Zurich Insurance Group Ltd

Ladies and gentlemen, welcome to the Zurich update for the first quarter 2026 conference call. I am Valentina, the call school operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operators distant, please press star and 0. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to John Hawking. Please go ahead.

Thank you very much, Valentina, and welcome, everybody, to Zero Concurrence Group's first quarter 2026 Q&A call. On the call today, we have our group CEO, Mario Greco, and the group CFO, Claudio Cordieri. Claudio will make some introductory remarks, but I'd like to remind everybody to please keep their questions to two. Thank you very much. Gladio.

Thank you, John. Good afternoon, everyone. Thank you for joining us today. I'm Carly Perdioli, Group C4, and joined by our Group CEO, Mario Greco. I share first a brief overview of our results for the first quarter of 2026, after which we will open for questions. We have started the year strongly with high-quality growth accelerating across targeted business lines and customer segments, including specialty, middle market, and life protection. While the external geopolitical environment is uncertain, we are structurally well-positioned with a diversified product and geographic mix, and we think confident that we will meet or exceed our 2027 targets. Now, turning to each of the key businesses, I'll start with P&C. P&C has started the year strongly with GWP up 8% on a lifelong basis. Growth was broad-based with strong performances in North America and in EMEA. In commercial P&C, we continue to deliver disciplined growth with sustained delivery in our strategic segments of global specialty and middle market, supported by strong growth across the rest of the portfolio. Gross rate on premiums grew by 9% like for like. Great environment was broadly stable versus the second half of the year, providing attractive margins despite continued pressure in large account properties and E&S. Auto liability rates remain positive, and we are seeing early signs of stabilization in some specialty lines, including U.S. financial lines. Importantly, our book remains well indexed to inflation. In international property, Q1 renewals drove a mid-single-digit increase in issuer values. Overall, our focus remains firmly on underwriting discipline and enhancing portfolio quality, to support sustainable profitability. Global specialty. Global specialty grew GWP by 7% like for like, with our leading U.S. construction business growing by 21%. Our growth in this space is structural, not cyclical, and we continue to see secular growth opportunities, given long-term infrastructure trends. not least in the data centers as hyperscalers invest to meet demand for AI computing capacity. As one of the leading engineering and construction insurance franchises, Zurich has a dedicated construction team of approximately 300 colleagues in the US and about 100 experts in the rest of the world. Our construction book reached premiums of around $800 million in Q1 and profitability remains high as infrastructure spend gains space in the U.S. and beyond, with UK and continental Europe also playing an important role in our portfolio. Leader market continues to benefit from investments that we made in recent years in product technology and targeted recruitment of specialist underwriters. Here as well, premiums grew by 7%, with EMEA delivering outstanding growth of 15%. Overall for the group, middle market has grown steadily, generating around 2.2 billion of premiums globally in the first three months, reflecting the scale we have built and the effectiveness of this segment. In the U.S., this has been driven by a multi-year infrastructure rollout, now with more than 30 offices nationwide, so that we can be close to our customers and distribution partners. These offices are staffed by a growing, dedicated, and rising workforce, focused on servicing our selected industry verticals. We are now applying the same playbook in Europe, where last year alone we hired over 100 middle market professionals and have recently launched dedicated industry verticals such as Life Science. As in the U.S., these efforts are supported by technology investments that are already improving speed and commercial rates. Now, retail P&C. The cost rate in premiums rose by 7% on a like-for-like basis in U.S. dollar, with momentum across all regions, supported by rate increases of 5%. Importantly, this growth reflects our continued focus on pricing excellence, sophisticated risk selection, and disciplined portfolio construction. As a result, retail profitability continues to trend positively, building on the trends in recent years. Retail remains an attractive and scalable growth area where we see meaningful opportunities over the coming years while maintaining a clear focus on return. Now shifting to life. The life business had a very strong quarter, both in terms of growth and profitability, with our global protection business producing a particularly strong performance. Overall life GWP grew by 5%, or minus 5% on a life-for-life basis, with the protection business growing tenuous by 9%, slightly above our three-year targets. Growth was broad across EMEA, LATAM, and EMPAC, showing first benefits of our strengthened global focus on life protection business. New business CSM was up 18% year-on-year, at a margin of 7.4%, reflecting a higher quality mix of the business. Growth in short-term insurance contracts, mainly related to our highly attractive Latin America protection business, was 9% higher, like for like, while our investment business enjoyed a 10% higher free revenue, despite volatile markets. Overall profitability in life showed a further strong improvement in Q1. Switching gears now to farmers, farmers' management services underline free income, rose 4% year-on-year, supported by a 4% increase in gross return premiums at the farmers' exchanges. Growth was driven by higher policy counts, while rates in most lines remained flat or up low single digits. Policy momentum remained strong, with policies in force increasing by 84,000 in the first quarter and further 49,000 in April. This was supported by robust new business, which saw double-digit growth in Q1 and solid retention. The independent agency channel was the main contributor to farmers' growth, benefiting from actions to improve pricing competitiveness, broaden the product offering across states, and increase agent engagement. Importantly, the exclusive agency channel returned to policy growth in both March and April, marking a clear inflection point. In addition, the exchange and surplus ratio improved further, reaching 56.4% at the end of March, providing significant financial flexibility to pursue growth in a disciplined fashion. And finally, we closed out the quarter with a very strong SST ratio of 275%. which does not include the impact of the new equity issued in March to partially fund the proposed acquisition of Beasley. So, in summary, our business has started the year very positively, delivering disciplined revenue growth, underpinned by a strong capital position. With our geographically diversified business, strong track record, and robust balance sheet, I am confident that we are on track to meet or exceed our 2027 targets. With that, Mario and I will be happy to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handouts while asking a question. Kindly limit yourself to two questions only. Anyone who has a question or a comment may press star and 1 at this time. The first question comes from Michael Hoopner from Berenderg. Please go ahead.

Fantastic. I'll ask my questions in a slightly aggressive way. I hope you don't mind, but it will make it easier for me. So 8% life-like growth in P&C. including mid-market seven, specialty seven. So there's obviously a missing part, which is growing faster. Now, I know you mentioned construction, but my guess is large risk also grew faster. So if I were a generalist, I'd say, whoa, you know, your pricing in large risk, I've heard, is down. You know, it's marked clearly, which, you know, has a lot of competition. What's happened there? Why are you so confident that the growth will be possible? That would be question number one. And question number two is on data centers. These are huge things, huge prospects, projects. What's the risk that, you know, if something goes wrong, how much money could, well, not me, but could I invest in this? That's it, price.

So thank you. Thank you, Michael. So on the first point, yes, it's true there's other areas that are growing, and they're growing in an accelerated pace as well. If you take North America, we've got the whole commercial business, the whole commercial book that has been growing 10%, like for myself, slightly above specialty and middle market. In large specialty, we've been benefiting from significant and continued growth rate increase, and we've been closing a sizable number of new contracts, including some transactions that are of hunting nature. We've been growing in the captive space as well, and we've been growing in EMEA in a number of other areas in commercial property where margins have been very attractive. So it's a growth-based growth. It's not limited to specialties, not limited to middle markets. But it's happening at very attractive rates, and the margins are definitely attractive across the board.

Michael, remember that there are areas in casualties which are growing like commercial auto, close to 20% of rates, and casualty and liability in general is growing at low double-digit numbers. So we're not growing with number of contracts and with customers there, actually. The motor portfolio in size is shrinking, but the impact of this rate growth over the past three years has been such that the premiums are actually bigger than they were three years ago. Wow, that's a nice problem to have.

So on data centers, Michael, so those projects are complex and they are built obviously across different phases, right? So typically our engineering and construction teams will work with the customers in many situations, in many projects. We are actually a leader in the project. And the price is as well as the risks around accumulation, for instance, on the property side, are commensurate to the specific phase and what is at risk in that phase, right? So, for a significant part, actually, of the construction, which is typically where Zurich is at risk, right, not so much on the operations of the data centers. The building hasn't been fitted yet, right, and you've got essentially a concrete, right, a large concrete building with limited exposure in financial terms, and then obviously the fitting would be made and chips and everything has been implemented. So there's different phases with different exposures, and the premiums do reflect that. We are very... attentive on, obviously, accumulation risks, be it on the property cash side or any other race that we are taking. Those are typically products or contracts that cover multiple lines, which is why there aren't so many players that can underwrite this type of exposure. They range from property, water scum, motor, general liability, excess liability. So there's multiple risks, They're all priced for, you know, our judgment in a very attractive way, and typically we take the cost of the exposure. Those are obviously syndicated risks, and we feel very comfortable with our own exposure.

Thank you very much.

The next question comes from Fahad Sanghazi from Qatar Shibok. Please go ahead.

Thank you for taking my question. On the middle market premiums of 2.2 billion USD, it's not the same effect, so it's still a little bit positive. Is that base run which you can build from, and just following on to that in the US middle market, are all those new underwriters coming online and was your outlook there? And just on life, if you don't mind, again, very strong, you didn't see a 10 growth. Anything to highlight on seasonality and then comments on the year 2016 outlook?

Thank you. Yeah. So take the first one first on middle market. We are very pleased about the growth that we've seen in middle market and specifically actually on the progress in continental Europe and UK. Germany, Italy, France, they all show double-digit growth. And the fact that we've been able to invest in the infrastructure, so to speak, in the relationships with the brokers, hiring, as I mentioned before, 100 new middle market underwriters in continental Europe, that has been very conducive to seeding this growth. There's potential definitely to expand more. In some countries like Germany, we see increased spend on infrastructure, as we've been highlighting a few times, which is definitely a space where we would like to continue to go. And then there are some areas specifically like life science I've mentioned, but also financial transactions, technology, where we would like to go more in specifically with middle market customers. So I'd I do see actually opportunities for us to grow, to continue to grow as strongly, at least in continental Europe and U.S. to accelerate in the latter part of the year. We've been mentioning last year the investment in additional underwriters and the teams that we have recruited in U.S. They started to produce, and we see that in Q1, I think more can be done from there, so I would expect them to accelerate further in the rest of the year.

Yeah. Look, I mean, on life, simple question. There are no specific similarities except from the fact that we have not replicated the tactical products that we issued last year for banks about aid. And I remember that they were in a takeover battle. They wanted to push commission sales, the products that were at margin not the most exciting ones. So we, in a sense, they created an overhang with their customers. So it is okay that, I mean, we expected that and We used to be accepted, and this explains what I said before, that the margins in life look better, higher this year compared to last year. That's the only thing which has been, I would say, seasonality. Brazil has normalized, or it is normalizing for Santander. So compared with last year when Brazil was underperforming, now it's getting back to normal size and results. And the protection numbers honestly are pleasing us and reassuring us that the 27 targets are inside it.

I would I would add as well that as you know we've been setting up life as a global business in order for us to be more strategic in the way we are growing it across all regions and countries for us to expand bank assurance further. And we start seeing the fruits of that setup, right? It is more intentional, the way we are going about the growth. It is more growth-based in terms of geographies and the products that we are developing. We've got medical underwriting that we resource. So, There's a number of things that have been contributing to this. I think it did structurally set our book up for better margins, as Mario said, and also for stronger growth going forward.

Thank you very much.

The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.

Yes, thank you. Thank you, Giulia. So, for me, the first question would be on the commercial pricing. I noted that some supplies that the outlook for North America is improving, let's say, from moderating to stable, depending on now. Is that a function of the fact that you're growing more in the that you would like to point out. So, that's my first question. Second question is just picking up a little bit on that commercial growth. So, Vajay even answered that it's more broad-based. But there are lots of other things there. There are cross-courses, dealerships, there is direct business, there's lots of other things. the middle market, 7%, the shadowed economy, 4%, commercial, 9%. And if you don't mind, could you just say a little bit more about that pickup in the other areas? And if it's a repetition, then please ignore it. It's all about that later. Thank you.

So, look, Vinik, on rates, Yeah, it's definitely the businesses we are pushing to grow have better rates, development, and stability than the whole markets. But equally, I mean, we have seen property, I would say, improving, you know, against the last quarter of last year. The price development is less negative than it was in the last quarter of last year. Commercial also has been accelerating again. Casualty remains double-digit high, and specialties have been improving. I mean, financial lines have been recuperating against last year. construction is very hard, too, for the reason that I explained before, and when there is such a high demand, prices also stay quite high. So, I would say it's not just the business we target. The market seems to be in a better shape, or has been in this three months in a better shape. Honestly, I see an improving pattern on the rates in commercial for also for the remaining part of the year. I don't expect this trend that we're seeing in these three months to revert from negative for lower in the following months.

Thank you. Thank you very much.

I think that partially answers also the second question, Mini. There's a mix of rates. There's a mix of growth in Europe that was, especially in continental Europe, more pronounced on the property side. We've been also retaining more business. So there's a number of factors that do play a role in the premium number. There's an indexation of our property book that's also 5% largely on the commercial side that plays a role in the volumes. There's several items. You mentioned the direct business in the U.S., so direct markets. Yes, that's also one of the markets that are growing. And that, by the way, will earn through also in a number of future years, so it's not only visible in revenues this year. Okay. There's a number of factors that contribute. I would say the biggest one is probably rates and some European growth outside of specialty and middle market. That said, I mean, again, given the numbers we're talking about in terms of absolute amounts, having 7% growth in the strategic targeted areas and such a disciplined execution like we've seen in Q1, it's really a strong performance. I don't want that to go unnoticed just because commercial overall is increasing 1% more. Thank you, Glenn. Thank you. Thank you.

The next question comes from Andrew Green from Autonomous. Please go ahead.

Good afternoon. A couple of questions, actually. Firstly, some numerical questions. Firstly, if retail is growing 5%, 8%, could you supply the number for what the rest of the retail book is growing? And similarly, I'm going to come back to this commercial thing and hopefully we get an answer. If you're happy to give us the growth rate in specialty and middle market at 7% and 7% versus 9% to the total, could you actually fill us in with the numbers on the other side, which is large corporate and I think your captive business?

Be careful, Andrew, that specialty and mid-market are not mutually exclusive. There is overlap because mid-market also sells specialty. And you also have to be mindful of the proportions because the book is shifting towards the specialty. And so the weight of the specialty is growing inside the books. And so it's a complicated mathematical game of proportions in rebalancing the books. And to say that, I think the IR team can come back with the details of all of that is not here at the point of making spreadsheets with all the members. But there is no anomalous trend in what we're saying, and once again, we're not growing large accounts. I mean, they Just that the portfolio is moving, I mean, already today, before business, especially our biggest line of business in commercial, and this has never been the case for us ever before. And that completely moves the profile of our results.

Yeah. On retail, Andrew, so, yes, there's a growth that's driven by race. So, most of it, again, has been the driving force in there. There are some other books in the retail space that are growing less. One of them would be travel. I mean, you can imagine the current circumstances are not necessarily... conducive to great growth in travel. Now, Q1 was okay, but, you know, it's not the book that's seen high single-digit growth year on year. So there are a few lines that are growing less than the 67% that we've mentioned.

So what are we growing? What are we growing at?

Let's just come back with a bit of detail on the retail lines. It's also a fairly diversified picture because retail is global. The rest of the retail book is mostly, especially the pieces that move the needle, are focused on Europe. So we'll come back and do that.

Okay. Thank you.

The next question comes from Jan Pierce from the NT Paribas. Please go ahead.

Hi, thanks for taking my questions. The first one is just another one on pricing. We've had some pretty interesting comments from some of your peers, particularly regarding ENS pricing and particularly the large-cap property in ENS. Could you comment on what you're seeing in that particular segment of the market? And the second one is on the travel line of business, actually, so thanks for the comments there. But if you could just sort of a picture of what sort of risks there are in the outlook for the growth in travel, and also if you expect anything potentially from higher claims in the travel business to impact in the remainder of the year. Thank you.

Yeah, so ENS, we confirm and also peers have said that ENS continues to be negative. For us, it is shrinking. because ENS, it's a very volatile tactical business. You do it when it's convenient, and you don't do it when it's not. It's a one-year business, which is fundamentally based on convenience on both sides of the table of the deal. So ENS remains soft and weak and is shrinking for us. On travel, look, it's not a cost issue. The way we structure our travel business is not that we expect significant claims. It's the risk on the revenues. I mean, the revenues have been very reassuring and very solid in Q1, and so far we haven't seen a significant reduction, not even through April. But if this situation continues as we keep reading, we can expect a reduction in revenues from travel over the next month. We haven't seen it yet. You know, it's the same story, I would say, with inflation. I mean, we're monitoring very carefully any sign that inflation is creeping or is coming back. We haven't seen it yet. But we do expect something like that to happen later. But it's not a claims issue. It's a revenue issue. On claims, we don't expect surprises from travel. But revenues, we're watching carefully.

Since it is generally a global book, and as you might remember, the book that has been with us for a longer period of time, Cobra Moore, has a very large exposure or presence in Australia. And that's the piece that possibly... We'll see some more heat in terms of brand news, as Mario was saying. We're seeing actually the EMEA both performing, you know, solidly in line with expectations, same for North America so far. The exposure that we've got in Latin and APAC also fairly stable. It's the Australian part of it, which may be the first one that we see potentially hit by less travel activity. That's really that.

Thank you.

The next question comes from William Oki from KDW. Please go ahead.

Hi, Mario and Claudia. Thanks for taking my question. I've been doing some work on admin expense leverage across the European insurers. The data is still surprisingly hard to come by in a reliable way. But based on my analysis, Zurich is still streaming quite high relative to other big European peers for its non-life and life admin expense ratios. I'm not sure that's a statement that you recognize. It leads to two questions, please, on that. When you're doing your own expense analysis across your business units, where do you think you're best in class and where do you see meaningful improvement potential? And then secondly, you know, when you're thinking about your EPS growth guidance, Do you ever envisage absolute admin expenses falling as a driver of profit growth, or is this always going to be a relative game of saving and reinvestment for volume growth so that it's more the ratio that you're seeking to improve?

Thank you. So, William, first of all, I agree with you. I mean, the industry still has a lot of fat over the body and can reduce expenses. We have an internal target, but we learned between the 16 and 18 that announcing external targets for admin expenses reduction is not very, how can I say, conducive of the morale of the organization. But we're actively working on expense reduction. We have a number of programs to do that. it's very difficult to compare with others, so we're very much working on just internal nominal amounts of expenses that we want to reduce in this year and in the next years. Then on reinvestment, so will the total expenses reduce? This is what we're trying to do. Of course, there is also a need to continue investing, especially in technology, which we will not, how can I say, disappoint on. But that's one of the priorities that Claude and I have to continue working on reducing expenses. But I'm not going to say any numbers. Sorry for that, but yeah, we burn our fingers when we say that we delivered the numbers. Actually, we did it, but then we had to repair other things internally for that.

Very reasonable, helpful comment. Thank you, Murray.

The last question for today is a follow-up from Michael Woodner from Burenberg. Please go ahead.

Thank you so much. One on farmers, one on solvency. Solvency, 265%. What can you say about the kind of capital generation side of the equation? Is it better? Basically, I'm asking a profit question, but maybe. Anyway, and then on farmers, the policy and force numbers are fantastic, but The growth is not so good, 4%. What's the disconnect, please, or when, or maybe I ask it more politely, sorry, when will we see the PIF numbers lead to better or higher kind of premium and revenue figures? Thank you.

Okay, let me start on farmers, and then Claudia will address the capital questions. Look, on farmers, Michael, I understand the dynamics. Farmers has a huge portfolio and is defending this portfolio. So it's improving on retention, which means that in today's great environment, they have to sacrifice ways to keep the customers in the portfolio. And that is growing the business. which the positive net policies enforce. So think about what the rate of growth would have been if they didn't grow, or compare farmers' numbers with U.S. peers. They've done that, and farmers is growing significantly above the U.S. peers this year and equally last year. So it's all about rates. As soon as the rates will... and then start growing, farmers will have a very strong multiplier to their growth numbers. With the current conditions, I think this is a pretty good result, and the acceleration in policy accounts growth and customers growth is very reassuring for us. Does that make sense? Perfect, definitely, yes.

Michael, on SFC, indeed quite a strong capital generation in the quarter. There were a few factors, a few elements to it. One is the genuine business earnings generation. Obviously, also some capital that went into supporting that new business. There's some market tailwind. Obviously, as you know, interest rates are... when they grow, they're positive for net positive for SST, and so is US dollar depreciation. So that was a positive as well. There's some tailwind as well from management actions that we've taken. We've been reducing tactically some exposure to a few equity positions. That has also helped in this quarter. So all in all, I would say it's a fairly balanced capital generation business. Some market driven management actions that we've taken to reduce the risks and then some pay win from interest rates and currency.

Perfect. Thank you very much.

Thank you. Ladies and gentlemen, that was our last question. I'd like to turn the call back to Mrs. Claudia Cordioli for any closing remarks.

Thank you, Valentina. So just to reiterate again, Zurich has made a really strong start to 2026. The current quarter performance is underpinned, as we said, by very strong quality growth, the uniquely diversified footprint that we've got. Our focus on delivering sustainable quality growth, and that's coupled with strong capitalization you see in our SST numbers we just discussed. These all positions as well to meet or exceed, again, our 2027 targets, and we're confident about that. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing ColorScore and thank you for participating in the conference. You may now disconnect your lines. Goodbye.