Zurich reports another strong operating performance for first six months 2007

Underlying the dedicated focus on exploiting opportunities for profitable growth is The Zurich Way, the Group’s operational improvement program addressing all core processes, including underwriting, claims, reserving, distribution management, finance and talent management. As previously announced, the Group has established a USD 700 million target of after tax benefits for 2007, and the company is well on track to achieve its goal.

General Insurance: Business operating profit at the half year was up USD 51 million to USD 1.8 billion. This result includes a total charge of USD 566 million for claims payments related to winter storm Kyrill and the UK floods during June 2007. These extreme weather conditions in Europe added 3.9 percentage points to the combined ratio, while operating performance was favorably impacted by reserve releases for earlier years of USD 390 million. As a consequence, the final six-month combined ratio increased 2.0 percentage points to 96.5%.

Gross written premiums and policy fees recorded a 3% increase in dollar equivalent terms, but were largely flat in local currency. Underlying these results was a continued ability to exert underwriting discipline as recent trends in market conditions, particularly among US casualty and UK property and casualty lines, continued to affect rates.

In North America Commercial, the proactive management of business lines along targeted market baskets and through enhanced segmentation techniques proved successful in containing rate reductions and generating selective new profitable growth opportunities. Europe General Insurance experienced top line growth both on a local currency and dollar basis, supported by good volume growth in Switzerland, Germany and Spain, but with rates offering a mixed picture by geography and business lines. Though Global Corporate saw rate decreases, largely US casualty driven, these were partially mitigated by successful customer retention strategies, a highly focused targeting approach and innovative product launches. Meanwhile International Businesses continued to demonstrate strong top line growth despite persistent pressure on rates.

Global Life: The Global Life segment continued its focus on unit-linked and protection markets and posted a strong business operating profit of USD 721 million, up 25%. New business value rose 51% to USD 319 million or 45% in local currencies. All key regions contributed to this result, with overall growth in new business annual premium equivalent (APE) of 12%, or 5% in local currencies, and a higher new business margin of 24.1%. The improved new business value was driven by strong APE growth in businesses such as the global expatriate business plus local business in emerging markets and Ireland, while in Switzerland, Germany and the US it was more as a result of increased margins.

New business growth accelerated over the year, from 2% in local currencies in the first quarter to 9% in the second quarter. This reflects the implementation of numerous initiatives. New business was exceptionally strong in emerging markets, up 35% in local currencies, in Ireland, up 30%, and in the US, up 11%, due to new product launches. Growth in Germany, Italy and Spain remains a challenge, but recent new product launches plus further expansion plans in emerging markets will contribute to growth in the second half of the year. The Group remains confident of meeting its growth target for Global Life by the end of the year.

Farmers Management Services: Farmers’ management fees and other related revenues grew by 4% to USD 1.1 billion as continued investments in product enhancements and distribution platforms enabled the Farmers Exchanges, which Zurich manages but does not own, to achieve premium growth of 5% in the first half of the year despite flat market conditions.

With Farmers’ business operating profit up 7% to USD 672 million, the operating margin improved to 49.5% from 47.9% in the first quarter, while absorbing the continuing impact of investments and expenses associated with growth-related projects and initiatives.

Other Businesses: The Other Businesses segment achieved a business operating profit of USD 478 million, up 57%. 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 profitability levels.

Group Investments: The net investment result for Group investments of USD 4.8 billion is up 10%. The resulting investment return improved by 0.2 percentage points to 2.6% (not annualized), supported by higher interest rates and the growth in the average asset base to USD 187.8 billion. Net capital gains, however, remained flat. These robust results despite volatile markets reflect the Group’s disciplined approach to managing its assets relative to liabilities on a risk-adjusted basis. The Group has no material exposure to US sub prime debt or CDO equity tranches in its investment portfolio and did not incur any impairment on these for the half year.

¹  Attributable to shareholders.

²  All comparisons refer to the first six 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 an analyst and media presentation at 9:30 a.m. CEDT at the Zurich Development Center, Keltenstrasse 48, Zurich. Analysts and reporters who cannot participate in person may dial in by telephone. Please note that during the Q&A session no questions will be taken from reporters dialing in.

Dial-in numbers

The presentation to analysts and media will be video webcast on our Web site www.zurich.com live, followed by a webcast playback available after 5 p.m. CEDT.

The presentation for analysts and media, as well as supplemental information including information on the business divisions, will be available on our Web site www.zurich.com. Please click on the “Half Year Results 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 58,000 people serving customers in more than 170 countries.

Financial Highlights