Business operating profit (BOP) was USD 1.7 billion, a decline of 40% compared with USD 2.8 billion in the first half of 2019. The underlying business performance was broadly in line with the previous year's, with the decline largely due to an overall COVID-19 related impact of USD 686 million and the pandemic's impact on financial markets leading to less favorable performance of the Group's investments, in particular in hedge funds. In addition, the first-half result was impacted by higher catastrophe-related claims, mainly related to weather events and civil unrest.
The net investment result on Group investments, which includes net investment income, realized net capital gains, and losses and impairments, contributed USD 2.8 billion to the Group's total revenues for the first half year of 2020, down 22% on the prior-year period. The net return on investments was 1.4%.
Shareholders' equity decreased by USD 1.8 billion mainly driven by the payment of the Group dividend in the second quarter, and partly offset by the net income of USD 1.2 billion.
- Gross written premiums and fees: USD 26,271 million (-1%), of which:
- P&C: USD 18,937 million (+2%)
- Life: USD 6,799 million (-8%)
- Farmers: USD 491 million (-12%)
- Life APE: USD 1,673 million (-25%)
- Net investment result: USD 2,762 million (-22%)
- P&C combined ratio: 99.8% (+4.8 pp.)
- ROE: 8.1% (-6.1 pp.)
- Z-ECM: 102% (-27 pp.)
- Business operating profit: USD 1,702 million (-40%)
- Net income: USD 1,181 million (-42%)
Gross written premiums grew 4% on a like-for-like basis, adjusting for currency movements, acquisitions and disposals, with growth primarily driven by commercial insurance in Europe, Middle East and Africa (EMEA) and North America. In U.S. dollars gross written premiums grew 2%.
The Group achieved price increases of about 8% overall, with the level of increases improved across most regions compared with the previous year, particularly in commercial insurance. Notably, North America experienced a further acceleration of recent trends, with overall rate increases of 18% achieved in the second quarter, and 16% on a half-year basis.
Business operating profit (BOP) of USD 751 million was USD 905 million lower than in the prior year. The decline was driven primarily by USD 484 million of COVID-19 related impacts, together with USD 234 million of higher catastrophe claims resulting from European and North American weather events and civil unrest in the U.S., and by USD 120 million lower capital gains on hedge funds.
The combined ratio of 99.8% was 4.8 percentage points higher year-on-year. The deterioration was entirely driven by the impact of COVID-19 and the higher level of catastrophes, while underlying performance continued to improve year-on-year.
Life business operating profit (BOP) for the first six months in 2020 was USD 559 million, USD 143 million below the prior year on a reported basis. Excluding USD 123 million of COVID-19 related items, business operating profit was 3% below the prior-year level, due entirely to movements in exchange rates and a lower contribution from one-off items.
In the first six months, 89% of new business production came from the protection, unit-linked and corporate savings business. The long-term strategy of focusing on protection and capital light savings business continues to position the Group's life business well for the prevailing low-yield environment.
Life new business annual premium equivalent (APE) sales decreased 15% on a like-for-like basis, adjusting for currency movements, acquisitions and disposals. The decline reflects the COVID-19 related impact of government lockdowns across the world. The development also reflected expected reductions in several markets from exceptional levels in the first quarter of 2019. As the government lockdowns have eased, sales have begun to recover, with distribution through key banking partners such as Banco Santander recovering sharply later in the period.
New business value (NBV) decreased 25% on a like-for-like basis, driven by lower new business volumes, unfavorable economic changes mainly due to the reduction in yields, and an update in operating assumptions in EMEA and in key countries in Asia Pacific.
The new business margin remained at 23.9% as reported or 24.5% on a like-for-like basis.
"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. (...) 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."