Ladies and gentlemen, welcome to the Zurich update for the first quarter 2026 conference call. I am Valentina, the Chorus Cal l 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 a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jon Hocking. Please go ahead.
Thank you very much, Valentina, and welcome everybody to Zurich Insurance Group's first quarter 2026 Q&A call. On the call today we have our Group CEO, Mario Greco, and the Group CFO, Claudia Cordioli. Claudia will make some introductory remarks, but can I please remind everybody to please keep their questions to two. Thank you very much. Claudia?
Thank you, Jon. Good afternoon, everyone. Thank you for joining us today. I'm Claudia Cordioli, Group CFO, 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 remain 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 like-for-like 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 written premiums grew by 9% like for like. Rate 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 insured 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. 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 U.S. and about 100 experts in the rest of the world. Our construction book reached premiums of around $800 million in Q1. Profitability remains high as infrastructure spend gains pace in U.S. and beyond, with U.K. and continental Europe also playing an important role in our portfolio. Middle 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 attractiveness 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 underwriting 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. Retail P&C.
Gross written 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 -5% on a like-for-like basis, with the protection business growing premiums by 9% slightly above our three-year targets.
Growth was broad across EMEA, LATAM, and APAC, 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 fee revenue despite volatile markets. Overall profitability in Life showed a further strong improvement in Q1. Switching gears now to Farmers. Farmers Management Services underlying fee income rose 4% year-on-year, supported by a 4% increase in gross written premiums at the Farmers Exchanges. Growth was driven by higher policy count, 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 surplus ratio improved further, reaching 56.4% at the end of March, providing significant financial flexibility to pursue growth in a disciplined fashion.
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 Beazley. In summary, our businesses 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 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 handset while asking a question. Kindly limit yourself to two questions only. Anyone who has a question or a comment may press star and one at this time. The first question comes from Michael Huttner from Berenberg. Please go ahead.
Fantastic. I'll ask my questions in a slightly aggressive way. I hope you don't mind, but it'll make it easier for me. So 8% like- for- like growth in P&C, in commercial lines P&C. Including mid-market 7%, specialty, 7%. There's obviously a missing part which is growing faster. I know you mentioned construction, but my guess is large risks also grew faster. If I were a generalist, I'd say, "Whoa, you know, your pricing in large risks I've heard is down." You know, it's a market clearly which, you know, has a lot of competition. What's happened there? Why are you so confident that the growth will be profitable? That'd be question number one.
Question number two is on data centers. These are huge things, huge projects. What's the risk that, you know, if something goes wrong, how much money could, well, not me, but could our investors lose? That's it. Thanks.
Thank you. Thank you, Michael . On, on the first point, yes, it's true there's other areas that are growing, and they're growing in, you know, 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 like, so it's slightly above Specialty and Middle Market. In large Casualty, we've been benefiting from significant and continued rate increase, and we've been closing a sizable number of new contracts, including some transactions that are of fronting 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.
It's a broad-based growth. It's not limited to specialties, not limited to middle market. But it's happening at very attractive rates and the margins are definitely attractive across the board.
Okay.
I mean, Michael, remember that there are areas in casualties which are growing like commercial auto close to 20% on rates. Casualty and liability in general is growing at low double-digit numbers. Although we're now growing with number of contracts and with customers there, actually the motor portfolio in size is shrinking. The impact of this rates 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.
On data centers, Michael, those are projects that are complex, and they are built obviously across different phases, right? 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. The prices 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? 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?
You've got essentially a concrete, right, a large concrete building with limited exposure in financial terms. Then obviously the fitting will be made and chips and everything is being implemented. 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 cat side or any other risk 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, workers' comp, motor, general liability, excess liability. There's multiple risks.
They're all priced for, you know, our judgment in a very attractive way, and typically we take a part of the exposure. Those are obviously syndicated risks. We feel very comfortable with our own exposure.
Brilliant. Thank you very much.
Thank you.
The next question comes from Fahad Changazi from Kepler Cheuvreux. Please go ahead.
Thank you for taking my question. On the Middle Market premiums of $2.2 billion, notwithstanding FX, which still seems a bit positive, is that a base run rate we can build from, and just sort of following on from that in U.S. Middle Market, are all those new underwriters coming online and was the outlook fair? Just on Life, if you don't mind. Again, very strong new business CSM growth. Anything to highlight on seasonality and any comments on full- year 2026 outlook? Thank you.
Take the first one 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 U.K. Germany, Italy, France, they all show double-digit growth. 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, you know, very conducive to see 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 grow. Then there are some areas specifically like life science I've mentioned, but also financial transactions, technology, where we would like to grow more in specifically with middle market customers. 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.
Life?
Life?
Yeah. Look, I mean, on Life, simple question. There are no specific seasonality except from the fact that we have not replicated the tactical products that we issued last year for Banco Sabadell. You might remember that they were in a takeover battle. They wanted to push commission sales. The products were at margin, not the most exciting ones. In a sense, they created an overhang with their customers. It is okay that, I mean, we expected that. We easily accepted, and this explains what Claudia 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. Compared with last year when Brazil was underperforming, now is getting back to normal size and results. The protection numbers honestly are pleasing us and reassuring us that the 2027 targets are in sight.
Yeah. I would add as well that, I mean, 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 banc assurance further. We start seeing the fruits of that setup, right? It is more intentional the way we are going about the growth. It is more broad-based on in terms of geographies and the products that we are developing. We've got medical underwriting that we insource. 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. Yes, thank you. Thank you, Claudia. For me, the first question would be on the commercial pricing, where I noted with some surprise that the outlook for North America is improving, let’s say, from moderating to stable between December and now. Is that a function of the fact that you’re growing more in your targeted lines, or is there something else that you would like to point out? That’s my first question. Second question is just picking up a little bit on that commercial growth. I hear you when you answer that it’s more broad based, but there were lots of other things there. There were growth, there was dealerships, there was direct business, there was lots of other things. Middle Market, 7%, Casualty, 7%, overall Commercial, 9%.
If you don't mind, could you just say a little bit more about that pick-up in the other areas? If it's a repetition, then please ignore. I'll follow with IR later. Thank you.
Look, Vinit, on rates, yeah, it's definitely the businesses we are pushing to grow have better rates, development, and stability than the whole market. 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 at the last quarter of last year. Commercial auto has been accelerating again. Casualty remains double-digit high, and specialties have been improving. I mean, financial lines has been recuperating against last year. Construction is very hard for the reason Claudia explained before. When there is such a high demand, prices also stay quite high.
I would say it's not just the business we target. The market seems to be in a better shape in this or has been in these 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 for negative, for lower in the following months.
Okay. Thank you, Mario.
That partially answers also the second question, Vinit. 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. There's a number of factors that do play a role in the premium, 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 U.S., so direct markets. Yes, that's also one of the markets that are growing.
That, by the way, will earn through also in a number of future years, so it's not all seen visible in revenues this year. There's a number of factors that contribute. I would say the biggest one is probably rates and some European growth outside of Global Specialty and Middle Market. That said, I mean, again, rate at 8, right? 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.
Great. Thank you, Claudia. Thank you.
Thank you.
The next question comes from Andrew Crean from Autonomous. Please go ahead.
Good afternoon. A couple of questions, actually. Firstly, and in sort of numerical questions. Firstly, if retail is growing 5% and motor is growing 8%, could you supply the number for what the rest of the retail book is growing? Similarly, I'm gonna come back to this commercial thing and hope we can get an answer. If you're happy to give us the growth rate in specialty and middle market at 7% and 7% versus 9% for 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 mid-market are not mutually exclusive. There is overlap because mid-market also sells specialty.
Yes, 9%.
You also have to be mindful of the proportions because the book is shifting towards the specialty, the weight of the specialty is growing inside the books. It's a complicated mathematical game of proportions in rebalancing the books. Having said that, I think the IR team can come back with details of all of that. It's not here the point of making a spreadsheet with all the numbers. There is no anomalous trend in what we're saying and once again, we're not growing large accounts. I mean, it's just that the portfolio is moving. I mean, already today, before Beazley, specialty is our biggest line of business in commercial, this has never been the case for us ever before.
That completely moves the profile of our results.
Yeah. On retail, Andrew, yes, there's a growth that's driven by rates. Motor, 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 it, you know, it's not the book that's seen high single-digit growth year- on- year. There are a few lines that are growing less than the 7% that we've mentioned for retail.
What are they growing? What rates are they 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. We'll come back, Andrew, on that.
Okay. Thank you.
The next question comes from Iain Pearce from BNP 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 E&S pricing and particularly the large account property in E&S. Could you comment on what you're seeing in that particular segment of the market? The second one is on the travel line of business, actually. Thanks for the comments there. If you could just sort of paint 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. E&S, we confirm, as also our peers have said, that E&S continues to be negative. For us, it is shrinking, because it's, E&S, it's a very volatile tactical business. You do it when it is 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, of the table of the deal. E&S remains soft and weak and is shrinking for us. On travel, look, it's not, it's not a cost issue. The way we structure our travel business is not that we expect significant claims. It's, there is a risk on the revenues. I mean, the revenues have been very reassuring and very solid in Q1.
So far, we haven't seen a significant reduction, not even through April. If this situation continues as we keep reading, we can expect a reduction in revenues from travel over the next months. 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. It's not, 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, you know, the book that has been with us for a longer period of time, Cover-More , has a very large exposure or presence in Australia, and that's the piece that possibly will see some more hit in terms of revenues earlier, as Mario was saying. We are seeing actually the EMEA book performing, you know, solidly in line with expectations. Same for North America so far. The exposure that we've got in LATAM 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 the core point.
Okay. Thank you.
The next question comes from William Hawkins from KBW. 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's still surprisingly hard to come by in a reliable way. Based on my analysis, Zurich is still screening 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?
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 gonna 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.
William, first of all, I agree with you. I mean, the industry is still fat, has a lot of fat over the body and can reduce expenses. We have an internal target, but we learn between the 2016 and 2018 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. On reinvestment, will the total expenses reduce? This is what we're trying to do.
Of course, there is, there is also a need to continue investing, especially in technology, which we will not, how can I say, disappoint on. That's one of the priority that Claudia and I have to continue working on reducing expenses. I'm not gonna say any number. Sorry for that.
That's fine.
Yeah, we burn our fingers when we say then we deliver the numbers. Actually, we did it, but then we had to repair other things internally for that.
Very reasonable. Helpful comments. Thank you, Mario.
The last question for today is a follow-up from Michael Huttner from Berenberg. Please go ahead.
Fantastic. 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, then on Farmers, the policy in force numbers are fantastic, but the growth is not so good, 4%. What's the disconnect, please? 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. Claudia will address the capital question. Look, on Farmers, Michael , 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 rate environment, they have to sacrifice rates to keep the customers in the portfolio. It's growing the business, which the positive net policies enforce. Think about what the rate of growth would have been if they didn't grow or compare Farmers' numbers with U.S. peers. We have done that. Farmers is growing significantly above the U.S. peers this year and equally last year. It's all about rates.
As soon as the rates will stabilize 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 counts growth and customers growth, it's very reassuring for us. Does that make sense?
Perfect. Thank you. Yes.
Michael, on SST, 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, when they grow, they're positive for a net positive for SST and so is U.S. dollar depreciation. 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. 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 tailwind 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. 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've seen our SST numbers we just discussed. This all positions us well to meet or exceed again our 2027 targets. We're confident about that. Thank you very much.
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