Zurich eyes enduring P&C price gains into 2023

Zurich Insurance Group expects prices will remain hard enough to drive margin expansion in property/casualty lines for the next 12 to 18 months, group CFO George Quinn (pictured) told the Q3 investor call today (Thursday, November 11).

“The rate continues to be very strong,” Quinn told analysts.

“I would expect to still be positive on price versus loss cost through virtually all next year. That would push the point at which we hit the strongest underwriting margin into 2023.”

Rate increases have lasted longer and gone further than Quinn had predicted at any point during the market’s hardening. But he stresses that they will eventually peak. “What is crystal clear is that this thing has sustained itself much longer than I expected…but I do expect it to moderate.”

Zurich grew its P&C premiums by 11 percent year-on-year on a like-for-like basis in the third quarter and Quinn feels certain that the overshoot of premium growth over GDP will hold throughout the coming year.

“Next year I expect the group retail and commercial will produce overall growth rates that are well above GDP,” he said. Margin expansion will continue “12 to 18 months, everything else being equal.”

Retail business lines are said to be “doing pretty well” with a portion of gains due to a post-COVID rebound and a reopening of select markets. “We have a significant rebound in retail which has been a significant tailwind for us,” Quinn said.

The North American market leads the P&C charge with 15 percent like-for-like growth in gross written premiums to put North America ahead of EMEA on Zurich’s P&C business. EMEA growth came to 6 percent.

The pace of gains in Zurich’s European commercial lines, focused on the UK, have “started to moderate” during the course of the third quarter, Quinn indicated. Beyond the UK, European rates “never really saw the run up” that the US and UK markets had provided, he said.

“We are not seeing a significant drop off, but you’ll see a gradual decline to the end of this year and into next year,” he said.

No matter what the pace, rates seem guaranteed to outpace claims inflation, which hasn’t been a major hurdle for Zurich to date.

“Inflation, despite the headlines, is manageable for us,” Quin told analysts. “It hasn’t shown up.” Wage inflation doesn’t impact Zurich’s US workers’ compensation business much given how Zurich’s policies are structured to the larger losses, making medical inflation the greater driver.

Asked by one conference participant if a Zurich rule of thumb might be 8 percent rates growth, 5 percent claims inflation, Quinn countered: “It’s not bad. 5 percent on the inflation side is higher than I would have had on my own rule of thumb, but it wouldn’t be far away.”

The greater inflation issue for Zurich might not be near claims, but in wage inflation as employee retention turns competitive, he said.

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