ZURICH annual BOP down by 15% due to higher levels of natcat losses
ZURICH Insurance Group said its FY2017 business operating profit (BOP) was USD 3.8 billion, down by 15% y-o-y, largely due to the high catastrophe, the Group's restructuring and a one-time item resulting from changes to capital gains relief in the UK.
Adjusting for these items, BOP rose 6% over the prior year period to USD 4.8 billion, the insurer said. At the same time, net income after tax attributable to shareholders decreased 6% to USD 3 billion.
ZURICH representatives pointed out the insurer is well on track to achieve its 2017 to 2019 targets. "As of December 31, 2017 cumulative cost savings of USD 700 million have been achieved towards the target of USD 1.5 billion. Cash remittances for the year of USD 3.7 billion are consistent with the target of in excess of USD 9.5 billion over the 2017 to 2019 period, and the estimated Z-ECM ratio stands at a very strong 132%, above the 100% to 120% target range. The underlying business operating profit after tax return on equity for the year was 12.1%, in line with the target of in excess of 12% and growing over the three-year period".
At the same time, ZURICH's Board of Directors will propose an increase of approximately 6% in the dividend to CHF 18 per share to shareholders at the Group's annual general meeting on April 4, 2018.
ZURICH also announced that, in line with the Group's policy on anti-dilution, it plans to implement measures that consist of the repurchase of shares of approximately USD 1 billion. The anti-dilution measures will consist of two actions: "a cancellation of repurchased shares in the amount of up to 1.74 million shares to reverse dilution from vestings of shares in recent years as part of the Group's long-term compensation awards; and the intention to purchase shares on the market instead of issuing new shares for long-term compensation awards in future years".
The Property & Casualty (P&C) business line reported BOP of USD 2.3 billion, down by 4% y-o-y, due the losses from from the hurricanes Harvey, Irma and Maria, while the combined ratio was 100.9%. Adjusting for these the exceptional impact of hurricanes Harvey, Irma, and Maria - the combined ratio was stable at 98.2%. AT the same time, the value of P&C GWP reimained stable at USD 33 billion.
Life segment BOP was up by 11% to USD 1.25 billion, "driven by a combination of portfolio growth, particularly in Asia Pacific and Latin America, expense reductions, positive market developments and a more favorable claims experience". Life gross written premiums, policy fees and insurance deposits increased by 13% to USD 33.24 billion.
The Farmers Exchanges, which are owned by their policy holders, continued to deliver robust top-line growth in 2017, with gross written premiums from continuing operations up 3.1% over the prior year, largely driven by higher rates, especially in the auto book. Rate and underwriting actions also contributed to a 2.3% improvement in the combined ratio of the Farmers Exchanges over the year to 101.6%.
The growth at the Farmers Exchanges resulted in a USD 25 million, or 1%, increase in management fees and other related revenues at Farmers Management Services (FMS). FMS BOP fell by USD 64 million to USD 1.4 billion, reflecting a USD 86 million one-time gain in 2016 related to the Farmers' pension plan.
Farmers Re BOP increased by USD 15 million to USD 57 million, driven by a 3.2% improvement in the combined ratio following underwriting actions at the Farmers Exchanges.
At Farmers Life, BOP increased by USD 17 million to USD 220 million, due in part to favorable assumption updates. The new business value rose 18%, driven by a favorable sales mix and lower acquisition expenses.