Zurich Insurance Group reported some record numbers during the first half: business operating profit (BOP) was up 6% to a record US$4.2 billion and core return on equity hit a best-ever number of 26.3%.
What is the reason for Zurich’s strong performance and is there a danger that softening rates could hit the company’s bottom line in the coming quarters?
Group Chief Executive Officer Mario Greco attributes the insurer’s “outstanding performance,” in part, to its ongoing re-underwriting and re-pricing efforts, while maintaining underwriting discipline, as well as its continuing focus on business from small-and-medium-sized enterprises (SME), the middle market, and specialty lines.
And he’s not concerned about the softening market, as long as underwriting discipline is maintained. “We’re growing in Mid-Market and Specialties where the rates and the profitability is even higher than in the rest of the market, so we’re very confident that we will continue with the same trend for the rest of this year and for the next years,” he said during a media briefing to discuss the results.
Indeed, the proof is in the underwriting profits: the combined ratio for Zurich’s property/casualty business improved by 1.2 percentage points to 92.4% – driven by strong underwriting performances in Commercial (90.5%) and Retail (94.1%). (Combined ratios below 100 indicate underwriting profitability).
The P/C business delivered a BOP of US$2.4 billion, up 9% from H1 2024, which Zurich described as an historic high at this stage of the year. P/C insurance revenue increased 7% to a record US$23.0 billion.
“Zurich continues to optimize its portfolio, seizing opportunities to drive profitability, including growing in preferred segments and lines of business such as Middle Market and Specialties,” the company said in its results statement. “Enhancements in the North American motor business led to a 21.3 percentage points improvement in the combined ratio to 99.3% compared to 120.6% the prior year period, bringing the business back to profitability.”
Retail P/C had a notable improvement 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, Greco said during an analysts’ call to discuss the H1 results.
More good financial news was reported from Zurich’s wholly owned subsidiary Farmers, which delivered its strongest-ever half-year business operating profit, up 4% to US$1.2 billion, despite the impact of the California wildfires. Farmers Exchanges (owned by their policyholders) reported a 5% increase in gross written premiums (GWP) with a combined ratio of 90.5% during H1 2025, leading to a surplus ratio of 45.7%, which is above the 34%-38% target range.
Farmers Exchanges increased their “policy count for the first time in more than a decade,” Greco said.
Diving into Zurich’s P/C performance, Greco said, U.S. commercial auto performance showed strong margin improvement after all the underwriting actions Zurich took last year and during the first half of this year, while EMEA motor saw an eight percentage point increase in rate.
The property market is showing a reduction of the hard rates of the past years but remains attractive and profitable, even at these rates, he said, noting that the future of this market will be decided by the catastrophes in the next month of the hurricane season. “So we will see if [property] rates hike again or continue this [softening] trend.”
However, Greco highlighted one area of concern – the liability market – which Zurich is underwriting “with great discipline and attention.” Despite strong rate increases, liability claims are high as are combined ratios, and the market “is still not profitable enough.”
Nevertheless, Greco said, Zurich continues to see pricing conditions supportive of profitable growth across its P/C business, particularly in its preferred growth engines – Middle Market and Specialties. (Zurich has been moving away from the more volatile—and, ultimately, less profitable—large corporate business over the past decade.)
“The property 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,” he said during the analysts presentation.
Middle Market, Specialties Growth
“We’re growing in Middle Market and Specialties where the rates and the profitability is even higher than in the rest of the market, so we’re very confident that we will continue with the same trend for the rest of this year and for the next years,” said Greco.
Commenting on Zurich’s “sizable specialty business,” Greco said, this portfolio generated US$4.9 billion of gross written premiums during H1 at a highly profitable 86.5% accident year combined ratio, excluding catastrophe. “We believe our underwriting skills, data availability, strong customer engagement across a range of diversified business lines differentiate us in the specialty business.”
In its investor and media presentation, Zurich laid out its preferred specialty lines and their portfolio proportions as construction & engineering (31%); financial lines (21%); energy (14%); credit & surety (11%); excess & surplus (7%); accident & health (6%); marine (5%), and cyber (4%).
“We are leaders in construction and engineering so that remains a point of strength for Zurich in the market, and it continues to be a growth engine for us,” Greco said. “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 globalize that and bring it to other customers.”
Energy is also important for Zurich, which is very active in the energy transformation sector and has been investing in many of the new energy sources, he said.
On the other hand, Greco said, E&S had a setback this year because of softening rates. As a result, the insurer is not growing as aggressively because “profitability might not be at the same level of the past years…”
As for cyber, Greco said, Zurich provides cover for SMEs and some of mid-markets but “we don’t go above that.”
The company’s other growth engine is Middle Market, which showed a strong H1 performance despite a slight hiccup in U.S. program business during H1. “Middle Market growth was strong in preferred segments in North America and EMEA, supported by resilient rate momentum and underlying exposure growth. This was offset by the effect of planned management actions in certain U.S. program businesses,” the company said in its H1 results. (Zurich reported Middle Market GWP of $4.039 million in H1 2024 versus $4.008 million in H1 2025).
“Middle Market gross written premiums remained in line on a like-for-like basis [level with H1 2024] as strong underlying growth was offset by a 19% reduction of U.S. program business to further improve profitability,” the company said in its presentation for investors and media.
The Middle Market’s combined ratio of 90.5% during H1 2025 improved 0.9 percentage points year on year, driven by a 1.7 percentage points improvement of the loss ratio.
Positive Outlook
When one of the equities analysts asked Greco how he could be positive about the company’s outlook when P/C pricing may not support that reality for the long term, Grece responded by saying: “We’re moving our books towards specialty, towards mid-market, and we’re reducing the impact of liability.”
In Zurich’s motor and commercial books there was “a pretty decisive cancellation of policies and contracts, partly contrasted by high rate increases,” he added.
Zurich is moving the books to businesses that have a much better combined ratio, as evidenced by the combined ratio in Commercial, which improved to 90.5% compared to 91.4% during H1 2024, with a BOP of US$1.8 billion.
Zurich’s strong performance during H1 “underscores the strength of our diversified portfolio and the disciplined execution across all business lines,” Greco said.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.