Zurich’s P&C profits down 28% despite H2 rebound and ‘strong’ commercial rates

P&C operating profit fell 28% at Zurich Insurance last year and was down 20% for the group as Covid-19 and nat cats took their toll, but a rebound in the second half and strong performance in commercial business, on the back of significant rate increases, helped steady the ship. Announcing full-year results, Zurich said the first half was impacted by Covid-19 with a return to growth in the second half of the year. Group Covid-19 claims for 2020 totalled $852m. P&C accounted for $450m of the pandemic losses that remain unchanged from the amount reported in half-year results. Zurich’s group catastrophe losses, meanwhile, were $558m higher than 2019. The hardening insurance market helped Zurich’s P&C business increase gross written premiums (GWP) by 4% last year to $35.52bn. P&C business operating profit fell 28% to $2.08bn and the combined ratio deteriorated by two percentage points to 98.4%. Zurich P&C profits were down 55% in the first half of this year at $751m. Full year P&C profit was affected by Covid-19 losses, higher catastrophe claims and lower investment income. The higher combined ratio was entirely driven by the pandemic and higher cat losses, with the underlying performance improving by about 2.6 percentage points. P&C achieved overall rate increases of 8% for the year. They were up 17% in North America, 5% in EMEA and 4% in both Asia-Pacific and Latin America. This helped P&C increase North America GWP by 5% to $16bn and 6% to $15.84bn in EMEA. GWP was down 11% in Asia-Pacific to $2.93bn and 2% in Latin America to $2.3bn. Zurich’s commercial insurance, which makes up about two thirds of P&C premiums, grew 7% on a like-for-like basis last year. The insurer said this was driven by “significant” rate increases in Europe and North America, as well as improved customer retention. Commercial business saw average EMEA rate increases of 15% in the fourth quarter, after rises of 15% in Q3, 12% in Q2 and 5% in Q1. North American commercial rates were up 18% in the fourth quarter of 2020, with the same increase in the previous two quarters and 12% in the first. Zurich said it expects commercial pricing to increase further during 2021, with rate in excess of loss-cost inflation. Commercial also saw changes to terms and conditions last year with increased use of Zurich standard wordings, higher deductibles and self-insured retentions, smaller line sizes, and exclusions for industries and coverages not meeting the insurer’s appetite. Zurich said it is well placed to benefit further from the hard market this year following improvements to its commercial portfolio during a three-year turnaround plan from 2016 to 2019. Zurich’s group operating profit fell 20% last year to $4.24bn, from $5.3bn, as Covid-19 and higher catastrophe losses hit. Net income attributable to shareholders was down 8% to $3.83bn, as the decline in operating profit was partially offset by higher levels of realised capital gains. Its Farmers business saw operating profit fall 12% to $1.5bn, with revenues down 2% to $3.7bn. Operating profit at Zurich life insurance fell 4% last year to $1.42bn, with GWP down 18% to $27.62bn. Zurich group CEO Mario Greco said the overall business performed well, with “strong growth” in commercial insurance. “Our results confirm the strength of our business, the agility of our people and the timeliness of our digital strategy. We kept our business fully operational throughout the year and our actions underlined our strong sense of social responsibility,” he added. Mr Greco also pushed Zurich’s green credentials. “We continued fighting climate change, including through impact investing, new resilience services for commercial customers and the Zurich Forest, a project in Brazil to restore a biodiverse habitat, and mobilising employees for climate action. More than 100,000 seedlings have already been planted.”

Zurich’s P&C profits down 28% despite H2 rebound and ‘strong’ commercial rates

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