Zurich UK delivers strong growth in trading and solid underlying performance despite impact of COVID-19

Financial and operating highlights

• Strong trading performance with Property and Casualty (P&C) top-line growth of 11% and Life and Savings up 2% on 2019, despite impact of COVID-19 crisis and a global recession
• UK business operating profit of £111 million, 73% lower than the £413 million reported in 2019 due to the impact of COVID-19. Excluding the effect of the pandemic, business performance remained strong with an increase in underlying profitability and efficiency
• Customer satisfaction, as measured by the net promotor score, up 14 points to its highest ever level, helped by ongoing digital transformation
• Total of £1.8 billion paid out to P&C and Life customers across all pandemic and non-pandemic related claims

Response to COVID-19: Supporting customers, colleagues and communities

• Zurich UK and its charitable arm, Zurich Community Trust, committed £15 million to support communities impacted by the pandemic across the UK
• Wide-ranging financial relief for customers most affected by the crisis, including payment holidays, policy extensions and premium rebates. Most recently Zurich introduced free counselling support for policyholders and their immediate family
• Rapid roll out of initiatives to help 4,500 employees in the work-from-home environment, including support for wellbeing and mental health
• Business fully operational for customers throughout the year, with a seamless transition to homeworking helped by 75% of employees benefiting from flexible work options before COVID-19

Tim Bailey, CEO of Zurich UK, said: “2020 was a year like no other. When the COVID-19 crisis hit, we were there for our customers, communities, and our people. Although full-year profits are significantly impacted by the pandemic, our underlying business has performed strongly. We achieved growth in our top line and an increase in underlying profits and efficiency – highlighting the strength and resilience of our business. Throughout a tough year, our employees have shown exceptional commitment, and I thank them all for their focus and determination. In an environment that remains highly challenging, I am confident we are well-placed for the future.”

Property and Casualty

• Gross written premium (GWP) is up 11% to £2,742 million from £2,480 million in 2019
• Combined ratio (COR) of 97.8% up 6.8% versus 91.0% in 2019
• Business operating profit (BOP) of £68 million is 75% lower than the £271 million reported in 2019 due to the impact of COVID-19

Zurich’s P&C business achieved strong premium growth in 2020 – up 11%. This was driven by rate and retention increases across both the Commercial and Retail businesses, alongside actions taken to address loss ratios, improve profitability and enhance the customer experience. Other factors that benefited the overall P&C result include significant prior-year reserve development and benign weather.

In Commercial, new business remained strong and retention ratios high, at 89%. The business also made excellent progress rebalancing the portfolio to better manage volatility and risk. In Retail, the business continued to reap the rewards of its digital transformation. Helped by the new digital platform for brokers – ETrade – the SME proposition saw a 50% increase in net new customers, an 18% growth in revenue and a 30-point increase in customer satisfaction, as measured by net promoter score.

The full year saw a material earnings impact from COVID-19 through claims for personal travel, school trips, event cancellation, and business interruption. Despite this, the performance of the business remained extremely strong, marked by an underlying increase in profits and improvement in the COR.

Commenting on the Property and Casualty result, Tim Bailey said: “Despite the unprecedented challenges of COVID-19, our P&C business performed strongly, with solid underlying improvements in profits and efficiency. The strategic choices we made in recent years, including becoming a more digital, customer-centric business, are paying off with double-digit top line growth and high rates of customer satisfaction and retention. Our P&C result has also benefited from further improvements in the quality and mix of business we underwrite. Excluding the effects of COVID-19, all our key indicators are green.”

Life and Savings

• Life and savings protection annual premium equivalent (APE) of £128 million is up 2% from £125 million in 2019
• Life and savings protection new business value (NBV) decreased to £37 million, 18% lower than the prior year on a like-for-like basis, reflecting prevailing market conditions
• Business operating profit of £44 million is lower than the £142 million reported in 2019 due to the impact of COVID-19

Life and Savings showed continued positive premium growth with APE up 2% – exceeding plan. This was supported by a strong performance within Zurich Corporate Risk – where APE increased 21% - and the Longevity business, which completed three deals. Retail protection bounced back strongly after a market contraction due to the national lockdown, recording an 8% increase in earned premium. Business operating profit was significantly affected by COVID-19, as we paid an increased number of Life claims and markets saw higher volatility. Despite this the Life and Savings business met its top line and revenue targets, and is well positioned for the future.

Commenting on the Life and Savings results, Tim Bailey said: “Our Life and Savings business continued to make excellent progress, achieving solid premium growth in extremely tough trading conditions. Group protection in particular outperformed and our Retail protection business achieved strong trading momentum in the second half. The pandemic has brought a renewed focus on health, and we hope to see increased consumer demand for protection. Our flexible products – which allow customers to adapt their benefits and cover at different life stages – are strongly positioned to capture these opportunities and help close the ‘protection gap’.”