Zurich reports strong growth for 2024 Q1

Zurich - Zurich Insurance Group (Zurich), a leading multi-line insurer, has reported a 12% on a like-for-like basis hike in revenue for its Property & Casualty (P&C) insurance business, and generated $173 million of fee revenue in the first quarter, up 12% year on year on a like-for-like1 basis, driven by higher assets under management.

Claudia Cordioli, Group Chief Financial Officer says: "Ongoing growth in both our P&C and Life portfolios, combined with improved margins in Retail P&C, confirms the strength of our diversified business model. Farmers continues to show impressive results with Farmers Management Services reaching 6% growth in underlying fee income, well on track to meet or exceed the guidance of mid-single digit growth for the year".

Broad-based growth in P&C and Life

In P&C, the Group has seen strong growth in both the commercial and retail businesses. Insurance revenue grew 8% in commercial insurance and 10% in retail. In commercial, rates improved across all regions with an average of 5%. North America was a key  contributor with overall rate increases of 8%, including commercial auto where rates increased by 14%.

Retail had a highly successful start to the year, continuing to see strong, broad-based growth, with 5% rate increases. Growth was additionally supported by higher customer retention in all regions. Top-line growth was underpinned by a 7% rate increase in motor. The rate increases come alongside targeted underwriting, claims and expense initiatives designed to continue improving profitability.

In the first quarter, the Group has seen natural catastrophe losses with a combined ratio impact of 1.6%, compared to 1.8% in the prior year period.

Zurich sees stable favorable development of P&C reserves in the first quarter with prior year development within the guidance range of 1–2%.

Life saw continued growth with revenue up 11%1 for short-term protection and 12%1 for our fee business, driven by strong sales as well as favorable market developments. New business premiums (PVNBP) were 1% lower on a like-for-like1 basis driven by lower sales of retail savings contracts in Spain.

Farmers business transformation accelerates

Farmers Exchanges has seen premium growth in the first quarter supported by continued rate actions. The combined ratio of 89.4% for the first quarter, versus 107.4% in the prior year, saw its second consecutive quarter below 90%. The excellent underwriting profitability drove a 2.6 percentage point increase in the surplus position to 36.2%, which now sits in the middle of the target range of 34–38%.

Since the start of 2023, Farmers Management Services has taken decisive actions to reduce expenses, improve underwriting discipline and enhance the efficiency of distribution. All these actions, together with the reduction in natural catastrophe exposure, are bearing fruit as evidenced by the improvement in the Exchanges’ profitability and surplus position.

Farmers Management Services has seen a 6% increase in underlying fee income2, which is well above the average annual growth rate of the last decade. Also, the brokerage entities that the Group acquired from the Farmers Exchanges3 in December 2023 have seen business increase by more than 50% year on year.

Additionally, following the back book reinsurance transaction of last year, Farmers New World Life is rebuilding its new business proposition for distribution by the Farmers Exchanges agents.

Property & Casualty for the three months ended March 31, 2024

Gross written premiums (GWP) in P&C rose 9% compared with the prior-year period on a like-for-like1,6 basis, adjusting for currency movements and 5% in U.S. dollar terms. Both commercial and retail insurance experienced a 5% increase in rates. Retail motor saw a 7% increase in rates, which together with a number of non-rate initiatives is expected to drive material improvement in the performance of the portfolio.

In Europe, Middle East and Africa (EMEA), GWP increased 7% on a like-for-like1 basis. Growth in excess of rates was mainly driven by a strong performance from Germany, Switzerland, UK, Spain, and Italy in both retail and commercial insurance. GWP in North America declined 1% on a like-for-like1 basis compared with the previous year. Growth across all lines of business was supported by an 8% rate change, mainly driven by property and auto lines. This was offset by a 15% reduction in crop volumes which after years of commodity price appreciation experienced less favorable developments more recently. Base prices for corn and soybeans are down 21% and 16% respectively which is expected to be reflected in the crop volumes throughout the year.

In Asia Pacific, GWP increased 12% on a like-for-like1 basis compared with the previous year. This is driven by the retail business partly due to higher motor business sales and to a lesser extent by a favorable commercial insurance performance across the region.

Latin America saw an increase of 80% in GWP on a like-for-like1,6 basis. Excluding Argentina, which was impacted by inflation and currency depreciation, GWP went up by 11% on a like-for-like1 basis benefiting from retail motor growth in Brazil and Mexico and higher property business sales in Mexico as well as a strong commercial insurance performance from Brazil.

Life for the three months ended March 31, 2024

In Life, the Group continued to grow top-line and new business in its preferred lines of business. Short-term insurance contracts, which are predominantly related to the Latin America protection business, generated $680 million of insurance revenue in the first quarter, up 11% year on year on a like-for-like1 basis.

Investment contracts, which are mainly written in EMEA, generated $173 million of fee revenue in the first quarter, up 12% year on year on a like-for-like1 basis, driven by higher assets under management.

In the first quarter, new business premiums (PVNBP) for long-term insurance contracts amounted to $4.0 billion, 1% less than in the prior year on a like-for-like1,6 basis. The reduction reflects the exceptional sales volumes of retail savings in Spain in the prior year period. The Group’s preferred lines, protection and unit-linked, continued to see strong growth in the first quarter, with new business premiums up 21% and 16% respectively on a like-for-like1 basis.

In EMEA, new business premiums were 15% below the prior year period on a like-for-like1 basis. Higher sales of protection products in the UK and Switzerland, as well as unit-linked products in Germany, were more than offset by the previously mentioned reduction of retail savings sales in Spain.

In North America, new business premiums grew 10% on a like-for-like1 basis, driven by corporate and individual savings.

In Asia Pacific, new business premiums grew 29% on a like-for-like1 basis benefiting from continued growth of protection sales in Japan and corporate business in Australia.

In Latin America, new business premiums increased 18% on a like-for-like1,6 basis. Excluding Argentina, which was impacted by inflation and currency depreciation, new business premiums went up by 6% on a like-for-like basis benefitting from higher unit-linked sales.

New business margin stood at 6.6% in the first quarter, 0.2 percentage points higher than in the prior year period, benefitting from a more favorable business mix. As a result, new business written in the first quarter added $264 million to the contractual service margin (CSM), in line with the prior year.

Farmers for the three months ended March 31, 2024

The Farmers Exchanges,3 which are owned by their policyholders, reported 6% growth in gross written premiums in the first three months,’ which is primarily driven by rate actions. Gross earned premiums increased 5% over the same period.

The combined ratio of 89.4% benefited from improved underwriting and a lower expense ratio. The first quarter combined ratio excluding catastrophe losses of 80.8% showed sequential improvement on this metric for the sixth consecutive quarter and improved materially over the 94.3% reported in the prior year period.

The Farmers Exchanges3 surplus ratio increased 2.6 percentage points in the first quarter to 36.2% – within the Exchanges’3 target range of 34–38%.

Farmers Management Services underlying fee income2 rose 6% compared with the prior year period, driven by the increase in gross earned premiums at the Farmers Exchanges.3
Farmers Re insurance revenue increased $116 million compared with the prior year period, driven by higher gross earned premiums at the Farmers Exchanges3 and an increase in the participation rate in the Farmers Exchanges3 All Lines Quota Share (to 10.0% from 8.5%, effective from December 31, 2023).