Zurich Financial Services
15 November 2007
(C1)
Continued growth and profitability drive Zurich's strong operating performance
for first nine months 2007
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, November 15, 2007 - Zurich Financial Services Group (Zurich) reported
today an excellent set of results for the nine months to September 30, 2007,
demonstrating targeted market growth across the Group and continued strong
operating performances from all business segments.
'I am pleased with the performance of our businesses as they are generating
record profits in today's challenging financial markets,' remarked Zurich's
Chief Executive Officer James J. Schiro. 'As our results indicate, we are
growing in our selected markets, maintaining a keen focus on profitability, and
benefiting from sound risk and investment management strategies.'
Performance highlights(1) include:
• Net income(2) of USD 4.2 billion, an increase of 25%(3). Annualized return
on equity (ROE) of 21.4%(4)
• Business operating profit (BOP) of USD 4.9 billion, an increase of 10%.
Annualized BOP ROE after tax of 18.9%
• General Insurance gross written premiums and policy fees of USD 27.3
billion, up 4% or 0.4% in local currencies, and a combined ratio of 96.9%,
a 2.4 percentage point increase primarily as a result of storms and floods
in the UK as well as winter storm Kyrill
• Global Life new business value up 44%, with new business margin (% of APE)
of 24.0%(5) and APE up 15% or 8% in local currencies
• Farmers Management Services' management fees and other related revenues up
6% to USD 1.7 billion
• Shareholders' equity of USD 28.4 billion, an increase of 11% over year end
after paying both the dividend and completing the share buyback
Reflecting the sustained momentum of The Zurich Way, the Group is also
announcing that it is extending and increasing its operational improvement
targets, from USD 2 billion of after-tax improvements over the three years 2007
to 2009, to USD 3.1 billion over the four years 2007 to 2010. The Group is well
on track to exceed its USD 700 million target for 2007, and as part of the
enhanced goals will target USD 800 million for 2008.
'The Zurich Way continues to gain momentum, and as we evolve the program to
drive deeper operational transformation and sustained growth we are confident in
our ability to achieve even greater results,' explained Mr. Schiro.
General Insurance: Business operating profit at the nine months 2007 was USD 2.8
billion, the same level as in 2006, reflecting strong underwriting results
achieved under difficult conditions and a higher investment income. While winter
storm Kyrill and the UK floods and storms caused total charges of USD 761
million and added 3.4 percentage points to the combined ratio, reserve releases
for earlier years had a beneficial effect of USD 558 million. Together with
continued investments in growth initiatives and higher commission levels that
exerted some upward pressure on the expense ratio, these forces increased the
combined ratio by 2.4 percentage points to 96.9%.
Gross written premiums and policy fees recorded a 4% increase in dollar
equivalent terms, but were largely flat in local currency. This was reflective
of our continued ability to exert underwriting discipline and manage different
business areas for margin and/or volume. While still presenting a mixed picture
by geography and line of business, the general trend in market conditions
continued to show some deterioration of rates, with the greatest pressure being
felt across commercial casualty and property business in the UK and the US.
In Europe General Insurance, which for the first time includes our Russian
acquisition Nasta, all countries experienced top line growth both on a local
currency and dollar basis, with the pattern of mainland Europe rate increases
partly offsetting the reductions in the UK, Italy and Ireland. North America
Commercial continued its focus on targeted distribution strategies and
profitable market segmentation techniques to contain rate reductions and
generate selective new profitable growth opportunities. Global Corporate
successfully mitigated continuing rate pressures, largely in the US, UK and
Global Energy sectors, as a direct result of customer retention and targeting
strategies, as well as innovative product launches. Meanwhile International
Businesses continued to demonstrate strong top line growth and profitability in
a competitive pricing environment.
Global Life: The Global Life segment continued its focus on unit-linked and
protection markets, and once again posted a strong performance with its business
operating profit increasing to USD 1.1 billion. This is up 28%, or 22% in local
currencies. New business value (NBV) rose 44%, or 37% in local currencies, to
USD 480 million. The strong NBV increase was the result of a combination of
higher new business margins and new business annual premium equivalent (APE)
growth. Our new business margin grew to 24%, compared to last year same period
of 19.2%. New business APE figures continued to show acceleration with a growth
of USD 258million, up 15%, or 8% in local currencies, up from 2% at the first
quarter and 5% at the half year. All key regions contributed to these results.
The growth momentum has been building during 2007 driven by product launches,
proposition improvements, and campaigns. Additionally, our emerging markets
continued to deliver strong growth in line with our strategy where the new
business APE grew 46% year to date (46% also in local currencies) and the new
business margin improved 2.0 percentage points to 24.7%. APE growth was
particularly strong in our global expatriate and international investors
business of Zurich International Solutions, in Hong Kong, and Ireland. The US,
UK, Germany and Switzerland had NBV improvements from higher margins, driven by
the enhancement of business models and improved product margins. Although a
challenging target, the Group remains committed to meeting its double-digit
growth target for Global Life.
Farmers Management Services: Farmers' management fees and other related revenues
grew by 6% to USD 1.7 billion, reflecting successful investments in distribution
capabilities and product enhancements, enabling the Farmers Exchanges, which
Zurich manages but does not own, to achieve premium growth of 5% in(GV2) the
nine months despite otherwise flat market conditions.
The strong performance shown by Farmers resulted in an increased business
operating profit of USD 1.0 billion, up 7%. While ongoing investments in
strategic growth initiatives contributed to lowering the operating margin by 3.2
percentage points to 48.6%, these initiatives continue to lay the groundwork for
future premium growth at the Exchanges. The integration of recently acquired
Bristol West is showing tangible benefits, with the rollout of Bristol West's
products throughout Farmers' distribution platform already completed in 18 of
the 29 tied-agents states.
Other Businesses: The Other Businesses segment achieved a business operating
profit of USD 585 million, up 34%. The segment's contribution to the Group's
overall profitability largely reflected higher profits from various run-off
businesses. Centre's profitability continues to be ahead of previously indicated
levels.
Group investments: The net investment result for Group investments of USD 7.5
billion is up 7%. The resulting investment return improved by
0.1 percentage points to 3.9% (not annualized), supported by rising interest
rates, higher dividend income and the growth in the average asset base to USD
191.5 billion. Net capital gains were stable, supported by gains on equities,
hedge funds and private equity funds. These robust results despite volatile
markets continue to reflect the Group's disciplined approach to managing its
assets relative to liabilities on a risk-adjusted basis. The Group continues to
have no material exposure to US sub prime debt or CDO equity tranches in its
investment portfolio, experiencing only minimal rating downgrades since the half
year.
1 All comparisons refer to the first nine months of 2006 unless stated
otherwise.
2 Attributable to shareholders.
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:
In addition to this release, more detailed information will be available on our
website www.zurich.com.
There will be a telephone conference with a Q & A session for analyst and
investors at 9:30 a.m. CET. Please dial in to register approximately 3 to 5
minutes prior to the start of the conference.
The slide presentation used at the conference will be available on the website
at 9:00 a.m. CET. Please click on the 'Nine Month Results Reporting 2007 -
Investor View' link on the bottom right corner of our homepage.
Conference call dial-in numbers
Europe +41 (0)91 610 5600
United Kingdom +44 (0)20 7 107 0611
USA +1 (1)866 291 4166
A webcast playback of the conference will be available after 12 p.m. CET.
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 58,000 people serving customers in more than 170 countries.
Financial Highlights (unaudited)
The following table presents the summarized consolidated results of the Group
for the nine months ended September 30, 2007 and 2006 and the financial position
as of September 30, 2007 and as of December 31, 2006. The 2006 amounts have been
restated for the adoption of the SoRIE option under IAS 19 Employee Benefits.
Interim results are not necessarily indicative of full-year results.
in USD millions, for the nine months ended September 30, 2007 2006 Change in Change
unless otherwise stated GC(1) in LC
Business operating profit 4'880 4'423 10%
Net income attributable to shareholders 4'157 3'326 25%
General Insurance gross written premiums and policy fees 27'323 26'295 4% 0%
Global Life gross written premiums, policy fees and 15'366 14'772 4% (3%)
insurance deposits
Farmers Management Services management fees 1'679 1'589 6% 6%
General Insurance business operating profit 2'779 2'781 (0%)
General Insurance combined ratio (in %) 96.9% 94.5% (2.4 pts)
Global Life business operating profit 1'090 853 28%
Global Life new business value, after tax 480 334 44% 37%
Global Life new business annual premium equivalent (APE) 2'002 1'744 15% 8%
Farmers Management Services business operating profit 1'005 936 7%
Farmers Management Services gross operating margin (in %) 48.6% 51.8% (3.2 pts)
Group investments average invested assets 191'506 183'273 4% 2%
Group investments results, net 7'471 6'979 7% 2%
Group investments return (as % of average invested 3.9% 3.8% 0.1 pts
assets)
Shareholders' equity(2) 28'396 25'587 11% 8%
Diluted earnings per share (in CHF) 34.80 28.58 22%
Return on common shareholders' equity (ROE)(3) 21.4% 21.0% 0.4 pts
Business operating profit (after tax) return on common 18.9% 19.9% (1.0 pts)
shareholders' equity(3)
1 Parentheses around numbers represent an adverse variance.
2 As of September 30, 2007 and December 31, 2006, respectively.
3 Returns for the nine months ended September are annualized on a compound basis
using the results for the nine 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 19.5%, 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.
--------------------------
(C1)
(GV2)5% growth = September 2007 compared with September 2006
This information is provided by RNS
The company news service from the London Stock Exchange