Earnings call transcript: Zurich Insurance Q2 2025 sees profit rise

Zurich Insurance Group, with a substantial market capitalization of $102.8 billion, reported a strong performance for Q2 2025, with group business operating profit reaching 4.2 billion dollars, marking a 6% increase year-on-year. The company also achieved a record Core Return on Equity (ROE) of 26.3%. According to InvestingPro analysis, the stock appears undervalued against its Fair Value, presenting a potential opportunity for investors. The company continues to focus on expanding its commercial insurance capabilities and investing in energy transformation, with the stock showing impressive year-to-date returns of 13%.

Key Takeaways

• Operating profit increased by 6% year-on-year to 4.2 billion dollars.
• Core ROE reached a record 26.3%.
• Gross written premiums rose by 14%, with new business premiums up 20%.
• The company is targeting a 9% CAGR in core EPS from a 2024 baseline.
• Zurich is investing in energy transformation and new energy sources.

Company Performance

Zurich Insurance Group demonstrated solid growth in Q2 2025, with operating profit and ROE reaching new heights. The company’s diversified portfolio across geographies and business segments continues to support its competitive position, particularly in construction and engineering specialty lines. The property and casualty profit rose by 9% to 2.4 billion dollars, while the life business maintained a strong performance with a 1 billion dollar bulk, growing 4% on an underlying basis.

Financial Highlights

• Operating profit: 4.2 billion dollars, up 6% year-on-year
• Core ROE: 26.3%, a record high
• Property and Casualty profit: 2.4 billion dollars, up 9%
• Life business bulk: 1 billion dollars, up 4% on an underlying basis
• Gross written premiums: up 14%
• New business premiums: up 20%

Outlook & Guidance

Zurich Insurance Group is optimistic about its future, targeting a 9% CAGR in core EPS from a 2024 baseline and aiming for a core ROE exceeding 23%. The company plans cumulative cash remittances of 19 billion dollars and expects Farmers exchanges to grow in the mid to high single-digit range. InvestingPro data shows the company maintains a strong financial health score of "GOOD" and an impressive Piotroski Score of 9, indicating robust financial stability. The focus remains on expanding mid-market and specialty segments, with continued investment in energy transformation.

Executive Commentary

Mario Greco, Group CEO, stated, "We have delivered an outstanding performance in the first half of the year," highlighting the company’s robust financial results. He also noted, "We continue to see pricing conditions supportive of profitable growth," emphasizing the favorable market environment. Greco further commented, "We are very active in the energy transformation," underlining the company’s strategic focus on sustainable energy initiatives.

Risks and Challenges

• Slowing property rates, though still attractive, could impact future profitability.
• The liability market remains challenging, posing potential risks to growth.
• Expense increases due to recent acquisitions, such as TravelGuard, could affect margins.
• Potential sale of the German life back book may introduce operational uncertainties.
• Market stabilization in motor insurance could limit growth opportunities.

Q&A

During the earnings call, analysts inquired about pricing dynamics in commercial lines, with management explaining the supportive conditions for growth. Questions also addressed the potential sale of the German life back book, with executives clarifying strategic growth plans across various insurance segments. Concerns about expense increases following the TravelGuard acquisition were also discussed, with management outlining measures to manage costs. For deeper insights into Zurich Insurance Group’s financial health and growth prospects, including exclusive ProTips and comprehensive analysis, check out the detailed Pro Research Report available on InvestingPro.

Full transcript - Zurich Insurance Group AG (ZURN) Q2 2025:

Mario Greco, Group CEO, Zurich Insurance Group: Good afternoon, everybody, and welcome to Zurich Insurance Group’s first half twenty twenty five results q and a call. On the call today is our group CEO, Mario Greco, and our group CFO, Claudio Corleoli. Before I hand over to Mario for some introductory remarks, just a reminder for the q and a, please keep questions to a maximum of two. Over to you, Mario. Thank you, Mitch.

Hello. Good afternoon, everyone. Thank you for joining us today. Before we take your questions, I’d like to share a few brief reflections on our half year results presented this morning. Zurich has delivered another outstanding performance through the 2025, continuing the strong performance delivered in the past years.

There are three important aspects of our results, which I would like to highlight. Group business operating profit reached a record US dollar 4,200,000,000.0, up 6% year on year with each of our geographic and business segments showing positive progression. And this result underscores the strength of our diversified portfolio and the disciplined execution across all business lines. Second, the core ROE climbed to a highest ever 26.3% over the last decade. This represents a sizable 15 percentage point increase and talks to the ongoing optimization of our capital allocation.

And lastly, our financial resilience underpinned by an SST ratio of 255% at the June, coupled with the high cash conversion of our earnings positions us strongly to continue generating attractive, durable returns for investors. Now let me briefly touch on the performance across our individual business segments. And I start with property and casualty this time. There we achieved an all time high bulk of US dollar 2,400,000,000.0, up 9% year over year. The combined ratio improved by one point one comma two percentage points to 92.4%, driven by strong underwriting results in both commercial and retail.

Now looking at commercial insurance specifically, we delivered further improvement to profitability with a 90 bps decline in the combined ratio to 90.5% for the half year. We continue to see favorable growth opportunities in our preferred segments, such as specialties and mid mark middle market. We’re also very happy to see The US commercial auto performance showing strong margin improvement after all the underwriting actions we took last year and in this six months. The property market is showing a reduction of the hard rates of the past years, but remains attractive and profitable. The liability market, however, despite the strong rate increases, is still not profitable enough, and we underwrite it with great discipline and attention.

Retail property and casualty had a notable progression with a 2.4 percentage point improvement to combined ratio of 94.1%, supported by rate momentum and underlying improvements to the motor and property portfolios. EMEA motor, in particular, saw an eight percentage point increase in rate. We continue to see pricing conditions supportive of profitable growth across our property and casualty business. You will see in our half year materials, we have provided you with additional details on our sizable specialty business. In the 2025, this portfolio generated US Dollars Four Point Nine Billion across written premiums at a highly profitable 86.5% accident year combined ratio ex excluding cat.

We believe our underwriting skills, data availability, strong customer engagements across a range of diversified business lines differentiate us in the specialties business. This is one of our preferred growth engines. We will tell you more about the strong opportunity we see for our specialty business at our Investor Day in November. In short, the corporate and casualty market gives us a multitude of opportunities to execute on value enhancing growth in the medium to long term with our usual underwriting discipline. Turning to life, we sustained last year record bulk of $1,000,000,000, which actually grew 4% year on year on an underlying basis, allowing for the one off contribution of 2024 from the conclusion of our German Life back book sale.

Gross written premiums are up 14%. New business premiums are up 20% on a like for like basis. They point to a solid foundational platform for future growth prospects. We’re particularly excited about the traction of our new global life protection unit. We see a structural opportunity to accelerate growth of Capital Light, high margin protection solutions addressing the prevailing protection gap across our key markets with a wide enough for customers.

Our protection sales grew 3% over the period at an expanded margin of 15.7% during the half year. And finally, turning to the considerable improvement underway at Farmers, they delivered a strongest half year ever with BUPA 4% to US dollars 1,200,000,000.0. The pharmacy exchanges reported a combined ratio of 90.5% despite exposure to the California wildfires. Most impressively, the exchanges returned to policy can grow in q second for the first time in over a decade. Strong underlying profitability combined with the surplus ratio in excess of 45%, sees the exchanges to raise their future growth ambition to a mid to high single digit percentage growth rates.

Farmers management services and Farmers REIT both contributed positively with agency brokerages showing some growth in fee revenues and bulk. The agency brokerages are proving themselves to be a valuable tool both to generate new business and to retain existing customers. Looking ahead, we entered the second half of the year financially resilient and with a strong underwriting culture focused on driving continued momentum across our businesses towards our 2027 financial ambition, which I just remind you of now. A compounded annual growth rate over 9% in core EPS from a 2024 baseline of $40.1 per share. A core ROE in excess of 23%, cash remittances exceeding 19,000,000,000 cumulatively.

Thank you for your attention. Carl and I are now happy to take your questions. Okay. Thank you, Mario. We’ll take it to q and a now, please.

Operator, as usual, please try and keep questions to maximum of

Operator/Moderator: two so we give everyone a

Mario Greco, Group CEO, Zurich Insurance Group: chance to ask a question. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: We will now begin the question and answer session. The first question comes from Andrew Sinclair from Bank of America. Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Good afternoon, everyone. First question for me, Farmers doing really well, guidance advising today. Just really wanted to how that affects your target for mix of profits of the 75 to 60% to come from PNC in 2027. Is is that still valid? I I know, Mario, you previously said you thought PNC consensus was way too low and it is certainly moved up since you set that.

Do do you still feel that way? So that that’s question one. And then question two is just on P and C expenses. I get there’s usually some seasonality on expenses. I I get the AIG book might have certainly higher expenses.

But really, the the increase is probably still quite a bit more than I expected. Just really wonder if you can help unpack that that higher expense ratio for us and and where that goes from here. Thank you very much. So look, I mean, quick answer on expenses. See, you have two two different phenomenon.

The energy component, which impacts the retail expenses, but then benefits the loss ratio. Right? So you have two sides of it. So expenses would would be redefined with that, but also the loss ratio is redefined. Travel gas business runs at a very low loss ratio, but has something like 300,000,000 of expenses that we might be able to reduce over time, but not eliminate for sure.

There are also some investments in the commercial part of the book in order to grow specialties in mid market. So we’ve been hiring underwriters. So we’ve been expanding our capabilities. Of course, we don’t have yet the revenues and the profits from that. So I can tell you if the expense ratio in commercial would say, at this level, will go lower.

Chances are it will go lower, but I can tell you by how much. But these are the two main impacts that we have had on the expenses, and they’re both nonreplicable ones. On property and casualty, look, I mean, we we never change targets and we never change what what we say even because we say that already. I am as you can as you could have heard from my comments at the beginning, I’m quite confident on profit and casualty continuing to grow and continuing to delivering profits. And, you know, if anything, this six months raised my confidence.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Maybe to add on on Farmers to your question by the fact that we are projecting mid to high single digit growth, and it’s definitely consideration based on the acceleration of growth that we have seen coming through. Right? So in q two, actually, than we had expected, we’ve seen farmers going back to policy in force growth. We expect them to continue on this path, and that’s the the basis for increasing our view on on the potential growth next year. The next question comes from Michael Huttner from Berenberg.

Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Thank you very much. I have two, one on German Life and one pricing. On on German Life, I think two years ago, you stopped the or it was stopped as of the Hudson, the back book sale of $30,000,000,000. So it’s it’s going to be a bigger quite a big deal. Now the your your partner has changed ownership so that that that ownership is is now more acceptable to the regulator.

And I just wondered how how you’re thinking about that term back book sale and and also what the economic drivers are. Because I was even back then, the cash benefits wasn’t going to be massive. And I think as interest rates normalize, we’re saying that the solvency benefit wasn’t going to be huge. But think there is another moving part, and I just wondered whether you could kind of explain. And then on on pricing, I know you you you’re so positive on on non life, Mario, which is fantastic.

But for for me for analysts, looking at the pricing, I’m kind of thinking, pricing is down from from four to three overall, probably in commercial lines somewhere around two. And I’m just wondering yeah. But it’s great to be posted on on on on the outlook, but but the pricing doesn’t get doesn’t kind of support that. Now I I just wondered if you can give give us kind of, you know, how how we can square the circle here. I think you you kind of alluded to in lots of ways, but I I I’m still a bit puzzled.

Thank you. Okay. Michael, I’ll start with pricing and then I’ll pass it to Claudia for the German guys and what we’re doing there. Look, on pricing, give me give me give me a few minutes of attention because it’s gonna be an articulated answer. So first of all, we’re moving our books.

If you see, we’re moving our books towards specialty, towards mid market. We’re reducing the impact of liability. What we did in the motor books was, for example, in commercial auto, was a pretty decisive cancellation of policies and contracts at part partly contrasted by high rate increases. But we’re moving the books, and we moved the books to businesses of which have a much better combined ratio. And it’s proof of it.

You see that our combined ratio commercial is improving. But, of course, if you have a combined ratio in the eighties, it is quite difficult to imagine that you’re gonna have double digit rate increases. Second, in property, which is often discussed, we see a very stable combined ratio in the nineties. And, yes, I mean, the rates are slowing down, but understandably so if you have been for four years in the nineties. So property is still very interesting and profitable even at this rate.

And then the future would be decided by the catastrophes in the next month. Depending on what happens, we would see if the rates hike again or continue this trend. Where we are very cautious, and actually, we don’t want to grow is on liability because although the rates are quite high, but also the claims cost is high, and the combined ratio stays too high. And so there, we

Operator/Moderator: will

Mario Greco, Group CEO, Zurich Insurance Group: continuously prune and reduce, especially if it is in the global corporate space. Retail is much easier because the retail is rebounding, rate increases are strong, and they are we’re just growth oriented, and we think that it will remain as profitable as it is for the next visible time. Did I fully answer your rates in commercial, Michael? Or More than I hoped. Thank you.

Okay. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: And just to give you a data point, because this is a super important element in in our release today, and I think that your view on on prices is a bit simplistic. Just a data point, Michael, on on our property book in US. Right? There are valuation adjustments on the underlying exposure that are still north of 7%. This is coming on top of what rates are doing.

Right? And this is to allow for inflationary pressure for cost increases, so it’s over 7%. Deductibles are holding up very nicely. There’s no erosion there. We’ve got average net limits that are coming down.

So it’s a it’s a combination of things that allow us to still print in property a combined ratio below 90, including tax, like, wildfires happening in in in January. So, yes, rates is one thing, but you need to to look at the aggregate, and the aggregate is a very strong margin that we are still able to generate.

Mario Greco, Group CEO, Zurich Insurance Group: Fantastic. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: On the German Life book, so as as you said, the the the completion of of Iridium gives certainty to the market. It was important for everyone now beyond the individual the individual transaction to get certainty on the ability to execute back book deals in in Continental Europe. So now there is that certainty in the market. We mentioned before that we continue to be focused on finding the right transaction and the right partner for the sale. So we’re actively working with with the German team to prepare and and, you know, get towards the necessary steps.

That’s there is interest in the market, so we continue to to look at our options. We’ll we’ll update you in due course. Your question on valuation, yes, it’s true that interest rates higher. So the the the the underlying is different compared to two or three years ago when we started looking into this. However, also keep in mind that there has been a runoff on that book, so that also needs to take needs to be taken into account on the valuation of the book.

So we are going through that exercise. We’ll update you in due course, but we continue to be strategically focused on on this.

Mario Greco, Group CEO, Zurich Insurance Group: Brilliant. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Fahad Chandaghazi from Kepler Cheuvreux. Please go ahead.

Analyst: Hello. Thank you very much for taking my questions, and thank you for the additional disclosure on middle market. I was just looking at Friday, and given the, again, the rates that you have shown shown and the 10% combined ratio, do you still expect that 87% combined ratio to hold in the medium term in the market and specialty? And second question on EMEA motor. It’s turned around very quickly.

Could you comment upon your expectation of the turnaround and what has accelerated it from the November GMV where we’re looking at to get below 96% by ’27? Thank you.

Mario Greco, Group CEO, Zurich Insurance Group: Look, on mid market and specialty, let me answer this way. We have no evidence that the profitability is gonna come down. Now that I I I didn’t answer your question because your question is, is this gonna hold for the long time? And I don’t know that. I mean, markets can change.

I have no evidence markets are ready for a change. And that and this is also driving us to insist on growing mid market, small and medium enterprises, and the specialty business. I mean, they partly overlap each other. Right? Is that clear?

I mean, this is not a NISI set because partly mid market, that’s specialty. So you cannot sum up the two the two numbers. Can I ask Claudia to take care of the your first question?

Claudio Corleoli, Group CFO, Zurich Insurance Group: On Jumia client ratio. Yes. So it’s true that it’s coming through very quickly. Especially in Germany, the actions taken by the team are striking. Right?

They they’ve been going through very, very fast into the the combined ratio. There’s also a comment on on the market to to be made by the whole market has turned because there there was an industry issue as as we repeatedly mentioned in the past. So they they literally left no no stone unturned. They’ve been acting on pricing in a very sophisticated fashion. They’ve been increasing new business, double digit on their direct platform, which is also very nice, and it’s improving profitability.

They’ve taken a number of action, obviously, on the book, on the retention, and and the repricing. So that’s what’s guiding the the the improvement. We’ve seen also some improvement in The UK book, which is SME, not retail, but it’s classified as retail in in our disclosures. Switzerland has been improving very nicely and and Italy too. So it’s a it’s a concerted action.

A lot of it went through pricing. And, you know, that retail is is relatively quick to the price. So it’s something that can be done on an ongoing basis. The way the teams have been acting to segment the customer spaces and and make sure that they could pull through the right degree of rates in the right segment has been has been really strong, and we are seeing that coming through the numbers.

Mario Greco, Group CEO, Zurich Insurance Group: And if you go back three years and you look at the notes, we say three years ago that we expected in 2025 retail to be below 95. So to me, the anomaly was last year, not this year. This year is going exactly as we expected three years ago. Last year was was the anomaly with Germany worsening instead of continued improvement. And then Switzerland also not improving enough as we expected.

This year, they are following the track that we expected for retail a while ago. And so it is not a surprise for us. Yes. Great. Thank you.

Welcome.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Andrew Baker from Goldman Sachs. Please go ahead.

Operator/Moderator: Great. Thank you for taking my questions. First one, can you just remind me the premium now associated with the North American motor business? And given, I guess, the turnaround here and sort of further rate coming through, where do you think that combined ratio can get to? And then secondly, on the middle market growth, I guess, the year on year growth was held back by The U.

S. Programs where you highlight, obviously, the focus on profitability. To share, was that profitability improvement work anticipated in your 10,000,000,000 GWP target for 2027, or does that create a bit of a headwind there? Thank you.

Mario Greco, Group CEO, Zurich Insurance Group: So once again, I take the second question, and I pass the first one to Claudia. On mid market, yes, we knew that we had an issue on the program business, and we knew that we would act on the program business. And so we’re committed to the target as we were before, and we’re we’re confident that we’re gonna get there. And if you see the growth has been accelerating in both US and EMEA, and actually, we are ahead of our plan to invest in mid market resources. And so, again, we’re confident that the results will be visible.

So nothing really unexpected there.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Yeah. And from what we’re seeing in July, Andrew, on the middle market, both, you know, the core middle market as it’s disclosed in in the slides, so ex US programs and ex specialties, it’s actually accelerating the growth. So the team expects to be able to grow double digit. So the the I guess, important thing to keep in mind is that the work to pull part of The US program book has been done between last year and the first six months of this year. So you will not see this degree of GWP decrease

Mario Greco, Group CEO, Zurich Insurance Group: in

Claudio Corleoli, Group CFO, Zurich Insurance Group: the second half. Right? So the the pruning actions have been largely taken. Obviously, they would still work through the the combined ratio, but in terms of cost premium written, the bulk of it is done. What we expect to see in the second half is a peak up in the core middle market premium over and above what we’ve seen in in in h one.

On North America Motors, it’s roughly 2,000,000,000 premium book, so it’s sizable. You’ve seen in in the deck the the year on year improvement. Keep in mind that last year, the the combined ratio was also and it’s what we are showing in in the slide, also included some reserve strengthening, which we’ve been communicating about, right, to ensure that we are equipped for potential adverse experience. So that obviously increased the combined to the 120 ish that you see in the slide. We are very pleased that this year, so far, actually, it was to see it’s been slightly positive, and we’ve been, you know, prudent in the way we we have defined the expected loss ratio in the books given the past experience.

Operator/Moderator: Great. Thank

Mario Greco, Group CEO, Zurich Insurance Group: you. And we expect this book to remain around to this level of profitability by year end.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Will Hart Castle from UBS. Please go ahead.

Operator/Moderator: Oh, hi there. Thanks for letting me take

Mario Greco, Group CEO, Zurich Insurance Group: the question. I guess, it’s just one left actually. Can you help us to understand the mix of farm ins between motor and non motor? And then let us know what current price adjustments are on each of those. I guess what we’re really what I’m trying to get to is sort of understanding in that high mid to

Operator/Moderator: high single digit growth, what is the sort of peak growth that you’re sort of implying in that? Thank you.

Mario Greco, Group CEO, Zurich Insurance Group: I suspect we need to come back to you with these numbers because I don’t think we have it offhand. So we will come back to you with an answer to that.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Maybe what we can already say, Mario, is that the growth that we’ve been seeing is supported both by motor and specialty products that they’re selling. So it’s a it’s a mixed growth. There has been an acceleration well, on on the specialty side of things, which is one of the reason why the cost in Britain are increasing more than the RN side. It takes more time for the specialty policies to run through. They are five months policies.

So it’s growth in both. We’ll come back on the exact mix mix. And it’s, by the way, it’s it’s something as well that’s being defined dynamically. Right? It’s not Cannot be perfectly predicted.

Mario Greco, Group CEO, Zurich Insurance Group: But there was no Yeah. Absolutely. Thank you very much. Thank you. Welcome.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Yes. Good afternoon. Thank you very much. I have actually only one question left after all these questions are asked. That’s just a clarification on the expenses.

Because is it if I mean, I’m just curious to know your your gut reaction to this. Is this something that is worrying you a bit? Because from where we said, we see obviously the underlying loss ratio including the loss, but the expenses eating some of that because of commissions or investment. And is that something that you would have anticipated or we should have anticipated? Is that something you’re quite comfortable with?

So I’m just curious to hear your thought on that because that’s obviously being the focus in an otherwise very strong underlying loss ratio without So so so look look, the the repair component of it, it could have been anticipated by all of you, and definitely, it was anticipated by us because as I said, I mean, we bought TravelGuard, which has roughly 350,000,000 of expense basis, but then has a 20 something percent loss ratio. And and overall, this is a very profitable business. It was well known. The commercial component, it was budgeted by us. You did not know that, but it’s precisely precisely what we budget for.

And so we were fully aware of it. We were supportive. And, you know, we think this is absolutely a direct thing to do. So I don’t see anything worry worrying that and, you know, the central expenses are under control and are coming down. I mean, every other expense item is absolutely under control and will come down.

So for us, this is not not not not new, and it’s not unexpected, and it’s not boring as at all. So And we need the commercial the commercial part of it

Claudio Corleoli, Group CFO, Zurich Insurance Group: is is 60 basis points, which includes the investment in the market that I was mentioning before. So it’s just not it it’s a much smaller piece of the overall increase in expenses. The majority of it is the travel guard impact and the the India’s contact inclusion in in retail, which is partly set up and partly so on some rate change that Mike was referring to.

Mario Greco, Group CEO, Zurich Insurance Group: Yeah. Thank you very much. And if I can get my second one in the slide nine is very helpful on the specialty line. Thank you very much. I’m just curious between these lines that there must be a lot of moving parts because obviously the a y c r on the left hand of the chart is flattish to smaller.

So is there any commentary that you’d like to share on this right hand side, which lines you’re focusing more on? Is it construction? Because you’re not not financial lines. Is there any commentary there that we could use? Thank you.

Well, look. I mean, the construction is is our backbone. I mean, we are leaders in constructions and engineering. So that remains a point of strength of surety in the market, and it continues to be a growth engine for us. Then credit and surety also is something that we have been doing very well over the past years, and we are thinking about how we can we can globalize that and and bring it to other customers.

Energy is also quite important for us. We’re very active in the energy transformation. We’ve been investing on many of the new energy sources. I think we’re very competitive there. E and S had a kind of a setback this year because of rates.

It was very interesting in the past two years. This year, we’re not growing that aggressively because we see that the market is softening the rates and the profitability might not be at the same level of the past years, and so we don’t plan to grow it. Yeah. The other lines are what they are. I mean, you know our view on cyber.

It’s a very specialized line line of business. We do cyber for SMEs and some of mid markets, so we don’t go above that. Yeah. And financial lines, not much to say about that. Okay.

Thank you so much. Appreciate that. Thank you. You’re welcome.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Kamran Hossein from JPMorgan. Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Hi. Asking two questions for me. The first one is just on the life CSM clearly kind of came in better than I think I’d hoped at least. I guess, the the relatively large move, should we think about amortization passing being any different to how you’ve kind of described it before? And the second question is on, I guess, the the areas that you think you can improve in P and C.

They’re clearly in your business as a mix shift as the middle market and thanks for the disclosure there. But, you know, you called out the commercial motor in The US piece improving today. Are there any other areas that you think, you know, you have ability to remediate through it to kinda keep that combined ratio coming down a little bit more outside of kind of rate and mix shift? Thank you. Yeah.

Alright. So, usually, usually, sequence, I start with your last questions and then Claudia takes the first one. Look. Of yes. I mean, of course.

We always have something that we’re working on. You know, the program business was known to us, and we acted upon that. We wanna see this year crop. Crop is an area where we had two years ago bad results. Last year was better, but still not okay.

We have re reformed the crop portfolio this year very carefully, and we wanna see if this produces the results. And then as I mentioned before, it’s especially important for us to continue pruning liability portfolio. We’re not pleased with the liability results or with the profitability. I heard that other companies are happy with that, so we’re not. And so we will continue taking actions either on rates or on on canceling some some accounts.

But we’re pretty pleased with the profitability of mid market, closely speaking, specialties, and even the property portfolio is generating very good returns at the moment.

Claudio Corleoli, Group CFO, Zurich Insurance Group: On the life system question, Cameron, it’s fair to assume that the 3% amortization rate that we’ve seen so far will continue that will continue to be arranged.

Mario Greco, Group CEO, Zurich Insurance Group: Got it. Thanks very much, both.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Thank you. The next question comes from Dominico Mahoney from BNP Paribas. Please go ahead.

Operator/Moderator: Hello, guys. Thanks for taking our our questions. My first question is just on the the financial result within within PNC. I’m looking at slide 13. And I I was a bit surprised that the investment income here, the $1.02 $7.06, increased more.

I’m looking at the book yield on the right hand side here. I think the book itself grew grew at a fair trip as well. Could you just help me bridge from what looks like, you know, a book yield that should imply a sort of a 10% increase on top of the growing book back to to a smaller increase in the investment income. What are the other moving parts? And I suppose, relatedly, I’m gonna try and shoe horn this into the same question.

The Iffy, if if you’re gonna grow the Iffy to full year ’25, 200,000,000 on full year ’24, and if I have a really sizable increase in the Iffy in the second half, is there a special reason for that that I might have misunderstood or missed? The second question is is just a very simple one. You you’ve been very specific in saying the life of profit will be it’s actually in line with last year at 2,200,000,000.0. When you gave that guidance, the the dollar was in a different place. I I I I have been expecting that that’s a bit of a tailwind to the life of of profit.

Is your 2.2 sort of adjusted for the the effects? Thank you.

Mario Greco, Group CEO, Zurich Insurance Group: Dom, I I don’t think we adjusted for the effects. And, essentially, I I I don’t even know where the effects will be because there is there is volatility there, and I wouldn’t predict the FX levels by year end. I wouldn’t even try to do that. So I wouldn’t try to adjust. I mean, we’ll speak to the guidance and then we’ll manage to come as close as possible or even better than that.

Claudio Corleoli, Group CFO, Zurich Insurance Group: And keep in mind, John, that we had last year, a 150,000,000 one off. So the the fact that we plan for the full year to be in the same range is actually substantial substantially for ’85. Not not taking into account any any one offs, and we didn’t have any positive one offs in in in a time unlike last year. So it it it’s quite an ambitious target, I would say. On your first first question on on the NII for for P and C, there’s there’s one main driver for for for the increase that that’s that’s not as high as expected, and that’s a hedge fund performance.

So a significant chunk of the hedge fund holdings we’ve got is reported through P and C and it’s part of the NII. And while it’s positive in in terms of mark to market and gains in in h one twenty five, it’s not as high as as last year. So it’s roughly a 100,000,000 a bit less than a 100,000,000 year on year, and that’s the main explanation for for the NII gap, if you if you will. Your second point, sorry, was on on EFI on the 200,000,000, right, on on the full year guidance. Is that

Operator/Moderator: Yeah. That’s right. Just to recap on the on the former point, Claudia, and forgive me if I wasn’t clear. I I’m looking at the one two seven six on on page 13. If I’m if I’m I’m sure correctly that the the hedge fund gains are within the 36.

But I’m

Mario Greco, Group CEO, Zurich Insurance Group: I understand the point about that. I’m just that’s why the

Operator/Moderator: one two seven six didn’t go up anymore.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Yeah. There’s no particular reason, actually. There’s there’s some some ethics that comes through as well on some some I use some of the nominated items that have been had in in the Swiss balance sheet, but there’s nothing more substantial than than than that, Dominic.

Mario Greco, Group CEO, Zurich Insurance Group: Okay. Yeah. And on the IFC?

Claudio Corleoli, Group CFO, Zurich Insurance Group: On the IFC, so the the unwind of discount is roughly 70,000,000 year on year for the first half. For the second half, it it probably won’t come up to 200,000,000. It would probably be somewhere below there, probably a bit higher than the first half.

Mario Greco, Group CEO, Zurich Insurance Group: Super clear. Thank you so much. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from James Fox from Citi. Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Hi there. Good afternoon. At the at risk of focusing on on negative things, there’s lots of positive things here as well. But, Mario, I just wanted to get you kind of insight into your commercial kind of large accounts versus other. There’s been a a bunch of commentary that large accounts that are seeing the the cycle turn off, you know, a little bit more a little bit more abruptly.

Are you seeing that in your book as well? And if you’re able to give us an indication of, you know, how much you would classify as an automatic commercial premium, how much of that is large account? That would be helpful. And then secondly, just returning to specialty. I I the the the mix you’ve given is, like, very helpful.

I I guess I’m looking for just a bit more of a strategic outlook here. I I know you give an update later in November, but specialty can mean many things. And, you know, there are bunch of listed players that that the specialty insurers and, you know, subsets of conglomerates as well. What are you thinking in terms of kind of Lloyd’s platform, the media platform, how much you actually integrating MGAs into the specialty book? Just really kind of a bit more strategic view for the the app that would be helpful.

Thank you. Right. A large corporate, I can’t give you a precise number of split, but we have been shrinking large corporate in percentage terms and in nominal terms now since ten years ago. You remember that ten years ago, Zurich was mainly a large corporate rider. Now the problem with that was, a, that the combined ratio was relatively higher because of the competitiveness of large corporate, but b was the volatility.

Because, of course, if you’re serving a large corporate, you have a large corporate claim too. And so when we announced back in 2016 that we wanted to stabilize and reduce the volatility of the business, we also indicated very clearly that we will grow mid market and SMEs. And we’re seeing there. We’re still growing. Where we are today, mid market and SMEs, is the result of ten years of investments to grow and shifting of the portfolio, and we’re continuing that.

So I I don’t see I don’t see changes. I mean, there are long term structural reasons for us to grow somewhere else than in the large accounts category, and there are also tactical short term reasons to do that. And this and this has remained the priority for us. Then your second question is on the specialty composition and the Lloyd’s platform. Look, do we need a large a large platform?

I don’t know. I mean, there are some businesses that don’t come if you’re not annoyed. Do we badly need these businesses? I doubt it. I mean, we we don’t feel we are limited by that.

But, yeah, it’s something that we keep looking at, and we’re open without without having made the decision. On the definition of specialty, completely understand what you’re saying, and that’s why we put in the page a breakdown of what are specialties for us. Because as you said, specialties means many different things, but you see from there what it means for us. Where we have competencies, where we have underwriters, where we have data, and this is what we’re planning to keep growing and develop. Does that answer your question of specialties?

Yes. Thank you very much. Okay. You’re welcome.

Claudio Corleoli, Group CFO, Zurich Insurance Group: The next question comes from Andrew Cream from Autonomous. Please go ahead.

Mario Greco, Group CEO, Zurich Insurance Group: Hi. Good morning, everyone. A couple of questions for me. Firstly, on Farmers, given the strength of the surface ratio, which is well above your thirty four thirty eight target thirty four thirty eight target, could you talk a bit about what kind of combined ratio the exchanges would be happy to accept and whether they’d be happy to go above a 100 in order to upgrade volumes and sacrifice some of that excess capital. And then secondly, slide four, the cash remittances.

I noticed your full year ’25 bar is more than a third of your wage, 19,000,000,000. Could you talk a bit about that? Whether that is just additional cash remittances in full year ’25 or whether that’s indicating that it’s a run rate where you might be 19,000,000,000 over the three years. So the purpose of that is simply to tell everyone that we feel very safe and confident on the dividend of this year. We have the cash, and we have even more cash than we should have had according to target for ’27.

The dividend is is pretty is pretty safe. That’s the message. And then, you know, let’s see. As you know, over the past three plans, we have always exceeded the cash remittances target. And whenever we announce targets, you know, we don’t just plan to meet the targets that we always have condition to exceed the targets, but it it is very early.

This is the first semester, and we have a lot more ground to to define the target. On combined ratio and and the exchanges, look, I think I think it’s not it’s not just the exchanges. It’s also us. I mean, we want to keep the exchanges with the proper surplus. As you might remember from the discussion of a couple of years ago, we have no lever to act on the surplus of the exchanges except for the combined ratio, except for the technical profits.

And so we don’t mind them having excess surplus, if I can say so. And we don’t mind having the combined ratio in the 95 to 100 kind of range. I think probably we’re more careful than them. Because remember, the exchanges are not professional people, and they might not understand completely the volatility and the fluctuations that are possible in the market. We will keep the combined ratio in a in a kind of range 95 to 100, and we will try to avoid the combined ratio going above 100.

Operator/Moderator: Okay. Thanks. You’re welcome.

Claudio Corleoli, Group CFO, Zurich Insurance Group: We now have a follow-up question from Fahad Changazi from Kepler Cheuvreux. Please go ahead.

Analyst: Thanks very much. Sorry. Just one follow-up on when you’re talking about FX. If I look at the LifeVault, the non controlling interest increased. Could you just comment, is that in part related to FX?

It’s probably related to last time. So I’m just wondering if that $2.03 4 is in part less the FX in addition to this higher earnings. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: I don’t think this is driven by FX. Let’s just come back to you on on this one.

Mario Greco, Group CEO, Zurich Insurance Group: We’re puzzled by your question. We will think back and and and come back to you with with an answer. Can I can I ask in can I ask myself a question and give you the answer? Because I’m surprised it didn’t come. We had a specific effect in life in LatAm because sales in Brazil were down because of a transition at Santander in their organizational model and incentives.

This has been fixed, and it would be recuperated or contracted in the second second half of the year. But that’s one of the reason why the growth in protection is it was below what we expected, but at the same time, it is it it it it also says why we’re saying very confident on the protection growth because we saw this already corrected by Santander, And they were as disappointed as we were by their sales results in Britain. I think they even mentioned that in their call.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Ladies and gentlemen, this was our last question. I’d like to turn the call back to mister Mayo Greco for closing remarks.

Mario Greco, Group CEO, Zurich Insurance Group: So alright. Thank you all for questions and for the interest in in our results. Before we close the call, I would like to reiterate our key messages for today. We have delivered an outstanding performance in the first half of the year with the record operating profit and record core return on equity, supported by strong progression in all our geographic and business segments. And our financial resilience with an SSP ratio of 255%, coupled with high cash conversion, position us strongly to execute in the best long term interest of our shareholders.

See you all in the next weeks and then in November at the Investor Day. Thank you.

Claudio Corleoli, Group CFO, Zurich Insurance Group: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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