Zurich(ZURVY) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported its highest first half business operating profit since 2008, achieving a significant milestone despite challenging market conditions [3][4] - Business operating profit for Property and Casualty (P&C) rose 32% to $2.1 billion, with a record low combined ratio of 91.9% [5] - Life business operating profit grew by 13%, driven by underlying growth and a reduced level of COVID claims compared to the previous year [8] Business Line Data and Key Metrics Changes - P&C gross written premiums increased by 13% on a like-for-like basis, with commercial insurance rate increases of 9% remaining stable [5] - Farmers Exchanges' gross written premiums increased by 15%, supported by the inclusion of the MetLife business and organic growth [8] - The Life business maintained a focus on protection and unit-linked products, contributing to its strong performance [6][8] Market Data and Key Metrics Changes - The company added over 850,000 customers in the first half of the year, indicating strong customer growth [4] - The company received an upgrade to AAA in its ESG rating from MSCI, reflecting its commitment to sustainability [9] Company Strategy and Development Direction - The company announced a CHF1.8 billion share buyback to offset the earnings per share impact from the sale of its German life back book, aiming to reduce capital volatility [4] - The management emphasized a focus on transforming Zurich into a leaner, more agile insurer, primed for future challenges [4] - The company plans to discuss its ambitions for the next strategic cycle in November, indicating a forward-looking approach to industry transformation [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unprecedented market conditions driven by the war in Europe, higher inflation, and the lingering effects of the pandemic [3] - The company expects continued margin improvement in commercial insurance, with pricing trends remaining ahead of loss cost trends into 2023 [15] - Management expressed confidence in the company's positioning to lead industry transformation with sustainable products and services [9] Other Important Information - The company is implementing the new IFRS 17 framework, with a detailed explanation planned for a webcast [9] - The management highlighted the importance of customer satisfaction, with significant improvements noted in various markets [96] Q&A Session All Questions and Answers Question: Capital and Buyback Impact - A participant inquired about the capital sensitivity and the binding constraints on capital, particularly in relation to the share buyback [12] - The CFO responded that the company has plenty of flexibility regarding capital and does not expect significant constraints [13][14] Question: Proceeds from Back Book Deal - A question was raised about the earmarking of proceeds from the back book deal and potential M&A opportunities [18] - The CFO indicated that while there is flexibility, the focus remains on organic growth and execution of existing plans [20] Question: Inflation and Reserve Adjustments - A participant asked about the areas of reserve adjustments in light of inflation [25] - The CFO explained that while some adjustments were made, the overall impact was not significant, with a focus on maintaining a consistent approach [29] Question: Farmers' Margin Recovery Timeline - A question was posed regarding the timeline for Farmers' margin recovery [38] - The CFO indicated expectations for recovery by the end of the next year, with a focus on maintaining expense control [40] Question: Inorganic Capital Allocation Priorities - A participant inquired about the company's inorganic capital allocation priorities [62] - The CFO noted that while there are opportunities, the company has been cautious and focused on existing markets [66] Question: Tactical Reinsurance and Crop Rates - A question was asked about the tactical reinsurance strategy in the US property market and crop rate adequacy [69] - The CFO responded that while there is a desire to accept more risk, the company is also focused on limiting exposure to natural catastrophe risks [70]