News release, Zurich, November 07, 2019

Zurich’s top line for the nine months shows good growth; on track to exceed all targets for 2017-2019

  • Property & Casualty (P&C) gross written premiums up 7% on a like-for-like1 basis, with further rate acceleration in the third quarter
  • Life new business value up 5% and APE sales down 6% on a like-for-like1 basis
  • Continued growth at Farmers Exchanges2, with gross written premiums up 1%
  • Capital position remains very strong with the Z-ECM estimated at 113%3

“We are pleased with the development of the Group year to date with continued progress against both our strategic and financial plans, including additional distribution agreements. We expect to exceed all of the targets that we set in 2016,” said Group Chief Financial Officer George Quinn. “In P&C pricing continues to increase, supporting growth and continued improvement in the portfolio, while in the Life business we are well positioned to face the challenge of low interest rates. The Farmers Exchanges2 continue to deliver steady growth and execution against their strategy. The strong achievements of the past three years position us well for the next stage of our development, on which we will provide more information at our upcoming investor day.”

Key figures
in USD millions, for the nine months ended September 30, unless otherwise stated 2019 2018 Change4 in USD Change1,4 Like-for-like
P&C gross written premiums (GWP) 26,442 25,870 2% 7%
Life annual premium equivalent (APE) 3,173 3,570 (11%) (6%)
Farmers Exchanges2 GWP 15,734 15,512 1% 1%
Z-ECM3 113% 124% (11ppts) n.a.

Commentary
Property & Casualty
  Gross written premiums (GWP) Rate change, in %
in USD millions, for the nine months ended September 30, unless otherwise stated 2019 2018 Change4 in USD Change1,4 like-for-like 2019 Expected trend
Property & Casualty 26,442 25,870 2% 7% 3% Stable
Europe, Middle East and Africa 11,388 11,511 (1%) 6% 2% Stable
North America 11,892 11,446 4% 4% 6% Stable
Asia Pacific 2,280 2,032 12% 14% 4% Slightly moderating
Latin America 2,114 1,959 8% 21% 1% Stable

Gross written premiums in Property & Casualty (P&C) for the first nine months rose 7% on a like-for-like1 basis, adjusting for currency movements, acquisitions and disposals, with growth coming from all regions. This development is expected to have a positive effect on the net earned premiums in the coming year.

Most regions also saw the level of rate increases improving compared to the previous year. Notably, in the third quarter North America achieved overall rate increases in excess of 7%, as well as improved terms and conditions.

In Europe, Middle East and Africa (EMEA), gross written premiums increased 6% on a like-for-like1 basis, with strong growth in Swiss and UK commercial business. Italy, Spain and a number of smaller European retail markets also contributed to the growth in the region. North America grew by 4% on a like-for-like1 basis compared to the previous year, with the growth driven mainly by rate increases. Asia Pacific increased 14% on a like-for-like1 basis, as a result of growth in Australia, Malaysia and Japan. Latin America grew 21% on a like-for-like1 basis, driven by growth in Brazil, Chile and Argentina.

After very moderate claims related to natural catastrophes and weather in the first half of the year, the third quarter was more in line with historical levels.


Life
  Annual premium equivalent (APE) New business value (NBV)
in USD millions, for the nine months ended September 30, unless otherwise stated 2019 2018 Change4 in USD Change1,4 like-for-like 2019 2018 Change4 in USD Change1,4 like-for-like
Life 3,173 3,570 (11%) (6%) 728 732 (1%) 5%
Europe, Middle East and Africa 2,032 2,191 (7%) (2%) 439 464 (5%) (1%)
North America 97 52 86% 86% 32 10 205% 205%
Asia Pacific 170 167 2% 5% 156 135 16% 19%
Latin America 874 1,160 (25%) (20%) 101 123 (18%) (4%)

Life new business annual premium equivalent (APE) decreased 6% on a like-for-like1 basis, adjusting for currency movements, acquisitions and disposals. The decline is largely explained by two large corporate protection contracts written in 2018, that did not recur this year. APE was 11% lower on a reported basis, with movements of key currencies against the U.S. dollar an additional factor driving the decline.

In EMEA and Latin America, APE decreased by 2% and 20%, respectively, on a like-for-like1 basis compared to the same period in 2018, when both regions benefited from large one-off contracts. EMEA showed strong underlying growth in corporate life and pensions as well as in individual protection products, while Latin America had strong sales of unit-linked and individual protection products.

North America grew APE on a like-for-like1 basis by 86% from a low base of comparison, with growth driven by higher volumes of protection business. In Asia Pacific APE increased 5% on a like-for-like1 basis, with continued growth of the retail protection business across the region.

The new business margin increased by 3.3 percentage points to an attractive 26.6% on a like-for-like1 basis and by 3 percentage points to 26.4% as reported. New business value (NBV) increased 5% on a like-for-like1 basis, driven by positive effects from business mix and operating assumption changes. On a reported basis NBV declined 1%, reflecting currency movements.


Farmers
in USD millions, for the nine months ended September 30, unless otherwise stated 2019 2018 Change4 in USD
Farmers Exchanges2      
Gross written premiums (GWP) 15,734 15,512 1%
Gross earned premiums (GEP) 15,290 15,063 2%
Surplus ratio5 41.9% 39.5% 2.4ppts

The Farmers Exchanges2, which are owned by their policyholders, continued to deliver top-line growth. In the first nine months of 2019, gross written premiums were up 1% with growth across all books of business. Growth was also supported by the continued expansion of the Farmers Exchanges2 in the Eastern U.S., with gross written premiums up 7% in the expansion states.

The Farmers Exchanges2 continued to make progress with their customer focused strategy. Key indicators of this strategy remained strong, with both net promoter score and retention above prior year levels. The build-out of larger and stronger agencies with an improved customer experience also continued. After a successful launch, ToggleSM, a new and innovative rental insurance offering aimed at millennials, has been rolled out to 21 additional states since the beginning of the year and has already attracted 13,000 policies.

The Farmers Exchanges2 surplus ratio improved further to 41.9%, reflecting a record high level of surplus.


in USD millions, for the nine months ended September 30, unless otherwise stated 2019 2018 Change4 in USD
Farmers      
Farmers Management Services management fees and other related revenues6 2,818 2,396 18%
Farmers Life annual premium equivalent (APE) 61 65 (7%)
Farmers Life new business value (NBV) 69 90 (24%)

Farmers Management Services (FMS) management fees and other related revenues increased 18% from the prior year period, driven by a change in accounting treatment. This change has no impact on FMS’s business operating profit and managed gross earned premium margin.

Farmers Life new business sales on an APE basis were down 7% year-on-year, while the new business value decreased by USD 22 million driven by lower sales volumes, modeling changes, and the impact of assumption updates made in the prior year.


Capital position

As of September 30, 2019, the Z-ECM ratio is estimated at 113%3 and remains within the Group’s targeted range.

1   Like-for-like comparisons represent the change in local currencies and are adjusted for the acquisition of Travel Ace and Universal Assistance in Latin America, the acquisition of the Latin American operations of the Australian insurer QBE Insurance Group Limited, the acquisition of the individual and group life insurance portfolios, as well as the long-term savings operations of EuroAmerica in Chile and some smaller P&C business transactions in Germany.
2   Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides certain non-claims administrative, management, and ancillary services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.
3   Ratios as of September 30, 2019 and December 31, 2018, respectively. Ratio for September 30, 2019, reflects midpoint estimate with an error margin of +/- 5 ppts.
4   Parentheses around numbers represent an adverse variance.
5    Ratios as of September 30, 2019, and December 31, 2018, respectively.
6   Number as of September 30, 2018, restated as a result of an IFRS 15 adjustment made in December 2018.


Further information

Q&A session for media
There will be a conference call Q&A session for media starting at 08:00 CET. Media may dial in using the details provided below. The call will be held in English.

Q&A session for analysts and investors
There will be a conference call Q&A session for analysts and investors starting at 13:00 CET. Media may listen in. A podcast of this Q&A session will be available from 17:00 CET. The call will be held in English.

Dial-in numbers for both Q&A sessions
Switzerland    +41 58 310 50 00
UK     +44 207 107 0613
U.S.    +1 631 570 5613

Contacts

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Zurich Insurance Group (Zurich) is a leading multi-line insurer that serves its customers in global and local markets. With about 54,000 employees, it provides a wide range of property and casualty, and life insurance products and services in more than 210 countries and territories. Zurich’s customers include individuals, small businesses, and mid-sized and large companies, as well as multinational corporations. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. The holding company, Zurich Insurance Group Ltd (ZURN), is listed on the SIX Swiss Exchange and has a level I American Depositary Receipt (ZURVY) program, which is traded over-the-counter on OTCQX. Further information about Zurich is available at www.zurich.com.

Disclaimer and cautionary statement
Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the Group). Forward-looking statements include statements regarding the Group’s targeted profit, return on equity targets, expenses, pricing conditions, dividend policy and underwriting and claims results, as well as statements regarding the Group’s understanding of general economic, financial and insurance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and plans and objectives of Zurich Insurance Group Ltd or the Group to differ materially from those expressed or implied in the forward-looking statements (or from past results). Factors such as (i) general economic conditions and competitive factors, particularly in key markets; (ii) the risk of a global economic downturn, in the financial services industries in particular; (iii) performance of financial markets; (iv) levels of interest rates and currency exchange rates; (v) frequency, severity and development of insured claims events; (vi) mortality and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes in laws and regulations and in the policies of regulators may have a direct bearing on the results of operations of Zurich Insurance Group Ltd and its Group and on whether the targets will be achieved. Zurich Insurance Group Ltd undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise.

All references to “Farmers Exchanges” mean Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and their subsidiaries and affiliates. The three Exchanges are California domiciled inter-insurance exchanges owned by their policyholders with governance oversight by their Boards of Governors. Farmers Group, Inc. and its subsidiaries are appointed as the attorneys-in-fact for the Farmers Exchanges and in that capacity provide certain non-claims administrative, management, and ancillary services to the Farmers Exchanges. Neither Farmers Group, Inc., nor its parent companies, Zurich Insurance Company Ltd and Zurich Insurance Group Ltd, have any ownership interest in the Farmers Exchanges. Financial information about the Farmers Exchanges is proprietary to the Farmers Exchanges, but is provided to support an understanding of the performance of Farmers Group, Inc. and Farmers Reinsurance Company.

It should be noted that past performance is not a guide to future performance. Please also note that interim results are not necessarily indicative of full year results.

Persons requiring advice should consult an independent adviser.

This communication does not constitute an offer or an invitation for the sale or purchase of securities in any jurisdiction.

THIS COMMUNICATION DOES NOT CONTAIN AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES; SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION, AND ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES WILL BE MADE BY MEANS OF A PROSPECTUS THAT MAY BE OBTAINED FROM THE ISSUER AND THAT WILL CONTAIN DETAILED INFORMATION ABOUT THE COMPANY AND MANAGEMENT, AS WELL AS FINANCIAL STATEMENTS.

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