Zurich claims select top-line growth, but hints at margin issues

Zurich Insurance Group laid claim to select pockets of strong top line growth in the first quarter of 2023, but remained largely silent on profit measures in its first-ever attempt at discussing earnings under the new IFRS17 accounting regime.

P&C segment insurance revenues appear to be the biggest bragging point in the Q1 pre-release, with management declaring 7% year on year growth or an 11% like-for-like gain. Management credited "strong growth in commercial insurance and further improvement in pricing."

However, not all aspects exhibited growth, and Zurich refrained from presenting a comprehensive measure of group revenue.

Life new business added $265 million of contractual service margin (CSM) in the quarter, 11% below the prior-year period on a like-for-like basis.

And at the Farmers Exchange, Zurich went for an old-school margin-excluding gross written premium accounting for the US unit and noted a 3% year on year decline. Management hinted at a pull back from volumes with comment on having pushed for pricing gains.

The Q1 earnings pre-release, Zurich's first in IFRS17, remained largely devoid of profit measures save for where IFRS17 revenues are margin implicit plus several round comments on business margin. Prior periods pre-releases, even under IFRS4, have likewise been top-line focused.

Commercial insurance was praised for margin improvement, not all of which Zurich may have booked as profit, while retail lines were said to suffer “continued elevated loss cost trends.”

“Underlying commercial insurance margins have continued to improve but we are being cautious about recognising the full benefit as we gain familiarity with the new accounting standard,” CFO George Quinn said in comment to the pre-release.

Price gains in the retail segment have yet to catch up with the loss cost trend, Quinn suggested. Margins “will improve over the course of the year as earned rates start to exceed loss cost trends.”

Elsewhere, the life business has “reduced margins” near-term outright on account of business mix. Nothing was said about margins in Farmers, save the suggestion that remediation of the portfolio continues.

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