Zurich provides preliminary update on fourth quarter 2015
Zurich expects its General Insurance business to record a business operating loss in the fourth quarter 2015 due to natural catastrophe claims, including those related to recent storms and floods in the UK and Ireland, and a significant level of large losses. Operating results for Farmers and Global Life should be in line with expectations, and the Group’s capital position remains very strong across all key metrics.
Zurich Insurance Group (Zurich) announced today that based on preliminary estimates it expects aggregate losses of approximately USD 275 million within its 2015 results related to storms Desmond, Eva and Frank in the UK and Ireland. These storm events brought heavy rainfall and caused severe flooding in parts of North England, Scotland and Ireland.
These estimates are net of reinsurance and before tax and will be recorded in the Group’s annual results, which are due to be released on February 11, 2016. While these amounts represent Zurich’s current best estimate of the cost for the above events, the nature of many of the losses and the extended remediation period to complete repairs means that the final cost remains uncertain.
In addition to the UK and Ireland floods, there have been a number of other natural catastrophe events in the quarter, including a tornado in Australia.
Further, Zurich has continued to experience a very high level of large current accident year losses in the fourth quarter. These large losses mainly relate to a large credit and surety loss, and several significant property claims, principally impacting Global Corporate and certain European countries. The profitability of business underwritten in 2015 continues to impact results but this will improve over the course of 2016 as the steps taken to reduce exposure to large losses take effect.
As a result of the adverse natural catastrophe experience and the high level of large current accident year claims, Zurich now expects the General Insurance business to report a business operating loss of approximately USD 100 million for the fourth quarter of 2015.
Zurich will provide further information on the drivers of the fourth quarter General Insurance results, an update on the actions under way as a result of the General Insurance review, and expectations for 2016 with the Group’s annual results.
The Group has accelerated a number of steps in its efficiency program, with an aim of exceeding the previously communicated cost savings target for 2016 of USD 300 million. This should result in charges of around USD 475 million in the fourth quarter, primarily within General Insurance. The Group also anticipates incurring a one-time impairment charge attributable to the write-off of its German Life business goodwill of approximately USD 230 million. These charges will be recorded outside of fourth quarter Business Operating Profit.
While the 2015 results for General Insurance are disappointing, operating performance for both Farmers and Global Life should be in line with expectations, and the Group’s capital position remains very strong across all key metrics.
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Zurich Insurance Group (Zurich) is a leading multi-line insurer that serves its customers in global and local markets. With more than 55,000 employees, it provides a wide range of general insurance and life insurance products and services. Zurich’s customers include individuals, small businesses, and mid-sized and large companies, including multinational corporations, in more than 170 countries. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. The holding company, Zurich Insurance Group Ltd (ZURN), is listed on the SIX Swiss Exchange and has a level I American Depositary Receipt (ZURVY) program, which is traded over-the-counter on OTCQX. Further information about Zurich is available at www.zurich.com.
Disclaimer and cautionary statement
Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the Group). Forward-looking statements include statements regarding the Group’s targeted profit, return on equity targets, expenses, pricing conditions, dividend policy and underwriting and claims results, as well as statements regarding the Group’s understanding of general economic, financial and insurance market conditions and expected developments. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and plans and objectives of Zurich Insurance Group Ltd or the Group to differ materially from those expressed or implied in the forward-looking statements (or from past results). Factors such as (i) general economic conditions and competitive factors, particularly in key markets; (ii) the risk of a global economic downturn, in the financial services industries in particular; (iii) performance of financial markets; (iv) levels of interest rates and currency exchange rates; (v) frequency, severity and development of insured claims events; (vi) mortality and morbidity experience; (vii) policy renewal and lapse rates; and (viii) changes in laws and regulations and in the policies of regulators may have a direct bearing on the results of operations of Zurich Insurance Group Ltd and its Group and on whether the targets will be achieved. Zurich Insurance Group Ltd undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise.
All references to “Farmers Exchanges” mean Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and their subsidiaries and affiliates. The three Exchanges are California domiciled inter-insurance exchanges owned by their policyholders with governance oversight by their Boards of Governors. Farmers Group, Inc. and its subsidiaries are appointed as the attorneys-in-fact for the Farmers Exchanges and in that capacity provide certain non-claims administrative and management services to the Farmers Exchanges. Neither Farmers Group, Inc., nor its parent companies, Zurich Insurance Company Ltd and Zurich Insurance Group Ltd, have any ownership interest in the Farmers Exchanges. Financial information about the Farmers Exchanges is proprietary to the Farmers Exchanges, but is provided to support an understanding of the performance of Farmers Group, Inc. and Farmers Reinsurance Company.
It should be noted that past performance is not a guide to future performance. Please also note that interim results are not necessarily indicative of full year results.
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