Zurich BOP up 48% to $5.9 Billion

February 15, 2007

Zurich Financial Services Group posted record results for 2007, with net income up 41 percent to $4.5 billion, and business operating profit (BOP) up 48 percent to $5.9 billion. The growth in profits came from all sectors, General Insurance, Global Life and Farmers Management Services.

CEO James J. Schiro was clearly delighted with the results. He indicated they showed Zurich’s “ability to generate strong underlying earnings growth across our well-balanced and diversified book of business while maintaining financial strength and operational discipline.”

Zurich’s shareholders will be pleased as well, as Schiro said the Board of Directors “has recommended a significant increase of the return to shareholders” to CHF11.00 ($8.90) per share, a 57 percent increase over last year’s CHF 7.00 ($5.66).

Performance highlights included the following:
— Return on equity (ROE) of 19.0 percent
— BOP ROE after tax of 18.1 percent
— General Insurance gross written premiums and policy fees of $ 34.2 billion, an increase of 2 percent (in local currencies), and a combined ratio of 94.2 percent, an improvement of 6.6 percentage points
— Global Life new business volume growth of 15 percent, with an increase in new business value after tax of 38 percent (both numbers in local currencies) leading to a new business margin after tax of 21.7 percent
— Farmers Management Services’ management fees increased 4 percent to $ 2.1 billion
— Shareholders’ equity of $ 26.5 billion, an increase of 18 percent
— Diluted earnings per share of CHF 38.71, up 43 percent

The bulletin indicated that Zurich “sees further opportunities for profitable growth, both organic and through acquisitions, based on new distribution touch points and product offerings.” Some of that growth will come from initiatives to “concentrate on increasing the efficiency of distribution channels, adopting a rigorous approach to product development and better understanding and responding to customer needs,” which are included in the Group’s business plan known as the “Zurich Way.”

Zurich also said it will “look carefully at targeted acquisitions where such opportunities arise and provided they can create shareholder value. We believe the benefits from all these actions will drive strong performance throughout the market cycle.”

Zurich’s General Insurance sector showed “strong underlying performance,” with business operating profit up 100 percent to $ 3.8 billion. The underwriting result increased by $ 1.9 billion, and the “underlying performance improved by $ 350 million, or 1.1 percentage points, after excluding the effects of the extreme catastrophes in 2005 and prior-years reserve movements in both years,” said the announcement. Zurich operates Farmers Management Services, which supervises the independently operated Farmers Exchanges in the U.S. Fees increased by 4 percent in 2007, “in line with full year premium written growth of over 3 percent at the Farmers Exchanges.

Zurich also noted that in “2006 work began on the creation of a shared services platform in North America, which is expected to drive operating efficiencies, while several investments were made in accelerating the growth of business through distribution productivity gains and expanded product offerings. Due to these investments and the remittance of surplus capital to the Group in late 2005, business operating profit fell slightly by 2 percent to $ 1.2 billion leading to a reduction in the gross operating margin to 49.1 percent.

“Strong growth at Farmers Exchanges was the consequence of increases across all major lines of business. This was also evidenced by a net gain of policies in force of 657,000 over the course of 2006 together with an all-time high of more than 14,000 agents in force.”

The full report and a replay of today’s conference call are available on the Group’s web site at: www.zurich.com. under “Annual Results 2006 – Media View,” the button on the bottom right corner of the homepage.
Dial-in numbers for the conference are as follows :
Europe: +41 (0) 91 610 56 00
UK: +44 (0) 207 107 06 11
USA: +1 (1) 866 291 41 66

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