Combined ratio up 3.4 points at Zurich Insurance

Zurich Insurance Group Ltd. released Thursday its financial results for the six months and three months ending June 30, reporting a 3.4 deterioration in its Q2 combined ratio in the midst of large losses in general insurance, with chief executive officer Martin Senn reporting he is “not satisfied” with the company’s performance in general insurance.

Zurich reported its combined ratio was 100% in the latest quarter, up 3.4 points from 95.6% in Q2 2014.

Catastrophe losses had a 3.4% “impact on the combined ratio for the quarter,” the company quoted chief financial officer George Quinn as stating Thursday in an investor presentation. “This was one point higher than last year but broadly in line with our expectations, with a large wildfire and several weather events in the US, storm Niklas in Germany and further storms in Australia.”

Zurich reported gross written premiums and policy fees, in general insurance, of $8.567 billion in the most recent quarter, down 8.5% from $9.361 billion during the same period in 2014. All figures are in United States dollars.

“When comparing results this year with last, currency is a significant feature,” Quinn stated. “We report in US dollars but only about half our business is in this currency. This means that the strength of the US dollar has had a negative impact on our reported results.”

Quinn added that on a constant-currency basis, Q2 gross written premiums were “roughly flat” compared with Q2 2014, while gross written premiums for the first six months were up 3% year over year.

Zurich has “a number of important initiatives underway to deliver a 2 to 3 percentage points improvement in the combined ratio from 2014 levels,” the company quoted Senn as stating in the investor presentation. “We see positive signs, for example, in some of our turnaround businesses, and would expect the benefit of these actions to become visible in our results towards the end of this year. Nonetheless, we had clearly expected to see more progress in improving profitability at this half way stage in the current three-year strategic period.”

Zurich reported net income after tax attributable to shareholders was $840 million in Q2 2015, down 1% from $848 million in Q2 2014. [click image below to enlarge]

“We have launched additional actions in the US Global Corporate property portfolio and we will look to adjust pricing in other parts of the US business,” Senn stated. “We are prepared to shed volume to ensure we achieve these goals. Let me be clear. I am not satisfied with our current performance in General Insurance, and delivering on the commitments we made at the investor day is my number one priority.”

For the six months ending June 30, the combined ratio in general insurance was 98.3%, up 2.6 points from 95.7% in the same period in 2013.

“While the positive trend in Global Life and Farmers has continued, with these businesses delivering good results, the profitability of our General Insurance business was adversely affected by large losses, particularly within Global Corporate and the UK, and a higher expense ratio,” Senn stated in a release.

For the first half of the year, general insurance gross written premiums and policy fees dropped 7%, from $19.995 billion in 2014 to $18.669 billion this year.

In the most recent quarter, gross written premiums and policy fees, in general insurance, were:

-$2.134 billion in global corporate;

-$2.943 billion in North America commercial;

-$2.501 billion in Europe, Middle East and Africa; and

-$1.041 billion in international markets.

The Q2 2015 combined ratios were:

-106.5% in global corporate (up from 97.5% in Q2 2014);

-97.4% in North America commercial, (up from 95.7% in Q2 2014);

-97.7% in Europe, the Middle East and Africa (up from 93.6% in Q2 2014); and

-101.4% in international markets (up from 99.9% in Q2 2014).