Zurich UK reports strong trading momentum and solid underlying performance

Tulsi Naidu, CEO of Zurich UK, said, “I am immensely proud of our performance in the first half of 2020. Our response to the COVID-19 crisis has prioritised customers, employees and our role in the community. Despite the highly challenging operating environment, we achieved continued momentum across all our business areas and have delivered on our commitments to customers. Although pandemic claims have impacted half-year earnings, our underlying business is strong and performing well. The steps we have taken in recent years to become a simpler, more digital and customer-centric business meant we came into the crisis strong, and give us a firm foundation from which to navigate the future. We are well-positioned to grow in the new economic environment, and remain fully focused on supporting customers through the recovery and beyond.”

Financial and operating highlights

• Strong trading performance with General Insurance top-line growth of 11% and Life and Savings up 2% on H1 2019.
• Ongoing impact of strategic transformation and response to COVID-19 reflected in highest ever levels of customer and employee satisfaction.
• Published UK business operating loss of £63 million including £212 million of COVID-19 related items.
• Total UK business operating profit excluding COVID-19 of £149 million with a very strong P&C combined ratio ex-COVID-19 of 90.8%.
• Confident outlook with business transformation translating into trading and efficiency gains and favourable rate environment for commercial business.

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

• Zurich reacted early to the crisis, building on the agile working foundations laid down in recent years to remain fully operational for customers.
• These results include £182 million notified and expected claims in relation to COVID-19, where Zurich’s policies provide cover. As well as paying claims swiftly, the company flexed its products and terms for customers and provided wide-ranging financial relief, including payment holidays, policy extensions and premium rebates.
• Through Zurich Community Trust and directly, the company also committed nearly £15 million to help people in communities across the UK.
• The company moved quickly to protect the wellbeing of 4,500 employees through a variety of support, most recently offering free COVID-19 antibody tests for colleagues and their families.
• Zurich’s rapid and flexible approach to the pandemic has helped drive customer satisfaction, as measured by the net promotor score, up 37% to its highest ever level. Employee satisfaction has also risen to an all-time high.

General Insurance

• Gross written premium (GWP) is up 11% to £1,339 million from £1,204 million in 2019
• Combined Ratio (COR) of 90.8% on an underlying basis vs 85.6% in 2019; H1 2020 combined ratio of 103.4% including COVID-19 impacts
• Published business operating loss of £35 million after £133 million of COVID-19 related items, with Business operating profit excluding COVID-19 of £98 million.

Zurich achieved strong premium growth in the first half of 2020, with a top line increase of 11% from £1,204 million to £1,339 million – ahead of expectations. The commercial business continues to benefit from the actions taken to address loss ratios, improve profitability, and enhance the customer experience. On the retail side, Zurich’s new digital SME platform has delivered a 42% year-on-year increase in new business and a 23% uplift in customer numbers. The first half saw a significant earnings impact of £140 million from COVID-19 claims. This comprises claims for personal travel, school trips, event cancellation, and, where policies respond to the pandemic, business interruption. However, the underlying performance of the business remains extremely strong with a COR excluding the impact of COVID-19 of 90.8%.

Commenting on the General Insurance results, Tulsi Naidu said, “Our General Insurance business has continued to make excellent progress, underlined by double-digit top-line growth. From day one of the pandemic, our servicing of customers and brokers didn’t skip a beat, contributing to stronger than expected new business and retention. We have also benefited from a flight to quality as customers look for financial strength and stability during these uncertain times.

“As we look forward, our business is particularly well placed. The pandemic has accelerated the focus on digital trading models, efficiency and superb customer service, all of which have been key aspects of Zurich’s transformation in the UK in recent years. Our commercial insurance business is particularly well positioned with a strong team operating in a rate environment that is favourable across all lines of business.”

Life and Savings

• Life and savings protection annual premium equivalent (APE) of £69 million is 2% higher than 2019 on a like-for-like basis
• Life and savings protection new business value (NBV) decreased to £17 million, 37% lower than the prior year on a like-for-like basis as a result of COVID-19
• Published business operating loss of £28 million after £79 million of COVID-19 related items, with Business operating profit excluding COVID-19 of £51 million

Life and Savings demonstrated continued positive growth, with APE up 2%. Business operating profit was affected by £42 million of COVID-19 claims and New Business Value adversely impacted by financial markets and the wider economic fallout arising from the outbreak. Despite this, Zurich’s corporate protection and longevity business continued to perform strongly, delivering year on year outperformance in APE of 21%, offsetting lower volumes in Retail Protection.

Commenting on the Life & Savings results, Tulsi Naidu said, “Our Life and Savings business has demonstrated its strength and resilience during tough market conditions. Continued investment in our protection proposition is driving further competitiveness in this market. We expect to see renewed recognition of the importance of the right level of protection in the lives of our customers. With our flexible products – which allow individuals to adapt their benefits and cover at different life stages - we are well placed to capture these opportunities and continue supporting customers.”