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					Zurich Financial Services Group

Half Year Report 2003
Zurich Financial Services Group
Half Year Operating Review
                                                  Contents
                                               1 Financial highlights
                                               2 Letter to shareholders
Zurich Financial Services Group
Half Year Consolidated Financial Statements

                                                  Half Year Operating Review
                                               5 Overview
                                               8 Net income and business operating profit by business segment
Use the color tabs to help you find the
appropriate section.                           8 Non-life Insurance
                                              11 Life Insurance
                                              13 Farmers Management Services
                                              14 Other Businesses
                                              15 Corporate Center
                                              15 Investment performance


                                                  Half Year Consolidated Financial Statements
                                              17 Consolidated operating statements (unaudited)
                                              18 Consolidated balance sheets (unaudited)
                                              19 Consolidated statements of cash flows (unaudited)
                                              20 Consolidated statements of shareholders' equity (unaudited)
                                              22 Notes to the half year consolidated financial statements (unaudited)
                                              35 Review report by the Group auditors


                                                  Half Year Consolidated Financial Statistics
                                              36 Statistical data per region - Non-life Insurance
                                              38 Statistical data per region - Life Insurance
                                              40 Embedded value results - Life Insurance


                                                  Shareholder Information
                                              43 Zurich Financial Services registered share data
                                              44 Financial calendar and contacts




                                                  Zurich Financial Services is an insurance-based financial services provider
                                                  with an international network that focuses its activities on its key markets
                                                  of North America, the United Kingdom and Continental Europe.

                                                  Founded in 1872, Zurich is headquartered in Zurich, Switzerland. It has
                                                  offices in more than 50 countries and employs approximately 64,000 people.
Financial highlights

              The following table presents the summarized consolidated results of operations of the Group for
              the six months ended 30 June 2003 and 2002 and the financial positions as at 30 June 2003
              and 31 December 2002.

              Consolidated operating statements
              in USD millions, for the six months ended 30 June                                                                   2003                            2002                         Change
              Gross written premiums and policy fees                                                                           26,096                        20,727                                 26%
              Net investment result                                                                                             3,145                          3,055                                 3%
              Net income                                                                                                          701                        – 2,029                                 nm
              Net income before special provisions in 20021                                                                       701                            683                                 3%
              Business operating profit2                                                                                        1,265                            812                                56%
              Consolidated balance sheets
              in USD millions                                                                                              30/6/2003                   31/12/2002                              Change
              Total investments                                                                                             177,567                         163,788                                  8%
              Total assets                                                                                                  309,725                         285,856                                  8%
              Insurance reserves, gross                                                                                     167,092                         153,334                                  9%
              Senior and subordinated debt                                                                                    4,544                           4,438                                  2%
              Total shareholders’ equity                                                                                     18,650                          16,805                                 11%
              Non-life combined ratio
              for the six months ended 30 June                                                                                    2003                            2002                         Change
              Net combined ratio                                                                                               98.8%                        119.7%                      – 20.9 pts
              Net combined ratio, before special provisions in 20021                                                           98.8%                        103.3%                       – 4.5 pts
              Life embedded value information
              for the six months ended 30 June                                                                                    2003                            2002                         Change
              Embedded value profit, after tax (in USD millions)                                                                    556                           – 380                           nm
              New business profit margin (APE)                                                                                    8.2%                            5.4%                        2.8 pts
          1   For a description of special provisions, see Operating review – Overview.
          2   For a definition of business operating profit, see Operating review – Overview.




              Net income                                                                   20021                   Business operating profit                                                   2002
              Half years 2002/2003                                                         2003                    Half years 2002/2003                                                        2003
              in USD millions                                                                                      in USD millions




                                                                                                                                                                                                    1,265
              1,300                                                                                                1,300
                                                                                                                                  929




              1,100                                                                                                1,100



                                                                                                                                                                                              812
                                766




                900                                                                                                  900
                                                                                                 701
                                                                                           683




                                                                                                                                                550




                700                                                                                                  700
                                                                                                                                                            513
                                      446




                                                                                                                                                      445
                                            391




                                                                                                                                          368
                                                               354




                500                                                                                                  500
                                                        313
                                                  269




                                                                                                                            249




                300                                                                                                  300
                          132




                                                                                    –465
                                                                     –304




                                                                                                                                                                       –478


                                                                                                                                                                                      –249
                                                                            – 518




                                                                                                                                                                               –295
                                                                                                                                                                  45




                100                                                                                                  100
               –100                                                                                                 –100
              –300                                                                                                 –300
               –500                                                                                                 –500
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              1
                  Net income before special provisions in 2002




              Revenue                                                                      Non-life GWP                                                Life GWP plus deposits
              (before eliminations)                                                        (before eliminations)                                       (before eliminations)
              Half year 2003                                                               Half year 2003                                              Half year 2003
              in USD millions                                                              in USD millions                                             in USD millions
                                1,468 238                                                              995
                                                                                                             870                                                              811
                                                                                                                                                                                               1,527
                          976

                                                                                             3,068
                                                                                                                            7,832
                                                                                                                                                       2,978

              8,196
                                                              14,495

                                                                                                  5,923                                                                                         5,113
                                                                                                                   1,583
                   Non-life           Other Businesses                                           NA Corporate      UKISA                                    NA Consumer                      Rest of World
                   Life               Corporate Center                                           NA Consumer       Rest of World                            Cont. Europe
                   Farmers                                                                       Cont. Europe      Centrally                                UKISA
                   Management                                                                                      Managed
                   Services                                                                                        Businesses


                                                                                                                                      Zurich Financial Services Group . Half Year Report 2003                1
                  Letter to shareholders

                  Dear shareholders

                                                              Three months ago we presented our first quarterly report. The financial result was
                                                              impacted by declining equity markets in the first three months of the year, but our core
                                                              businesses showed a solid underlying trend of improving profitability. We are pleased to
                                                              report that our continuing efforts to focus on underwriting, expense and cost control as
                                                              well as financial discipline are bearing fruit and that rising equity and bond markets have
                                                              made a positive contribution to the half-year result.

                                                              Net income for the half year 2003 rose to USD 701 million, compared with last year’s
                                                              loss of USD 2.0 billion. The improvement in our underlying performance is reflected in
                                                              business operating profit, which grew by 56% to USD 1.3 billion. The combined ratio,
                                                              benefiting from disciplined underwriting and pricing, better claims and expense
                                                              management as well as higher net earned premiums, improved by 20.9 percentage points
                                                              to 98.8%. Compared with the combined ratio before special provisions recorded
                                                              in the first six months of 2002, the improvement amounts to 4.5 percentage points.
                                                              Shareholders’ equity increased from USD 16.8 billion at 31 December 2002 to
                                                              USD 18.7 billion at 30 June 2003, and the business operating return on equity after
                                                              tax reached an annualized rate of 10.9%.

                                                              Gross written premiums and policy fees rose to USD 26.1 billion. This is an increase of
                                                              26% over the same period last year. Given the favorable pricing environment in most
                                                              non-life markets, this is indeed an opportune time to emphasize our Non-life Insurance
                                                              segment. It grew by 29% to USD 19.3 billion, with almost all of this rate-driven organic
                                                              growth. The Life Insurance segment recorded growth of 31% in gross written premiums
                                                              and policy fees to USD 6.4 billion, which was primarily due to the inclusion of the
                                                              results of the former Deutsche Bank insurance operations, acquired in April of 2002, for
                                                              the full six months of 2003. As a result of our continuing effort to deliver cost-efficient
                                                              services in the Life business, the new business profit margin increased by 2.8 percentage
                                                              points to 8.2%. The Farmers Management Services segment reported an improvement in
                                                              its operating margin against the backdrop of an increase in management fees and related
                                                              revenues of 6% to USD 935 million.




                                                                   Lodewijk C. van Wachem                             James J. Schiro
                                                                   Chairman of the Board of Directors                 Chief Executive Officer

2   Zurich Financial Services Group . Half Year Report 2003
But the insurance marketplace continues to pose challenges. These challenges include
accelerated claims cost inflation, rapidly rising tort awards, and the ever-present
possibility of large-scale catastrophes. As risk managers, however, we have taken steps to
reduce the volatility and strengthen the sustainability of our earnings through focusing
on core businesses and diligent cost management. While we cannot completely eliminate
the impact external factors have on our income and balance sheet, we are dedicated to
operating excellence and financial discipline and to making our core insurance businesses
as robust as possible.

Net income in the Other Businesses segment has been affected by our decision to
strengthen reserves at Centre by USD 474 million. These reserves were primarily related
to certain asset-backed transactions in the leisure, transportation and healthcare sectors
where collateral values have declined, as well as to the life and disability business. The
repositioning of Centre and Zurich Capital Markets (ZCM), including a framework
agreement on the transfer of certain ZCM transactions and assets to BNP Paribas, will
contribute to mitigating losses in this segment and strengthening our balance sheet. We
will continue to manage this segment to maximize shareholder value.

Despite a difficult climate for transactions, we completed a number of divestments. In
addition to smaller transactions, mainly in Continental Europe, we reached an agreement
to sell the UK asset manager Threadneedle to American Express. As part of our plan
to enhance the profitability of our life business we have also agreed to sell the US unit
Zurich Life to Bank One and we decided to close the business of the Zurich Life
Assurance Company in the UK and sell it to Swiss Re. We expect most of these
transactions to close in the second half of 2003.

To further strengthen our life business we are continuing to focus on efficiency gains and
synergies across our key markets. Common financial reporting standards will facilitate the
measurement of performance, ensuring that the Life Insurance segment, too, contributes
to the Group’s internal earnings targets. The life business is likely to benefit from
demographic changes and financial pressures on government-funded retirement schemes
that will create a market for supplementary pension products provided by the private
sector. We need to ensure, however, that such products are based on prudent actuarial
calculations and sound economic assumptions.

Our commitment to the implementation of the action plan to restore the Group’s
profitability remains unwavering. The pursuit of operating excellence and financial
discipline will be key in an environment characterized by modest investment returns and
low economic growth. The performance in the first six months indicates that our action



                                                             Zurich Financial Services Group . Half Year Report 2003   3
                                                              program is on track, and the results underscore that the balance sheet and capital base
                                                              have been strengthened. The planned consolidation of our IT operations should
                                                              contribute to sustained cost savings in the current year.

                                                              As we begin planning for 2004, we will maintain our focus on operating efficiency,
                                                              disciplined pricing, sound underwriting, tight cost and expense management and financial
                                                              discipline. We will be continuing to allocate capital to our core businesses in Non-life
                                                              Insurance, and we will be managing our core Life Insurance segment to improved
                                                              profitability under current economic conditions. This will enhance shareholder value.

                                                              The steps we are taking to optimize our business portfolio have been placing heavy
                                                              demands on both Zurich management and employees. The Board of Directors and
                                                              Management recognize and appreciate the dedication Zurich employees bring to their
                                                              jobs in these challenging times. The results demonstrate that our efforts are bearing fruit,
                                                              and we look forward to reporting on further progress. On behalf of the Board and
                                                              Management, we would like to thank you for your continued support.




                                                              Lodewijk C. van Wachem               James J. Schiro
                                                              Chairman of the Board                Chief Executive Officer




4   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review

Operating review



                         Overview
                         Zurich Financial Services Group (the Group) recorded a net income of USD 701 million in accordance with
                         International Financial Reporting Standards (IFRS) for the first half of 2003, compared with a net loss of
                         USD 2.0 billion for the first half of the previous year. Following a detailed review of our strategy and operations,
                         which led to our decision in the first half of 2002 to refocus our Group’s strategy in 2002 towards being an
                         insurance-based financial services provider, we recorded USD 2.7 billion of special provisions to strengthen reserves
                         and to write-off goodwill and E-business and other assets in the first six months of 2002.
                         Net income before the 2002 special provisions increased from USD 683 million for the first half of 2002 to net
                         income of USD 701 million for the first six months of 2003. In the first half of 2002, we recorded USD 369 million
                         of after-tax gains on disposal, primarily related to the disposal of Zurich Scudder Investments. In the first half of
                         2003, after-tax gains on disposals were minimal. Excluding these gains, our net income before special provisions
                         increased from USD 314 million for the first half of 2002 to USD 695 million in the current year. Business
                         operating profit, Zurich’s internal metric for assessing performance, increased by 56% to USD 1.3 billion. Business
                         operating profit adjusts for the impacts of special provisions and gains on disposals. The analysis of the results,
                         including net income and combined ratios, for the first half of 2003 is made against the prior period results before
                         the 2002 special provisions, unless otherwise explicitly stated.
                         The results for the first six months of 2003 reflect the considerable progress made towards reaching the goals set
                         on 5 September 2002 when we disclosed our half-year 2002 results and announced our new strategic focus.
                         •     We have continued to execute our strategy of concentrating on core businesses and key markets in the first
                               half of 2003. Several disposals have been either closed, signed or announced. We expect most of these
                               transactions to close in the second half of 2003.
                         •     Our capital position has improved to USD 18.7 billion at 30 June 2003 from USD 16.8 billion at 31 December
                               2002, reflecting our net income, improvement in equity markets since the year-end and favorable currency
                               translation movements.
                         •     Net loss reserves increased by USD 3.2 billion since 31 December 2002 to USD 32.8 billion at 30 June 2003.
                               The balance sheet of Centre was strengthened by USD 474 million.
                         •     We are on track to meet the targets set for the global operational improvement program.
                         •     We reduced our exposure to volatile equity markets by lowering the proportion of common stock for
                               which we bear investment risk to 6.1% of our investment portfolio at 30 June 2003, down from 8.3% at
                               31 December 2002.
                         We continue to experience the best pricing conditions in the non-life insurance industry in over ten years.
                         However, we have seen signs that the rate increases have begun to moderate.
                         In the first six months of 2003, we continued to experience considerable growth in our core businesses, Non-life
                         Insurance and Life Insurance, most of which came from our key markets of North America, the United Kingdom
                         and Continental Europe.
                         •     Overall gross written premiums and policy fees rose 26% (15% in local currency) over the same period in
                               2002 reaching USD 26.1 billion, primarily as a result of a 29% (19% in local currency) increase in Non-life
                               Insurance and a 31% (12% in local currency) increase in Life Insurance. Non-life growth was driven primarily
                               by rate increases, whereas growth in the Life Insurance segment was largely due to including the results of
                               the Deutsche Bank insurance operations, acquired in April of 2002, for the full six months of 2003.
                               Excluding the impacts of foreign currency movements and the acquisition, gross written premiums and
                               policy fees declined slightly in our Life Insurance segment reflecting challenging conditions in the market.
                         •     Net earned premiums and policy fees were up 32% over the same period in 2002, to USD 20.0 billion,
                               driven by the same factors as gross written premiums.
                         Key indicators for our core businesses of Non-life Insurance and Life Insurance also improved in the first six
                         months of 2003 compared with the same period in 2002.
                         •     Non-life combined ratio continued to benefit from better claims and expense management and higher net
                               earned premiums, and improved by 4.5 percentage points to 98.8%.
                         •     New business margins in our Life Insurance segment have increased 2.8 percentage points to 8.2% while
                               new business profit after tax has increased 84% to USD 90 million.
                         Our well diversified USD 177.6 billion investment portfolio produced net investment results of USD 3.1 billion in
                         the first half of 2003, an increase of USD 90 million as compared with the same period in 2002. Including
                         movements in unrealized gains and losses recorded in shareholders’ equity, our investment portfolio produced a
                         total return of 3.3% in the first half of 2003 as compared to 0.9% in 2002.
                         •     Net realized and unrealized capital losses on investments increased by USD 300 million to losses of
                               USD 422 million in 2003. We incurred impairments on investments, primarily equities, of USD 978 million
                               and USD 292 million in the first halves of 2003 and 2002, respectively. Of the 2003 impairments,
                               USD 927 million was recognized in our first quarter 2003 reporting. A substantial portion of these capital
                               losses and impairments are allocated to life insurance products that share investment risk.
                         •     Increases in interest rates could adversely affect our shareholders’ equity as unrealized capital gains on debt
                               securities would decline.


                                                                                                            Zurich Financial Services Group . Half Year Report 2003   5
             Zurich Financial Services Group Half Year Operating Review




         Movements in foreign currency exchange rates have had a significant impact on our results for the first half
         of 2003.
         •       Total revenues have increased by 22% in US dollar terms over the first six months of 2002 although, in local
                 currency terms, this growth was 11%. Total benefits, losses and expenses, after special provisions, have
                 increased by 5% in US dollar terms over the first six months of 2002 whereas, in local currency terms they
                 declined by 5%.
         •       Our shareholders’ equity has increased by USD 283 million since 31 December 2002 as a result of the
                 cumulative translation adjustment declining to USD 201 million at 30 June 2003.
         The factors listed above have impacted our financial results for the first half of 2003.
         •       Our net income increased from USD 683 million in 2002 to USD 701 million in 2003. In the first half of
                 2002, we recorded after-tax gains of USD 369 million on disposals, primarily related to the sale of Zurich
                 Scudder Investments, as compared to only USD 6 million in 2003. In the first half of 2002, after the special
                 provisions in that year, we recorded a net loss of USD 2.0 billion.
         •       Our business operating profit improved by USD 453 million, or 56%, to USD 1.3 billion in 2003. Business
                 operating profit adjusts for the impacts of special provisions and gains on disposals.
         •       Operating cash flow increased by 25% to USD 4.5 billion for the first six months of 2003.
         •       For the first half of 2003, on an un-annualized basis, our IFRS net income return on equity was 4.2% and
                 our business operating profit return on equity was 5.3%.
         On 22 May 2003, we reported quarterly results for the first time. These results included a net income of
         USD 114 million and business operating profit of USD 785 million for the first three months of 2003. Results
         in the three months from 1 April to 30 June 2003 have shown continued improvement.
         •       Our net income increased more than five-fold from USD 114 million for the first quarter of 2003 to
                 USD 587 million for the second quarter, largely as a result of a reduction in net realized and unrealized
                 capital losses. The lower investment losses are an indication of the improved equity market conditions that
                 were noted in the second quarter of 2003.
         •       Our business operating profit has increased by USD 480 million since 31 March 2003. Growth in our
                 business operating profit was driven by our continued improvement in non-life and life operating results and
                 cost containment efforts across all of our segments, partially offset by significant reserve strengthening at
                 Centre as discussed in our Other Businesses segment.

         Previously announced changes in segmentation
         Effective 1 January 2003, we changed our primary segmentation. As we have previously communicated, we are
         focused on being an insurance-based financial services provider. We have exited certain businesses and markets
         over the past twelve months. Following the implementation of our strategic change, we examined the way
         we present our primary segments in our consolidated financial statements. We have determined that Reinsurance -
         run-off, Centre, Capital Markets & Banking and Asset Management segments would be more appropriately
         combined into one segment: Other Businesses. At the time we examined our segmentation, certain of our
         operations were determined to be more appropriately categorized in a different segment. The Threadneedle Asset
         Management business is now included in the Life Insurance segment as it is the principal asset manager for
         the UKISA life operations’ assets. The comparative first half 2002 results have been reclassified according to
         the new segmentation.

         Measuring performance
         As previously communicated, we manage our business units on their underlying operations using the measure of
         business operating profit which reflects adjustments for taxes, net realized capital gains and net unrealized
         capital gains and losses on investments (except for the Capital Markets & Banking operations included in our
         Other Businesses segment), policyholders’ share of investment results for the life business, non-operational foreign
         exchange gains and losses, and significant items attributable to special circumstances. Non-operational foreign
         currency gains and losses arise from intercompany foreign currency hedging and the corporate financing of its
         subsidiaries and are not a reflection of local operating activities. Business operating profit as previously published
         for the first half of 2002 did not include the USD 41 million adjustment for non-operational foreign currency gains
         and losses. Business operating profit is not a substitute for net income as determined in accordance with IFRS.
         We have communicated that we will measure our total Group performance according to business operating profit.
         However, for the management of our Life Insurance operations on a stand-alone basis, we also use embedded
         value operating profit, which we believe to be a useful measure of performance for life insurance business.
         The business operating profit for the half year ended 30 June 2003 was USD 1.3 billion, compared to
         USD 812 million for 2002. The table below presents a reconciliation of net income in accordance with IFRS
         to business operating profit for the half years ended 30 June 2003 and 2002.




6   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review




                            Net income and business operating profit
                            in USD millions, for the six months ended 30 June                                                          2003            2002
                            Net income                                                                                                  701        – 2,029 1
                            Adjusted for:
                            Special provisions                                                                                            0          2,985
                            (Gains)/losses on disposal of businesses                                                                     –1          – 463
                            Realized and unrealized capital (gains)/losses, including impairments,
                              excluding capital markets and banking                                                                    514              141
                            Policyholder allocation of realized and unrealized capital (gains)/losses                                – 597              – 96
                            Tax expense, adjusting for UK life policyholder tax                                                        648              274
                            Business operating profit                                                                                1,265              812
                        1   Net income after special provisions in 2002


                            Special provisions in 2002
                            During the first half of 2002, we undertook a detailed examination of our strategy and operations which
                            resulted in a decision to refocus our Group strategy in 2002 towards being an insurance-based financial
                            services provider and to record USD 2.7 billion of after tax special provisions. These special provisions
                            comprised USD 1.8 billion to strengthen reserves, USD 727 million to write-off goodwill and USD 227 million
                            to write-off discontinued E-business and other assets. An additional USD 746 million of provisions for
                            operational improvements were recorded in the second half of 2002 and do not affect the comparative results
                            as of 30 June 2002. We did not record any special provisions in 2003.

                            Increased focus on core activities
                            We have continued to dispose and reposition non-core activities during the first half of 2003. Several disposals
                            were closed and agreements have been signed for additional disposals subject to regulatory approval or other
                            conditions prior to closing. We will continue to assess operations not in our core businesses or key markets. We
                            will develop plans to deal with these operations in a manner that maximizes shareholder value.
                            In the first half of 2003, we completed the sale of (1) Rüd, Blass & Cie AG, Bankgeschäft to Deutsche Bank
                            (Suisse) SA (no gains have been recorded in the first half of 2003 for this transaction); (2) our asset management
                            business in India to HDFC Asset Management Company Limited; and (3) our insurance operations in the Czech
                            Republic. A charge was recorded in the first half of 2003 related to warranties arising from the 1999 disposal of
                            Eagle Star Re in the United Kingdom. The aggregate net gain from these transactions was USD 1 million before
                            tax. These transactions generated approximately USD 240 million of net cash proceeds and released approximately
                            USD 120 million of risk-based capital.
                            We have signed agreements to exit our insurance operations in the Baltic countries through both portfolio
                            transfers and run-off. In May, we signed an agreement with SNS Reaal Groep N.V. regarding the sale of our
                            non-life (consumer and small businesses) and life operations in the Netherlands. Also in May, we announced
                            that we have entered into definitive agreements to sell our Zurich Life US operations, excluding Kemper Investors
                            Life Insurance Company and certain of its businesses, to Bank One. The sale of the ordinary share capital of
                            Threadneedle Asset Management Holdings Ltd. to American Express Financial Corporation was announced in
                            June. Also in June, we announced that we will transfer part of the banking products of Zurich Invest Bank AG
                            to AIG Private Bank. Furthermore, in June, we announced that we have signed a Letter of Intent followed
                            by a framework agreement in July 2003 with BNP Paribas (BNPP) on the transfer of certain derivatives and
                            credit facilities and the related assets from Zurich Capital Markets to BNPP. We sold our indirect holding in Eagle
                            Insurance Company Limited, a Sri Lankan non-life and life insurer to Capital Development & Investment
                            Company Ltd. in July. In August, we announced the closure of Zurich Life Assurance Company, one of our UK life
                            operations, and its sale to Swiss Re. We expect most of these transactions to close in the second half of 2003.
                            We also expect these transactions to generate approximately USD 1.4 billion of net cash proceeds and release
                            approximately USD 1.0 billion of risk-based capital.
                            The only significant disposal in the first half of 2002 was that of Zurich Scudder Investments. The aggregate after-
                            tax gain on all disposals in the first half of 2002 was USD 369 million.




                                                                                                              Zurich Financial Services Group . Half Year Report 2003   7
              Zurich Financial Services Group Half Year Operating Review




           Shareholders’ equity
           The graph below illustrates the major impacts on our shareholders’ equity in the first half of 2003.
           in USD millions

           20,000
                                                                            +304                     –25                    +701                18,650
           18,000                                      +865
                             16,805

           16,000


           14,000


           12,000


           10,000
                          Opening                   Change in net         Translation             Treasury stock         Net income          Balance
                          balance at                unrealized gains      adjustments             and dividend                               as at
                          1 Jan 2003                on investments                                transactions                               30 June 2003




           Net Income and Business Operating Profit by Business Segment
                                                                            Net            Net income /             Net income /             Business
           Net income and business                                     income /            (loss) before              (loss) after          operating
           operating profit by segment1                                   (loss)      special provisions       special provisions             profit
           in USD millions, for the six months ended 30 June               2003                    2002                     2002         2003        2002
           Non-life Insurance                                                766                     132                 – 1,365          929          249
           Life Insurance                                                    391                     446                   – 112          550          368
           Farmers Management Services                                       313                     269                     269          513          445
           Other Businesses                                                – 304                     354                     100        – 478           45
           Corporate Center                                                – 465                   – 518                   – 921        – 249        – 295
           Total                                                             701                     683                 – 2,029        1,265            812
       1   Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

           In the following sections, we discuss the results of operations for each of our segments. The results for the
           comparable period in 2002, unless explicitly stated otherwise, are the results before the special provisions of 2002.
           As investments and the corresponding investment income and realized and unrealized capital gains and losses
           are managed centrally, our discussion of these results is included in the Investment Performance section of this
           operating review.


           Non-life Insurance
           Non-life Insurance (before special provisions in 2002 and
           eliminations of intercompany transactions)
           in USD millions, for the six months ended 30 June                                                                2003         2002      Change
           Gross written premiums and policy fees                                                                        19,308       14,983         29%
           Net earned premiums and policy fees                                                                           13,146        9,788         34%
           Total benefits, losses and expenses                                                                           13,398       10,533         27%
           Business operating profit                                                                                        929          249        273%
           Net income                                                                                                       766          132        480%
           Net loss ratio                                                                                                74.0%         77.1%      – 3.1 pts
           Net expense ratio                                                                                             24.5%         25.9%      – 1.4 pts
           Policyholder dividend and participation in profits ratio                                                       0.3%          0.3%          0 pts
           Net combined ratio                                                                                            98.8%        103.3%      – 4.5 pts
           Net combined ratio, after special provisions in 2002                                                          98.8%        119.7% – 20.9 pts




8   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review




                            The following tables highlight the financial performance of our Non-life Insurance segment by geographic region.
                            Net income / (loss) and business operating
                            profit by geographic region
                            (before special provisions in 2002 and
                            eliminations of intercompany transactions)                               Net income / (loss)                     Business operating profit
                            in USD millions, for the six months ended 30 June                 2003          2002      Change               2003        2002     Change
                            North America Corporate                                            474           259          83%               441              354          25%
                            North America Consumer                                              46             25         84%                57               34          68%
                            Continental Europe                                                 190           – 18      1,155%               299               24       1,146%
                            UKISA                                                              118             59        100%               216               48         350%
                            Rest of the World                                                   53             15        253%                63               23         174%
                            Subtotal of regions                              881                              340         159%           1,076              483           123%
                            Centrally Managed Businesses and eliminations1 – 115                            – 208          45%           – 147            – 234            37%
                            Total                                                              766            132         480%              929              249          273%

                            Combined ratio by geographic region (before special provisions                                                     Before special After special
                            in 2002 and eliminations of intercompany transactions)                                                                provisions provisions
                            for the six months ended 30 June                                                                               2003        2002          2002
                            North America Corporate                                                                                     96.3%            97.7%         116.4%
                            North America Consumer                                                                                      98.5%            97.6%          97.6%
                            Continental Europe                                                                                          98.7%           105.5%         114.8%
                            UKISA                                                                                                       97.6%           103.5%         109.6%
                            Rest of the World                                                                                           95.7%           103.3%         109.2%
                            Centrally Managed Businesses and eliminations1                                                            130.5%            133.2%         227.3%
                            Total                                                                                                       98.8%           103.3%         119.7%
                        1   Centrally Managed Businesses include our internal reinsurance and other businesses managed by the headquarters in Zurich.


                            Total premium volume
                            Our Non-life Insurance segment’s gross written premiums and policy fees increased USD 4.3 billion, or 29% (19%
                            in local currency), from USD 15.0 billion for the first half of 2002 to USD 19.3 billion for the same period in 2003.
                            Gross written premiums and policy fees increased in our geographic regions as follows: 14% in North America
                            Corporate, 188% in North America Consumer, 39% in Continental Europe, 34% in UKISA and 16% in Rest of the
                            World.
                            The growth of gross written premiums and policy fees in our North America Corporate region is largely driven
                            by rate increases with minimal volume change. We continued to achieve significant rate increases in most lines
                            of business in 2003. We have seen signs that the rate increases are beginning to moderate. Growth in volumes
                            in certain lines of business such as corporate customers and other profitable lines were largely offset by declines
                            in construction and small business lines of business. The decline in our construction line of business is due to
                            weakness in the construction market, while the decline in small business line of business is due to our withdrawal
                            from certain unprofitable lines of business.
                            The USD 1.0 billion, or 188%, increase in gross written premiums and policy fees in our North America
                            Consumer region is the result of two new quota share reinsurance treaties entered into on 31 December 2002
                            between Farmers Re and certain other Group internal reinsurance entities and the Farmers P&C Group Companies.
                            These internal reinsurance entities have now been included in our North America Consumer region to best reflect
                            the regional results for the first half of 2003. The two new treaties cover 20% of premiums in personal automobile
                            lines of business and 10% of all remaining lines of business written by the Farmers P&C Group Companies. North
                            America Consumer now reports 100% of the Group’s share of the auto physical damage (APD) treaty.
                            The gross written premium and policy fees growth in our Continental Europe region of 39% is a result of rate
                            increases and volume growth as well as the appreciation of the euro (23%) and Swiss franc (21%) against the US
                            dollar. In Germany, the largest country within our Continental Europe region in terms of gross written premiums
                            and policy fees, the growth is due to the increased volume primarily attributable to a product offered through
                            ADAC, a national automobile association and the appreciation of the euro. In Switzerland, we were again able to
                            increase rates on certain lines of business and had higher customer retention rates. Combined with the
                            appreciation of the Swiss franc against the US dollar, our Swiss non-life insurance operations recorded a 27%
                            increase in gross written premiums and policy fees. Strong growth in our automobile lines of business and the
                            appreciation of the euro has contributed to a 49% increase in gross written premiums and policy fees in Italy.
                            While we were able to raise rates on most lines of business in Spain, only our fire insurance and third-party
                            liability lines of business experienced growth in total gross written premiums and policy fees. This growth along
                            with the appreciation of the euro, contributed to a 35% increase in gross written premiums and policy fees in
                            Spain. Finally, Continental Europe Corporate (CEC), which underwrites non-life corporate business for
                            international and larger national companies, experienced an increase of 45% in its gross written premiums
                            and policy fees to USD 1.5 billion for the first half of 2003. Two-thirds of the growth, in local currency, is
                            attributable to increased rates and one third is due to higher volumes. The appreciation of the euro against the
                            US dollar also contributed to the increase.



                                                                                                                                   Zurich Financial Services Group . Half Year Report 2003   9
             Zurich Financial Services Group Half Year Operating Review




          Our UKISA region had a 34% increase in gross written premiums and policy fees for the first six months of 2003
          as compared to the same period in 2002. Approximately two-thirds of the growth in local currency is attributable
          to rate increases while volume increases account for the remainder. This region benefited from the appreciation
          of the British pound (12%) in the United Kingdom, the euro (23%) in Ireland and the rand (37%) in South Africa
          against the US dollar. The United Kingdom continued to benefit from strong rate and volume increases in the
          commercial sector. Liability and property lines are our strongest performing lines of business in the United
          Kingdom. However, rate growth has slowed in the automobile line of business as a result of this market reaching
          the peak of its underwriting cycle. In Ireland, a significant portion of the growth in our gross written premiums
          and policy fees has been driven by the appreciation of the euro against the US dollar. In our Irish commercial lines
          of business, we have achieved increases in most lines of business while in personal lines of business, softening
          automobile market conditions have constrained growth. Gross written premiums and policy fees in South Africa
          have increased as a result of the appreciation of the South African rand against the US dollar as well as a
          combination of rate and volume increases.
          Gross written premiums and policy fees increased 16% in our Rest of the World region. The largest increases
          in gross written premiums and policy fees in this region were experienced in Australia, Japan and Mexico. In
          Australia, we continued to benefit from hardening markets, which enabled us to raise our rates as well as increase
          volume. This growth was also helped by the 16% appreciation of the Australian dollar against the US dollar.
          Gross written premiums in Japan increased in the commercial lines of business largely due to penetration in the
          industrial risk market and sales through the direct distribution channel has once again increased over the prior
          year. Additionally, the Japanese yen appreciated 9% against the US dollar, which has contributed to the overall
          growth of gross written premiums and policy fees. The growth of gross written premiums and policy fees in
          Mexico is largely attributable to rate increases on corporate and wholesale lines of business.

          Total revenues
          Our Non-life Insurance segment’s total revenues increased USD 3.7 billion, or 34% (24% in local currency), from
          USD 10.8 billion for the first half of 2002 to USD 14.5 billion for the same period in 2003. In each of our regions,
          we experienced an increase in total revenues driven primarily by an increase in premiums and, to a lesser extent, to
          an increase in net investment results.
          Our Non-life Insurance segment’s net earned premiums and policy fees increased USD 3.3 billion, or 34%, from
          USD 9.8 billion for the first half of 2002 to USD 13.1 billion for the same period in 2003. The growth in net
          earned premiums in our North America Corporate (17%), North America Consumer (191%), Continental Europe
          (36%), UKISA (37%) and Rest of the World (13%) regions is consistent with the growth in gross written premiums
          and policy fees in those regions.

          Total benefits, losses and expenses
          Total benefits, losses and expenses in our Non-life Insurance segment increased USD 2.9 billion, or 27%, from
          USD 10.5 billion for the first half of 2002 to USD 13.4 billion for the same period in 2003. Our net combined
          ratio for the first six months of 2003 improved by 4.5 percentage points to 98.8% from 103.3% for the
          comparative period of 2002. Our net loss ratio improved 3.1 percentage points to 74.0% in the first half of 2003.
          Insurance benefits and losses in our North America Corporate region increased by 18% in the first half of 2003,
          in line with the 17% growth in net earned premiums. The increase in the total benefits and losses is attributable
          to increased premium volumes written since 2002, claims associated with higher than average storm losses in the
          first half of 2003 while the comparative period had lower than average storm losses and claims inflation. The net
          loss ratio increased 0.3 percentage points to 74.9% in the first half of 2003.
          Our North America Consumer region incurred USD 647 million, or 166%, higher insurance benefits and losses
          as a result of the two new quota share treaties with the Farmers P&C Group Companies entered into on
          31 December 2002. For the first half of 2003, our net loss ratio has improved by 6.0 percentage points to 64.8%.
          Insurance benefits and losses in our Continental Europe region increased by USD 665 million, or 30%, to
          USD 2.9 billion in the first half of 2003 over the same period of 2002. This increase is largely attributable to the
          appreciation of the euro against the US dollar. In local currency the increase was USD 130 million, or 6%, primarily
          as a result of the higher volume of premiums. As the insurance benefits and losses for this region have increased
          at a lower rate than net earned premiums, our net loss ratio improved 3.6 percentage points to 73.8% for the first
          half of 2003 from 77.4% for the same period in 2002.
          Insurance benefits and losses in our UKISA region increased by USD 404 million, or 31%, to USD 1.7 billion for
          the first half of 2003. This increase is attributable to the higher premium volumes in 2003 over the previous
          period of 2002 and the effects of the appreciation of the British pound against the US dollar. Our UKISA region’s
          net loss ratio has improved 3.4 percentage points to 75.3% for the first half of 2003.
          Insurance benefits and losses in our Rest of the World region decreased by USD 2 million, or 1%, for the first
          half of 2003. This decrease is despite a significant increase in premiums. In Australia we benefited from good
          claims performance in short tail lines leading to an overall reduction in net losses in the first half of 2003 as
          compared to the same period in 2002. Accordingly, the net loss ratio in our Rest of the World region has improved
          by 8.1 percentage points to 57.7% for the first half of 2003.
          Insurance benefits and losses in our Centrally Managed Businesses have declined by USD 12 million in the
          first half of 2003 to USD 556 million. Lower losses due to certain businesses in run-off status were largely offset



10   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review




                            by a reserve strengthening of USD 95 million recorded in respect of prior year development on North America
                            Corporate business reinsured by group reinsurance entities.
                            Other costs and expenses in Non-life Insurance increased by USD 569 million, or 19%, from USD 3.1 billion for the
                            first half of 2002 to USD 3.6 billion for the first six months of 2003. The overall increase in our Non-life Insurance
                            segment’s other costs and expenses is significantly below the increase in premiums volume reflecting our cost
                            savings initiatives in each of our regions. Underwriting and policy acquisition costs alone increased USD 553 million.
                            This increase is closely related to the growth in gross written premiums. The net expense ratio in Non-life Insurance
                            declined 1.4 percentage points from 25.9% for the first half of 2002 to 24.5% for 2003.

                            Business operating profit
                            Business operating profit increased USD 680 million from USD 249 million for the first half of 2002 to
                            USD 929 million for the same period in 2003, largely as a result of the same factors contributing to the
                            4.5 percentage point improvement in our net combined ratio.


                            Life Insurance
                            Life Insurance (before special provisions in 2002 and
                            eliminations of intercompany transactions)
                            in USD millions, for the six months ended 30 June                                                   2003             2002         Change
                            Gross written premiums, policy fees and insurance deposits                                      10,421             9,252            13%
                            Gross written premiums and policy fees                                                           6,447             4,934            31%
                            Total revenues                                                                                   8,196             6,840            20%
                            Total benefits, losses and expenses                                                              7,615             6,429            18%
                            Business operating profit                                                                          550               368            49%
                            Net income                                                                                         391               446          – 12%

                            The following table highlights the financial performance of Life Insurance by geographic region.
                            Net income and business operating profit
                            by geographic region (before special
                            provisions in 2002 and eliminations
                            of intercompany transactions)                                           Net income                    Business operating profit
                            in USD millions, for the six months ended 30 June                2003      2002    Change           2003        2002     Change
                            North America Consumer1                                          135        99       36%             187              145           29%
                            Continental Europe                                               132       291     – 55%             211               49         331%
                            UKISA                                                            121        27     348%              148              119           24%
                            Rest of the World                                                  3        29     – 90%               4               55         – 93%
                            Total                                                            391       446     – 12%             550              368           49%
                        1   North America Corporate is no longer active in life insurance.


                            The following table presents the embedded value results for our Life Insurance segment.
                            Life – Embedded value results
                            in USD millions, for the six months ended 30 June                                                   2003             2002         Change
                            Embedded value profit, after tax                                                                    556            – 380          246%
                            Gross new business premiums annual premium equivalent (APE)                                       1,092              896            22%
                            New business profit, after tax                                                                       90               49            84%
                            New business profit margin (APE)                                                                  8.2%             5.4%           2.8 pts

                                                                                                                                        Six months     Full year
                                                                                                                                             ended       ended
                                                                                                                                         30/6/20031 31/12/2002
                            Embedded value operating profit, after tax (in USD millions)                                                         583              996
                            Embedded value operating return, after tax                                                                         5.8%             9.0%
                            Expected return                                                                                                    4.0%             8.4%
                        1   Half year figures are not annualized.


                            Total premium volume
                            Life Insurance gross written premiums, policy fees and insurance deposits increased by USD 1.2 billion, or
                            13%, to USD 10.4 billion for the first half of 2003. In local currency, we experienced a 1% decline in gross written
                            premiums and policy fees and insurance deposits. With the purchase of Deutscher Herold Leben in Germany and
                            Deutsche Bank’s insurance operations in Italy, Spain and Portugal, Continental Europe became our largest life
                            insurance region accounting for 49% of Life Insurance gross written premiums, policy fees and insurance deposits
                            in the first half of 2003, followed by UKISA with 29% of total volume and North America Consumer with 15%.




                                                                                                                        Zurich Financial Services Group . Half Year Report 2003   11
             Zurich Financial Services Group Half Year Operating Review




          Gross written premiums and policy fees in our Life Insurance segment have grown by USD 1.5 billion, or 31%
          (12% in local currency), from USD 4.9 billion for the first half of 2002 to USD 6.4 billion for the first six months of
          2003. The largest increase was in our Continental Europe region, which was primarily due to the inclusion of the
          results of the Deutsche Bank insurance operations in Continental Europe, acquired in April of 2002, for the full six
          months of 2003. These operations contributed USD 1.2 billion of gross written premiums and policy fees in the
          first half of 2003 as compared to USD 527 million in the same period in 2002; an incremental increase of
          USD 716 million year-on-year. Also recorded within our Continental Europe region, Switzerland has seen an
          increase in gross written premiums and policy fees of USD 403 million, or 23%, driven by the appreciation of the
          Swiss franc against the US dollar. In local currency, our Swiss life operation’s gross written premiums and policy
          fees have increased slightly. Our UKISA region also experienced an increase in gross written premiums and policy
          fees of USD 152 million, or 19%. The growth in UKISA was driven largely by the impact of the increase in UK stock
          markets in the first half of 2003 as compared to a decline in the same period in 2002. Additionally, the appreciation
          of the British pound against the US dollar has contributed to the increase. Gross written premiums and policy
          fees in our Rest of the World region amounted to USD 501 million in the first half of 2003 and increased by
          USD 152 million, or 44%, over the same period in 2002. This was driven by the launch of a new product distributed
          through the bancassurance channel in Asia Pacific. North America Consumer experienced a slight decrease in
          gross written premiums and policy fees in the first half of 2003 due to the fact that Farmers Life stopped writing
          new structured settlements business in the latter part of 2002. Partially offsetting this decrease at Farmers Life is a
          12% increase in periodic premiums in the first six months of 2003. The remaining life operations in our North
          America Corporate region have been wound down following the disposal of Zurich Life in Canada in 2002.
          Despite the additional USD 412 million of insurance deposits in the first half of 2003 associated with the life
          insurance operations acquired in Continental Europe (USD 558 million in 2003 and USD 146 million in 2002),
          insurance deposits in our Life Insurance segment decreased by USD 344 million, or 8% (17% in local currency),
          from USD 4.3 billion for the first half of 2002 to USD 4.0 billion for the same period in 2003. North America
          Consumer experienced the largest decline in insurance deposits. This decline is primarily due to lower variable
          annuity volumes in our US operations, which led to a USD 389 million, or 30%, decline in insurance deposits in
          the first six months of 2003. Our UKISA and Rest of the World regions also recorded lower insurance deposits as
          poor stock market performance over the past several years lead to lower sales of investment type products.
          Insurance deposits in Continental Europe increased by USD 410 million as a result of the additional deposits from
          the acquired operations mentioned earlier.

          Total revenues
          Total revenues in Life Insurance increased by USD 1.4 billion, or 20% (3% in local currency), from
          USD 6.8 billion for the first half of 2002 to USD 8.2 billion for 2003. Net earned premiums and policy fees
          increased by USD 1.5 billion, or 32%, from 4.6 billion for the first half of 2002 to USD 6.1 billion for 2003. Each
          of our regions had movements in net earned premiums that were in line with the movement in gross written
          premiums.

          Total benefits, losses and expenses
          Total benefits, losses and expenses in Life Insurance increased by USD 1.2 billion, or 18%, from USD 6.4 billion for
          the first half of 2002 to USD 7.6 billion for the same period in 2003.
          Insurance benefits and losses increased by USD 1.9 billion, or 46% (23% in local currency), from
          USD 4.2 billion for the first half of 2002 to USD 6.1 billion for 2003. The largest increase was in our Continental
          Europe region, which was primarily due to including the results of the Deutsche Bank insurance operations,
          acquired in April of 2002, for the full six months of 2003. The incremental impact of this acquisition on insurance
          benefits and losses in the first half of 2003 was USD 812 million (USD 571 million in 2002 and USD 1.4 billion in
          2003). Switzerland, also included in our Continental Europe region, has seen a slight increase in insurance benefits
          and losses in local currency. However, due to the appreciation of the Swiss franc against the US dollar, insurance
          benefits and losses increased 26% in US dollars. In UKISA, insurance benefits and losses increased by
          USD 324 million, or 90%. The falling stock market in 2002 contributed to reduced benefits to policyholders in that
          year while the first six months of 2003 have seen an increase in stock market levels and a corresponding increase
          in benefits. North America Consumer recorded a decrease in total insurance benefits and losses of 20%, largely
          due to lower benefits on structured settlements which it stopped writing in the latter half of 2002. Our Rest of the
          World region has had an increase in insurance benefits and losses of 98%, driven primarily by Asia Pacific where a
          new product was introduced and distributed through the bancassurance channel.
          Policyholder dividends and participation in profit shifted from an expense of USD 36 million for the first
          half of 2002 to a benefit of USD 459 million for the first six months of 2003. The variance in policyholder dividends
          and participation in profit is largely due to Continental Europe. In accordance with German regulations, certain life
          insurance products share up to 100%, but not less than 90%, of the risks and rewards associated with the
          investment results on assets supporting those products. The allocation of net investment losses has been recorded
          as a reduction of the accrual for expected future benefit payouts on unrealized investment gains. The remaining
          reserves related to these products are sufficient to meet our contractual obligations, including declared policyholder
          dividends. Policyholder dividends in our UKISA life operations shifted from revenue of USD 220 million in the first
          half of 2002 to a small expense of USD 12 million in the first six months of 2003 due to recovering stock market
          levels and the corresponding need to return a portion of the gains to the policyholders. Our remaining regions did
          not have significant variances in policyholder dividends and participation in profits.



12   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review




                         Underwriting and policy acquisition costs decreased by USD 265 million, or 26% (34% in local currency),
                         from USD 1.0 billion for the first half of 2002 to USD 765 million for the same period in 2003. The largest driver
                         of this improvement is our UKISA region, where we have seen a decrease of USD 288 million. Favorable
                         movements in the UK stock market have decreased the amount of amortization of deferred policy acquisition
                         expense in the first half of 2003 as compared to the same period in 2002. Our other regions did not have
                         significant variances in underwriting and policy acquisition costs.
                         Other operating and administrative expenses decreased by USD 68 million, or 9% (21% in local currency), to
                         USD 658 million for the first half of 2003. This improvement was experienced in each of our regions except for our
                         Rest of the World region, where Argentina’s expenses have been adversely affected by exchange rate movements
                         against the US dollar. This decline largely reflects our global initiatives to reduce expenses and headcount. The
                         decrease also comes despite the incremental addition of the acquired operations in our Continental Europe region
                         and the impacts of the appreciation of most currencies against the US dollar.
                         Amortization of goodwill and other intangible assets has decreased by USD 27 million from the first
                         half of 2002 to USD 76 million for the first half of 2003. In the second quarter of 2002, we recorded a special
                         provision of USD 558 million to write-off goodwill. As a result of lower goodwill balances, the amortization
                         charge on the remaining goodwill was lower in 2003.

                         Business operating profit
                         Business operating profit for our Life Insurance segment increased USD 182 million from USD 368 million for the
                         first half of 2002 to USD 550 million for the first six months of 2003.

                         Embedded value
                         Embedded value operating profit for the first half of 2003 was USD 583 million, corresponding to an operating
                         return on embedded value of 5.8%, 1.8 percentage points above the expected return of 4.0%. This represents
                         an improvement over the operating return for the full year of 9.0%, which was 0.6 percentage points above the
                         expected return of 8.4%. Embedded value operating profit in North America Consumer was USD 184 million,
                         which includes a strong contribution from new business. Continental Europe achieved embedded value operating
                         profit of USD 187 million reflecting reductions in expenses and bonus participation, and the repricing of the
                         Group business in Switzerland. In UKISA, embedded value operating return was USD 176 million, in line with the
                         expected return.
                         Since the end of 2002, we have seen increases in stock markets, and this is reflected in lower embedded value
                         economic losses than in previous years. However, lower interest rates and lower expected investment returns due
                         to reduced exposure to equities (in particular in the United Kingdom) have reduced embedded value profit by
                         USD 27 million to a total profit for the first half of 2003 of USD 556 million (a return of 5.5%).
                         Gross new business premiums, measured on an annual premium equivalent (APE) basis (new annual premiums
                         plus 10% of single premiums), increased over the half year by 10% in local currency terms to USD 1.1 billion.
                         This increase is primarily due to the acquisition of the former Deutsche Bank insurance operations in Continental
                         Europe during 2002. These businesses contributed USD 212 million of APE during the first half of 2003,
                         compared to USD 95 million in the same period in 2002. In addition, strong sales of bancassurance products in
                         Asia Pacific are primarily responsible for the increase in production in the Rest of the World region. These increases
                         have more than offset reductions in new business premium seen in both North America Consumer (down 16%
                         due to lower volumes of variable annuity and structured settlement products) and UKISA (down 10% in local
                         currency). In general, in the United Kingdom life market, volumes are reflecting the continued lack of investor
                         confidence in equity markets. In addition, Eagle Star Life in the United Kingdom discontinued new with-profits
                         business at the end of 2002.
                         New business contributed USD 90 million to our after tax embedded value profits, an increase of 84% (71% in
                         local currencies) when compared to the first half of 2002. North America Consumer new business value added
                         USD 36 million, an increase of USD 20 million over 2002 due to the discontinuance of lower margin structured
                         settlement products and increased margins on traditional life products in Farmers Life, and expense reductions in
                         Zurich Life US. The repricing of Group business and lowering of bonus rates on individual products in Switzerland,
                         and expense reductions in general across the Continental Europe region, have resulted in a substantial increase in
                         value added by new business, USD 22 million for 2003.


                         Farmers Management Services
                         In the United States, Farmers Management Services continued to show profit growth in the first half of 2003.
                         Farmers Group, Inc. and its subsidiaries (FGI) provide management services to the Farmers P&C Group Companies,
                         prominent writers of personal lines and small commercial lines business. “Farmers” is our main market brand for
                         personal insurance in the United States. While premiums are written and claims are paid by the Farmers P&C
                         Group Companies, which we do not own, FGI provides management services to the Farmers P&C Group
                         Companies and receives management fees for these services.




                                                                                                           Zurich Financial Services Group . Half Year Report 2003   13
             Zurich Financial Services Group Half Year Operating Review




          Farmers Management Services (before special provisions in 2002
          and eliminations of intercompany transactions)
          in USD millions, for the six months ended 30 June                                         2003        2002     Change
          Management fees and other related revenue                                                 935          885         6%
          Management expenses and other related expenses                                            422          432       – 2%
          Business operating profit                                                                 513          445       15%
          Net income                                                                                313          269       16%
          Gross operating margin                                                                 54.7%       51.2%       3.5 pts
          Gross written premiums of the Farmers P&C Group Companies                               6,908        6,861       0.7%
          Gross earned premiums of the Farmers P&C Group Companies                                6,803        6,536       4.1%

          Management fees and other related revenue, which primarily consist of management fees from the Farmers P&C
          Group Companies, increased 6% from USD 885 million for the first half of 2002 to USD 935 million for the same
          period in 2003, due mainly to a 4.1% increase in gross earned premiums of the Farmers P&C Group Companies.
          Gross earned premiums are higher as a result of premium rate increases, primarily implemented in 2002, across all
          lines of businesses. The other related revenue was also higher in the first half of 2003 reflecting a greater number
          of policies and higher in-force amounts of premiums for which various service fees are charged.
          Despite an increase in management fees and other related revenue, expenses were down slightly in the first half
          of 2003, reflecting improved operating efficiencies. As a result of these operating efficiencies and higher revenue,
          gross operating margin increased 3.5 percentage points in the first half of 2003 to 54.7%.
          Net income for our Farmers Management Services segment increased by USD 44 million, or 16% from
          USD 269 million in the first six months of 2002 to USD 313 million in the same period in 2003, reflecting the
          strong growth in revenue and the success of our cost-cutting efforts.
          Business operating profit for Farmers Management Services increased by USD 68 million, or 15%, from
          USD 445 million in the first half of 2002 to USD 513 million in the same period in 2003, reflecting the same
          favorable factors as impacted our net income.


          Other Businesses
          Other Businesses (before special provisions in 2002 and
          eliminations of intercompany transactions)
          in USD millions, for the six months ended 30 June                                         2003        2002     Change
          Net earned premiums and policy fees                                                       656          659        0%
          Management fees                                                                            20          351     – 94%
          Net investment result                                                                     692          564       23%
          Net gain on disposal of businesses                                                         27          472     – 94%
          Insurance benefits and losses, including policyholder dividends                         1,053          566       86%
          Other operating and administrative expenses                                               298          607     – 51%
          Business operating profit / (loss)                                                      – 478           45 – 1,162%
          Net income / (loss)                                                                     – 304          354   – 186%

          Net earned premiums and policy fees, which are principally generated by Centre, have declined slightly by
          USD 3 million to USD 656 million for the first half of 2003. Centre continues to write new structured finite risk
          property and casualty business. Centre no longer writes new credit enhancement, life or health business.
          Management fees have declined by USD 331 million, or 94%, to USD 20 million for the first half of 2003. Zurich
          Scudder Investments was sold in April 2002, which has caused this decrease.
          Net investment result, the sum of net investment income, net realized and unrealized capital gains and losses, has
          increased by USD 128 million in the first half of 2003 to USD 692 million compared to the same period in 2002.
          The increase at Centre, attributable to gains realized on the sale of debt securities, is partially offset by decreases
          in our capital markets and banking operations.
          In the first half of 2003, gains on disposals declined by USD 445 million to USD 27 million from USD 472 million in
          the same period in 2002. The gain in 2002 related primarily to the disposal of Zurich Scudder Investments.
          Insurance benefits and losses and policyholder dividends in our Other Businesses segment have increased by
          USD 487 million or 86%, to USD 1.1 billion for the first six months of 2003. Insurance benefits and losses have
          increased by USD 248 million, or 50%, to USD 746 million for the first half of 2003. Insurance benefits and losses
          in our reinsurance - run-off operations have decreased by USD 20 million as this business is in run-off status.
          Substantially all insurance benefits are in our Centre operations for the first halves of 2002 and 2003. Centre has
          recorded a reserve strengthening of USD 474 million in the first six months of 2003, primarily related to certain
          asset-backed transactions in the leisure, transportation and healthcare sectors where collateral values have
          declined, as well as to the life and disability business. Policyholder dividends and participations in profit have
          increased by USD 239 million. This increase is attributable to experience refunds at Centre. However, a portion of
          the increase in experience refunds is offset by higher investment income.




14   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Operating Review




                         Other operating and administrative expenses have decreased by USD 309 million, or 51%, to USD 298 million for
                         the first half of 2003. The decline is largely attributable to our asset management operations, which declined by
                         USD 369 million following the sale of Zurich Scudder Investments in the second quarter of 2002.
                         Net income in our Other Businesses segment has shifted from a net income of USD 354 million for the first half of
                         2002 to a net loss of USD 304 million in 2003. However, the 2002 figure includes USD 373 million of after-tax
                         gains on disposals, primarily the disposal of Zurich Scudder Investments. Business operating profit has also shifted
                         from a net profit of USD 45 million for the first half of 2002 to a net loss of USD 478 million in 2003. As business
                         operating profit removes the effects of realized capital gains from our Centre operations, which have improved in
                         the first half of 2003, business operating profit is lower than net income for our Other Businesses segment.


                         Corporate Center
                         Our Corporate Center segment includes Group holding companies, central expenses at the headquarters in Zurich,
                         central financing vehicles and certain businesses in run-off.
                         Corporate Center (before special provisions in 2002 and
                         eliminations of intercompany transactions)
                         in USD millions, for the six months ended 30 June                                         2003             2002         Change
                         Total revenues                                                                            238              295          – 19%
                         Insurance benefits and losses                                                             146               67          118%
                         Interest expenses on debt                                                                 338              335             1%
                         Total benefits, losses and expenses                                                       684              768          – 11%
                         Business operating profit / (loss)                                                      – 249            – 295            16%
                         Net loss                                                                                – 465            – 518            10%

                         The decrease in total revenues of USD 57 million, or 19%, was primarily attributable to a USD 54 million decline
                         in net investment result. This decline is largely attributable to an increase in unrealized losses on swaps of
                         USD 33 million. However, the losses on our Bâloise investment were USD 5 million lower in the first half of 2003
                         at USD 158 million.
                         Total benefits, losses and expenses declined from USD 768 million to USD 684 million, or 11%, compared with
                         the same period in 2002.
                         As a result of adverse development run-off business, insurance benefits and losses increased by USD 79 million
                         over the first half of 2002 to USD 146 million in the first half of 2003. This increase was offset in the first six
                         months of 2003 when we commuted certain reinsurance treaties and recovered losses paid on treaties with
                         experience refunds on certain other treaties resulting in revenue from policyholder dividends and participations in
                         profit of USD 91 million. In the same period in 2002, we incurred an expense of USD 49 million for this line item.
                         In the first half of 2003, we achieved a significant reduction in the net expenses of our headquarters in Zurich.
                         These expenses declined by USD 37 million, or 48%, to USD 40 million in the first half of 2003. This decrease
                         reflects the results of our global profit improvement program and the reduction in full time equivalents (FTEs)
                         and improved billing for services performed at the headquarters in Zurich for the local operating units.
                         Corporate Center reported a net loss of USD 465 million for the first half of 2003, an improvement of
                         USD 53 million over the same period in 2002. Business operating profit for our Corporate Center segment
                         has improved by USD 46 million over the comparable period in 2002, from a loss of USD 295 million to a
                         loss of USD 249 million in the first half year 2003.


                         Investment Performance
                         We manage our well diversified portfolio to maximize benefits for both shareholders and policyholders. The
                         portfolio is managed in accordance with local regulatory and business requirements under the guidance of
                         our Asset/Liability Management and Investment Committee.
                         Investment performance
                         in USD millions, for the six months ended 30 June                                         2003             2002         Change
                         Net investment income                                                                   3,567            3,177            12%
                         Net realized capital gains/(losses) on investments and impairments                      – 418               56         – 846%
                         Net unrealized capital losses on investments                                               –4            – 178            98%
                         Net investment result                                                                   3,145            3,055              3%
                         Total return (excluding investment expenses)                                            3.3%             0.9%           2.4 pts

                         Net investment income increased USD 390 million to USD 3.6 billion, primarily as a result of a higher invested
                         asset base and our shift towards debt securities, and is partially offset by lower yields. Additionally, favorable
                         foreign currency impacts have helped our investment income. Net realized and unrealized capital gains and losses
                         decreased by USD 300 million, primarily driven by the impairment charge in the first half of 2003.




                                                                                                           Zurich Financial Services Group . Half Year Report 2003   15
             Zurich Financial Services Group Half Year Operating Review




          Total investment return for all asset classes, including investment income, realized and unrealized gains in
          the operating statements and movements in unrealized gains and losses included in shareholders’ equity, was
          USD 5.6 billion representing a total return of 3.3% (after excluding investment expenses of USD 142 million), as a
          percentage of average assets. This result represents an increase of 2.4 percentage points over the same period in
          the prior year.
          Debt securities comprise approximately two-thirds of our own investments and contributed USD 4.4 billion to the
          total investment result. Our investment return on this asset class, including movements in unrealized gains and
          losses was 4.0%.
          Equity securities, for which we bear investment risk, account for 6.1% of our own investments as at 30 June
          2003. These assets added a further USD 691 million, including movements on unrealized gains and losses included
          in shareholders’ equity, to the total investment result. The investment return on equities was 3.0%. This result
          includes USD 943 million of impairments, which were recorded in the first quarter of 2003. Impairment charges in
          the second quarter of the year did not have a significant impact on the investment result.
          Our remaining investment categories, including real estate, contributed USD 519 million to our total investment
          result. These investments yielded 1.4%. Short-term investments and cash comprise 7.4% of our invested assets
          and represent a significant portion of our other investments.

          Investment portfolio                                                                         30/6/2003 31/12/2002
          Total (in USD millions)                                                                        177,567    163,788
          Debt securities                                                                                 67.5%       62.6%
          Equity securities:
          Common stocks, including equity unit-trusts                                                       6.1%       8.3%
          Unit-trusts (debt securities, real estate, short-term investments)                                0.9%       1.5%
          Common stock portfolios backing the participating
            with-profit policyholder contracts                                                              0.8%       1.7%
          Trading equity portfolios in capital markets and banking                                          3.2%       4.3%
          Investments held by investment companies                                                          0.9%       0.8%
          Real estate held for investment                                                                   4.2%       4.5%
          Mortgage loans                                                                                    5.6%       5.4%
          Policyholder, collateral and other loans                                                          2.7%       4.4%
          Investments in associates                                                                         0.5%       0.5%
          Short-term investments and cash and cash equivalents                                              7.4%       5.8%
          Other investments                                                                                 0.2%       0.2%
          Total                                                                                          100.0%      100.0%

          Our own investments, excluding unit-linked assets, increased by 8% to USD 177.6 billion at 30 June 2003 from
          USD 163.8 billion at year-end 2002. The increase in investments was mainly due to the weakening of the US dollar
          against the Swiss franc (– 2%), the euro (– 10%) and the British pound (– 3%) as well as the recoveries in equity
          markets noted since the end of the first quarter of 2003. Favorable bond markets further increased our
          investments.
          At 30 June 2003 we reduced our exposure to common stock by 2.2 percentage points to 6.1% as compared to
          31 December 2002. In the first half of 2003, we also reduced our holdings in other equity security categories,
          common stock portfolios backing the participating with-profit policyholder contracts, trading equity portfolios in
          capital markets and banking and certain unit-trusts classified as equity securities.




16   Zurich Financial Services Group . Half Year Report 2003
  Zurich Financial Services Group Half Year Consolidated Financial Statements

  Consolidated operating statements (unaudited)
  for the six months ended 30 June
  in USD millions



                                                                                                               Notes               2003               2002
Revenues
Gross written premiums and policy fees                                                                                         26,096             20,727
Less premiums ceded to reinsurers                                                                                              – 4,257            – 3,803
Net written premiums and policy fees                                                                                           21,839             16,924
Net change in reserves for unearned premiums                                                                                   – 1,884            – 1,774
Net earned premiums and policy fees                                                                                            19,955              15,150
Management fees                                                                                                                  1,037              1,327
Net investment income                                                                                                5           3,567              3,177
Net realized capital (losses) / gains on investments and impairments                                                 5           – 418                 56
Net unrealized capital losses on investments                                                                         5              –4              – 178
Net gain on disposal of businesses                                                                                   4               1                463
Other income                                                                                                                       723                453
Total revenues                                                                                                                 24,861              20,448

Benefits, losses and expenses
Insurance benefits and losses                                                                                        6       – 16,694            – 14,293
Policyholder dividends and participation in profits                                                                                209               – 185
Underwriting and policy acquisition costs                                                                            6         – 3,124             – 2,788
Administrative expense                                                                                                         – 1,873             – 1,997
Other operating expense                                                                                                          – 838             – 1,238
Interest expense on debt                                                                                           10            – 223               – 324
Interest credited to policyholders and other interest                                                                            – 642               – 396
Amortization of intangible assets                                                                                                – 216             – 1,055
Total benefits, losses and expenses                                                                                          – 23,401            – 22,276

Net income / (loss) before income taxes and minority interests                                                                   1,460            – 1,828
Income tax expense                                                                                                   8            – 723              – 138
Net income applicable to minority interests                                                                                         – 36              – 63
Net income / (loss)                                                                                                                 701           – 2,029

in USD
Basic earnings / (loss) per share                                                                                                  4.93           – 24.34
Diluted earnings / (loss) per share                                                                                                4.91           – 24.34

The notes to the half year consolidated financial statements are an integral part of these half year consolidated financial statements.




                                                                                                             Zurich Financial Services Group . Half Year Report 2003   17
             Zurich Financial Services Group Half Year Consolidated Financial Statements

             Consolidated balance sheets (unaudited)
             in USD millions



          Assets                                                                                                         Notes   30/6/2003     31/12/2002
          Investments                                                                                                        5
          Debt securities                                                                                                          119,980          102,498
          Equity securities                                                                                                         13,921           18,795
          Trading equity portfolios in capital markets and banking                                                                   5,671            7,093
          Investments in associates                                                                                                    925              908
          Other investments                                                                                                         25,756           26,050
          Cash and cash equivalents                                                                                                 11,314            8,444
          Total investments                                                                                                        177,567          163,788

          Accrued investment income                                                                                                  2,508            2,278
          Receivables                                                                                                               12,039           10,654
          Reinsurance assets                                                                                                        23,292           22,193
          Deferred policy acquisition costs                                                                                  9      11,816           11,103
          Fixed assets                                                                                                               2,421            2,362
          Goodwill                                                                                                                     837              792
          Other intangible assets                                                                                                    3,037            3,075
          Deferred tax assets                                                                                                8       4,352            4,422
          Derivative trading assets and other assets                                                                                 2,989            2,839
          Mortgage loans given as collateral                                                                                         4,513            4,291
          Separate account (unit-linked) assets                                                                                     64,354           58,059
          Total assets                                                                                                             309,725          285,856


          Liabilities and shareholders’ equity
          Liabilities
          Insurance reserves, gross                                                                                          7     167,092          153,334
          Reserve for premium refunds                                                                                                4,150            3,997
          Funds held under reinsurance contracts                                                                                     4,556            4,341
          Obligation to repurchase securities                                                                                        4,757            3,416
          Deferred tax liabilities                                                                                           8       6,044            5,545
          Accrued liabilities                                                                                                        2,794            2,686
          Deferred front-end fees                                                                                                    2,625            2,370
          Debt related to capital markets and banking                                                                      10        6,520            7,370
          Senior and subordinated debt                                                                                     10        4,544            4,438
          Other liabilities                                                                                                         17,141           16,910
          Collateralized loans                                                                                                       4,513            4,291
          Separate account (unit-linked) liabilities                                                                                65,510           59,146
          Total liabilities                                                                                                        290,246          267,844
          Minority interests                                                                                                            829           1,207

          Shareholders’ equity
          Preferred securities                                                                                                        1,096           1,096
          Common stock                                                                                                                1,028           1,028
          Treasury stock                                                                                                                – 14            – 14
          Additional paid-in capital                                                                                                  9,891           9,896
          Net unrealized gains on investments                                                                                         2,179           1,293
          Cumulative translation adjustment                                                                                           – 201           – 484
          Retained earnings                                                                                                           4,671           3,990
          Common stockholders’ equity                                                                                               17,554           15,709
          Total shareholders’ equity                                                                                                18,650           16,805
          Total liabilities and shareholders’ equity                                                                               309,725          285,856

          The notes to the half year consolidated financial statements are an integral part of these half year consolidated financial statements.




18   Zurich Financial Services Group . Half Year Report 2003
  Zurich Financial Services Group Half Year Consolidated Financial Statements

  Consolidated statements of cash flows (unaudited)
  for the six months ended 30 June
  in USD millions



                                                                                                                                   2003               2002
Cash flows from operating activities
Net income / (loss)                                                                                                                 701           – 2,029
Adjustments for:
Realized and unrealized capital losses on investments and impairments                                                               422               122
Net gain on disposal of businesses                                                                                                   –1             – 463
Equity in income of investments in associates                                                                                        –6                 7
Depreciation and amortization                                                                                                       377             1,267
Other non-cash items                                                                                                                603               127
Changes in operational assets and liabilities:
Deferred policy acquisition costs                                                                                                – 346                – 13
Reinsurance assets, net                                                                                                          – 640            – 1,757
Receivables and payables                                                                                                       – 3,336              – 191
Insurance reserves                                                                                                               4,849              6,951
Deferred income tax, net                                                                                                           469                – 56
Net changes in other operational assets and liabilities                                                                          1,380              – 380
Net cash provided by operating activities                                                                                        4,472              3,585

Cash flows from investing activities
Sales and maturities of investments                                                                                            62,477             42,587
Purchases of investments                                                                                                     – 65,890           – 47,544
Disposals of fixed and other assets                                                                                              8,581             6,920
Purchases of fixed and other assets                                                                                            – 7,327           – 6,782
Investments in associates, net                                                                                                      –1               – 53
Acquisitions of companies, net of cash acquired                                                                                      –             – 759
Disposals of companies, net of cash balances                                                                                       138             2,362
Dividends from associates                                                                                                            9                  6
Net cash used in investing activities                                                                                          – 2,013            – 3,263


Cash flows from financing activities
Change in universal life and investment contracts, net                                                                             325                – 36
Proceeds from sale and repurchase agreements                                                                                     1,358              – 275
Dividends paid to shareholders                                                                                                     – 20             – 434
Issuance of deferred exchangeable securities                                                                                          –               349
Redemption of preferred stock by subsidiaries                                                                                    – 527              – 443
Issuance of debt                                                                                                                   113              4,099
Payments on debt outstanding                                                                                                   – 1,134            – 3,217
Net cash provided by financing activities                                                                                           115                  43
Effect of exchange rate changes on cash and cash equivalents                                                                        296                144
Change in cash and cash equivalents                                                                                              2,870                509
Cash and cash equivalents as at 1 January                                                                                        8,444              7,231
Cash and cash equivalents as at 30 June                                                                                        11,314               7,740

Other supplementary cash flow disclosures
in USD millions                                                                                                                    2003               2002
Other interest income received                                                                                                   3,151              2,442
Dividend income received                                                                                                           329                342
Other interest expense paid                                                                                                      – 528              – 572
Income tax paid                                                                                                                  – 490              – 257

At 30 June 2003 and 2002, cash and cash equivalents restricted as to use were USD 1,004 million and USD 449 million, respectively.

Cash and cash equivalents comprise the following:
in USD millions                                                                                                                    2003               2002
Cash at bank and in hand                                                                                                         6,098              4,499
Cash equivalents                                                                                                                 5,216              3,241
Balance as at 30 June                                                                                                          11,314               7,740

The notes to the half year consolidated financial statements are an integral part of these half year consolidated financial statements.




                                                                                                             Zurich Financial Services Group . Half Year Report 2003   19
             Zurich Financial Services Group Half Year Consolidated Financial Statements

             Consolidated statements of shareholders’ equity (unaudited)
             for the six months ended 30 June
             in USD millions, except number of shares




                                                                          Number of                                                             Deferred
                                                                            common              Preferred                Common             exchangeable
                                                                        shares issued           securities                  stock                 equity
          Balance as at 31 December 2001                                 83,886,001                 1,096                     626                     –
          Change in net unrealized gains on investments
             (excluding translation adjustments)                                    –                   –                       –                     –
          Translation adjustments                                                   –                   –                       –                     –
          Change in net gains and losses not recognized
              in the operating statement                                            –                   –                       –                     –
          Issuance of deferred exchangeable equity                                  –                   –                       –                   349
          Exchange of deferred exchangeable equity
              into common stock                                                  130                    –                       –                     –
          Treasury stock transactions                                              –                    –                       –                     –
          Net loss                                                                 –                    –                       –                     –
          Dividends                                                                –                    –                       –                     –
          Balance as at 30 June 2002                                     83,886,131                 1,096                     626                   349


          Balance as at 31 December 2002                               144,006,955                  1,096                   1,028                     –
          Change in net unrealized gains on investments
             (excluding translation adjustments)                                    –                   –                       –                     –
          Translation adjustments                                                   –                   –                       –                     –
          Change in net gains and losses not recognized
             in the operating statement                                             –                   –                       –                     –
          Treasury stock transactions                                               –                   –                       –                     –
          Net income                                                                –                   –                       –                     –
          Dividends                                                                 –                   –                       –                     –
          Balance as at 30 June 2003                                   144,006,955                  1,096                   1,028                     –

          The notes to the half year consolidated financial statements are an integral part of these half year consolidated financial statements.




20   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Consolidated Financial Statements




              Treasury                                               Net
                 stock               Additional               unrealized      Cumulative                                         Total
             (nominal                   paid-in                 gains on      translation     Retained                   shareholders’
                value)                  capital             investments       adjustment      earnings                         equity
                    –3                   7,706                    1,567          – 1,151          7,901                           17,742

                     –                        –                  – 1,295               –                 –                       – 1,295
                     –                        –                      175             435                 –                           610

                     –                        –                  – 1,120             435                 –                          – 685
                     –                        –                        –               –                 –                            349

                     –                        –                        –               –              –                                 –
                    –2                     – 68                        –               –              –                              – 70
                     –                        –                        –               –        – 2,029                          – 2,029
                     –                        –                        –               –          – 434                            – 434
                    –5                   7,638                      447            – 716          5,438                           14,873


                  – 14                   9,896                    1,293            – 484          3,990                           16,805

                     –                        –                     865                –                 –                            865
                     –                        –                      21              283                 –                            304

                     –                        –                     886              283                –                          1,169
                     –                       –5                       –                –                –                              –5
                     –                        –                       –                –             701                             701
                     –                        –                       –                –             – 20                            – 20
                  – 14                   9,891                    2,179            – 201          4,671                           18,650




                                                                                            Zurich Financial Services Group . Half Year Report 2003   21
               Zurich Financial Services Group Half Year Consolidated Financial Statements

               Notes to the half year consolidated financial statements (unaudited)



          1.      Basis of presentation
          These half year consolidated financial statements have been prepared in accordance with International Accounting Standard 34, “Interim
          Financial Reporting”. The accounting policies used to prepare these consolidated financial statements comply with International Financial
          Reporting Standards (IFRS), previously known as International Accounting Standards (IAS), and are consistent with those set out in the notes
          to the Annual Report 2002 of Zurich Financial Services Group (“the Group”). These unaudited half year consolidated financial statements
          should be read in conjunction with the Group’s Annual Report 2002. The Group’s independent auditors have carried out a review of these
          unaudited half year consolidated financial statements. Their report is set out on page 35.
          On 5 September 2002, the Group announced a program to improve profitability in combination with a repositioned strategic focus on core
          businesses and key markets. Beginning in 2003, the Group has adjusted its financial reporting to better reflect its new strategic focus on
          non-life and life insurance. Accordingly, its business segment reporting now comprises five rather than eight reporting segments. The former
          segments “Asset Management”, “Centre”, “Capital Markets & Banking” and “Reinsurance – run-off” have been combined to form the
          “Other Businesses” segment. In addition, new property & casualty (P&C) finite risk contracts and renewals written by Centre have been
          included in the Non-life Insurance segment. The Threadneedle asset management business has been included in the Life Insurance segment
          as it is the principal asset manager for the UKISA life operations’ assets.
          Certain reclassifications have been made to prior period amounts and segment disclosures to conform to the presentation in the Group’s
          Annual Report 2002 and to the current period presentation. These reclassifications have no effect on the previously reported net loss.
          Certain amounts recorded in the half year consolidated financial statements reflect estimates and assumptions made by management about
          insurance liability reserves, investment valuations, interest rates and other factors. Actual results may differ from the estimates made. Interim
          results are not necessarily indicative of the full year results.


          2.      Foreign currency translation and transactions
          The table below summarizes the principal exchange rates which have been used for translation purposes. The net losses on foreign currency
          transactions included in the consolidated operating statements were USD 34 million and USD 46 million for the half years ended 30 June
          2003 and 2002, respectively.
                                                                                                                                    Operating statements
          Table 2                                                                                           Balance sheets              and cash flows
          Principal exchange rates                                                                               as at                six months ended
          USD per foreign currency unit                                                                30/6/2003 31/12/2002        30/6/2003     30/6/2002
          Euro                                                                                            1.1513        1.0492        1.1062        0.8968
          Swiss franc                                                                                     0.7403        0.7228        0.7412        0.6106
          UK pound sterling                                                                               1.6552        1.6102        1.6125        1.4436


          3.      Restructuring activities
          The strategic operational improvement program includes repositioning our focus on key markets, exiting non-core and low performing
          businesses and initiating a Group-wide program to improve operational efficiencies and increase profitability. Such actions include closing
          down or selling businesses, terminating employees, closing down or selling facilities, exiting leases and terminating supplier contracts.
          As a result, in 2002, restructuring costs of USD 516 million before tax were charged against income and USD 107 million were utilized,
          leaving a restructuring provision amounting to USD 409 million as per 31 December 2002.
          The table below indicates the utilization of and other changes in the restructuring provision between 1 January and 30 June 2003.
          Table 3
          Restructuring provision
          in USD millions                                                                                                                             2003
          Opening balance as at 1 January 2003                                                                                                         409
          Utilized                                                                                                                                   – 146
          Increases                                                                                                                                      13
          Reductions                                                                                                                                   – 32
          Foreign exchange translation                                                                                                                   16
          Balance as at 30 June 2003                                                                                                                   260




22   Zurich Financial Services Group . Half Year Report 2003
     Zurich Financial Services Group Half Year Consolidated Financial Statements




4.      Changes in the scope of consolidation
The Group’s significant transactions affecting the scope of consolidation during the half years ended 30 June 2003 and 2002 are as follows.

a) Disposals in 2003
The Group completed sales of Rüd, Blass & Cie AG, Bankgeschäft, the asset management business in India, and the insurance operations
in the Czech Republic in the first six months of 2003. In addition, certain business operations were discontinued or disposed to third parties
in Taiwan, the United Kingdom, the United States and Estonia. Additionally, a charge was recorded for warranties arising from the 1999
disposal of Eagle Star Re in the United Kingdom. The aggregate net gain from these transactions recorded in the first six months of 2003 was
USD 1 million before tax.
On 31 March 2003, the Group completed the sale of Rüd, Blass & Cie AG, Bankgeschäft to Deutsche Bank (Suisse) SA. For this transaction,
a significant portion of the sales proceeds could not be recognized at the time of sale, as it is contingent on the development of assets under
management over a period of fifteen months subsequent to the closing. Consequently, no gain was recognized to date on the disposal.
Several significant disposals of businesses have been announced, including:
• Zurich Capital Markets – Letter of Intent followed by a framework agreement in July 2003 for the transfer of certain derivative transactions
  and credit facilities and related assets to BNP Paribas.
• Zurich Invest Bank AG – Transfer of part of banking business to AIG Private Bank Ltd.
• Zurich Life US – Agreement for the sale of Zurich Life, a US life insurance group of companies, excluding Kemper Investors Life Insurance
  Company with certain businesses, to Bank One.
• Zurich Netherlands – Sale of non-life (consumer and small businesses) and life operations to SNS Reaal Groep N.V.
• Threadneedle Asset Management Holdings Ltd. – Agreement for the sale of the ordinary share capital to American Express Financial
  Corporation.
Most of these transactions are expected to close in the second half of 2003, subject to regulatory approval and other conditions. The Group
is reviewing the impacts of these transactions on the reconstituted businesses retained, which could be material to the operating statement.
Accordingly, it is not possible at this time to estimate the financial effects of these transactions.

b) Disposals in 2002
In April 2002, the Group sold 100% of Zurich Scudder Investments, Inc., after buy-out of all minority interests, for USD 2.5 billion. The
Threadneedle business, previously part of Zurich Scudder Investments, Inc., was retained by the Group. Additionally, on 14 May 2002 the
Group sold its asset management businesses in Germany and Italy.
Table 4
Net gain on disposal of asset management businesses
in USD millions, for the six months ended 30 June                                                                                                      2002
Consideration received                                                                                                                               2,603
Less: net assets disposed                                                                                                                          – 2,123
Costs related to disposal                                                                                                                              – 49
Net gain on disposals before tax                                                                                                                        431

Net assets disposed consisted of total assets of USD 2,679 million (including cash and cash equivalents of USD 372 million) and total liabilities
of USD 556 million.
In January 2002, the Group sold a 49.9% interest in Zurich Bank, UK, for a gain of USD 16 million before tax. In February 2002, the Group
sold its controlling interest in Zurich Payroll Solutions Limited, recognizing a loss on disposal of USD 14 million before tax. In March 2002, the
Group sold 100% of Zurich Life Insurance Company of Canada recognizing a profit on disposal of USD 5 million before tax. In May 2002,
the Group sold Zurich Afore, Zurich’s private retirement fund management company in Mexico, recognizing a profit on disposal of
USD 25 million before tax.




                                                                                                              Zurich Financial Services Group . Half Year Report 2003   23
               Zurich Financial Services Group Half Year Consolidated Financial Statements




          c) Acquisitions in 2002
          In April 2002, the Group acquired 76.43% of Deutsche Bank’s insurance operations in Germany. The transaction also includes the right to
          purchase the remaining minority shares in the future. In May 2002, the Group acquired Deutsche Bank’s life insurance operations in Italy,
          Spain and Portugal.
          The acquisitions have been recorded using the purchase method and goodwill is amortized using the straight-line method over its estimated
          economic life. Goodwill is reviewed for recoverability on a periodic basis, including goodwill in the year that it is acquired. Any amounts
          deemed not recoverable are written off and charged as an expense in the operating statement.
          Assets acquired comprised cash and cash equivalents of USD 543 million, goodwill of USD 472 million and other assets totaling
          USD 8,858 million. Subsequent to the acquisition, a provision for impairment of USD 157 million was recorded in the first six months of
          2002 relating to the goodwill resulting from this transaction. The remaining goodwill balance is being amortized on a straight-line basis
          over its estimated economic life of 20 years.
          Additionally, in February 2002, the Group completed the acquisition of the Austrian operations of the Winterthur Group.


          5.      Investments
          A summary of the investment income, realized and unrealized capital gains and losses charged to the operating statements is given below.
          Table 5.1                                                                    Net realized capital
          Investment result                                      Net investment          gains / (losses)     Net unrealized capital
          in USD millions,                                           income             and impairments           gains / (losses)        Investment result
          for the six months ended 30 June                      2003        2002       2003           2002     2003            2002       2003         2002
          Debt securities                                      2,560        2,273      1,217          – 75       34               11     3,811            2,209
          Equity securities                                      324          360    – 1,904            67      622             – 34     – 958              393
          Investments in associates                                6           –7          –             –        –                –         6               –7
          Other investments:
          Investments held by investment
             companies                                             –            –       – 18            –         8               84       – 10             84
          Real estate                                            251          225         14           –6      – 22               42       243             261
          Mortgage loans, policyholder,
             collateral and other loans                         352           283        87            –2        –1                2       438              283
          Short-term investments                                 31            28         –             –         –                –        31               28
          Other                                                  81            50       186            72     – 645            – 283     – 378            – 161
          Cash and cash equivalents                             104            86         –             –         –                –       104               86
          Investment result, gross                             3,709        3,298     – 418            56        –4            – 178     3,287            3,176
          Investment expenses                                  – 142        – 121            –           –         –               –     – 142            – 121
          Investment result, net                               3,567        3,177     – 418            56        –4            – 178     3,145            3,055

          Table 5.2
          Realized capital gains / (losses)
          and impairments
          in USD millions,                                        Debt securities       Equity securities              Other                      Total
          for the six months ended 30 June                      2003          2002     2003          2002      2003            2002       2003             2002
          Gross realized capital gains                         1,366          373        665          971       383              275      2,414         1,619
          Gross realized capital losses                        – 119        – 432    – 1,626        – 655     – 109            – 184    – 1,854       – 1,271
          Impairments                                            – 30         – 16     – 943        – 249        –5              – 27     – 978         – 292
          Total                                                1,217         – 75    – 1,904           67       269               64     – 418              56




24   Zurich Financial Services Group . Half Year Report 2003
     Zurich Financial Services Group Half Year Consolidated Financial Statements




The details of the investment balances as at 30 June 2003 and 31 December 2002 are given in the tables below.
Table 5.3                                                                                                   30/6/2003                      31/12/2002
Investment breakdown                                                                               USD millions   % of total       USD millions    % of total
Debt securities:                                                                                      119,980         67.5%            102,498               62.6%
Available-for-sale                                                                                    112,027         63.1%             97,689               59.6%
Held-to-maturity                                                                                        1,863          1.0%                815                0.5%
Trading                                                                                                 6,090          3.4%              3,994                2.5%
Equity securities:                                                                                     19,592         11.0%             25,888               15.8%
Available-for-sale                                                                                     12,336          6.9%             15,876                9.7%
Trading                                                                                                 7,256          4.1%             10,012                6.1%
Investments held by investment companies                                                                1,521             0.9%            1,328               0.8%
Real estate held for investment                                                                         7,538             4.2%            7,378               4.5%
Mortgage loans                                                                                          9,935             5.6%            8,811               5.4%
Policyholder, collateral and other loans                                                                4,793             2.7%            7,159               4.4%
Investments in associates                                                                                 925             0.5%              908               0.5%
Short-term investments and cash and cash equivalents                                                   13,125             7.4%            9,542               5.8%
Other investments                                                                                         158             0.2%              276               0.2%
Total investments                                                                                     177,567          100%            163,788               100%

Table 5.4
Unrealized gains / (losses) on investments included in shareholders’ equity
in USD millions                                                                                                                     30/6/2003          31/12/2002
Debt securities – available-for-sale                                                                                                      5,909              5,295
Equity securities – available-for-sale                                                                                                  – 1,328            – 2,977
Other                                                                                                                                     – 186              – 271
Less amount of net unrealized investment gains /(losses) attributable to:
Life policyholder dividends and other policyholder liabilities                                                                          – 1,180                – 90
Life deferred acquisition costs                                                                                                           – 236               – 117
Deferred income taxes                                                                                                                     – 791               – 547
Minority interests                                                                                                                           –9                   –
Total                                                                                                                                     2,179               1,293


6.      Insurance benefits, losses and expenses
Table 6
Insurance benefits, losses and expenses                                            Gross                          Ceded                                Net
in USD millions, for the six months ended 30 June                           2003            2002          2003            2002              2003               2002
Losses and loss adjustment expenses                                      12,163        12,341          – 1,915       – 2,502            10,248                9,839
Life insurance death and other benefits                                   5,031         3,507            – 283         – 152             4,748                3,355
Increase in future life policyholders’ benefits                           1,767         1,168              – 69          – 69            1,698                1,099
Total insurance benefits and losses                                      18,961        17,016          – 2,267       – 2,723            16,694               14,293
Thereof:
Losses and loss adjustment expenses paid, net                              8,797           7,489         – 797            – 687           8,000               6,802

Underwriting and policy acquisition costs                                  3,877           3,539         – 753            – 751           3,124               2,788

The Group establishes loss reserves, which are estimates of future payments of reported and unreported claims for losses and related
expenses, with respect to insured events that have occurred. Reserving is a complex process dealing with uncertainty, requiring the use of
informed estimates and judgments. Any changes in estimates are reflected in results of operations in the period in which estimates are
changed. In 2002, the Group performed non-life reserve reviews utilizing data derived from recent experience and other data and considered
the results of an independent actuarial study. As a result of these reviews, a provision of USD 2,021 million before tax (USD 1,758 million
after tax) was recorded during the first half of 2002 relating to adverse developments of risks insured in prior years, particularly for asbestos
claims and in the US for casualty specialty lines, as well as general liability, automobile and workers’ compensation. The provision also
reflected the effects of the changing risk profile of the Group following the Converium spin-off and the increasing focus on our key markets.




                                                                                                                      Zurich Financial Services Group . Half Year Report 2003   25
               Zurich Financial Services Group Half Year Consolidated Financial Statements




          7.      Insurance reserves
          Table 7.1
          Insurance reserves
          in USD millions                                                                                                        30/6/2003     31/12/2002
          Gross
          Reserves for losses and loss adjustment expenses                                                                          47,821        44,546
          Reserves for unearned premiums                                                                                            14,857        12,491
          Future life policyholders’ benefits                                                                                       81,664        76,262
          Policyholders’ contract deposits and other funds                                                                          22,750        20,035
          Total insurance reserves, gross                                                                                          167,092      153,334
          Ceded
          Reserves for losses and loss adjustment expenses                                                                         – 14,980     – 14,940
          Reserves for unearned premiums                                                                                             – 2,151      – 1,821
          Future life policyholders’ benefits                                                                                        – 1,435        – 980
          Policyholders’ contract deposits and other funds                                                                             – 331        – 321
          Total ceded reserves                                                                                                     – 18,897     – 18,062
          Net
          Reserves for losses and loss adjustment expenses                                                                          32,841        29,606
          Reserves for unearned premiums                                                                                            12,706        10,670
          Future life policyholders’ benefits                                                                                       80,229        75,282
          Policyholders’ contract deposits and other funds                                                                          22,419        19,714
          Total insurance reserves, net                                                                                            148,195      135,272

          Table 7.2
          Reserves for losses and loss adjustment expenses
          in USD millions                                                                                                                      30/6/2003
          At 1 January (opening balance)
          Gross reserves for losses and loss adjustment expenses                                                                                  44,546
          Reinsurance recoverable                                                                                                               – 14,940
          Net reserves for losses and loss adjustment expenses                                                                                    29,606
          Losses and loss adjustment expenses incurred
          Current half year                                                                                                                        9,835
          Prior periods                                                                                                                              413
          Total                                                                                                                                   10,248
          Losses and loss adjustment expenses paid
          Current half year                                                                                                                       – 2,465
          Prior periods                                                                                                                           – 5,535
          Total                                                                                                                                   – 8,000
          Acquisitions and disposals of companies and businesses                                                                                   – 105
          Foreign currency translation effects                                                                                                     1,092
          At 30 June (closing balance)
          Net reserves for losses and loss adjustment expenses                                                                                    32,841
          Reinsurance recoverable                                                                                                                 14,980
          Gross reserves for losses and loss adjustment expenses                                                                                  47,821

          Significant delays occur in the notification of claims and a substantial measure of experience and judgment is involved in assessing
          outstanding liabilities, the ultimate cost of which cannot be known with certainty at the balance sheet date. The reserves for losses and loss
          adjustment expenses are determined on the basis of information currently available; however, it is inherent to the nature of the business
          written that the ultimate liabilities may vary as a result of subsequent developments.
          Deferred charges relating to retrospective reinsurance assumed totaling USD 251 million as at 30 June 2003 have been deducted from
          reserves for losses and loss adjustment expenses.




26   Zurich Financial Services Group . Half Year Report 2003
     Zurich Financial Services Group Half Year Consolidated Financial Statements




8.      Income taxes
Table 8.1
Income tax (expense)/ benefit
in USD millions, for the six months ended 30 June                                                                                  2003               2002
Current                                                                                                                           – 443              – 466
Deferred                                                                                                                          – 280                328
Total income tax expense                                                                                                          – 723              – 138

The Group, as a proxy for policyholders in the UK, is required to record taxes on investment income and gains each year. Accordingly, the
tax benefit or expense attributable to UK life insurance policyholder earnings is included in income tax expense. The tax expense / (benefit)
attributable to policyholder earnings was USD 75 million and USD –137 million in the first half of 2003 and 2002, respectively. In addition,
deferred income tax on policyholders’ separate account unrealized investment gains is included as income tax expense. An accrual for future
policy fees that will cover the tax charge is included in gross written premiums and policy fees revenue. Income tax is shown before reduction
for the element attributable to policyholders.
Table 8.2
Expected and actual income tax (expense)/ benefit
in USD millions, for the six months ended 30 June                                                                                  2003               2002
Expected income tax (expense) / benefit                                                                                           – 489                596
Reduction /(increase) in taxes resulting from:
Non-taxable income                                                                                                                    52                 48
Non-deductible expenses                                                                                                             – 37               – 83
Withholding, state and local taxes                                                                                                  – 20               – 21
Non-utilizable tax losses                                                                                                         – 157                – 71
Effect of special provisions                                                                                                           –             – 699
Additional tax expense attributable to policyholder earnings                                                                       – 42                106
Other                                                                                                                               – 30               – 14
Actual income tax expense                                                                                                         – 723              – 138

The table above illustrates the factors that cause the actual income tax expense to differ from the expected amount computed by applying
the expected rate.
The “expected” weighted average tax rate for the Group was 33.5% and 32.6% in the first half of 2003 and 2002, respectively. These rates
were derived by obtaining a weighted average of the applicable statutory income tax in relation to the operating income /(loss) generated in
the main territories in which the Group operates.
Table 8.3
Deferred income taxes
in USD millions                                                                                                            30/6/2003          31/12/2002
Deferred tax assets
Deferred tax assets, gross                                                                                                       4,535              4,608
Valuation allowance on deferred tax assets                                                                                       – 183              – 186
Deferred tax assets, net                                                                                                         4,352              4,422
Deferred tax liabilities
Deferred tax liabilities                                                                                                       – 6,044            – 5,545
Net deferred tax liabilities                                                                                                   – 1,692             –1,123

The current income tax payable (net of income tax receivable) at 30 June 2003 and 31 December 2002 was USD 473 million and
USD 502 million, respectively.
At 30 June 2003 and 31 December 2002, respectively, the Group had income tax loss carryforwards of USD 3,421 million and
USD 3,696 million available (subject to various statutory restrictions) for use in future tax returns. The majority of the income tax loss
carryforwards expire after five years. Deferred tax assets for loss carryforwards of USD 2,527 million and USD 2,838 million have been
recognized at 30 June 2003 and 31 December 2002, respectively.




                                                                                                             Zurich Financial Services Group . Half Year Report 2003   27
               Zurich Financial Services Group Half Year Consolidated Financial Statements




          9.        Deferred policy acquisition costs
          Table 9
          Deferred policy acquisition costs                                                            Non-life          Life       Other
          in USD millions                                                                            Insurance     Insurance    Segments1           Total
          At 1 January 2003 (opening balance)                                                            1,895        9,029          179       11,103
          Acquisition costs deferred                                                                     1,237          670             1        1,908
          Amortization charged to income                                                                 – 938        – 379          – 23      – 1,340
          Amortization charged to shareholders’ equity                                                        –       – 112             7        – 105
          Disposals                                                                                         –4            –             –           –4
          Increase / (decrease) due to currency translation                                                – 74         342          – 14          254
          At 30 June 2003 (closing balance)                                                              2,116        9,550          150       11,816
          1   Including eliminations of intersegment transactions


          10. Debt
          Table 10.1
          Debt
          in USD millions                                                                                                       30/6/2003   31/12/2002
          Debt related to capital markets and banking
          Zurich Capital Markets                                                                                                   5,983           6,787
          Dunbar Bank                                                                                                                352             379
          Centre Solutions (Bermuda) Ltd.                                                                                            185             204
          Debt related to capital markets and banking                                                                              6,520           7,370
          Senior debt
          Zurich Finance (USA), Inc.                                                                                               1,037           1,033
          Zurich International (Bermuda) Ltd.                                                                                        386             370
          Kemper Corporation                                                                                                         228             228
          Zurich Insurance Company                                                                                                   995             877
          Zurich Financial Services (UKISA)                                                                                           50               –
          Other                                                                                                                      348             430
          Senior debt                                                                                                              3,044           2,938
          Subordinated debt
          Zurich Holding Company of America                                                                                        1,000           1,000
          Farmers Group, Inc.                                                                                                        500             500
          Subordinated debt                                                                                                        1,500           1,500
          Total senior and subordinated debt                                                                                       4,544           4,438
          Total debt                                                                                                              11,064       11,808

          In March 2003, Zurich Capital Markets entered into a transaction relating to an obligation to repurchase securities. The proceeds were
          utilized to reduce short-term debt by USD 750 million.
          Table 10.2
          Maturity schedule of outstanding debt
          in USD millions                                                                                                                    30/6/2003
          2003 (six months)                                                                                                                        6,390
          2004                                                                                                                                       479
          2005                                                                                                                                       210
          2006                                                                                                                                       909
          2007                                                                                                                                       160
          after 2007                                                                                                                               2,916
          Total                                                                                                                                11,064

          Table 10.3
          Interest expense on debt
          in USD millions, for the six months ended 30 June                                                                          2003           2002
          Debt related to capital markets and banking                                                                                – 87          – 112
          Senior debt                                                                                                                – 73          – 149
          Subordinated debt                                                                                                          – 63           – 63
          Total                                                                                                                     – 223          – 324




28   Zurich Financial Services Group . Half Year Report 2003
  Zurich Financial Services Group Half Year Consolidated Financial Statements




11. Impairment of assets
Write-downs for invested asset impairments amounted to USD 978 million before tax in the first six months of 2003 (USD 292 million in the
first six months of 2002).
In the first six months of 2002 a provision of USD 727 million was recorded relating to write-offs of goodwill associated with certain business
acquisitions and a provision of USD 237 million before tax was recorded relating to certain E-business initiatives that were discontinued and
to other assets that had reduced continuing value.


12. Summary of quarterly consolidated financial information (unaudited)
The following quarterly consolidated financial information for each quarter ended 31 March and 30 June is unaudited.
Table 12
Summary of quarterly consolidated financial information (unaudited)
in USD millions, for the three months ended                                                 30/6/2003     30/6/2002        31/3/2003          31/3/2002
Gross written premiums and policy fees                                                         12,596       10,380            13,500              10,347
Net earned premiums and policy fees                                                            10,250        7,899             9,705               7,251
Net investment income and net realized and unrealized capital gains / (losses)
   on investments and impairments                                                               2,678         1,778                467             1,277
Total revenues                                                                                 13,848       10,902            11,013               9,546
Insurance benefits and losses                                                                  – 8,756      – 8,310           – 7,938            – 5,983
Other expenses                                                                                 – 3,933      – 4,674           – 2,774            – 3,309
Total benefits, losses and expenses                                                          – 12,689      – 12,984         – 10,712             – 9,292
Net income / (loss) before income taxes and minority interests                                  1,159       – 2,082                301                254
Net income / (loss)                                                                               587       – 2,035                114                    6

Interim results are not necessarily indicative of the full year results.




                                                                                                            Zurich Financial Services Group . Half Year Report 2003   29
             Zurich Financial Services Group Half Year Consolidated Financial Statements




          13. Segment information

          Table 13.1                                                                                Non-life
          Operating statements by business segment                                                 Insurance            Life Insurance
          in USD millions, for the six months ended 30 June                                    2003         2002      2003         2002
          Revenues
          Gross written premiums and policy fees                                            19,308      14,983      6,447        4,934
          Less premiums ceded to reinsurers                                                 – 4,288     – 3,499     – 404        – 355
          Net written premiums and policy fees                                              15,020      11,484      6,043        4,579
          Net change in reserves for unearned premiums                                      – 1,874     – 1,696         8            4
          Net earned premiums and policy fees                                               13,146        9,788     6,051        4,583
          Management fees                                                                         –           –        84           96
          Net investment income                                                                962          815     2,332        1,874
          Net realized capital gains / (losses) on investments and impairments                 182           –6     – 655          292
          Net unrealized capital gains / (losses) on investments                                  5           4        10        – 212
          Net gain on disposal of businesses                                                   – 25           5         –            –
          Other income                                                                         225          185       374          207
          Total revenues                                                                    14,495      10,791      8,196        6,840
          Benefits, losses and expenses
          Losses and loss adjustment expenses                                               – 9,656     – 9,061        – 43        – 74
          Life insurance death and other benefits                                               – 71        – 75   – 4,379     – 2,966
          Increase in future life policyholders’ benefits                                         –5        – 12   – 1,657     – 1,123
          Insurance benefits and losses                                                     – 9,732     – 9,148    – 6,079     – 4,163
          Policyholder dividends and participation in profits                                   – 34        – 32       459         – 36
          Underwriting and policy acquisition costs                                         – 2,219     – 1,666      – 765     – 1,030
          Other operating and administrative expenses                                       – 1,219     – 1,127      – 658       – 726
          Interest expense on debt                                                              – 90        – 74       – 24        – 48
          Interest credited to policyholders and other interest                                 – 57        – 24     – 472       – 323
          Amortization of intangible assets                                                     – 47      – 172        – 76      – 661
          Total benefits, losses and expenses                                              – 13,398    – 12,243    – 7,615     – 6,987
          Net income / (loss) before income taxes and minority interests                     1,097      – 1,452       581        – 147
          Net income / (loss)                                                                  766      – 1,365       391        – 112

          Supplementary segment information
          Losses and loss adjustment expenses paid, net                                     – 7,335     – 6,179       – 42        – 73
          Significant non-cash expenses:
          Depreciation and impairments of fixed assets                                         – 61         – 73      – 49         – 51
          Amortization and impairments of intangible assets                                    – 47       – 172       – 76       – 661
          Reserve strengthening (special provisions)                                              –     – 1,389          –            –




30   Zurich Financial Services Group . Half Year Report 2003
   Zurich Financial Services Group Half Year Consolidated Financial Statements




     Farmers
  Management                                                                                Intersegment
     Services                    Other Businesses                 Corporate Center           Eliminations                                Total
2003         2002                2003       2002                  2003       2002         2003         2002                    2003               2002


    –            –                782        1,146                 412             383    – 853      – 719                 26,096            20,727
    –            –              – 107        – 402               – 312           – 266      854        719                 – 4,257           – 3,803
    –            –                675          744                 100            117        1            –                21,839            16,924
    –            –                – 19         – 85                  1              3        –            –                – 1,884           – 1,774
    –            –                656          659                 101            120        1            –                 19,955            15,150
 935          885                  20           351                   3               1      –5         –6                   1,037               1,327
  43           35                 445           599                176             181    – 391      – 327                   3,567               3,177
  –2           –5                 110         – 173                – 53            – 52       –          –                   – 418                  56
   –            –                 137           138              – 156           – 108        –          –                      –4               – 178
   –            –                  27           472                   –            – 14      –1          –                       1                 463
   –            –                  73             7                167             167    – 116      – 113                     723                 453
 976          915               1,468        2,053                 238            295     – 512      – 446                  24,861            20,448

    –            –              – 402         – 512              – 185           – 237       38         45                – 10,248           – 9,839
    –            –              – 263         – 263                 –8              –6     – 27       – 45                 – 4,748           – 3,355
    –            –                – 81           23                 47              11       –2          2                  – 1,698          – 1,099
    –            –              – 746         – 752              – 146           – 232       9            2               – 16,694          – 14,293
     –            –             – 307          – 68                  91           – 49       –           –                     209             – 185
     –            –             – 139          – 92                 –1               –       –           –                 – 3,124           – 2,788
– 401        – 411              – 298         – 607              – 232           – 469      97         105                 – 2,711           – 3,235
  – 21         – 21              – 96         – 167              – 338           – 335     346         321                   – 223             – 324
     –            –             – 158          – 65                – 15             –2      60          18                   – 642             – 396
 – 44         – 42                 –6           – 36              – 43           – 144       –           –                   – 216           – 1,055
– 466        – 474            – 1,750       – 1,787              – 684      – 1,231        512         446                – 23,401          – 22,276
 510          441               – 282          266               – 446           – 936       –            –                  1,460           – 1,828
 313          269               – 304          100               – 465           – 921       –            –                     701          – 2,029



    –            –              – 509         – 428              – 151           – 165      37          43                 – 8,000           – 6,802

 – 22         – 21                – 15          – 14              – 14             – 53      –            –                   – 161            – 212
 – 44         – 42                 –6           – 36              – 43           – 144       –            –                   – 216          – 1,055
    –            –                   –        – 254                  –           – 115       –            –                       –          – 1,758




                                                                                                        Zurich Financial Services Group . Half Year Report 2003   31
              Zurich Financial Services Group Half Year Consolidated Financial Statements




            Table 13.2                                                                                                                   Non-life
            Balance sheets (summarized) by business segment                                                                             Insurance               Life Insurance
            in USD millions                                                                                                       30/6/2003 31/12/2002      30/6/2003 31/12/2002
            Total investments                                                                                                         48,308       42,167    107,515     99,301
            Reinsurance assets                                                                                                        18,220       17,383      1,954      1,611
            Deferred policy acquisition costs                                                                                          2,116        1,895      9,550      9,029
            Goodwill and other related intangible assets1                                                                                178          160      1,760      1,745
            Separate account (unit-linked) assets                                                                                          9           10     64,345     58,049
            Other segment assets                                                                                                      12,771       12,036     12,514     11,902
            Total segment assets after consolidation of investments in subsidiaries                                                   81,602       73,651    197,638    181,637
            Reserves for losses and loss adjustment expenses, gross                                                                   41,632       38,035        459        431
            Reserves for unearned premiums, gross                                                                                     14,379       11,795        153        144
            Future life policyholders’ benefits, gross                                                                                   147          136     79,636     74,302
            Policyholders’ contract deposits and other funds, gross                                                                      843          790     22,131     19,471
            Insurance reserves, gross                                                                                                 57,001       50,756    102,379     94,348
            Total debt                                                                                                                 5,279        5,203        812        829
            Separate account (unit-linked) liabilities                                                                                     –            –     65,509     59,146
            Other segment liabilities                                                                                                 12,190       11,150     17,371     16,927
            Total segment liabilities                                                                                                 74,470       67,109    186,071    171,250
            Minority interests                                                                                                              156       91         145        119
            Segment equity                                                                                                                 6,976    6,451     11,422     10,268
        1   Other related intangible assets consists of attorney-in-fact relationship and present value of acquired insurance contracts.


            Supplementary segment information
            in USD millions
            Reserves for losses and loss adjustment expenses, net                                                                     28,058       24,689        343        324
            Reserves for unearned premiums, net                                                                                       12,044        9,932        149        142
            Future life policyholders’ benefits, net                                                                                     147          136     78,310     73,355
            Policyholders’ contract deposits and other funds, net                                                                        838          785     21,806     19,158
            Insurance reserves, net                                                                                                   41,087       35,542    100,608     92,979




32   Zurich Financial Services Group . Half Year Report 2003
      Zurich Financial Services Group Half Year Consolidated Financial Statements




       Farmers
    Management                                                                                  Intersegment
       Services                 Other Businesses                  Corporate Center               Eliminations                           Total
30/6/2003 31/12/2002          30/6/2003 31/12/2002             30/6/2003 31/12/2002         30/6/2003 31/12/2002                30/6/2003 31/12/2002
   2,028       1,814             24,904        25,145             11,883        11,682       – 17,071     – 16,321                177,567           163,788
     436         436              5,858         5,872                600           640         – 3,776      – 3,749                23,292            22,193
       –           –                161           185                  1             1             – 12          –7                11,816            11,103
   1,090       1,110                 77            79                 15             8               –2           –                 3,118             3,102
       –           –                  –             –                  –             –                –           –                64,354            58,059
     791         867              4,501         3,817              1,955         2,151         – 2,954      – 3,162                29,578            27,611
   4,345       4,227             35,501        35,098             14,454        14,482       – 23,815     – 23,239                309,725           285,856
       –            –              8,051        8,366                 683            581      – 3,004      – 2,867                  47,821            44,546
       –            –                575          712                 170             96        – 420        – 256                  14,857            12,491
       –            –              1,939        1,848                 480            502        – 538        – 526                  81,664            76,262
       –            –                  1            –                   –              –        – 225        – 226                  22,750            20,035
       –            –            10,566        10,926               1,333           1,179     – 4,187      – 3,875                167,092           153,334
     500         500              7,201         7,902             14,337        13,690       – 17,065     – 16,316                  11,064            11,808
       –           –                  –             –                  –             –               1            –                 65,510            59,146
   1,366       1,350             16,013        13,901              2,204         3,276         – 2,564      – 3,048                 46,580            43,556
   1,866       1,850             33,780        32,729             17,874        18,145       – 23,815     – 23,239                290,246           267,844
       –            –                176          689                 352            308             –            –                     829            1,207
   2,479       2,377               1,545        1,680             – 3,772      – 3,971               –            –                 18,650            16,805




        –           –              4,465        4,642                 171            319        – 196        – 368                  32,841            29,606
        –           –                468          550                   1              2           44           44                  12,706            10,670
    – 212       – 210              1,679        1,659                 288            325           17           17                  80,229            75,282
    – 225       – 226                  –            –                   –              –            –           –3                  22,419            19,714
    – 437       – 436              6,612        6,851                 460            646        – 135        – 310                148,195           135,272




                                                                                                                Zurich Financial Services Group . Half Year Report 2003   33
             Zurich Financial Services Group Half Year Consolidated Financial Statements




                                                                Gross written premiums
          Table 13.3                                                 and policy fees                        Revenues                   Assets
          Premiums, revenues and assets by geographical segment    six months ended                     six months ended                as at
          in USD millions                                       30/6/2003     30/6/2002              30/6/2003    30/6/2002    30/6/2003 31/12/2002
          North America Corporate                                                  7,832     6,875       4,838        3,956        34,572       32,574
          North America Consumer                                                   2,202     1,178       3,351        2,236        38,181       35,977
          Continental Europe                                                     10,308      7,413       9,566        7,865      109,023        98,446
          UKISA                                                                    4,016     3,093       4,146        2,791        89,309       81,711
          Rest of the World                                                        1,496     1,204       1,144          886         9,567        8,367
          Centrally Managed Businesses                                             2,059     2,375       2,085        2,916        45,714       44,770
          Intersegment Eliminations                                              – 1,817   – 1,411       – 269        – 202      – 16,641     – 15,989
          Total                                                                  26,096    20,727      24,861        20,448      309,725      285,856

          14. Subsequent events
          On 16 July 2003, entities of the Group announced an agreement to buy 11,600,000 Bâloise shares from The Strategic Money Management
          Company B.V. (SMM) at a price of CHF 47.30 per share amounting to an aggregate purchase price of CHF 548.7 million. The swap
          transaction announced on 21 December 2001, in connection with a sale of Bâloise shares under which Zurich retained an economic interest
          in such shares relative to a basket of Swiss and Dutch shares, will be terminated. Upon closing of the transaction, which is subject to
          regulatory clearances, the Group will own 27% of the outstanding capital of Bâloise: 21.5% as Bâloise common stock, classified as
          “available-for-sale”, and 5.5% as options on Bâloise common stock, accounted as derivatives.
          On 6 August 2003, the Group announced the closure of Zurich Life Assurance Company, one of its UK Life businesses, and its sale to
          Swiss Re. The transaction is subject to regulatory approvals and is expected to be closed by the end of 2003.
          Effective as of 14 July 2003 the share capital is reduced by a nominal value reduction from CHF 10 to CHF 9 per each registered share.




34   Zurich Financial Services Group . Half Year Report 2003
  Zurich Financial Services Group Half Year Consolidated Financial Statements

  Review report by the Group auditors



To the Board of Directors and Shareholders of Zurich Financial Services, Zurich
We have reviewed the half year consolidated financial information (operating statement, balance sheet, statement of cash flows, statement
of shareholders’ equity and notes on pages 17 to 34) of Zurich Financial Services for the six months ended 30 June 2003.
The financial information is the responsibility of the Board of Directors. Our responsibility is to issue a report on the half year consolidated
financial information based on our review.
Our review was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards
on Auditing issued by the International Federation of Accountants (IFAC) which require that a review be planned and performed to obtain
moderate assurance about whether the half year consolidated financial information is free from material misstatement. A review is limited
primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an
audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Based on our review, we are not aware of any material modification that needs to be made to the accompanying half year consolidated
financial information for it to be in accordance with International Financial Reporting Standards and Swiss Law.


PricewaterhouseCoopers AG


R Marshall          M Frei


Zurich, 20 August 2003




                                                                                                                Zurich Financial Services Group . Half Year Report 2003   35
             Zurich Financial Services Group Half Year Consolidated Financial Statistics

             Statistical data per region – Non-life Insurance



                                                                                   North America         North America        Continental
          Non-life Insurance                                                         Corporate             Consumer             Europe
          in USD millions, for the six months ended 30 June                       2003       2002       2003      2002     2003        2002
          Gross written premiums and policy fees                                 7,832      6,875      1,583      550     5,923      4,252
          Net earned premiums and policy fees                                    4,277       3,641      1,601      550     3,941      2,898
          Insurance benefits and losses                                        – 3,204     – 3,398    – 1,036    – 389   – 2,909    – 2,514
          Policyholder dividends and participation in profits                       –4          –6          –        –       – 26       – 27
          Total net technical expenses                                           – 911       – 832      – 540    – 147     – 955      – 786
          Net underwriting result                                                  158       – 595        25       14        51       – 429
          Net investment income                                                    288         277        34       20       335         273
          Net realized capital gains / (losses) on investments
             and impairments                                                       181         – 32       –4       –3         30         18
          Net unrealized capital gains / (losses) on investments                     –            –        –        –          3          2
          Net non-technical result                                                  –7       – 111        –1        –      – 128      – 117
          Net income / (loss) before income taxes and
            minority interests                                                     620      – 461         54       31       291       – 253
          Net income / (loss)                                                      474       – 316        46       25       190       – 288

          Ratios, as % of net earned premiums and policy fees:
          Net loss ratio                                                       74.9%       93.3%      64.8%     70.8%    73.8%      86.7%
          Policyholder dividends and participation in profits ratio             0.1%        0.2%       0.0%      0.0%     0.7%       1.0%
          Net expense ratio                                                    21.3%       22.9%      33.7%     26.8%    24.2%      27.1%
          Net combined ratio                                                   96.3%       116.4%     98.5%     97.6%    98.7%      114.8%




36   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Consolidated Financial Statistics




                                                                         Centrally         Intersegment
            UKISA                    Rest of the World              Managed Businesses      Eliminations                              Total
     2003           2002             2003         2002               2003        2002    2003         2002                  2003              2002
   3,068         2,297                995          855                870        859     – 963      – 705                19,308            14,983
    2,276        1,664                542           478               509         557       –           –               13,146              9,788
  – 1,714      – 1,410              – 313         – 343             – 556     – 1,092       –          –2               – 9,732           – 9,148
        –            –                 –4             –                 –           1       –           –                   – 34              – 32
    – 507        – 412              – 202         – 179             – 108       – 174       –           –               – 3,223           – 2,530
      55          – 158                23          – 44             – 155       – 708       –          –2                    157          – 1,922
     185            144                38            31                84          70      –2           –                    962              815

       –5             17                7           –6                – 27          –       –            –                   182                 –6
        2              1                –            –                   –          –       –            1                     5                  4
     – 54           – 39                5           12                – 26       – 89       2            1                 – 209              – 343

     183            – 35               73            –7             – 124       – 727       –            –                1,097           – 1,452
     118            – 41               53          – 13             – 115       – 732       –            –                   766          – 1,365


  75.3%         84.8%             57.7%         71.7%            109.2%       196.0%      n/a         n/a                74.0%             93.5%
   0.0%          0.0%              0.8%          0.1%              0.0%        – 0.3%     n/a         n/a                 0.3%              0.3%
  22.3%         24.8%             37.2%         37.4%             21.3%        31.2%      n/a         n/a                24.5%             25.9%
  97.6%       109.6%              95.7%        109.2%            130.5%       226.9%      n/a         n/a                98.8%           119.7%




                                                                                                     Zurich Financial Services Group . Half Year Report 2003   37
               Zurich Financial Services Group Half Year Consolidated Financial Statistics

               Statistical data per region – Life Insurance



                                                                                               North America
            Life Insurance                                                                       Consumer1
            in USD millions, for the six months ended 30 June                                 2003      2002
            Gross written premiums, policy fees and insurance deposits                       1,527     1,925
            Gross written premiums and policy fees                                             619       628
            Net earned premiums and policy fees                                               349        375
            Management fees                                                                     –           –
            Net investment income                                                             347        357
            Net realized capital gains / (losses) on investments and impairments                2        – 19
            Net unrealized capital gains / (losses) on investments                              –           –
            Other income (incl. net gain on disposal of businesses)                            46          38
            Total revenues                                                                    744        751
            Insurance benefits and losses                                                    – 158     – 198
            Policyholder dividends and participation in profits                                  –2        –2
            Underwriting and policy acquisition costs                                         – 48       – 37
            Other operating and administrative expenses                                      – 102     – 121
            Interest expense                                                                 – 216     – 217
            Amortization of intangible assets                                                  – 30    – 439
            Total benefits, losses and expenses                                              – 556    – 1,014
            Net income / (loss) before income taxes and minority interests                    188      – 263
            Net income / (loss)                                                               135      – 302
        1   North America Corporate is no longer active in life insurance.




38   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Consolidated Financial Statistics




        Continental                                                                        Intersegment
          Europe                             UKISA                   Rest of the World      Eliminations                              Total
     2003        2002                2003            2002            2003         2002   2003         2002                  2003               2002
   5,113         3,479             2,978         3,153                811        695      –8             –               10,421               9,252
   4,385         3,161               948           796                501        349      –6             –                6,447               4,934
   4,334         3,136                899           761               469        311       –             –                6,051               4,583
        1            3                 82            90                 1           3      –             –                   84                  96
   1,419         1,032                508           433                57          52      1             –                2,332               1,874
   – 698           365                 35          – 40                 6        – 14      –             –                – 655                 292
     – 50           21                 58         – 233                 2           –      –             –                   10               – 212
     218            93                 85            61                27          15     –2             –                  374                 207
   5,224         4,650             1,667         1,072                562        367      –1             –                8,196               6,840
  – 4,864      – 3,417              – 683         – 359             – 374       – 189       –            –              – 6,079           – 4,163
      484        – 244                – 12          220               – 11        – 10      –            –                  459               – 36
    – 274        – 256              – 360         – 648               – 83        – 89      –            –                – 765           – 1,030
    – 184        – 242              – 292         – 334               – 81        – 29      1            –                – 658             – 726
    – 219        – 111               – 60          – 42                 –1          –1      –            –                – 496             – 371
      – 34       – 175                – 10         – 47                 –2           –      –            –                  – 76            – 661
  – 5,091      – 4,445            – 1,417       – 1,210             – 552       – 318       1            –              – 7,615           – 6,987
     133           205                250         – 138                10          49       –            –                   581              – 147
     132           134                121             27                 3         29       –            –                   391              – 112




                                                                                                     Zurich Financial Services Group . Half Year Report 2003   39
               Zurich Financial Services Group Half Year Consolidated Financial Statistics

               Embedded value results – Life Insurance
               for the six months ended 30 June1




                                                                                                                                                                                 North America
                                                                                                                                                                                   Consumer
            in USD millions                                                                                                                                                     2003      2002
            Gross new business premiums including deposits                                                                                                                      509              586
            of which:
            Annual premiums                                                                                                                                                      88              107
            Single premiums                                                                                                                                                     421              479
            Gross new business annual premiums equivalent (APE)                                                                                                                 130              155
            Embedded value information:
            Opening embedded value                                                                                                                                            3,160           3,526
            Profit expected from in-force business and net assets, after tax                                                                                                    127              150
            New business profit, after tax                                                                                                                                       36               16
            Operating variance, after tax                                                                                                                                        21               n/a2
            Total operating profit, after tax                                                                                                                                   184               n/a2
            Economic variance                                                                                                                                                    37            – 125
            Embedded value profit / (loss), after tax                                                                                                                           221               41
            Dividends and capital movements                                                                                                                                     – 16           – 224
            Closing embedded value before foreign currency translation effects                                                                                                3,365           3,343
            Foreign currency translation effects                                                                                                                                  –               –
            Closing embedded value after foreign currency translation effects                                                                                                 3,365           3,343
            of which:
            Shareholders’ net assets                                                                                                                                          1,563           1,656
            Value of business in-force                                                                                                                                        1,802           1,687
            After-tax operating return before foreign currency translation effects                                                                                            5.8%               n/a2
            After-tax return on opening embedded value before foreign currency translation effects                                                                            7.0%             1.2%
            New business profit margin (APE)                                                                                                                                27.5%            10.1%
            Embedded value economic assumptions:
            Discount rate                                                                                                                                                     7.5%             8.5%
            Investment returns before tax:
            Fixed interest                                                                                                                                                    4.4%             6.6%
            Equities                                                                                                                                                          7.5%             9.0%
            Property                                                                                                                                                             –                 –
            Expense inflation                                                                                                                                                1.0%             2.1%
            Attributed tax rate                                                                                                                                             35.4%            35.4%
        1   Embedded value returns shown are not annualized.
        2   For explanation see additional note 2 on the following page.

            Embedded value notes: The information above should be read in conjunction with the additional notes on the following page.

            External Review: B&W Deloitte, consulting actuaries, have undertaken a limited review of the half year 2003 embedded value results for the main life companies of the Zurich Financial
            Services Group (“the Group”) in the US, UK, Switzerland and Germany that was conducted on the basis of data provided by the Group. B&W Deloitte have reported to the Group that
            during this review, nothing has come to B&W Deloitte’s attention that would indicate that the embedded value results of the Group as at 30 June 2003 are unreasonable.




40   Zurich Financial Services Group . Half Year Report 2003
Zurich Financial Services Group Half Year Consolidated Financial Statistics




                                        Continental
                                          Europe                              UKISA            Rest of the World                            Total
                                     2003        2002                2003             2002     2003         2002                  2003               2002
                                   1,283           892              1,781         1,910         547        339                  4,120               3,727


                                      299          190                226           209         142         75                    755                 581
                                      984          702              1,555         1,701         405        264                  3,365               3,146
                                      397          260                382             379       183        102                  1,092                896


                                   1,944         2,225              4,309         4,350         675        546                 10,088            10,647
                                       79          100                163             175        38         32                     407               457
                                       22             –                 28             26         4           7                     90                49
                                       86           n/a2              – 15             n/a2      –6         n/a2                    86                n/a2
                                      187            n/a2             176            n/a2         36        n/a2                   583                 n/a2
                                       76         – 461             – 121         – 278         – 19       – 22                    – 27             – 886
                                      263         – 361                55             – 77       17          17                    556              – 380
                                    – 110           410              – 97               85       –8          15                  – 231                286
                                   2,097         2,274              4,267         4,358         684        578                 10,413            10,553
                                     168           261                136           252          59         20                    363               533
                                   2,265         2,535              4,403         4,610         743        598                 10,776            11,086


                                     964         1,151              1,873         1,760         482        308                  4,882               4,875
                                   1,301         1,384              2,530         2,850         261        290                  5,894               6,211
                                   9.7%            n/a2             4.1%             n/a2     5.3%          n/a2                 5.8%                n/a2
                                  13.5%       – 16.2%               1.3%         – 1.7%       2.5%        3.1%                   5.5%            – 3.6%
                                    5.5%        – 0.2%              7.4%          7.0%        1.9%        6.6%                   8.2%               5.4%

                                    7.5%         8.2%               7.3%          8.0%        9.6%       11.0%                   7.6%               8.4%


                                    3.8%         4.8%               4.3%          5.0%        4.7%        5.7%                   4.0%               5.2%
                                    7.2%         8.0%               6.9%          7.5%        8.0%        8.4%                   7.2%               7.8%
                                    4.5%         5.6%               6.5%          7.0%        6.7%        7.8%                   5.0%               5.9%
                                   1.3%          1.5%              3.0%           3.2%         3.0%       3.2%                  2.1%              2.2%
                                  27.6%         26.1%             28.9%          29.2%        27.3%      26.2%                 30.6%             30.1%




                                                                                                           Zurich Financial Services Group . Half Year Report 2003   41
             Zurich Financial Services Group Half Year Consolidated Financial Statistics




          Additional notes to main table
          1. From the beginning of 2003, several companies not directly transacting life and pensions business (for example, asset management,
             holding and service companies) have been included in the IFRS consolidated financial statements in the Life Insurance segment as they
             support the activities within this segment. Our embedded value shown in the main table only considers the life and pensions companies.
             We have used the USD 574 million opening 2003 shareholders’ equity, as calculated in accordance with IFRS, for the value of these
             additional companies, for which we currently do not calculate an embedded value. Their corresponding value at 30 June 2003 was
             USD 553 million. The inclusion of this amount would result in a total embedded value of USD 11.3 billion as at 30 June 2003.
          2. The split of embedded value profit into operating and economic profit is not available for the first half of 2002. Hence, the value shown
             under “Economic variance” for this period represents the sum of operating profit in excess of expected (excluding new business value)
             and economic variance. For the 2003 results, changes in operating assumptions and changes in economic assumptions are included
             within the appropriate item in the main table.
          3. To enable comparison of our UKISA new business results with those of our competitors in the UK market, the following figures have
             been provided.
               The new business profit here is shown before tax and before cost of solvency. In addition, the premium and the value generated from
               the sale of asset management products through our UK life distribution channel are also included.
               Selected figures for UKISA new business                                                                                           UKISA
               in USD millions, for the six months ended 30 June                                                                          2003           2002
               Gross new business annual premiums equivalent (APE)                                                                        454           453
               New business profit, before tax, (before effect of solvency)                                                                42            51
               New business profit margin (APE)                                                                                         9.3%         11.2%

               During the first half of 2003, our UK life business conducted a review of benefits on some critical illness and term assurance portfolios.
               Policyholders were offered the option of taking out new contracts to replace existing contracts. These new contracts contributed
               USD 15 million to new business profit, after tax, shown in the main table on the previous pages.

          Embedded Value Methodology
          The embedded value represents the shareholders’ interest, excluding any value from future new business, in the existing life insurance
          business. It is the total of the shareholders’ interest in the net assets of the life business and the present value of the projected releases to
          shareholders arising from the business in-force less a charge for the cost of capital supporting the solvency requirements of the business.
          The discount rate used to value the in-force business in each country reflects long-term government bond rates at the valuation date plus a
          risk margin. The economic assumptions used for the embedded value are “actively” set. They are, amongst other things, based on the
          relevant bond returns at the end of the period.
          The assumptions for mortality, persistency and expenses reflect recent and expected experience. Gross new business annual premium
          equivalent (APE) is calculated as new annual premiums plus 10% of single premiums.
          Embedded value profit is the change in the embedded value over the reporting period, after adjustment for any dividends and capital
          movements. The profit is calculated on an after-tax basis.
          Embedded value profit consists of the following components, the first two of which in aggregate are referred to as operating profit:
          – new business profit, after tax, which represents the value added by new business written during the period, including allowance for the
            cost of holding solvency capital, is valued at point of sale using the applicable discount rate;
          – the operating profit from existing business, which is equal to:
            – the profit expected from the in-force business and net assets, after tax, including allowance for the cost of holding solvency capital,
            – the experience variances caused by the differences between the actual experience during the period and the expected experience
              assumed in the prior year embedded value, and
            – the impact of changes in assumptions of future operating experience;
          – the economic variance, which is equal to:
            – the investment variance caused by differences between the actual and the expected experience over the reporting period, and
            – the change in future economic assumptions, such as changes in discount rates and future investment rates.




42   Zurich Financial Services Group . Half Year Report 2003
       Zurich Financial Services Group Shareholder Information

       Zurich Financial Services registered share data



    Share data                                                                                                                       30/6/2003                           31/12/2002
    Number of shares issued with a nominal value of CHF 101                                                                        144,006,955                       144,006,955
    Number of dividend-bearing shares with a nominal value of CHF 101                                                              144,006,955                       144,006,955
    Average number of outstanding shares                                                                                           142,035,814                        93,645,453
    Average number of outstanding shares, incl. potentially dilutive shares                                                        142,691,492                        94,110,063
    Market capitalization (in CHF millions at end of period)                                                                            23,257                            18,577

    Share price
    in CHF                                                                                                                           30/6/2003                           31/12/2002
    End of period value                                                                                                                161.50                                  129
    Period high                                                                                                                        177.00                                321.94 2
    Period low                                                                                                                          91.50                                 91.87 2

    Per share data
    in CHF                                                                                                                           30/6/2003                           31/12/2002
    Basic earnings / (loss) per share                                                                                                    6.66                                – 58.40
    Diluted earnings / (loss) per share                                                                                                  6.62                                – 58.40
    Book value per share                                                                                                               164.66                                150.30

    Additional data
    number of shares                                                                                                                 30/6/2003                           31/12/2002
    Treasury stock1                                                                                                                  1,955,413                           1,975,663
    Authorized stock, CHF 101 par value                                                                                              6,000,000                           6,000,000
    Contingent stock, CHF 101 par value                                                                                              6,981,828                           6,981,828
1   Nominal value reduction by CHF 1 per registered share is effective as of 14 July 2003.
2   Restated prices following the capital increase in October 2002




    Performance of Zurich Financial Services registered share since 1996, indexed (Source: Datastream)

       400%
       350%
       300%
       250%
       200%
       150%
       100%
        50%
            0%
                 1996                   1997                   1998                   1999                  2000            2001               2002                    2003


                                          Zurich Financial Services                              Swiss Market Index                     DJ Stoxx Insurance




    Stock listings
    Place                           Nature                        Official Symbol            Virt-x (Reuters / Bloomberg)   Exchange           Security identification codes
    Zurich                          primary listing               ZURN                       ZURZn.VX / ZURN VX             –                  National security number
                                                                                                                                               (Valorennummer): 1107539
                                                                                                                                               ISIN: CH0011075394
    London                          secondary listing             ZURN.L                     ZURZq.L / ZURN LI              1:1



    US American Depositary Receipt (ADR) Program
    Depositary                      Nature                        Official Symbol            Virt-x (Reuters / Bloomberg)   Exchange
    Bank of New York                ADR                           ZFSVY                      ZFSVY.PK / ZFSVY US            10 :1




                                                                                                                                        Zurich Financial Services Group . Half Year Report 2003   43
             Zurich Financial Services Group Shareholder Information

             Financial calendar and contacts



          Financial Calendar                3rd Quarter 2003 Results Reporting      19 November 2003
                                            Annual Results Reporting 2003           19 February 2004
                                            Annual General Meeting 2004             16 April 2004


          Contacts                          Registered Office                       Zurich Financial Services
                                                                                    Mythenquai 2
                                                                                    8022 Zurich
                                                                                    Switzerland
                                            Media Inquiries                         Corporate Communications, Media and Public Relations
                                                                                    Zurich Financial Services, Switzerland
                                                                                    Telephone: + 41 (0) 1 625 21 00
                                                                                    E-mail: media.info@zurich.com
                                            Investor Inquiries                      Investor Relations, Zurich Financial Services, Switzerland
                                                                                    Telephone: + 41 (0) 1 625 22 99
                                                                                    E-mail: investor.relations@zurich.com
                                                                                    Shareholder Services, Zurich Financial Services, Switzerland
                                                                                    Telephone: + 41 (0) 1 625 28 32
                                                                                    E-mail: shareholder.services@zurich.com
                                            Swiss Custody Service                   Zurich Financial Services
                                                                                    Custody Accounts
                                                                                    c /o S A G SIS Aktienregister AG
                                                                                    P.O. Box
                                                                                    4601 Olten, Switzerland
                                                                                    Telephone: + 41 (0) 62 311 61 45
                                                                                    Fax: + 41 (0) 62 205 39 71
                                                                                    Web site: www.sag.ch
                                            Inquiries of CDI holders                Lloyds TSB Registrars
                                            within the Zurich Financial             The Causeway, Worthing
                                            Services corporate nominee              West Sussex, BN99 6DA, United Kingdom
                                            service                                 Nominee Service helpline: 0870 600 3979
                                                                                    Lloyds TSB share dealing helpline: 0870 242 4244
                                                                                    (from outside the UK: + 44 1903 854261)
                                                                                    Web site: www.shareview.co.uk
                                            General CDI Inquiries                   CRESTCo Limited
                                                                                    33 Cannon Street
                                                                                    London EC4M 5SB, United Kingdom
                                                                                    CREST Service Desk: 0845 964 5648
                                                                                    Web site: www.crestco.co.uk
                                            American Depositary Receipts            Zurich Financial Services has an American Depositary Receipt program
                                                                                    with The Bank of New York (BNY).
                                                                                    For more information call BNY’s ADR Services Center
                                                                                    in the USA +1-888-bny-adrs
                                                                                    outside the USA +1-610-312-5315.
                                                                                    ADR holder assistance may also be obtained
                                                                                    from BNY at www.adrbny.com.
                                            Corporate Citizenship /                 Group Corporate Responsibility & Compliance
                                            Responsibility Inquiries                Zurich Financial Services, Switzerland
                                                                                    Telephone: + 41 (0) 1 625 28 74
                                                                                    E-mail: zurich.basics@zurich.com


                                            The Half Year Report 2003 may be downloaded from our Web site at http://www.zurich.com




44   Zurich Financial Services Group . Half Year Report 2003
Disclaimer & Cautionary Statement
Certain statements in this Half Year Report are forward-looking statements, including, but not limited to, statements that are
predications of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our
targeted profit improvement, return on equity targets, expense reductions, pricing conditions, dividend policy and underwriting claims
improvements. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and
unknown risks and uncertainties and can be affected by other factors that could cause actual results and Zurich Financial Services’ plans
and objectives to differ materially from those expressed or implied in the forward looking statements (or from past results). Factors such
as (i) general economic conditions and competitive factors, particularly in our core markets; (ii) performance of financial markets; (iii)
levels of interest rates and currency exchange rates; (iv) frequency, severity and development of insured claims events; (v) mortality and
morbidity experience; (vi) policy renewal and lapse rates; (vii) changes in laws and regulations and in the policies of regulators may have
a direct bearing on Zurich Financial Services’ results of operations and on whether Zurich Financial Services will achieve its targets. Zurich
Financial Services undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new
information, future events or circumstances or otherwise.

It should be noted that past performance is not a guide to future performance.

Persons requiring advice should consult an independent adviser.




The Half Year Report is published in English, German and French. In the case of inconsistencies
in the German and French translations, the English original version shall prevail.
The paper used in this report is manufactured from pulp sourced from fully sustainable forests,
and has been produced without the use of elemental chlorine.
Design by www.pauffley.com
Typesetting by NZZ Fretz AG, Switzerland
Printed by St Ives Burrups Ltd., England
Photography by Alex Sauer, Switzerland
Zurich Financial Services Group
                  Mythenquai 2
        8002 Zurich, Switzerland
      Phone +41 (0)1 625 25 25
               www.zurich.com




                              46828-03

				
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