Zurich, April 5, 2000. For the Zurich Financial Services Group (Zurich), 1999 has been another successful year. The Group recorded an excellent result in 1999. Pre-tax operating income increased by 21.5% to USD 5.34 billion and net income by 15.9% to a record result of USD 3.26 billion (1998 USD 2.81 billion before merger and other related charges). A marked improvement in non-life underwriting results, good growth in life and fee income, and wider asset management margins have all contributed to this favorable result.
Consolidated earnings per share for Zurich Allied (ZUAN) on a fully diluted basis were CHF 57.04, an increase of 18.9%, and GBP 55.1 pence for Allied Zurich (ADZ), an increase of 19.0%, based on their respective 57:43% ownership split.
Developments and results by businesses
The total premium volume, including life insurance deposits and the premiums written by the Farmers Insurance Exchanges, increased by 5% to USD 48.0 billion for the year. Gross written premiums on an IAS-basis were USD 29.2 billion. Total assets under management at the end of 1999 grew by 8.3% to USD 442 billion (11.6% growth in local currencies). Consolidated shareholders’ equity before dividends was USD 22.2 billion. Return on equity improved to 14.4%.
The integration process, following the merger in September 1998, is ahead of schedule. By the end of 1999, the Group had achieved annualized cost savings of USD 226 million out of the USD 500 million planned by 2001.
Life profits after tax increased by a strong 37% to USD 988 million. Our life insurance businesses earned a return of 10.2% on their embedded value in local currencies. The total Group embedded value for the life business increased to USD 11.6 billion.
In the non-life business the Group recorded a significant improvement of 5.4 percentage points in the combined ratio to 110.3%. The US and the UK were major contributors to this result, as their combined ratios improved by 8.6 and 10.7 percentage points respectively.
Farmers reported 15.2% growth in operating earnings due to an increase in fees and continued tight expense control.
In reinsurance, the Group achieved another good result in 1999. Operating income increased by 20% to USD 209 million and gross premiums grew by 22.6%. The marked increase in earnings was due to favorable developments at Zurich Re and good results at the Zurich Centre group of companies. Zurich Capital Markets contributed its first profit in 1999. Centre Group increased its embedded value from USD 942 million to USD 1,125 million.
In asset management, profitability improved significantly with operating income up by 43.3% to USD 255 million. This was primarily due to increased efficiency at Scudder Kemper Investments’ operations in the U.S. Reflecting strong growth in Europe, the Group had at year end USD 264 billion of third-party assets under management (1998: USD 236 billion).
Balance sheet
Compared with the level at June 1999, equity increased by 6.1% to USD 22.2 billion. The ratio of underwriting reserves to premiums for non-life and reinsurance combined increased from 233% to 237% in local currencies.
Dividends
Based on their proportionate share of dividends received from the Zurich Financial Services Group, the Boards of Directors recommend the dividend payments per share of CHF 17.15 gross for Zurich Allied and GBP 15.11 pence per share for Allied Zurich for the financial year 1999. Dividends are payable by both companies on May 31 to shareholders registered on May 12 in the case of Allied Zurich and on May 31 in the case of Zurich Allied.
Blueprint for success in New Economy
Zurich has aligned its strategic direction to not only "play the current game well", but to play it better, and to shape the future game. Building on the existing high performance organization and unique structure with more than 350 strategic business units focused on specific target customer groups, Zurich is transforming itself into a new economy "high-touch" and technology driven company.
The opportunities offered by the Internet will enable Zurich to develop entirely new business models involving the formation of a network of partnerships and alliances. Through this network, Zurich will be able to broaden relationships with individual customers by expanding its offerings to include non-proprietary products and services.
Furthermore, these alliances and partnerships will provide access to numbers of customers far in excess of the present 35 million.
Zurich will offer personalized portals to its customers, advisers and intermediaries. These portals will provide access to insurance, investment and other financial services products including selected products from third party providers, as well as information and services of specific interest to individual customers. The backbone of the enabling technology is the "Group e-business Exchange" which is progressively being deployed within Zurich’s worldwide operations.
Outlook
Zurich Financial Services is convinced that its powerful and effective strategy will improve efficiency and generate strong growth in the number of customers and build sustainable value for shareholders in 2000 and beyond. The fundamental strengths that the Group has built in the past are the foundations for an exciting future. These will allow the Group to exploit the full potential of technology in building the New Zurich. With a customer population of 35 million, strong financial and intellectual capital, a clearly focused multi-cultural business network, "on the ground" service capabilities and highly recognized brands, Zurich will take full advantage of the New Economy.
To see the key figures download the Annual Report 1999, Keyfigures (pdf, 10 KB)
