Zurich, September 17, 1998. - The Zurich Group - since September 7, 1998 part of the Zurich Financial Services Group - recorded an excellent overall result during the first six months of 1998. Consolidated profit again increased significantly by 46.3% over the same period last year, totalling CHF 1.37 billion. Earnings per share rose a gratifying 46.0% to CHF 29.43.
Zurich Financial Services will be publishing consolidated results for the full year 1998. Unless faced with exceptional events, the new group is expected to attain very good operating results, although earnings in the second half of the year are not likely to reach the level achieved during the first six months.
All four core businesses of the Zurich Group contributed to the remarkable overall result: non-life and life insurance, reinsurance and asset management. Gross premiums - including insurance deposits - increased by 7% to CHF 18.9 billion. Third-party investments managed by the Zurich Group within its asset management activities posted an 11.4% rise to CHF 330.9 billion during the period under review. At the end of June 1998, the Group had a total of CHF 463.6 billion in assets under management. Shareholder equity increased by 26.2% within the last 12 months and by 11.9% since year-end 1997 to a total of CHF 23.1 billion, which reflects a considerably higher rate than that of premium income growth. Besides profit increases in all four core businesses, this rise is attributable primarily to the significantly higher stock market value of investments during the first six months as a result of favorable developments in the capital markets.
Performance by core business
Of the overall total of CHF 17.2 billion gross premium income, based on International Accounting Standards (IAS), non-life business accounted for 58.5% (CHF 10.1 billion), life insurance (excluding insurance deposits) 26.1% (CHF 4.5 billion) and reinsurance 15.4% (CHF 2.7 billion).
In non-life insurance, pre-tax operating income totalled CHF 1.08 billion, representing 13.5% of net premiums earned or an increase of about two percentage points over 1997. A number of countries, notably the United States, Canada and the United Kingdom, recorded a significant decline in premium income, while Switzerland was slightly below the previous year’s level. Overall, as a result of our continued restrained underwriting policy, premium income in direct non-life business declined by 2%. The expense ratio demonstrated a modest upward tendency, due in large part to limited premium development which performed slightly below expectation. The loss ratio also rose slightly. Loss reserves both in absolute terms and in relation to premiums were increased again.
Life insurance recorded a result of CHF 425 million before tax. In relation to earned premiums, this reflected a gain of around two-and-a-half percentage points over 1997. Business volume expanded significantly. Premium income and insurance deposits together rose about 28%. Swiss operations showed an increase of about 30%, with single premiums demonstrating a particularly sharp rise. Investment income and a below average rise in expenses contributed to the strong overall performance.
Reinsurance business accounted for CHF 177 million of the pre-tax result, reflecting 9.5% of net premiums earned as compared with 7.1% for all of 1997. Premium income in Swiss franc terms rose by 2% in the first six months, with a major focus on finite and alternative risk transfer solutions.
In Asset Management, the Zurich Group recorded a pre-tax result of CHF 57 million. Before amortisation of goodwill totalling CHF 78 million, the result stands at CHF 135 million.
Zurich Financial Services
A pro forma balance sheet and statement of income for the first half year is reported for the Zurich Financial Services Group, which comprises the existing Zurich, Eagle Star, Allied Dunbar, Farmers and Threadneedle together with their subsidiaries. For the first six months of 1998 the pro forma consolidated earnings of USD 1.42 billion compared with USD 2.1 billion for all of 1997. The balance sheet total amounts to over USD 202 billion, with shareholders’ equity totalling USD 23 billion. Overall funds managed by the Zurich Financial Services Group - including its own assets and third party investments - totalled USD 403 billion at mid-year 1998 compared with USD 375 billion at the end of 1997.
