Zurich Insurance Group reported net income attributable to shareholders of $4.6 billion in 2022, a 12 percent decrease from $5.2 billion in 2021, which was driven mainly by a lower level of capital gains, net losses on divestment of businesses and hyperinflation charges related to the Latin American business.

Nevertheless, Zurich had its highest business operating profit (BOP) since 2007, reporting $6.5 billion for full-year 2022, an increase of 12 percent from $5.7 billion in 2021. The company also exceeded its financial targets for the second consecutive three-year period. (BOP is the group’s internal performance measure, which determines underlying performance by eliminating the impact of financial market volatility and other non-operational variables.)

Lower catastrophe and weather-related claims were partially offset by the inflationary environment experienced within the retail and SME business in the second half of 2022, in particular in motor, while commercial insurance continued to benefit from higher earned rate and margin expansion, Zurich said in a statement.

“These were tough years with unexpected challenges during which we had to stay very agile and focused on our goals. We continued to execute our strategy with strong discipline and successfully drove our results to deliver the targets,” according to Group Chief Executive Officer Mario Greco.

Zurich’s property/casualty business segment reported “an excellent combined ratio at 94.3 and record premium levels,” Greco said during an analysts’ call to discuss the earnings. Last year’s combined ratio was level with 2021. (A combined ratio below 100 indicates underwriting profits.)

In U.S. dollars, the group’s P&C gross written premiums rose to $42.3 billion, an 8 percent increase from $40.1 billion in 2021 (or a 14 percent hike on a like-for-like basis, adjusting for currency movements).

Greco said strong growth was achieved in both commercial insurance and retail businesses. “Higher risk-adjusted prices in commercial insurance and continued measured progress toward our growth ambitions took P&C gross written premiums to a record level,” he said.

“While we expect rate increases in commercial insurance to moderate from the 8 percent seen in 2022, we expect to see further margin expansion in 2023,” he added.

Greco said the company continues to focus on customers, which is reflected in the fact that customer retention rate is up 2 percentage points to 82 percent, with more than 2.1 million net new customers added during 2022.

As a result of its strong BOP and the company’s strong capital position, Zurich proposed a dividend increase of 9 percent to 24 Swiss francs per share from 22 francs.

The group’s Swiss Solvency Test (SST) ratio was estimated at 265 percent, well above the group’s target for an SST ratio of 160 percent or above.

A research note issued by Berenberg Capial Markets suggested that Zurich’s strong solvency position would allow the company to fund more acquisitions.

“In 2023, Zurich is set to close the German life back book deal, which we estimate will add 5ppt to solvency, while retained earnings should add another 8ppt. This means we estimate Zurich could fund an $8 billion to $9 billion insurance acquisition and keep solvency above 220 percent,” Berenberg said. (Zurich announced in June 2022 that it has agreed to sell its legacy traditional life insurance back book in Germany to Viridium Holding AG, a specialist in the management of life insurance portfolios in Germany.)

“We have a very strong balance sheet, so that allows us to look at opportunities that might make sense for us. If they make sense, we’ve got the capacity to pursue them,” according to Chief Financial Officer George Quinn during a media briefing to discuss the results. He declined to discuss any specific M&A opportunity at this stage.