Group Profit: $7.8 billion, up 5% year over year. Core ROE: 24.6%, an increase of 1.6 percentage points from 2023. Cash Remittances: $7.1 billion. Dividend Proposal: Increase of 8% to CHF28. Life BOP: Grew 9% like for like to $2.2 billion. Life Gross Premiums: Grew 4% like for like. New Business Premiums: Grew 5% like for like. Property and Casualty Gross Premiums: Up 5% like for like. Property and Casualty BOP: Up 8% to $4.2 billion. Combined Ratio: 94.2%. Farmers BOP: $2.3 billion. Farmers Combined Ratio: 91.4%, down from 103.3% in 2023. SST Ratio: 252% at the end of 2024. Core EPS Base for 2024: $40.1 per share.

Warning! GuruFocus has detected 7 Warning Sign with ZFSVF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Zurich Insurance Group AG (ZFSVF) reported a record group profit of $7.8 billion, up 5% year over year, indicating strong business momentum. The company achieved a core return on equity (ROE) of 24.6%, an increase of 1.6 percentage points from 2023, showcasing efficient capital allocation. Cash remittances were healthy at $7.1 billion, reflecting high cash conversion and dynamic capital management. Life business operating profit grew 9% like-for-like to a record $2.2 billion, driven by growth in protection and unit-linked products. The property and casualty business saw gross premiums up 5% on a like-for-like basis, with a strong combined ratio of 94.2% and business operating profit up 8% to $4.2 billion.

Negative Points

The financial impact of the California wildfires on Zurich Insurance is estimated at $200 million, highlighting exposure to natural disasters. Farmers' business saw a decline of 8% in 2024, with ongoing challenges in customer retention and policy losses. The company's capital position, while strong, did not lead to additional capital returns to shareholders, as management prioritized growth opportunities. The middle market segment showed slower growth, with only 2.5% growth, indicating potential challenges in achieving future growth targets. The crop business had a combined ratio above 100% in 2024, reflecting ongoing adjustments and cancellations in the portfolio.

Q & A Highlights

Q: Can you provide a timeline for Farmers' return to growth, especially after the LA wildfires? A: Claudia Cordioli, Group CFO, explained that Farmers experienced an 8% decline in 2024, with a significant decrease in customer loss in the second half of the year. The team is focused on returning to growth, expected in the second half of 2025. Post-wildfire, Farmers is well-equipped to grow in California and other states.

Story Continues

Q: Was there any consideration for additional capital return to shareholders given your strong capital position? A: Mario Greco, Group CEO, stated that while the company could have distributed more capital, they are in the first year of a three-year plan with excellent growth opportunities. The focus is on deploying capital for growth, and any excess will be returned to shareholders if no better opportunities arise.

Q: Can you elaborate on the North America rate outlook and its impact on claims inflation? A: Claudia Cordioli noted that while the pace of rate increases is moderating, rates remain above loss cost trends in property, liability, and motor. The company is seeing strong rates in the middle market segment, particularly in the US and Canada, and expects these to continue favorably.

Q: What are your expectations for cash remittances over the next three years? A: Claudia Cordioli reiterated the target of over USD19 billion in cash remittances over the three-year period. The 2024 figure included one-offs from transactions, but the company will continue with dynamic capital management to achieve this target.

Q: How is Zurich positioned for retail recovery in 2025, particularly in terms of rate actions? A: Claudia Cordioli mentioned that the company is happy with the rates achieved in Switzerland and Germany, with the market moving favorably. The goal is to return to mid-term combined ratio targets by 2027, with inflation moderating and favorable rates supporting this recovery.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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