Zurich estimates pre-tax impact of $200 million from LA wildfires

By Rebecca Delaney

Feb 20 - (The Insurer) - Zurich Insurance on Thursday announced a P&C combined ratio of 94.2% for the 12 months ended December 31, 2024, with the group also disclosing that it expects a pre-tax impact of $200 million (including Farmers Re) from the California wildfires.

The carrier reported group business operating profit of $7.8 billion for the period, up 5% from 2023.

P&C business operating profit increased by 8% in US dollar terms and on a like-for-like basis to $4.2 billion, compared to $3.9 billion in the prior year.

Insurance revenue in the P&C segment increased by 6% year on year to $44.8 billion, while GWP and policy fees stood at $46.6 billion. While this marked an increase of 5% from 2023, Zurich noted that less favourable commodity prices in the U.S. crop business led to a reduction of $0.6 billion. Excluding crop, GWP increased 7%.

Lower crop insurance volumes meant that P&C GWP remained flat on a like-for-like basis in North America, while Europe, Middle East and Africa GWP increased 7% as a result of higher property business volumes.

The commercial insurance business delivered a business operating profit of $3.4 billion, while the retail business increased by 171% (or $618 million) to $1.0 billion.

Zurich posted a combined ratio of 92.3% in the commercial insurance segment, a deterioration of 0.9 percentage points year on year as underlying improvement was offset by a 1.5 point increase related to higher catastrophe losses.

Within Farmers, business operating profit reached $2.3 billion over the 12-month period, with GWP up 4% and the Farmers Exchanges combined ratio improving by 11.9 percentage points to 91.4%.

As communicated on Wednesday, initial estimates from the Farmers Exchanges indicate an expected net pre-tax loss from the California wildfires of $600 million, and an approximately $250 million reinstatement premium payment.

Zurich said Farmers is expected to manage this event through its strong capital base and underlying profitability. For Zurich, the wildfires are estimated to have a pre-tax impact of $200 million, including Farmers Re.

Overall, the group posted a return on equity of 24.6% for 2024, with cash remittances at $7.1 billion.

Adjusted earnings per share increased 10% year on year to $42.2, with Zurich proposing a dividend increase of 8% to 28 Swiss francs per share.

Zurich expects compound annual growth in core earnings per share to exceed 9% in the 2025–2027 cycle compared to a baseline of $40.1, with a core ROE of more than 23% in 2027 and cumulative cash remittances of more than $19 billion over the three-year period.

Group CEO Mario Greco said: "We continue to experience positive rate momentum in our commercial business and a healthy pricing environment in retail, positioning us strongly at the start of the new cycle for which we have already set our most ambitious targets yet."