Zurich reports a consolidated profit of R42 million for the year ended 31 December 2014

Edwyn O’Neill, Chief Executive Zurich Insurance Company South Africa.

Zurich Insurance Company South Africa (JSE: ZSA) today reported a consolidated profit after tax of R42 million for the year ended 31 December 2014 compared to the consolidated loss of R164 million in the prior year.

“We have made measurable progress in implementing the turnaround strategy that was initiated at the end of 2013. Premium volumes reduced by 9% to R3.7 billion compared to the prior year of R4.1 billion, as a result of corrective action taken on unprofitable books of business in line with the Group’s strategy. Growth and retention strategies are beginning to take hold on selected books of business. Net earned premium reduced by 3% to R3.1 billion from R3.2 billion in 2013,” says Edwyn O’Neill, Chief Executive Zurich Insurance Company South Africa.

The company reported an underwriting deficit of R351 million compared to the deficit of R455 million in 2013. The general insurance result, inclusive of attributable investment income, also shows improvement to a deficit of R266 million compared to a deficit of R372 million in the prior year.

Claims expenses decreased by 12% from R2.6 billion in 2013 to R2.3 billion in the period under review. O’Neill commented: “The attritional loss ratio improvement was offset by a series of large losses in the second half of the year within the property portfolio.”

Net commissions decreased slightly by 1%. Operating expenses during 2014 were well managed and contained with an increase of 4% to R597 million (2013: R573 million), being below inflationary as well as contractual increases.

Attributable investment income increased by 3% to R86 million (2013: R83 million) due mainly to an increase in interest rates. Net realised gains increased by 84% to R194 million (2013: R106 million) due to the disposal of listed shares to finance strategic projects together with the re-balancing of portfolios.

International solvency improved from 58% to 60% due to lower premium volumes and is in excess of the targeted solvency levels of 45 to 50%. The net asset value per share of the company dropped by 4% as a result of the underwriting loss experienced for 2014. The surplus asset ratio is still high at 2.0 (2013: 1.9).

O’Neill concludes: “Since embarking on our turnaround strategy at the end of 2013 we have started to see positive developments in the core initiatives aimed at improving long-term profitability. Our balance sheet remains strong, and our international solvency margin at 60% continues to exceed the targeted solvency levels. We hold capital in excess of the minimum threshold to allow for more stringent requirements that are expected under the Solvency Assessment Management (SAM) regime as well as planned capital expenditure on our new systems and other areas of growth. We are on track for our 2015-16 targets.”