Zurich Financial Services announces record results

The Zurich Board of Directors proposes to the Annual General Meeting of April 3, 2007 a gross dividend of CHF 11.00 per share, a 57% increase over last year’s CHF 7.00 payout to shareholders. Furthermore, the Group announces that the Board has authorized a repurchase of CHF 1.25 billion worth of shares over the course of 2007. Together, these shareholder distributions account for roughly 51% of 2006 profits.

Mr. Schiro added: “The proposed dividend positions the Group among the top tier of its peer group. We commit to further create shareholder value by continuing to realize efficiency gains and investing in selective profitable growth opportunities through organic and inorganic means.”

The results underscore the combined effects of a well-diversified portfolio, a strong balance sheet and continued disciplined focus on operational improvements. Through instilling a culture of excellence in all core business processes – through The Zurich Way operational improvement program – the Group continued to realize efficiency gains and exceed the benefit improvement target of USD 500 million after tax for 2006. The benefits can be seen in the underlying growth and profitability of all business segments.

Going forward, the Group sees further opportunities for profitable growth, both organic and through acquisitions, based on new distribution touch points and product offerings. In 2006 alone, the Group invested approximately USD 250 million in bolstering its technology, knowledge enhancing and distribution capabilities, and it expects to see direct benefits in 2007 and beyond. Furthermore, a number of significant growth initiatives under The Zurich Way concentrate on increasing the efficiency of distribution channels, adopting a rigorous approach to product development and better understanding and responding to customer needs. Zurich will also look carefully at targeted acquisitions where such opportunities arise and provided they can create shareholder value. We believe the benefits from all these actions will drive strong performance throughout the market cycle.

Segment performance

General Insurance: With all major markets showing a strong underlying performance, business operating profit increased 100% to USD 3.8 billion. While the underwriting result increased by USD 1.9 billion, the underlying performance improved by USD 350 million, or 1.1 percentage points, after excluding the effects of the extreme catastrophes in 2005 and prior-years reserve movements in both years. In addition, through the use of refined market segmentation techniques and strict catastrophe accumulation management the Group considerably improved the quality of its book of business.

Although rates remained broadly flat across the Group, Zurich managed to increase gross written premiums and policy fees by 2% (in local currencies) by actively selecting and managing growth opportunities in attractive markets in Europe, the US and elsewhere. While the rate picture continues to be mixed by both geography and line, the Group continues to carefully assess the impact of the current rate environment and accumulation exposures by applying sophisticated portfolio analyses, disciplined underwriting standards and global capital management procedures, in addition of benefiting from strong diversification effects.

Global Life: The Global Life segment ended the year on a high note as evidenced by a strong new business value after tax of USD 515 million, up 27%. This result reflects the market leadership that Zurich continues to show in its chosen unit-linked and protection markets. It was driven by strong Annual Premium Equivalent (APE) growth of 15% in local currencies, leading to an improvement in new business margin after tax to 21.7%. The significant profit margin improvement underscores the dedicated focus on operational efficiency and profitable growth initiatives.

Global Life’s results benefited from particularly strong growth contributions and market share gains in Ireland and South East Asia. In South East Asia, the Group recorded a 81% increase in APE and achieved a very attractive new business margin. Switzerland and Germany also contributed to the strong growth in new business value. Even after a transfer of USD 1.1 billion of excess capital from Global Life to the Group at the end of 2005, business operating profit was up 8% compared with last year and reached USD 1.2 billion.

Farmers Management Services: Management fees at Farmers Management Services increased by 4%. This was in line with full year premium written growth of over 3% at the Farmers Exchanges, which Zurich manages but does not own. In 2006 work began on the creation of a shared services platform in North America, which is expected to drive operating efficiencies, while several investments were made in accelerating the growth of business through distribution productivity gains and expanded product offerings. Due to these investments and the remittance of surplus capital to the Group in late 2005, business operating profit fell slightly by 2% to USD 1.2 billion leading to a reduction in the gross operating margin to 49.1%.

Strong growth at Farmers Exchanges was the consequence of increases across all major lines of business. This was also evidenced by a net gain of policies in force of 657,000 over the course of 2006 together with an all-time high of more than 14,000 agents in force.

Other Businesses: The Other Businesses segment increased its business operating profit to USD 554 million compared with USD 413 million in 2005. Of this, USD 181 million arose from reinsurance business received from the Farmers Exchanges. The other operations in this segment contributed USD 373 million with profits stemming from certain run off businesses, including Centre’s contribution of USD 246 million.

Group Investments: Due to lower total net capital gains, total net investment result for Group investment decreased 8% to USD 9.4 billion, resulting in a net investment return of 5.1% as opposed to 5.6% in 2005. Net capital gains attributable to shareholders, though, benefited from an improved return on equities and alternative investments, and as a result increased by 13% to USD 1.1 billion. Net investment income, which contributes to business operating profit, increased by 1.5% to USD 7.9 billion producing a higher income yield of 4.3% compared with 4.2% in 2005.

Payout to shareholders

The Group’s previously declared dividend policy targets a competitive yield and sustainable dividend levels with the possibility of some further progression going forward. Other capital management related issues will be dealt with outside of the regular dividend. The proposed capital return to shareholders meets that commitment as it follows a very strong performance during 2006 and reflects the Group’s achievements in reaching a sustainable level of financial strength and operational discipline. It is comprised of a proposed gross dividend of CHF 11.00 per share, and authorization of a share buyback of up to CHF 1.25 billion or approximately USD 1 billion over the course of 2007. At the closing price of CHF 347.75 on February 14, 2007, this would represent 3.59 million shares or approximately 2.5% of shares issued. The share buyback will be carried out on a second trading line on virt-x expected to be open before the end of the month. At the Annual General Meeting 2008, a proposal to cancel all repurchased shares will be submitted to the shareholders.

¹ Attributable to shareholders.

² All comparisons refer to the full year 2005 unless stated otherwise.

³ ROE calculated on common shareholders’ equity. See the Financial Supplement and the Financial Review on the Investor Relations page of our Web site www.zurich.com for further information on shareholders’ and common shareholders’ equity.

⁴ Calculated in accordance with the European Embedded Value principles.

Note to editors

There will be a media conference at 11:00 a.m. CET at the Zurich Development Center, Keltenstrasse 48, Zurich. 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 participants dialing in.

Dial-in numbers

The presentation to analysts and investors will be webcast on our Web site www.zurich.com live from 9:30 a.m. CET followed by a webcast playback available after 1 p.m. CET. Reporters may listen in by telephone. Please dial the numbers given above.

Presentations 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 “Annual Results 2006 - Media View” button 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 55,000 people serving customers in more than 120 countries.

For additional information please contact:

Media and Public Relations
Phone: +41 (0)44 625 21 00, Fax: +41 (0)44 625 26 41

Investor Relations
Phone: +41 (0)44 625 22 99, Fax: +41 (0)44 625 36 18

Zurich Financial Services
Mythenquai 2, P.O. Box, 8022 Zurich, Switzerland
SWX Swiss Exchange/virt-x: ZURN
Valor: 001107539

Financial Highlights (unaudited)

The following table presents the summarized consolidated results of the Group for years ended December 31, 2006 and 2005 and the financial position as of December 31, 2006 and 2005. Certain prior year amounts have been reclassified to conform to the 2006 presentation.