Zurich(US:ZURVY)2023-08-10 14:20Financial Data and Key Metrics Changes - The Group reported a BOP of $3.7 billion, flat compared to the record result from the previous year, but higher on a per-share basis [3][4] - The return on equity (ROE) for BOP was strong at 22.9% [4] - The U.S. dollar EPS increased by 8% [4] Business Line Data and Key Metrics Changes - Property & Casualty (P&C) reported a combined ratio of 92.9% with a headline BOP down 6%, but up 3% when adjusted for foreign exchange and absence of a real estate gain from last year [7][8] - Gross written premiums in P&C grew by 10% in constant currency for commercial and 9% for retail [5] - Life business saw a 17% like-for-like growth in new business premiums and an 18% growth in BOP [5][11] - Farmers management services had a BOP increase of 8%, driven by 5% underlying growth at the Farmers Exchanges [13] Market Data and Key Metrics Changes - Commercial rates increased by 7% overall, with 9% in North America and significant acceleration in property rates, which rose by 18% in Q2 [8] - Retail rates increased by 4%, with higher increases in motor portfolios [9] Company Strategy and Development Direction - The company aims to selectively grow the business in a disciplined manner, focusing on simplification, improving customer experience, and building distribution [6] - The shift to IFRS 17 is expected to provide additional transparency for investors, particularly regarding the fast-growing, protection-focused joint venture with Santander in Latin America [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong start to the new financial cycle and sees significant opportunities for growth and attractive returns for shareholders [14] - The outlook for commercial rates is stable for the remainder of the year [8] Other Important Information - The company incurred costs in the first half related to rationalizing its real estate portfolio [6] - The company is working towards closing the Germany and Chile back book transactions later in the year, which will improve the risk profile of the portfolio [12] Q&A Session Summary Question: Rate changes in commercial lines and margin expansion in H2 - Management indicated that rates are stabilizing and expect to expand margins in H2, with positive developments in pricing across various lines [16][18] Question: Farmers Re and cat losses - Management confirmed that there is a natural cat loss cap in place, which will help predict outcomes for Farmers Re in the second half [23][25] Question: Progress on the German life back book deal - Management is targeting a year-end close for the deal, pending regulatory approval, and does not expect financial impact from any delays [30][32] Question: Capital addition to Farmers - Management stated that Zurich cannot directly add capital to the exchanges and prefers external market support for reinsurance needs [33][36] Question: Additional conservatism in commercial lines - Management acknowledged increased conservatism in loss cost trend assumptions, particularly in commercial auto, to avoid unnecessary volatility [39][42] Question: Life CSM contribution and guidance - Management indicated that the expected return on CSM is more about transparency and consistency, with modest growth anticipated due to current interest rate conditions [47][59] Question: Liability business and social inflation - Management noted that loss cost trend assumptions have been increased for lines exposed to social inflation, while overall trends have slightly improved [70][71]