New business at Zurich down 12% in first half of year

NEW BUSINESS at Zurich life insurance, the company formerly known as Eagle Star Life, fell 12 per cent to €92 million in the first half of 2008 as nervous investors shied away from committing lump sums to the ravages of world equity markets.

The "challenging" conditions meant operating profit at Zurich's Irish life insurance business declined 28.6 per cent year on year in US dollar terms to $25 million.

Globally, the Swiss-based insurance group reported net income of $2.7 billion (€1.8 billion) for the first half of 2008, it announced yesterday.

This was in line with analysts' expectations and up marginally on the first half of 2007.

It said pressure on premiums in commercial lines was felt the hardest in its Irish operation, which posted stronger decreases in rates than other markets.

Zurich's performance in Ireland was still better than the Irish life insurance market as a whole for the period, where sales have plunged 30 per cent compared to the first half of 2007.

This resulted in a gain in market share for the company, which has recently conducted a major advertising campaign advising customers of its change of brand name from Eagle Star to Zurich, the insurance group that has owned Eagle Star since the 1990s.

New business in annual premium pensions rose 11 per cent year-on-year to €47.4 million, while single premium pensions business was flat at €250 million, compared to a market decline of 41 per cent.

Sales of personal retirement savings accounts (PRSA) rose 14 per cent.

This brings Zurich's market share in this category to 28 per cent.

The company is the strongest seller of PRSAs through brokers, although the large banks dominate the overall PRSA market.

However, new business margins after tax fell from 22.2 per cent to 19.6 per cent.

Zurich's pensions director Brendan Johnston said pensions business was more resilient than the "difficult" investment business. This was because of the long-term nature of retirement savings.

He said some people were nervous about investing large lump sums and were happier dripping it in gradually through regular contributions.

The sales figures are on an annual premium equivalent basis, which comprises the value of new regular premium sales plus 10 per cent of the value of single premium business.

The Zurich group said it was on track to meet its $800 million savings target for 2008 following job cuts in the UK and US amid the subprime mortgage market meltdown.

Meanwhile, ING Canada, the country's largest property and casualty insurer, said profit declined for the ninth straight quarter, missing analysts' estimates. ( Additional reporting: Bloomberg)