- Property & Casualty insurance revenue up 7%, with growth of 11% on a like-for-like1 basis, driven by strong growth in commercial insurance and further improvement in pricing
- Commercial insurance margins improve as a result of higher prices and higher interest rates, partially offset by continued elevated loss cost trends in retail
- New business in Life adds USD 265 million of contractual service margin in the quarter; new business premiums (PVNBP) up 23% on a like-for-like1 basis
- Farmers Exchanges2 gross written premiums down by 3%, impacted by the commercial rideshare business, partially offset by strong improvement in pricing
- Capital position very strong with Swiss Solvency Test ratio estimated at 258%3 as of March 31, 2023
- Proactive capital allocation continues with reinsurance agreement of the in-force individual life insurance book of Farmers New World Life and planned sale of Chilean annuity book
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. Our Life business has seen strong growth in new business volume, while in the short term, business mix has reduced margins. The Farmers Exchanges2 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.”
P&C insurance revenues grew strongly in the first quarter with all regions contributing to growth. Commercial insurance further improved its high level of returns while retail rates started to increase. North America displayed a strong performance, delivering about 50% of total P&C growth on a like-for-like1 basis.
Life new business added USD 265 million of contractual service margin (CSM) in the quarter, 11% below the prior-year period on a like-for-like1 basis. This was driven by higher new business premiums with lower margins mainly due to a less favorable business mix.
Gross written premiums (GWP) at the Farmers Exchanges2 were down by 3% compared with the prior-year period, impacted by the commercial rideshare business. The focus on improving the underwriting performance saw the business deliver continued strong pricing momentum.
As of March 31, 2023, Zurich’s Swiss Solvency Test (SST) ratio is estimated at 258%3 and remains well in excess of the Group’s ≥160% target level.
Focused execution of the customer strategy helped the Group to further improve customer satisfaction, with the retail net promoter score increasing by 1.5 points in the first quarter.
The new IFRS 17 reporting standards intend to make the financial statements of public insurance companies more consistent, transparent and comparable. For P&C, the Group has continued to report gross written premiums, but now also shows insurance revenue. The transition to IFRS 17 also impacts how the Group presents metrics in Life, which now reports new business premiums and the associated incremental contractual service margin (CSM) for certain contracts. Life also reports net inflows for investment contracts and insurance revenue for short-term life business. A financial supplement for full-year 2022 results under IFRS 17 and an explanatory presentation is available here. A glossary of terms is available in the Appendix.
Continued pro-active capital allocation
Zurich has taken further important steps to refocus the Group’s Life business to provide high quality protection and unit-linked solutions. The Group has entered into an agreement with Resolution Life Group to reinsure the in-force individual life insurance book of Farmers New World Life Insurance Company (FNWL), a subsidiary of Farmers Group, Inc. The ceding commission is just over 16 times the average of recent remittance payments. The Group will receive after tax proceeds of USD 1.8 billion and retain the risks and rewards of the business until the effective date, currently expected to be August 1, 2023. Other metrics such as capital and leverage are not significantly impacted by the agreement.
Zurich has also agreed to sell its annuity book in Chile to Ohio National Seguros de Vida S.A.
Both transactions are subject to regulatory approval.
Given the transition to IFRS 17 and the continuing share buyback Zurich expects little to no earnings dilution from its activities to improve capital allocation in the Life business.