Global insurance and reinsurance group Zurich has reported a 60% increase in its first-half operating profit, which came out at $2.7 billion for H1 2021.
This was supported by strong performance in Zurich’s property and casualty division, which reported a 93.9% combined ratio, a level that the company said it has not reported in over 20 years.
As a result, the Property & Casualty (P&C) operating profit more than doubled to $1.6 billion, despite elevated weather and catastrophe losses.
At the same time, the P&C unit at Zurich reported 16% growth in gross premiums underwritten, as the insurer capitalised on the improving rate environment.
On the life side of Zurich’s business, profit rose by 44% to $802 million, thanks to higher fee revenue and investment results.
Zurich’s Farmers Exchanges division also reported strong growth, with premiums rising 16%.
Group Chief Executive Officer Mario Greco commented on the results, “We achieved outstanding results in the first six months of 2021 with profits back to the levels of 2019, when we reported our best first half in a decade. This is a remarkable achievement considering the elevated natural catastrophe losses in the period and the ongoing public health crisis.
“Our first-half performance is the result of the focused execution of our strategy, with contributions from all parts of the business. Our combined ratio in property and casualty insurance, now at its lowest in more than 20 years, is testament to the improvements made to underwriting since 2016. And we added more than 600,000 retail customers during a period of continued uncertainty and restrictions related to the pandemic.
“In our Life business, margins improved as we continued to focus on protection and capital-light savings products, while the Farmers Exchanges2 benefited from efforts to diversify and strengthen distribution channels.
“This year’s extreme weather events – from winter storms in the southern United States to the more recent flooding in South East Asia and Europe – underscore society’s vulnerability to the risks of climate change and the need for businesses to take action.
“We are supporting our customers with new services to improve resilience to climate risks and are acting to mitigate the climate impact of our activities. In March, we announced intermediate emissions targets for our operations and investments in real estate, corporate credit and equities, as we set the Group on a course to achieve net-zero emissions by 2050.
“As economies emerge from the COVID-19 pandemic, Zurich is fitter, faster and more resilient than ever. Our work in the last five years to simplify and strengthen the business, combined with the continuing upturn in commercial insurance pricing, positions us well. I have great confidence in the strength of our business and the skills of our employees to maintain this momentum and deliver on our targets.”
Impacts from the pandemic have continued, with Zurich reporting higher mortality-related claims across the Group’s life insurance business.
However, the COVID-19 impact to operating profit was only -$73 million for the first-half of 2021, well down on the prior year’s $686 million.
On the P&C side of its business, Zurich reported that reduced claims frequency associated with COVID-19 restrictions more than compensated for COVID-19 related claims received.
Growth achieved in the Zurich P&C business was supported by “significant rate increases in the Group’s commercial business across all regions, with these trends expected to continue through the second half of the year,” the company explained.
However, the P&C result could have been even better were it not for higher-than-normal catastrophe and weather-related claims, in particular winter storm Uri in the United States.
Overall, catastrophe losses, excluding impacts from COVID-19, were US $438 million above normal levels, Zurich said, which is based on an assumption of around 3.5 percentage points of catastrophes within the loss ratio, and US $413 million above prior year levels, the company explained.
The company expects that its catastrophe loss burden will continue to be elevated, partly due to the impacts of the European flooding in July.
Zurich said that in addition to the elevated natural catastrophes of the first-half, it anticipates nat cat losses of around 5 percentage points for the full year, taking into account an initial assessment of the impacts from the recent European flooding, as well as normal weather and cat losses over the rest of 2021.
