ZFSVF - Zurich Insurance Group AG (ZURVY) Q4 2023 Earnings Call Transcript

2024-02-22 16:35:26 ET

Zurich Insurance Group AG (ZURVY)

Q4 2023 Results Conference Call

February 22, 2024 07:00 AM ET

Company Participants

Jon Hocking - Head, IR & Rating Agency Management

Mario Greco - Group CEO

George Quinn - Group CFO

Conference Call Participants

Andrew Sinclair - Bank of America

Andrew Ritchie - Autonomous

Michael Huttner - Berenberg

Peter Eliot - Kepler Cheuvreux

Kamran Hossain - JP Morgan

Dominic O'Mahony - BNP Paribas

James Shuck - Citi

Will Hardcastle - UBS

William Hawkins - KBW

Ismael Dabo - Morgan Stanley

Vinit Malhotra - Mediobanca

Presentation

Jon Hocking

Thank you very much and good afternoon, everybody, and welcome to Zurich Insurance Group's Full-Year 2023 Results Q&A Call. On the call today is our Group CEO, Mario Greco; and our Group CFO, George Quinn. Before I hand over to Mario for some introductory remarks, just a reminder, the Q&A, we kindly ask you to keep to a maximum of two questions. Thank you.

Mario Greco

Thank you, Jon, and welcome to everyone and thanks for being on the call. As tradition, before we answer your question, I wanted to provide you with few remarks on our results. We've made a very strong start to our new financial cycle and we're well ahead of all targets for the '23 to '25 cycle. We have seen particularly strong growth in both P&C and Life, with the management action of farmers already showing excellent results. Given this positive momentum, we expect to achieve EPS growth above 10% over the cycle. BOP is up 21% to a record level of $7.4 billion, with earnings per share up 12% in U.S. dollars.

BOPAT ROE is strong at 23.1%, with returns remaining extremely high even as we have continued to carefully grow the business in P&C, with 10% growth in gross written premium in constant currency for commercial and 13% for retail. In Life, where we saw 26% like-for-like growth in new business premiums and 39% growth in BOP. I'm particularly pleased with the strength and the speed of the improvements at farmers, where Farmers Management Services business operating profits grew by 10% year-on-year and the Farmers Exchanges reported a Q4 combined ratio of 89.8%, a substantial improvement from earlier in the year.

A proposed dividend at CHF 26, up 8% on prior year or 19% in U.S. dollar terms, will be supplemented by share buyback of CHF 1.1 billion. Now looking at the business segments, starting from Property & Casualty, the Property & Casualty business today reports an excellent combined ratio of 94.5%, with BOP up 7% on a reported basis, or 10% in local currencies. The strength of the group's reserves is evidenced by consistent prior year reserve development.

The steps taken to manage exposure to natural catastrophes has resulted in a cat loss ratio within the guided range and improving year-on-year. Commercial insurance continued to show strong returns, contributing $3.5 billion to BOP at a combined ratio of 91.4%. Commercial overall saw 7% rate increases, 9% in North America. In property, rate increases have remained in the teens while rates in commercial, auto and excess liability are seeing continued momentum. Overall, we see a stable outlook for commercial rate for the rest of the year. In retail, we continue to see early signs of results improving.

Various weather events impacted the results in the second half, and there is significant room for improvement, which we expect to deliver over '24 and '25. Across Retail P&C, we saw rates increased by 4%, with higher rate increases achieved on the motor portfolios. On Life, the Life business performed extremely strongly, reporting an all-time high BOP of $2.1 billion, with top line growth across all parts of the business. Life new business premiums grew 24% in U.S. dollar terms. Short-term insurance contracts saw insurance revenue increase at 13%, while fee revenues from investment contracts were up 22%....

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