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Zurich Performs Well Despite Cat Losses

Posted on 16 Feb 2012

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Zurich Financial Services Group today reported a business operating profit of $4.3 billion and net income after tax of $3.8 billion for the year ended December 31, 2011.

“We delivered a good result in a year characterized by natural catastrophes, including devastating earthquakes in Japan and New Zealand as well as exceptional weather-related losses around the globe. This trend continued during the fourth quarter with flooding in Thailand and aftershocks in New Zealand. In challenging economic and market conditions, we maintained our focus on underwriting discipline while continuing to selectively grow the business,” said Chief Executive Officer Martin Senn.

The Board of Directors will propose to the shareholders an unchanged dividend of CHF 17 per share. As in the prior year, the dividend payment is planned from the capital contribution reserve and will be exempt from Swiss withholding tax. The final benefit to shareholders will depend on their individually applicable tax situations.

“This attractive dividend proposal, especially in the light of the current environment, reflects our strong cash flow and capital base as well as our confidence in the success of our business strategy,” Mr. Senn said.

“I am also pleased with the performance of our Group investments, which delivered an excellent total return of 5.4% in times of high volatility and historically low interest rates.”

“We continued to develop our business in emerging markets where the outlook for economic growth remains positive. We closed significant acquisitions in Latin America and Malaysia enhancing Zurich’s footprint in our target high-growth markets,” Mr. Senn said.

“And as announced yesterday, in recognition of the fact that Zurich’s strategic focus has been on insurance for several years, our Board of Directors has proposed changing the name of Zurich Financial Services Ltd to Zurich Insurance Group Ltd at our Annual General Meeting on March 29.”
Robust underwriting discipline combined with a sustained focus on profitability produced strong improvements in the underlying loss ratio of the

General Insurance business partly offsetting the effects of the exceptional frequency and overall severity of catastrophe and weather-related loss events. In the Global Life business, increased fee income supported investments to enhance global capabilities and mitigated the impact of the low interest rate environment. Profit increased at Farmers Management Services driven by reduced 21st Century integration expenses and these savings helped compensate for lower revenues from the planned run-off of the 21st Century agency auto book in the Farmers Exchanges, which are managed but not owned by Farmers Group Inc., a wholly owned subsidiary of Zurich. High weather-related losses and a lower average level in the All Lines Quota Share reinsurance contributed to a decline in profit at Farmers Re.

The Group’s capital position remains strong with shareholders’ equity of USD 31.6 billion, despite the volatile financial markets, currency fluctuations and financial market impacts on pension liabilities. This is broadly the same level as of December 31, 2010, after recording the total cost of USD 2.7 billion for dividends in 2011.

As part of the establishment of the 51%-participation in the Latin American insurance operations of Banco Santander, S.A., the Group has appointed senior management and completed acquisitions in Argentina, Brazil, Chile, Mexico and Uruguay in October and November 2011. In Malaysia, the Group closed the acquisition of the composite insurer, Malaysian Assurance Alliance Berhad (MAA), in September 2011.