Zurich announces record three month results fueled by continued operating discipline and selective growth

Performance highlights include:

• Net income¹ of USD 1.4 billion, an increase² 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 of USD 438 million as of March 31, 2007

“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 manage­ment, 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 invest­ment 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 13%, 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 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).