Zurich reports good growth in revenues for the first three quarters

• Strong growth in Life APE up 25% with 6% growth in new business value on a like-for-like¹ basis
• Property & Casualty (P&C) gross written premiums stable with the Group continuing to focus on profitability
• Continued top-line growth at Farmers Exchanges² with gross written premiums of continuing operations³ up 4%
• Very strong capital position with Z-ECM estimated at 134%⁴

Update at a glance:

“We are pleased with the strong development of the Group over the first quarter of the year, underlining our focus on delivering on our strategy and financial plans. We expect to meet or exceed all of our targets this year,” said Group Chief Financial Officer George Quinn. “P&C pricing trends have improved in the first quarter and the Group’s Life business continues to perform strongly. Farmers Exchanges² are also delivering on their key strategic priorities, positively impacting our fee income. The Group is well-positioned to meet the growing expectations of customers in the digital era and continues to strengthen its customer and partnership propositions by adding new distribution agreements.”

Key figures

Commentary

Property & Casualty (P&C)

Gross written premiums in Property & Casualty for the first nine months of 2018 grew 2% in U.S. dollar terms and were stable on a like-for-like¹ basis. Growth in Asia Pacific and Latin America was partially offset by planned actions focused on profitability in North America. Overall the Group saw rate increases of around 3% over the period.

In EMEA, gross written premiums increased 5% in U.S. dollar terms and remained flat on a like-for-like¹ basis, with growth in commercial business in Switzerland, and in Portugal, offset by reductions in Germany and the UK. Gross written premiums for North America were down 1% compared to the prior year period. In line with the Group’s strategy, this was mainly driven by planned reductions in less profitable lines of business. In Asia Pacific, premiums were up 15% on a like-for-like¹ basis with around two thirds of the increase resulting from growth in the Australian travel business, with the balance largely resulting from growth in Japan and Malaysia. In Latin America, gross written premiums increased by 7% on a like-for-like¹ basis driven by the retail business in Brazil and Argentina.

Weather and natural catastrophe losses over the first nine months were slightly above expected levels. In the fourth quarter, losses related to Hurricane Michael are estimated to be approximately USD 175 million.

Life

Life new business annual premium equivalent (APE) volumes increased by 25% on a like-for-like¹ basis in the first nine months after adjusting for currency and the disposal of the UK workplace savings business, with growth of 3% as reported.

In EMEA, like-for-like¹ growth of 16% was driven by an overall strong performance, in particular by the joint venture with Banco de Sabadell S.A. in Spain, together with Italy, Switzerland and the UK. North America grew 30% as a result of improved volumes of corporate protection business. In Asia Pacific all countries contributed to growth of 22%, while Latin America saw growth of 46% as a result of winning a tender for a large corporate protection contract in Chile.

New business value increased 4% and 6% on a like-for-like¹ basis, with volume growth and positive changes to economic assumptions offset by business mix.

The new business margin improved by 0.1 percentage points to 23.3%.

Farmers

The Farmers Exchanges², which are owned by their policyholders, continued to deliver top-line growth in the first nine months of the year with the key customer metrics of Net Promoter Score and retention improving further in the most recent quarter.

In the first nine months, gross written premiums from continuing operations³ were up 4%, with growth across all books of business. The Uber commercial rideshare insurance accounted for approximately one percentage point of the growth. Growth was also supported by the continued delivery of the Farmers Exchanges² expansion in the Eastern U.S., with gross written premiums increasing 16% in the expansion states. In July 2018, the Farmers Exchanges² opened for business in Florida.

As in previous quarters, top-line growth in continuing operations³ was partially offset by the run-off of discontinued operations. The run-off is largely complete and the drag on reported top-line growth is expected to reduce steadily over the next four quarters.

The Farmers Exchanges² combined ratio for the nine months showed improvement compared to the prior year as a result of a reduction in the underlying combined ratio (excluding catastrophes) and lower natural catastrophe losses. The surplus ratio stood at 39.7% at the end of September.

Farmers Management Services (FMS) management fees grew 1% compared to the prior year period, in line with the development of gross earned premiums within the Farmers Exchanges².

Farmers Life new business APE was down 3% year-on-year, while new business value increased 27%, driven by updated operating assumptions, lower acquisition expenses and the reduction in U.S. corporate tax rates.

Capital position

As of September 30, 2018, the Z-ECM ratio was estimated at 134%⁴, stable compared to June 30, 2018.

Sale of Venezuelan business

The Group has entered into an agreement to sell Zurich Seguros S.A. in Venezuela. The transaction is subject to the customary approvals. On completion of the transaction, the Group expects to recognize a negative non-cash currency translation adjustment of around USD 258 million, recognized outside of business operating profit. The charge will have no impact on the Group shareholders’ equity or Z-ECM capital position.

¹ Like-for-like comparisons represent the change in local currencies and are adjusted for the disposal of the UK workplace savings business and the closed acquisition of the operations of the Australian insurer QBE Insurance Group Limited in Argentina, Brazil and Mexico.
² Zurich Insurance Group has no ownership interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides administrative and management services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.
³ Continuing operations exclude Business Insurance Independent Agents, 21st Century business outside of California and Hawaii and other discontinued operations.
⁴ Ratios as of September 30, 2018, and December 31, 2017, respectively. Ratio for September 30, 2018, reflects midpoint estimate with an error margin of +/- 5 ppts.
⁵ Parentheses around numbers represent an adverse variance.
⁶ Ratios as of September 30, 2018, and December 31, 2017, respectively.

Further information

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