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Zurich South Africa reports restored underwriting results for the first six months of 2010

02 September 2010 Zurich South Africa

Zurich Insurance Company South Africa Limited (Zurich) has announced its results for the six months ended 30 June 2010.

Half-year performance highlights:

* Underwriting results reflect a surplus of R10.8 million compared to a deficit of R24.5 million
* General insurance result (which includes attributable investment income) improved from R30.7 million to R54.7 million
* Combined ratio of 113.2% improved to 99.4% in six months

The underwriting result reflects a surplus of R10.8 million compared to a deficit of R24.5 million in the comparative period last year and the general insurance result (which includes attributable investment income) improved from R30.7 million to R54.7 million.

“We have started to see powerful indications that our business transformation programme is gaining traction and this is reflected in our positive underwriting results,” commented Guy Munnoch, Chief Executive Officer of Zurich South Africa. “In the six months since December 2009, we have been able to improve the combined ratio of 113.2% to 99.4% as a result of our transformation plan which is on track.”

“Whilst our gross premium income declined by 16% from R2.9 billion to R2.4 billion, this was in line with our stated strategy to focus on profitability and combined ratio improvement,” said Munnoch. “We will not grow the business at the expense of profitability and the actions taken last year to correct underperforming portfolios have continued into the first half of this year.”

Claims at R1.3 billion are down 22% on 2009 (R1.7 billion) and the initiatives currently underway to reshape the claims and underwriting environment are contributing to the positive underwriting result.

Investment income attributable to insurance operations declined by 21%, mainly impacted by changes in interest rates. Non-technical expenses increased sharply to R168 million (2009: R5.8 million) but include a provision of R127 million, in terms of International Financial Reporting Standards, for the full cost of the business transformation programme that was embarked on in February 2010. This programme, which will create a strong platform for future profitable growth, is already having a positive impact on underwriting results. In addition, non-technical expenses include a management fee of R32.7 million which came into effect in January 2010 and is payable to the majority shareholder.

Other investment income was influenced by market movements and declined by 29% to R60.6 million.

Zurich’s cash flows remain sound and the balance sheet reflects cash and cash equivalents of R1.4 billion. At 41.3%, the solvency ratio remains within the target range as set by the Board. Net asset value decreased by 13% to R134.02 per share at the end of the period.

“Overall, our results demonstrate that we are making steady progress towards our aspiration to be the leading empowered insurer in our chosen markets,” said Munnoch.

In addition, there have been a number of Board changes since the beginning of the year. Steve Phiri, who represented Royal Bafokeng Finance, resigned as a Director on 5 May and was replaced by Pieter Rörich who was appointed on 1 September. Ivan Perez resigned as Acting Group Company Secretary on 31 May and George Kostopoulos was appointed as Group Company Secretary on 17 June.

“We would like to thank Steve for the very significant contribution he made to the Company during his tenure,” said Munnoch.

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