Zurich starts 2023 with strong top-line growth

Zurich -  Zurich Insurance Group has reported that it has started the year 2023 on a high with its Property and Casualty insurance revenue up 7%, growth of 11% on a like-for-like basis, which it says was driven by strong growth in commercial insurance and further improvement in pricing. The Group said its commercial insurance margins improved as a result of higher prices and higher interest rates, partially offset by continued elevated loss cost trends in retail.

Zurich added that its new business in Life added $265 million of contractual service margin in the quarter, with new business premiums (PVNBP) up 23% on a like-for-like basis.

The Group said its gross written premiums (GWP) in P&C rose 10% compared with the prior-year period on a like-for-like basis, adjusting for currency movements. They rose 6% in U.S. dollar terms, reflecting the stronger U.S. dollar against major currencies, and this growth was supported by higher premium rates in P&C, with commercial insurance experiencing a 6% increase in rates.

In Europe, Middle East and Africa (EMEA), Zurich said its GWP increased 5% on a like-for-like basis, while it gre 10% in North America on a like-for-like basis compared with the previous year. In Asia Pacific, it increased 18% on a like-for-like basis compared with the previous year because of the rebounding travel insurance sales in Australia and higher retail sales across the region, while Latin America saw an increase of 24% on a like-for-like basis.

Zurich Group Chief Financial Officer George Quinn said: “The Group has made a strong start to the new financial cycle. We saw robust growth in Property & Casualty (P&C), with a double-digit increase in premiums in North America, mainly driven by rate increases. Underlying commercial insurance margins have continued to improve but we are being cautious about recognising the full benefit as we gain familiarity with the new accounting standard. Retail markets are seeing higher prices on renewal and margins will improve over the course of the year as earned rates start to exceed loss cost trends."

The Group further explained that on its Life Business, new business premiums increased 17% in U.S. dollar terms, and 23% on a like-for-like basis, with growth in local currencies partially offset by the appreciation of the U.S. dollar against major currencies in the first quarter. It said in EMEA, new business premiums grew 23% on a like-for-like basis, compared with the same period in 2022. This growth reflects large sales volumes of a retail savings product in Spain, written by the Group’s joint venture with Banco Sabadell, and this more than offset the adverse impact of lower sales volumes in Italy and Switzerland and higher discount rates in the region.

"Our Life business has seen strong growth in new business volume, while in the short term, business mix has reduced margins. The Farmers Exchanges saw underlying growth while focusing on improving the underwriting result. We have also announced two further back book transactions, which mark an important step in our commitment to reduce volatility and improve the quality of returns. These transactions also create the potential to deliver returns at even higher levels in the future. These are our first financial results under IFRS 17. I would like to thank all my colleagues for their hard work to reach this milestone. We have had a strong start to the year and our new financial cycle and we remain focused on executing our strategy,” Quinn added.

The Group said its new business written in the first quarter added $265 million of contractual service margin (CSM), which will be earned over time and converted into operating profit. New business CSM was 11% lower on a like-for-like basis compared with the first quarter of 2022. This was due to a reduced new business margin of 6.4% in the first quarter compared with 9.0% in the prior-year period. The reduction was mainly driven by a less-favorable business mix, it said.

Its Farmers Life new business premiums decreased by 8% compared with the prior-year period to $203 million. This was driven by the adverse impact of higher discount rates, which were only partially offset by higher sales volumes of the universal life product. New business CSM increased by 37% to $34 million, benefiting from the strong sales as well as modeling changes.

Zurich Griup said as of March 31, 2023, Zurich’s Swiss Solvency Test (SST) ratio is estimated at 258% and remains well in excess of the Group’s ≥160% target level compared with 267% as of January 1, 2023. The reduction was driven by unfavorable market movements, mainly due to lower interest rates, and a modest negative impact from model and assumption updates, concluded.