Global insurer Zurich has announced a 40% dip in business operating profit (BOP) for the first half of the year to $1.7 billion, driven mostly by an impact of $686 million related to the ongoing COVID-19 pandemic.
As well as the decline in BOP, Zurich has today reported a 42% contraction in net income for the first half of 2020 to just under $1.2 billion, compared with over $2 billion in the same period last year.
COVID-19 had an overall impact of $686 million in the period, with the insurer also noting the impact of the crisis on financial markets leading to a dip in the performance of its investments, most notably in hedge funds.
In Q1, Zurich recognised COVID-19 related claims within its P&C business of $280 million, and said at this time that for the full year this figure could rise to $750 million. In its H1 2020 results, Zurich reaffirms that its full-year P&C COVID-19 impact is expected to be $750 million, which has been fully recorded by the company in the first half of the year.
As well as the pandemic losses, in H1 2020 the firm’s P&C segment also recorded $234 million of higher catastrophe claims resulting from European and North America weather events and civil unrest in the U.S., alongside $120 million lower capital gains on hedge funds.
Overall, the elevated level of catastrophe claims combined with COVID-19 related impacts of $484 million, saw BOP within P&C amount to $751 million, which is down $905 million on the same period in 2019.
Somewhat offsetting the P&C claims experience in the period was a net favourable $64 million of other items related to the COVID-19 outbreak and its impact on financial markets, including lower P&C claims driven by restrictions on activity during the lockdown period.
Gross written premiums (GWP) jumped 4% on a like-for-life basis in P&C to $18.9 billion, with growth being driven mostly by commercial insurance in Europe, Middle East and Africa (EMEA) and North America. Within P&C, Zurich notes that during the first half of the year it achieved price increases of roughly 8%, with the level of increases improved across the majority of regions.
In total, the insurer’s P&C unit recorded a combined ratio of 99.8% for the first half of the year, compared with 95.1% a year earlier, driven entirely by COVID-19 and catastrophe events.
Group Chief Executive Officer (CEO), Mario Greco, commented: “The first half of 2020 has been an unprecedented period with unforeseeable events ranging from a global pandemic and recession, to civil unrest and a higher rate of natural catastrophes. In this context, our priority has been to focus on our customers, colleagues and the communities in which we operate.
“We delivered on our commitments to our customers and provided a wide range of additional support and financial relief such as premium rebates and payment holidays. We moved quickly to protect our colleagues, switching early to home office and providing hospitalization benefits to them and their families. We are pleased that our actions have increased trust and confidence in Zurich among customers and colleagues alike.
“Since the start of the crisis we have focused on understanding the steps needed to drive the business forward and deliver on our plan presented last November. We are well placed to adapt quickly in a very dynamic and uncertain scenario, and therefore remain fully committed to our three-year plan.
“Our business developed well in the first six months of the year in spite of the uncertainties. Our commercial business reported strong growth following improvements to the portfolio mix in recent years, and is positioned to further benefit from the improved pricing environment. We continue to expand our digital offering, whose growth contributed to the resilience of our Retail business. We launched Zurich WellCare to serve demand for health and wellbeing services, and plan further steps this year to accelerate the digital transformation.
“While our operating environment changes, our goals are the same – we remain confident in the strength of our business, our strategy, and our ability to adapt to changing needs.”
In its Life business, Zurich has reported BOP of $559 million, which is down by $143 million on H1 2019. This figure includes $123 million of COVID-19 related items, with the pandemic also hitting new business annual premium equivalent sales, which fell by 15%.
Turning to investments, and Zurich states that the net investment result on Group investments, contributed $2.8 billion to its total revenues for H1 2020, which represents a dip of 22% on the same period in 2019.