Ladies and gentlemen, welcome to the Zurich update for the nine months ended September 30, 2026 conference call. I am Vicky, the Chorus Call 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 then zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Richard Burden, Head of Capital Market Strategy and Investor Relations. Please go ahead.
Thank you very much. Good afternoon, everybody, and welcome to Zurich Insurance Group's third quarter 2026 results Q&A call. On the call today is our Group CEO, Mario Greco, and our Group CFO, Claudia Cordioli. I will hand over to Claudia for some introductory remarks, and then Mario will lead the Q&A session. Just to remind you, for Q&A, we would ask you to keep to a maximum of two questions. Claudia, over to you.
Thank you, Richard. Good afternoon, everyone, and thank you for joining us today. Claudia Cordioli, Group CFO. I am here with Mario. I will take you through our performance for the first nine months of 2026, and then we will open the call for questions. We delivered strong growth in the first nine months, focusing on businesses where we see attractive returns, particularly Global Specialty, Middle Market, and Life Protection. We believe we are structurally well-positioned, and thanks to the progress we are making, we remain confident that we will exceed our 2027 targets. The completion of the Beazley acquisitions further strengthens our leadership position in Global Specialty, adding complementary capabilities and creating additional opportunities for profitable growth. Now, turning to each of our key businesses. Starting with P&C, gross written premiums increased 7% to $42.1 billion. Commercial grew 5% year-on-year, reflecting our targeted approach to growth.
Retail continued its strong momentum, up 9% versus the prior year. Within commercial P&C, our Global Specialty business continued to see strong growth with premiums up 9%. U.S. construction was an area of particular strength, where Zurich has a leading position, and growth was 17%, building on the momentum we already saw in the first half. We continue to see attractive opportunities from infrastructure investment and structural trends in technology and AI. Outside of Global Specialty, growth remains positive across both U.S. commercial and international. Within U.S. commercial, captives grew 7% year-on-year, and crop grew strongly, up 10%, adding diversification to the portfolio in areas that are less dependent on the traditional commercial cycle and pricing. Turning to Middle Market, premiums grew 6% to $6.5 billion. This growth reflects infrastructure rollout and investments we have made in our capabilities over the last years.
The U.S., excluding programs, delivered double-digit growth, while EMEA grew 8% year-on-year. We continue to actively balance the portfolio towards higher-margin business and deepen our expertise in industries such as technology and life sciences, creating a broader pipeline of attractive growth opportunities. Pricing trends within commercial remain broadly in line with what we saw at half year. Large property continues to soften. In U.S. financial lines and U.S. cyber, however, we are seeing some positive signals in the third quarter. The breadth of our portfolio and our ability to serve complex customers allows us to compete on more than price and capture the most attractive opportunities through the cycle. We are actively managing our portfolio, directing growth towards areas where we see strong demand and require high expertise, such as construction.
Strong growth in these areas give us greater flexibility to be selective in areas where the market conditions are more competitive. Where it makes sense, we also continue to look for opportunities to optimize exposure through reinsurance structures, such as the energy quota share that was put in place in July, and continue to support our customers. Turning to retail P&C, gross written premiums increased 9%, with growth seen across all regions, supported by new business and rate increases of 4%. Motor was a key driver of growth, up 14% versus prior year. Looking ahead, we will continue to invest in capabilities to improve the quality of our retail business. This includes sophisticated pricing and risk selection, faster deployment of rate changes, and greater use of data and AI in claims. These investments are improving pricing accuracy and portfolio steering, lowering claims leakage, and supporting underlying profitability.
The third quarter also saw a higher level of natural catastrophe losses, including severe storms across Switzerland, Germany, and Italy, mainly affecting our European retail book. Year-to-date cat losses are only marginally above long-term averages at 3.2 points within the combined ratio. Assuming a normal level of catastrophes in the fourth quarter, we expect cat losses to be within, but towards the upper end of our full-year guidance. In life, gross written premiums grew 3% to $28.6 billion. Protection continued to lead the growth, up 11% year-on-year, with strong performance in both individual and group products. We saw strong increase in volumes from our bank partnerships and new corporate schemes supporting the strong performance. The recent acquisition of ClearView in Australia further strengthens our position and provides an additional platform for growth.
Unit-linked premiums grew 8%, led by strong performance in Ireland, while newer propositions in Japan and Hong Kong continue to gain momentum. Overall, our life business continues to accelerate, and we feel confident on meeting our increased full-year profit guidance. Beyond the growth we are seeing, life continues to play an important role in the group, providing resilient cash generation and diversifying our earnings alongside our P&C business. At Farmers, underlying fee income at Farmers Management Services grew 5%, supported by 4% increase in gross written premiums at the exchanges. The exchanges added 342,000 policies in the first nine months, including 127,000 in the third quarter, continuing to grow their customer and policy count. In doing so, Farmers are outperforming peers in a competitive market, both on premiums and underwriting profitability. Healthy new business volumes and improved retention supported growth across all distribution channels and lines of business.
The exchange combined ratio remained excellent at 82%, in line with half-year and ahead of peers. The strong underwriting performance helps the Exchanges stay competitive and continue outgrowing the market. It also helped to lift the surplus ratio to an excellent 61.5% at the end of September, providing a strong foundation for further growth. Finally, our capital position remains very strong. Our estimated SST ratio was 271% at September 30, up from 266% at half-year.
That figure excludes the impact from the Beazley acquisition, which is expected to have approximately 30 percentage points impact. In summary, we are continuing to grow where we see attractive returns, capturing opportunities in commercial P&C, with retail, life, and Farmers showing continued strong momentum. Our diversified business model and robust balance sheet gives us confidence that we will exceed all our targets. We are looking forward to sharing more details on our strategic progress at our Investor Day next week on November 17. With that, Mario and I are happy to take your questions.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their 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, then two. Participants are requested to use only handsets 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 is from Michael Huttner, Berenberg. Please go ahead.
I am afraid we cannot hear you.
Mr. Huttner, your line is open. You can ask your question. We can't hear you, unfortunately. We will take the next question from Andrew Baker, Goldman Sachs. Please go ahead.
Hi. Thank you for taking my questions. The first one, are you able to give a little bit more specificity on the pricing that you're seeing in North America commercial? I know you mentioned weak property and maybe some turning of financial lines and cyber, and any additional detail there would be helpful. Then secondly, again in U.S. commercial, we saw one of your U.S. peers talking about some deterioration in their workers' comp book, in particular in the third quarter. Have you seen anything similar in your book? Thank you.
Thank you, Andrew. On the first question, more broadly on North America pricing, overall, the trend is fairly similar to what we've seen at H1. Slightly better, as you've seen probably in the table we have in the press release, but largely in line. Property continues to be high single digits negative, albeit from a high level, as we said a few times. Still in positive territory, but clearly continuing to soften, and this is particularly visible on larger accounts. We continue to see positive rate momentum in casualty, which is also obviously reflecting loss trends. We are growing modestly there with a lot of caution, as we've said before. We started to see a flattening on financial lines and cyber, particularly in the U.S.
As we mentioned a few times in earlier calls, particularly cyber in the U.S. was seeing some more important losses, and the market is reflecting that. The fact that the price decline is bottoming out is definitely a good signal at this point in the market. On workers' comp, we still see the same trends that we've been observing in earlier quarters. Also, in terms of loss experience, it's relatively stable. We're not seeing negative trends over and above what we had in the past, and obviously, still quite some reserve prudence, particularly in the older years. Very robust balance sheet there.
Great. Thank you.
Thank you.
The next question from Will Hardcastle, UBS. Please go ahead.
Oh, thank you. I guess, are you able to give any more color at this stage on the crop impact in Q3? I am thinking really about the margins given should have largely developed, I think, versus a normal run rate. Then just thinking about Farmers, clearly the U.S. market is still pretty competitive right now. Is there any change in momentum or anything you can talk about between motor and homeowners quarter-on-quarter, or has it remained relatively stably competitively? Thanks.
Well, on crop, so far, I mean, I don't dare to be too optimistic because we've seen in previous years sometimes that the real performance of crop is only visible when the harvest is fully developed in November and December. Touchwood, we are seeing really strong momentum on pricing, on the growth in terms of top line. There's also been some governmental programs that have supported the top line and the growth through subsidies to farmers. Overall, very positive momentum. Crop has had a very strong year last year, so this feels like the second year in a definitely much more stable environment, both from a Zurich book perspective, right. All the actions that we've been taking to improve the performance specifically and the business mix are really starting to come to fruition.
We have reduced expenses significantly, and that's also visible in the performance, and then the momentum seems to be, again, positive. We'll give more update, Will, when year-end comes. But so far, so good, I would say. Farmers. The good news on Farmers is that they are growing both on the motor and the homeowner side, so across the whole book. For a while, specialty lines and homeowners have been actually driving the momentum from a policy in force addition perspective. Now they started to grow on motor as well, and they are doing so across all distribution channels, including direct.
That's increasing sales and pick up quite nicely. So, it's positive definitely from a customer addition, new business perspective. Obviously, the rates momentum, as you said, it's a very competitive market, so rates are not going up a great deal. In terms of the loss experience, frequency has been going down quite steadily over the last few quarters. Severity is starting to see some pickup, although it's not on a high level yet. So, that might be reflected at some point in pricing, but not seeing that coming through yet.
That's great. Thank you.
Thank you.
The next question from William Hawkins, KBW. Please go ahead.
Hello, everyone. A couple of very boring numbers questions, if you can help me please, Claudia. Thank you. The numerator and the denominator behind the 271% solvency ratio, please. I would just like to understand whether it is moving from own funds or required capital. Then secondly, could you maybe hint at the data center construction premiums that you have taken in the first nine months, and any updates on kind of how you are thinking about the growth outlook there? I am still trying to kind of scale that opportunity for Zurich. Thank you.
So, hi, William. On the SST side, sorry, I am looking at the— we are seeing— right. We are seeing a slight decrease on the AFR side, and the target capital is going down slightly less than the AFR, and this is really what drives the increase of the ratio. So, it is actually an improvement on the target capital side. The second point you were asking, sorry, was?
The premium what you've done in data centers, and again, if you've got any updates on how that could be growing.
We don't give specifically an outlook on data centers, William, and keep in mind that this is one of the components of the construction business, but by no means the only one that's driving construction up. It's a component of the 17% that I mentioned before, but it's one of many. There's infrastructure, there's energy that are equally driving the very positive outlook on construction volumes.
Look, William, on the data center, there has been now for more than a couple of years, apologies, a long queue of projects which don't find financing, and they're waiting to find proper financing or don't find underwriting because of capital restrictions on the reinsurance side. We don't see any specific change in outlook over the next years because the projects that we have been underwriting are a small fraction of the total one. Still, as I said, there is a long queue of other projects which are waiting to be financed and underwritten.
Great. Thank you very much.
Welcome.
The next question from Vinit Malhotra, Mediobanca. Please go ahead.
Yes. Good afternoon, Claudia and Mario. Thank you. Actually, I had two questions. One is now more a follow-up on the construction topic. The first one was on cyber, and this commentary that is more constructive from your end. I'm just curious, is this commentary relating to Zurich's original earlier book, or is it linked to a combined kind of book or feedback with Beazley in it? So that's just on the cyber, whether it's your whole book or is it your own earlier book that you're commenting on?
And on the U.S. construction, I mean, if I could just ask again, please, given that there's been loads of attention in the political climate there and the change there, and you have mentioned that there's a big pipeline, but if you don't mind just reiterating that or just putting into context of the politics that is changing there for data center/construction, which we have heard is not the only thing there, but if you just help a bit contextualize that would be great. Thank you.
Yeah. So, your first question, Vinit, the comment around U.S. cyber and rate environment getting more constructive, that's an overall comment that encompasses what we are seeing on the Zurich side and Beazley side equally. So it's a broader comment that fits both portfolios and what we are observing in the market. On U.S. construction and data center, I mean, what Mario has said applies absolutely also in the context of the election and the result of the midterm votes, right? So, there's a number of projects that are in construction and delivery, and we are supporting them.
If anything, what we are seeing might also because of the funding constraints that Mario was highlighting, we'll see maybe some delay in the pacing of some projects, but not necessarily on the overall plans, right? There are many projects that haven't started yet, and we'll see whether they see the light in general. But in terms of our portfolio, we don't expect impact from what we've seen from the election.
I think, just guessing on what's going to happen, which is, of course, a very difficult exercise, but I think what's going to happen is that the social cost of this data center construction will be more and more charged to the constructors, to the owners, and less to the society. Of course, this data center is well known that they consume a lot of water, a lot of energy, and so there will be a fair request to embed these costs of water and energy in the cost of the construction. So, I honestly don't expect that they will be severely reduced in number or in amounts, but I think the social costs of them will be in a fair way shared with the communities where they're based.
Okay. Thank you, Mario.
The next question from Kamran Hossain, JPMorgan. Please go ahead.
Hi. Good afternoon. Just on Farmers, clearly the surplus ratio is hugely above the kind of 40% range. I guess the top line in Farmers really reduced this year. The Exchanges retain more risk. Do you think that's probably the base case again for 2027? That's my one question. Thank you.
Yeah. It will be. I mean, clearly with this surplus ratio, the Exchanges are continuing to reduce the quota share. That makes perfect sense. I mean, it might not be super convenient for us, but it's absolutely logical and correct for them to do that.
Yeah.
This will continue.
Also, Kamran, what they've started doing this year, and that's reflected in the growth as well, investments in branding and marketing have been accelerated. They can obviously, given the structure of the Exchanges, they can afford to invest more in growth and acquire new business at different rates than they were able to do in the past, or some of their competitors might be able to do. So, we expect to continue to see strong growth in policies in force and new business in 2027.
Thanks very much.
The next question from Andrew Crean, Autonomous. Please go ahead.
Good afternoon. Two questions. Firstly, the growth in commercial, which is 5%. Could you say what that was ex-captives and fronting arrangements? Business where you are actually underwriting that, and how that has changed over the quarters of this year? Because I think the strong growth earlier in the year was largely to do with captives. Second question, are you intending to change your segmentation? I know you split now commercial and retail, but with the greater significance of Global Specialty, will that be broken out and treated separately to the other two splits? Thank you.
Thanks, Andrew. On your second question, yes, we intend to split out Global Specialty the way that we will disclose business next year, particularly in the slides and the supplement will be in line with the business accountability. We will have the U.S. commercial business, international business, and specialty, and we will break down underwriting results and premiums at that level, given, as you say, the strategic relevance of specialty, but also the U.S. for our book. That is a relevant split that we should be providing.
Great.
On the first. Sorry. Okay. On the first point, on the growth in the commercial business, I mean, in North America, if you exclude the specialty business, we were up somewhere between 1% and 2% for commercial. You are right in saying that a significant part of that is driven by the gross growth in captives, which we like, because obviously, it is a business where we retain a portion of the risk, but not all. It is very efficient in terms of the capital we deploy and the margins that we get. That has been a significant driver of growth, particularly in the first and second quarter. What we are seeing now as a slowdown of North America for the third quarter standalone is partially the reflection of us writing less large property and the fact that rates are also going down. It is a combined effect of both.
Great. Thanks, Claudia.
Thanks, Andrew.
As a reminder, if you wish to register for questions, please press star and one on your telephone. The next question from Ben Cohen, RBC Capital Markets.
Oh, hi there. Good afternoon, everyone. I just wanted to ask on the retail business. You had a positive comment in terms of, excuse me, in terms of rates there. But in EMEA, where you're still talking about rate moderating, I just wonder if, particularly after the losses in Q3, you would see this acting as an accelerant for rate across EMEA. The second question, which is related, I think there's a comment saying that you're using reinsurance in terms of exposure management for North America. I just wonder after the experiences in Q3, whether that's going to encourage a rethink in terms of the reinsurance program for the rest of the world, I guess, particularly in Europe again. Thank you.
Thank you. Thank you, Ben. On the first point, EMEA environment is moderating, but taken as a whole. When we look at the regional breakdown, we take an average, weighted average, I guess, between our commercial book, specialty book, and retail. So, in EMEA, we are seeing a bit of a tale of two cities. We are seeing, particularly in the U.K., quite some pressure on commercial lines, similar to the U.S., in fact. So, it starts with the property lines. And we are seeing strong momentum on continental Europe, both on the Middle Market, SME, and retail side. The moderating is a bit of a qualitative summary, if you will, of those different dynamics that are going on in the book. To your question, will the events in Q3 serve as an accelerator? I would say so locally.
In Switzerland, I'm sure that the fact that those hail events that the industry has been seen as, one in five or one in seven are happening almost every second year, must prompt a response, right, from an underwriting and pricing perspective. But I would not expect it to become an EMEA-wide pricing driver, to be honest. I think it will remain quite local. And the same applies to what we've seen in Portugal, what we've seen in Germany, and Italy. I think it will stay quite local.
Great.
The second question on reinsurance. We have taken quite a few steps in 2026 to make sure that we balance the way we retain the exposures on an net side, and we are able to support our customers as they grow across the board. I am sure that we will, on the 1st of January, try to not only renew, but potentially expand the aggregate that we have got, right? And we saw it in EMEA with the losses that we just discussed, that something like this is precious.
That is one point. We have made a few further steps, like the cat bonds at mid-year, the energy quota share. There is a number of things that we are looking into. The fact that with Beazley we get exposure to the Lloyd's channel might be interesting as well for us to look at in the context of reinsurance. You will definitely see us taking a few more steps on the reinsurance side as well in 2027.
Great. Thank you very much.
Thank you.
The last question will be from Mr. Michael Huttner, Berenberg. Please go ahead.
Yeah. First of all, big apology for not being there at the start. I have been really cheeky, I will ask three, because for such a big group as you to have half an hour, it sounds such a disappointment. The first one is the mix shift. I am looking at slide nine in your lovely corporate presentation, which shows the split by country, the U.S. and then corporate, Middle Market, other. The feeling I have, but I did not hear a number, is that property is coming down massively fast in the U.S., but offset by an equally fast ramp-up in Global Specialty. I just wondered if you could give us a feel for this mix shift, which I guess will continue, but it is changing the character of Zurich, so I guess it is important. The second, I wonder if you could talk a bit more about life.
You introed saying life is fantastic, but I did not hear a single question on it, and I am kind of thinking, "Wow, this business, which is a quarter of Zurich, and the numbers that your lovely IR kind of shared with me this morning are absolutely stunning. Protection up 11%, premiums up 3%, unit-linked up 10%." These are extraordinary numbers. I just wondered, I suppose the real question is not whether it is a quarter of your business, but can it become a third of your business, or would you be willing I mean, obviously, there is Beazley, so I guess I am wrong, but would you be willing to invest more to get there?
Then the final one is on Farmers. The 61% sounds an amazing number. This is the surplus ratio. You alluded to, yeah, it could be spent in marketing, et cetera. But my real question, and you spoke about margin pressure, but what is the margin pressure? My guess is the combined ratio around 80% and maybe the underlying combined ratio 87%? I think three years ago, you were targeting 90%. Is that about right? Thank you.
Thank you for your questions, Michael. Thank you for asking about the life business. Much appreciated. Starting from Farmers. The margins, the pressure is there from a competitive environment perspective, partially driven by litigation and the social inflation costs, plus the severity that I was mentioning before, more broadly, and inflation, I guess, will also come through.
Michael, sorry if I jump in, but I'll add to the Farmers competitive situation. They have a far better combined ratio than the rest of the market. This is what continues to make us optimistic that the market will turn to higher rates, because the combined ratio that the peers have is absolutely not the one of Farmers, especially on homeowner. Farmers is far lower in combined ratio than the peers there, and so has a competitive opportunity as soon as the rates move that nobody else will be able to match. So it's not pressure on Farmers, it's pressure in the market. But this won't last much longer than it did already because of the results of the peers. I mean, you can look at them, and it's quite evident in their published results.
Thank you.
Also, I mean, obviously, the exchanges are mutual, so they're not necessarily planning to have a combined ratio of 82% forever, right?
Yeah.
They've got a lot of room there to acquire customers, be it with branding, marketing, but also, obviously, with competitive pricing, which is what they're doing.
Yeah. You see that also in the growth reported in Q3 by Farmers and by the peers. Farmers has been outpacing many of the peers, if not all, in growth. So they're growing more than the market at a super positive combined ratio, and the peers are growing less with a poorer combined ratio. But it's difficult to force this even more than they're doing.
So the policy growth in net terms is the highest ever, and I don't think anybody else in the market is growing with any similar number to the one of Farmers. Yeah. We need to see rates also moving, and we need to see peers starting. The indication, for example, from non-standard auto, which is always an early indicator of what the market is doing, is that there, the rates are already in the mid-single-digit positive camp, and usually then the standard auto follows that with a short lag. So that's why we expect this to be close to a turning point.
Brilliant.
On your two other questions, Michael. In terms of the business mix and how this is evolving, taking a step back, I mean, it's really been interesting and intentional how Zurich has been shaping the business mix over the years. We were probably overweight casualty some 10 years ago, right? We've been reducing progressively the portion of our portfolio that's driven by long-tail lines, and while we've done that, we've also been reducing the large account portion, given the exposure to litigation and social claims, social inflation. So that has happened while we've been growing the short-tail lines proportion in our book, driven by property. So if you were to look at our setup now compared to some of our peers, you would say we are probably overweight property compared to them, or for sure more exposed to short-tail lines. Specialty is the next phase of our development, right?
Very intentionally, again, we are growing, in fact, already the Global Specialty portion of our book, driven by, as we said, construction, energy, and reinsurance, and so on, with Beazley becoming a massive accelerator in that. Yes, you will see by the integration of Beazley another step in our business mix, which will also drive a customer segment shift. So definitely going down proportionally in the large account exposure and growing the proportion that we have in engagement with Middle Market and SMEs.
Brilliant.
Michael. We've been doing this also in 2017, 2018. You might remember in those years, property was actually much more challenging than it is today because it was also loss-making and combined ratio, and the market was soft, and so we shrank, and we reinsured a lot, and we kept property at a manageable decent margin despite the market conditions. I guess what I'm saying is that I think we know what to do on property. We've done it before. This time is much better than it was because property is still profitable, but we are prepared to continue acting on property.
Brilliant.
On Life, are we willing and ready to invest more to make it 1/3 of our P&L? Well, next week actually at the Investor Day, we're going to deep dive in life, and Alison Martin, who leads the Global Life business, will be there. So I encourage you, Michael, to ask Alison the same question. But definitely, I mean, we are investing in life. The sheer fact that it's becoming a global business for us with senior leadership driving this in a more strategic fashion across all geographies, that's exactly the expression of that.
I mean, you've seen us improving the margins over the last couple of years, right? We have a really strong and attractive margin. It's a highly cash-generative business that doesn't require big capital deployment. We are very happy with where the life business is going, and we'd definitely like to see it growing over-proportionally in our portfolio.
Brilliant. Thank you very much. Thank you.
This was the last question. I would like to turn the conference back over to Claudia Cordioli for closing remarks. Thank you.
Well, thank you very much. Thanks, everyone, for your questions and interest in Zurich. I'd like to reiterate our key messages for today before we close the call. Zurich has delivered strong growth in the first nine months of the year, again, focusing on businesses where we see attractive returns. With that, we believe we are structurally well-positioned thanks to the progress we are making, and we remain confident that we will exceed our 2027 targets. We look forward to seeing you next week at our Investor Day, where we will give you an update on our strategic progress to date and integration of Beazley. Thanks, everyone.
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