The FINANCIAL -- Zurich Insurance Group (Zurich) reported a business operating profit (BOP) of USD 1.4 billion and net income attributable to shareholders (NIAS) of USD 1.3 billion for the three months ended March 31, 2014, according to Zurich Insurance Company Ltd.
“This is a solid start to the year,” said George Quinn, Chief Financial Officer. “We see some early positive signs in the execution of our strategic targets for 2014 to 2016 but there is still much to do. As announced in March, we are implementing a program to streamline the company, removing management layers between Group and the business units and empowering our people to act decisively in delivering first-class services to our customers. Global Life is progressing as planned and the development trend at Farmers is positive, while our General Insurance business reported a good Combined Ratio, benefitting from a relatively benign catastrophe environment and a one-off pension gain,” he added.
General Insurance recorded an increase in BOP of USD 38 million to USD 845 million, or by 5% in both U.S. dollar terms and on a local currency basis. Gross written premiums and policy fees remained flat compared with the same period of 2013. Underlying growth in North America Commercial was 3% after adjusting for a fronted portfolio that was not renewed. The net underwriting result increased by USD 89 million to USD 456 million, with a reported combined ratio of 93.9%, compared with 94.9% in the prior period, according to Zurich Insurance Company Ltd.
Global Life BOP increased by USD 12 million to USD 319 million, or by 4% in U.S. dollar terms and 9% on a local currency basis. Gross written premiums, policy fees and insurance deposits increased by USD 331 million to USD 7.0 billion, or by 5% both in U.S. dollar terms and on a local currency basis. Annual premium equivalent increased by 6% in U.S. dollar terms or 7% on a local currency basis, mainly driven by the UK with solid growth in Ireland, Italy and Spain. New business value declined by 11% compared with prior period, which had benefitted from particularly strong sales of UK protection products.
Farmers business operating profit was broadly stable at USD 415 million compared with the prior year. At Farmers Exchanges, which are owned by their policyholders and managed by Farmers Inc., a wholly owned subsidiary of the Group, the decline in gross written premiums narrowed to 2% compared with a 4% decline in the last quarter of 2013. The business operating profit in Farmers Management Services remained broadly flat, according to Zurich Insurance Company Ltd.
The Non-Core Businesses, which comprise run-off portfolios that are managed with the intention of proactively reducing risk and releasing capital, reported a business operating loss of USD 26 million. The result was impacted by a one-off loss on a specific contract in centrally managed businesses.
In Other Operating Businesses, the holding and financing business operating loss decreased by USD 27 million to USD 172 million, primarily driven by lower headquarters expenses, which benefitted from a one-off pension gain, according to Zurich Insurance Company Ltd.
The net investment result on Group investments, which includes net investment income, net capital gains and losses and impairments, contributed USD 2.2 billion to the Group's total revenues for the three months ended March 31, 2014, a net return of 1.0% (not annualized). Total return on Group investments was 2.5% (not annualized), an increase of 2.1 percentage points compared with the same period of 2013, mainly driven by falling government yields and tightening credit spreads.
The Group preserved a strong capital position. Shareholders’ equity has increased by USD 2.2 billion to USD 34.7 billion since December 31, 2013 mainly driven by net unrealized gains as well as retained earnings. The 2013 dividend of CHF 17.00 per share approved by shareholders at the Annual General Meeting on April 2, 2014 will be recognized through shareholders’ equity in the second quarter of 2014. The Group’s solvency as determined under the Swiss Solvency Test5 increased by 11 percentage points, rising to 217% as of January 1, 2014 compared with July 1, 2013. The Z-ECM ratio stands at 127% pending deployment of additional capital to the business, according to Zurich Insurance Company Ltd.