Zurich Posts $702 Million Q1 Net

May 19, 2004

Zurich Financial Services continued its strong financial comeback with the announcement that the company’s net income in the first quarter of 2004 was $702 million, an annualized return on equity (ROE) of 16.2 percent, and a 424 percent increase over the $134 million it earned in the same period in 2003.

Last February Zurich reported 2003 net earnings of $2.1 billion for 2003, a return on equity of 12.5 percent, after its disastrous $3.4 billion loss in 2002.

Other highlights noted in the report included the following:
— Business operating profit (BOP) of $ 942 million, up 21 percent from 2003; annualized BOP ROE after tax of 14.8 percent.
— Gross written premiums in General Insurance of $11.1 billion, up 14 percent from 2003; combined ratio at 96.9 percent, an improvement of 1.2 percentage points
— Gross written premiums and policy fees in Life Insurance decreased by 14 percent to $ 3.1 billion due to the impact of structural changes while new business margin improved by 3.5 percentage points to 9.8 percent.
— Net income at Farmers Management Services of $177 million, up 12 percent from 2003; BOP of $276 million, up 6 percent.
— Total shareholders’ equity of $20.1 billion, up from restated $18.8 billion at December 31, 2003.

“The results reflect the disciplined implementation of the Group’s customer-focused strategy, measures to further strengthen the performance in Life Insurance, and support from firm prices in key markets. Premium growth in General Insurance contributed to positive operating cash flow of $1.5 billion,” said the announcement.

CEO James J. Schiro commented: “The results reflect our continuing ability to manage our businesses to profitability. We remain committed to disciplined underwriting in line with sound pricing and a tight grip on cost and expenses as we focus on creating shareholder value through superior products and services that help our customers manage risk effectively.”

Zurich earned $458 million net in its general insurance activities, an increase of 42 percent over the same period in 2003. The bulletin noted that “net underwriting result more than doubled to $ 222 million as earned premiums, benefiting from rate increases in previous periods, rose faster than losses and loss adjustment expenses. Correspondingly, the combined ratio improved by 1.2 percentage points to 96.9 percent. Based on developments in the year so far, pricing is expected to continue to be adequate throughout 2004.”

In the life sector Zurich said it “recorded a swing from net loss of $23 million to net income of $223 million. Gross written premiums and policy fees were $3.1 billion, a decrease of 14 percent (23 percent in local currencies), while Life Insurance deposits rose by 16 percent (2 percent in local currencies) to $ 2.3 billion.”

Discussing the good news from Farmers Management Services, Zurich attributed the increases to “higher premiums at the Farmers P&C Group Companies, which Zurich manages, but does not own. In the first quarter, the surplus of the Farmers P&C Group Companies grew by $143 million to $3.8 billion.”

The company will hold a telephone conference with a Q&A session for analysts and investors at 15:00 hrs. CET (9:00 A.M. EDT). To access the conference call in to register approximately 10 to 15 minutes prior to the start of the conference.
Dial-in numbers:
— Europe: +41 (0) 91 610 56 05
— UK: +44 (0)207 107 06 13
— USA: +1 (1) 866 865 51 44

A presentation for analysts and supplemental information including information on the Business Divisions will be available on the company’s web site www.zurich.com. Click on the “Media View” button on the bottom right corner of the homepage.

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