Zurich Reports $3 Billion 2008 Net Income; Operating Profit $5.2 Billion

Zurich Financial Services Group has announced net income after tax of $3 billion for 2008 as well as a CHF 11.00 ($9.48) gross dividend proposal and operating profits of $$5.2 billion. As detailed below, the figures show a general decline from 2007, due mainly to the ongoing financial crisis.

Zurich said that “while the heightened financial pressures of the latter half of the year led to annual and quarterly reductions in net income and business operating profit, the Group’s disciplined approach to operational and risk management issues generated resilient operating results across its core business segments as well as a positive investment return. Furthermore, the Group’s business operating profit post-tax return on equity continued to remain above its mid-term target of 16 percent.

Zurich’s bulletin listed the following “Performance highlights:”
— Business operating profit (BOP) of $5.2 billion, a decrease of 23 percent. BOP return on equity (ROE) after tax of 16.8 percent
— Net income of $3.0 billion, a decrease of 47 percent. ROE of 12.1 percent
General Insurance gross written premiums and policy fees of $37.2 billion, up 4 percent or 2 percent in local currencies, and a combined ratio of 98.1 percent [up from 95.6 percent in 2007]
— Global Life new business value, after tax, up 3 percent to $753 million, with new business margin, after tax (as percent of APE), of 23.1 percent and APE up 11 percent or 10 percent in local currencies
— Farmers Management Services’ management fees and other related revenues up 8 percent to $2.5 billion
— Shareholders’ equity of $ 22.1 billion, a decrease of 24 percent
— Diluted earnings per share of CHF 23.35 [$20.13], down 50 percent

“These results illustrate the quality of our business model and the value of our risk and investment management strategies, particularly in view of the rapidly deteriorating global economic environment,” remarked Zurich’s CEO James J. Schiro. “Looking forward, we do not see significant improvements in the economic environment in the near term, but our strong balance sheet, operational capabilities and well-balanced portfolio of businesses position us well to continue executing on our strategy.”

In addition to the 8 percent growth in profit, Zurich noted that the Farmers Exchanges, which it manages but does not own, “delivered 6 percent premium growth in 2008 despite flat market conditions. The gross management result improved by 8 percent, resulting in a slight increase of the managed gross earned premium margin to 6.9 percent.

“Business operating profit decreased 5 percent to $1.2 billion, largely driven by lower investment income as a result of markedly higher dividends and cash transfers to the Corporate Center, reflecting the Group’s consistent capital management strategy.

“The Exchanges’ strong growth was driven in part by continuing the successful rollout of Bristol West’s products throughout the Exchanges’ distribution platform, with Bristol West’s premiums growing strongly by 25 percent and accounting for 3.1 percentage points of growth.”

Farmers Chairman Paul Hopkins commented on prospects for 2009, indicating that, “despite the highly challenging US personal lines environment, the ongoing success of our strategy gives us confidence that the Exchanges will be able to continue to outperform the market without sacrificing profitability, as we accelerate our effective growth strategies and leverage our underwriting, pricing, and expense management discipline.”

Thge full report and a replay of this morning’s earnings conference call may be obtained on the Group’s web site at: www.zurich.com.

Source : Zurich Financial