Strong performing non-life business
Turnaround in the UK
Successful launch of Zurich Invest Bank in Switzerland
Strategic initiative in e-business
Zurich, September 6, 1999. - The Zurich Financial Services Group achieved a gratifying overall operating result in the first six months of 1999. Consolidated net income rose 17.2% over the same period last year to USD 1.69 billion. Attributable earnings per share amounted to CHF 28.96 for Zurich Allied and 28.4 pence for Allied Zurich, the two holding companies of the Group, based on their respective 57%:43% ownership split. Aided by the progressive benefits of the integration between the constituents of our Group, which merged one year ago to become Zurich Financial Services, and barring extraordinary events, the Group anticipates another strong operating result for the full year of 1999.
The increased earnings for the first half year were driven primarily by improved performance in the non-life and life business. Gross premiums written, including life insurance deposits and the premiums written in the Farmers Insurance Exchanges, increased by 3.7% to USD 24.0 billion in the first half of 1999. In local currencies the premium growth was 4.0%.
Total assets under management rose 5.2% year over year and 2.1% since the end of 1998 to USD 423 billion. Assets managed for third parties grew 6.2% in the first half year to USD 257 billion.
Performance by core businesses
The breakdown by core businesses in the Group’s total gross premium volume of USD 24.0 billion remained largely unchanged with non-life insurance at 59.2%, life insurance at 31.3% and reinsurance at 9.5%.
In a challenging market environment, non-life business recorded a very strong growth in operating results of 27.9% to USD 1.57 billion. During the first half year the loss ratio improved significantly by 2.8 percentage points and, together with a lower expense ratio, led to a better underwriting performance. The Farmers Group made a strong contribution to the operating result. Including the non-life business managed by Farmers, the Group’s total premium volume increased by 5.9%. In the UK, as a result of business reorganization and a stricter underwriting policy, premiums declined. An improvement in the underwriting result helped achieve a turnaround to profitability in the UK non-life business.
Results in life insurance continued to improve. With an increase of 9.9%, life insurance generated USD 747 million in operating income for the first half year of 1999, contributing 29% to the Group’s overall operating result. Life insurance premium growth was affected by a decline in single premium business in Switzerland, which had experienced an extraordinary gain in the previous year prior to the introduction of stamp duty on single-premium life insurance policies. Overall, an increase in deposits and unit-linked business compensated for this decline. The 3.5% growth in total investment income contributed to the favorable operating performance.
In reinsurance, the gross premium volume rose by 6.2% to USD 2.81 billion. Operating income was maintained at the previous years’ level, when ignoring the impact of the sale of Eagle Star Re in the first quarter of 1999. Reinsurance contributed 6% to the Group’s operating profit.
In asset management, the Group recorded an operating result, before amortization of intangibles, of USD 121 million which is slightly above the comparable figure from the same period in 1998. Scudder Kemper Investments, the Zurich Financial Services Group’s global asset manager, improved its operating margin and made good progress, especially in the institutional business. The Group continued to make substantial investments in the area of asset management, particularly in a number of start-up businesses in Europe and Latin-America. In Switzerland, Zurich Invest Bank commenced operations on May 17, 1999 and since then has opened more than 12.000 accounts.
Building e-business for the next millennium
The Zurich Financial Services Group is significantly broadening its activities and expanding its capabilities in the area of e-business. Building on existing high standards and leading edge technology in many business units, where customers already transact insurance or investment activities via electronic channels, the Group will take Internet technology beyond its basic communication and distribution functions. Zurich Financial Services is creating a comprehensive integrated e-business platform which will enable business units to increase the distribution capacity for offering multi-channel choice to customers and intermediaries, bridge core businesses, provide integrated solutions, and focus on target customers. This e-business initiative is highly complementary to the e-commerce strategies of the Zurich Financial Services Group’s various business units.
To accomplish this, Zurich Financial Services has chosen to work with IBM Corporation and ChannelPoint Inc. because of the companies’ specific expertise in electronic business. IBM is widely recognized as a leader in the design, development and maintenance of e-business based technological infrastructure and will contribute to a seamless global integration. ChannelPoint, a leading provider of e-commerce applications in the financial services sector, will support the implementation of an e-commerce hub that will enable customers and intermediaries to access the Group’s global capabilities including - in selected areas - third party products.
