net investment result for Group investments of USD 2.4
billion is up 7%, in line with the growth in(GV1) the average invested assets
to USD 192.1 billion. Net capital gains, however, remained flat. This resulted
in a stable investment return of 1.2% (not annualized).
(1) Attributable to shareholders.
(2) All comparisons refer to the first three months of 2006 unless stated
otherwise.
(3) The 2006 net income was after a charge for US regulatory settlement costs of
USD 262 million net of tax (USD 325 million pre taxes).
(4) ROE calculated on common shareholders' equity. See the Financial Supplements
and the Group Financial Review on the Investor Relations page of our Web site
www.zurich.com for further information on shareholders' and common shareholders'
equity.
(5) Calculated on the European Embedded Value basis.
Note to editors:
There will be a telephone conference with a Q&A session for analysts and
investors at 9:30 a.m. CEDT. Media may listen in by telephone. Please dial-in to
register approximately 3 to 5 minutes prior to the start of the conference.
Dial-in numbers:
• Europe +41 (0)91 610 56 05
• UK +44 (0)207 107 06 13
• USA +1 (1) 866 865 51 44
The presentation to analysts and investors will be audio webcast on our Web site
www.zurich.com live, followed by a webcast replay available after 12:00 p.m.
CEDT.
Supplemental financial information, including information on the business
divisions, will be available on our Web site www.zurich.com. The presen-tation
for analysts and investors will be published at 9:30 a.m. CEDT. Please click on
the 'Results Reporting Q1, 2007 - Media View' link on the bottom right corner of
our homepage.
Zurich Financial Services Group (Zurich) is an insurance-based financial
services provider with a global network of subsidiaries and offices in North
America and Europe as well as in Asia Pacific, Latin America and other markets.
Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs
approximately 55,000 people serving customers in more than 120 countries.
Financial Highlights (unaudited)
The following table presents the summarized consolidated results of the Group
for the three months ended March 31, 2007 and 2006 and the financial position as
of March 31, 2007 and December 31, 2006, respectively. The 2006 amounts have
been restated for the implementation of a change in accounting policy in
accordance with IAS 19 Employee Benefits. Interim results are not necessarily
indicative of full-year results.
in USD millions, for the three months ended March 31, 2007 2006(1) Change in Change
unless otherwise stated GC(2) in LC
Business operating profit 1'734 1'392 25%
Net income attributable to shareholders 1'387 810 71%
General Insurance gross written premiums and policy 10'216 9'861 4% (1%)
fees
Global Life gross written premiums, policy fees and 5'239 5'357 (2%) (10%)
insurance deposits
Farmers Management Services management fees 542 522 4% 4%
General Insurance business operating profit 1'135 883 29%
General Insurance combined ratio (in %)(3) 93.3% 94.8% 1.5 pts -
Global Life business operating profit 317 285 11%
Global Life new business value, after tax (4) 146 102 43% 36%
Global Life gross new business annual premium 628 579 8% 2%
equivalent (APE)
Farmers Management Services business operating profit 330 319 3%
Farmers Management Services gross operating margin (in 47.9% 53.3% (5.4 pts) (5.4
%) (5) pts)
Group investments average invested assets (6) 192'097 179'169 7% 7%
Group investments results, net 2'370 2'214 7% 1%
Group investments return (as % of average invested 1.2% 1.2% 0.0 pts (0.3
assets) pts)
Shareholders' equity (7) 26'515 25'587 4% 3%
Diluted earnings per share (in CHF) 11.60 7.11 63%
Return on common shareholders' equity (ROE) (8) 23.5% 16.6% 6.9pts
(GV2)
Business operating profit (after tax) return on common 21.4% 19.8% 1.6pts
shareholders' equity (8)
(1) Restated as a result of the SoRIE option under IAS 19 Employee Benefits.
(2) Positive / (negative) change.
(3) The General Insurance combined ratio is calculated as the sum of net earned
premiums and policy fees less the net underwriting result, divided by net earned
premiums and policy fees.
(4) Global Life new business value is the present value of the projected after tax
profit from life insurance contracts sold in the year.
(5) Farmers Management Services gross operating margin is calculated as the sum of
Farmers' management fees less management expenses, divided by Farmers management
fees.
(6) Excluding cash collateral received for securities lending.
(7) As of March 31, 2007 and December 31, 2006, respectively.
(8) Returns for the three months ended March are annualized on a compound basis
using the results for the three (GV3) months. ROE (based on net income
attributable to common shareholders) and business operating profit (after tax)
return on common shareholders' equity for the year ended December 31, 2006 were
20.4% and 19.4%, respectively.
Disclaimer and cautionary statement
Certain statements in this document are forward-looking statements, including,
but not limited to, statements that are predications of or indicate future
events, trends, plans or objectives. Forward-looking statements include
statements regarding our targeted profit improvement, return on equity targets,
expense reductions, pricing conditions, dividend policy and underwriting claims
improvements. Undue reliance should not be placed on such statements because, by
their nature, they are subject to known and unknown risks and uncertainties and
can be affected by other factors that could cause actual results and Zurich
Financial Services' plans and objectives to differ materially from those
expressed or implied in the forward looking statements (or from past results).
Factors such as (i) general economic conditions and competitive factors,
particularly in our key markets; (ii) performance of financial markets; (iii)
levels of interest rates and currency exchange rates; (iv) frequency, severity
and development of insured claims events; (v) mortality and morbidity
experience; (vi) policy renewal and lapse rates; and (vii) changes in laws and
regulations and in the policies of regulators may have a direct bearing on
Zurich Financial Services' results of operations and on whether Zurich Financial
Services will achieve its targets. Zurich Financial Services undertakes no
obligation to publicly update or revise any of these forward-looking statements,
whether to reflect new information, future events or circumstances or otherwise.
This communication is directed only at persons who (i) have professional
experience in matters relating to investments or (ii) are persons falling within
Article 49(2)(a) to (d) (high net worth companies, unincorporated associations,
etc) of The Financial Services and Markets Act 2000 (Financial Promotion) Order
2001 (as amended) or to whom it may otherwise lawfully be communicated (all such
persons together being referred to as relevant persons). This communication must
not be acted on or relied on by persons who are not relevant persons. Any
investment or investment activity to which this communication relates is
available only to relevant persons and will be engaged in only with relevant
persons.
It should be noted that past performance is not a guide to future performance.
Please also note that interim results are not indicative of the full year
results.
Persons requiring advice should consult an independent adviser.
--------------------------
(GV1)average asset base
(GV2)New numbers (as of 09.05.2006)
(GV3)New text (as of 09.05.2007)
This information is provided by RNS
The company news service from the London Stock Exchange