Zurich Insurance Group today reported a business operating profit (BOP) of $4.1 billion and net income attributable to shareholders (NIAS) of $3.9 billion for the year ended December 31, 2012.
"We delivered a solid performance in 2012, a year characterized by ongoing economic challenges. Our dividend proposal is again very attractive and reflects our confidence in the success of Zurich's business strategy as well as the Group's strong cash generation and capital base," said Chief Executive Officer Martin Senn.
"The integration of our acquired insurance businesses in Latin America and Malaysia is progressing well and contributing meaningfully to growth as evidenced in the strong contribution to profitability from these areas. In addition, during 2012, we expanded our bank distribution agreements through alliances in the Middle East, Italy, Spain and Indonesia."
"We continue to execute our proven strategy, growing our business in emerging markets while delivering a resilient performance in mature markets. This strong underlying profitability ensures we remain well positioned to continue to deliver for our customers, employees and shareholders in 2013."
The Group remains focused on delivering its targets. The underlying loss ratio for General Insurance continued to improve in 2012 and was 61.4% at year end. The business segment showed a strong underlying performance, which was adversely impacted by weather-related events, a continued decline in investment income as well as decreases in favorable development on reserves established in the prior years and by the previously announced financial adjustments in Germany.
In the course of the review related to the General Insurance business in Germany the Group determined that improper case reserving practices had resulted in errors which led to insufficient reserves for losses estimated in previous years. Additionally, the Group determined that deferred policy acquisition costs were overstated due to a system error in Germany. In aggregate the errors were deemed material and as a result, the Group has restated for prior periods in accordance with IFRS accounting standards. The restatement has no overall impact on shareholders' equity as of end 2012. Due to the restatement, third quarter 2012 BOP and NIAS were higher by $264 million and $194 million respectively. Full details are contained in the Consolidated Financial Statements (note 1) and analysts presentation.
Global Life maintained profitability levels while continuing to show growth in gross written premiums, policy fees and insurance deposits. The business segment strategy of diversifying geographically into target markets and diversifying product mix into protection and fee-based offerings, is offsetting the volume and margin pressures in Europe.
Farmers showed an increase in BOP of 5% in the management services company, while the second consecutive year of significant weather-related events and the absence of favorable prior year loss development compared with 2011 led to losses from reinsurance operations.
The non-core businesses recorded an increased business operating profit of $128 million resulting from an increased profit from other run-off businesses.
Total return on Group investments, which includes investment income, net capital gains and losses and impairments as well as changes in net unrealized gains and losses reported in shareholders' equity, was 7%, an increase of 1.7 percentage points compared with 2011. This excellent investment performance was achieved through a disciplined approach to investing relative to liabilities underpinned by prudent risk management.
The Group preserved an excellent capital position with shareholders' equity increasing by $3 billion to $34.5 billion.