Zurich Insurance Group has made a strong start to the year and expects to exceed all its financial targets for 2022, despite ongoing inflationary pressures. The company has minimal exposure to the war in Ukraine.
Premium rates will continue to exceed loss cost trends well into 2023, according to Zurich in its first-quarter earnings report (which does not provide net income figures).
Given the group’s very strong performance over the past two years “and given the positive operating trends that we see in the first quarter, we’re very confident that you’ll see us exceed all of our targets by the end of this year,” said Group Chief Financial Officer George Quinn during a media briefing to discuss the results.
Zurich said Q1 property/casualty gross written premiums were up 8 percent, or 12 percent on a like-for-like basis (when adjusted for currency movements), to nearly $12 billion versus $11 billion in Q1 2021.
Growth was driven by strong premium rates in commercial insurance, the company said.
“We saw a rise in premiums across the group, most notably in our North American Property/Casualty business, where crop insurance and rate increases drove double-digit, top-line growth,” Quinn said in a statement.
Zurich’s North American Q1 gross written premiums rose by 17 percent compared to the same quarter a year ago. About 40 percent of this growth was contributed by the group’s crop insurance business, RCIS.
“An overall strong performance [in North America] was supported by a 9 percent increase in rates,” the insurer said.
During the press briefing, Quinn said the rise in agricultural commodity prices was a big driver of higher crop insurance premiums as the underlying crops become more valuable.
The main news from Zurich’s Q1 results “is that pricing in commercial lines is still well above claims cost inflation,” said Berenberg Capital Markets in a research note. “Zurich highlighted that inflation concerns support further rate rises, and that therefore margins in terms of non-life combined ratio are now likely to peak in 2024 rather than 2023.”
Further, Berenberg said Zurich’s natural catastrophe claims costs are in line with an expected 3.5 percent loss-cost budget in terms of combined ratio and the insurer “is using this hard market period to further reduce its exposure to natural catastrophes.”
Addressing the impact of the Ukraine war, Quinn noted that while the insurance industry is likely to see large losses, Zurich does not expect significant insurance claims from the conflict.
As of March 31, 2022, Zurich’s Swiss Solvency Test (SST) ratio is estimated at 234 percent (compared to 212 percent in Q1 2021) and remains well above the group’s 160 percent target level.