Zurich Posts 35% Increase in Nine Month Net Income

November 17, 2004

Zurich Financial Services reported a 35 percent increase in its net income for the first nine months of 2004 to $1.902 billion, compared to $1.41 billion in the same period of 2003, despite the impact of the Florida hurricanes.

Other highlights cited in the report were:
— Business operating profit (BOP) of $ 2.522 billion net of a pre-tax charge of $525 million for hurricanes. This corresponds to an increase of 65 percent from 2003 and an annualized BOP return on equity (ROE) after tax of 12.5 percent.
— Gross written premiums in General Insurance of $29.1 billion; combined ratio increased from 98.2 percent to 98.8 percent including a hurricane impact of 2.3 percentage points.
— Gross written premiums and policy fees in Life Insurance of $8.1 billion; new business profit margin improved by 1.8 percentage points to 10.5 percent
— Net income at Farmers Management Services of $ 528 million, up 11 percent from 2003
— Shareholders’ equity of $20.4 billion compared with $18.9 billion at December 31, 2003.
— Earnings per share (diluted) of CHF 16.59 [$12.30), an increase of 24 percent, and an annualized ROE of 13.9 percent.

CEO James J. Schiro commented: “Our job is to deliver consistent operating performance and to strengthen our balance sheet enabling us to absorb volatility inherent in the insurance business while achieving attractive returns for shareholders. This year’s unparalleled hurricane season, which caused tragic losses in life and property, put our endeavor to a severe test. But Zurich delivered. Our claims people were out in force helping our customers put their lives and businesses back together. Despite hurricane claims payments we achieved an underwriting profit in General Insurance with a combined ratio of 98.8 percent of which 2.3 percentage points represent the charge for the hurricanes.”

Schiro affirmed Zurich’s “intention to maintain an underwriting profit and achieve our Group profitability target of 12 percent business operating profit return on equity after tax over the insurance cycle.”

In its general insurance market the $29.1 billion premium revenues represented a five-percent increase over 2003, while net earned premiums grew by 12 percent. The bulletin noted, however, that “after adjusting for divestments and currency effects gross written premium growth was 1 percent. This reflects small rate increases in key regions moderated by some volume reduction in certain lines where we have chosen to decline business that does not meet our technical price targets. Generally however, we are able to write business at rates that provide adequate compensation for the exposure, and the trend in the operating result continues to be positive.”

The report also indicated that “although the combined ratio rose from 98.2 percent to 98.8 percent, the four hurricanes added 2.3 percentage points to the combined ratio. The United Kingdom, Ireland and Southern Africa (UKISA) region as well as Continental Europe reported sizeable improvements in their combined ratios of 2.8 points and 3.4 points respectively, with strong improvements in business operating profits and net income. The segment’s net income declined marginally from $1.233 billion to $1.206 billion, while business operating profit decreased by 2.3 percent to $1.508 billion.”

Farmers Management Services, which Zurich operates, was a bright spot. The company reported that net income at Farmers grew 11 percent to $ 528 million on management fees and other related revenue, which increased by 5 percent to $1.5 billion. “The premium volume of the Farmers P&C Group Companies, which Zurich manages but does not own, grew by 3 percent to $10.5 billion,” the report said. “The Farmers P&C Group Companies increased their surplus by $308 million, making good progress towards their goal of strengthening the surplus by $ 400 million in the current year. This was achieved despite hurricane losses, which added 1.0 percentage point to the nine months combined ratio of 97.5 percent.

The entire report is available on the company’s Web site at: www.zurich.com, as well as material relating to the conference call presentation, which Zurich will host at 12 noon CET [6:00 a.m. EST]. Dial 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

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