Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — H1 2024 Earnings Presentation
65 slides from Zurich Insurance's earnings presentation, Aug 8, 2024
Slide 1: Record first half operating profits
Record first half operating profits Half year results 2024 August 8, 2024 Investor and media presentation Zurich Insurance Group ©©Zurich Zurich
Slide 2: Content
Content Use symbols to navigate through the document Main sections Other important information Key highlights Dividend policy Group results and outlook Customer KPIs Property & Casualty (P&C) P&C reinsurance program Life Life new business and top-line Farmers Farmers Exchanges details by line of bus
Slide 3: Key highlights
Key highlights 3 © Zurich
Slide 4: Key messages
Key messages BOP of USD 4.0bn is at a record level and up 7%. NIAS is up 21% to USD 3.0bn, with EPS up 23% to USD Record start to the year 20.8. Highest ever BOPAT ROE at 25.0%. EPS growth expected to exceed 10% CAGR over 2023-2025 P&C BOP up 3% on a like-for-like1 basis, with a combined ratio of 93
Slide 5: On track to exceed all the 2023-2025 financial targets
Key highlights On track to exceed all the 2023-2025 financial targets BOPAT ROE (%)1 Cash remittances EPS growth (USD)2 SST (%)4 (USDbn) 25.0% 232% >13.5 40.4 38.5 >20% 32.1 ≥160% FY-24 & 25 FY-23 4.8 HY-24 Target Cumulative Target FY-22 FY-23 FY-25e 2025 HY-24e Target 2023-2025 2023-2025 2023-2025
Slide 6: Record H1 level of BOP continues trend of robust profit growth
Key highlights Record H1 level of BOP continues trend of robust profit growth; supporting industry-leading return on equity Group BOP (USDbn)1 BOPAT ROE (%)2 6.1 25.0% +9% 7.4 23.1% 6.5 2023-2025 target 5.7 17.8% >20% 5.3 3.7 2.1% 4.2 3.1 14.2% 14.0% H2 2.5 3.0 11.0% 2.5 15.7% 3.7 4.0 3.4 H1 2.8 2.7
Slide 7: Retail performance benefits from continued delivery of customer initiatives
Key highlights Retail performance benefits from continued delivery of customer initiatives. Strong retention despite rate actions Customer centricity Higher customer Balancing rate and Retail GWP growth program roll-out satisfaction retention Roll-out progress as of HY-24: Retail and SME - tNPS (pts
Slide 8: Disciplined growth in new business volumes across Commercial and Retail P&C
Key highlights Disciplined growth in new business volumes across both Commercial and Retail P&C P&C GWP growth by driver P&C GWP growth by driver Commercial (USDm)1 Retail and SME (USDm)1 +3% +12% 125 14,476 533 8,902 344 11 113 275 13,996 7,981 HY-23 Rate change Exposure Net new HY-24 HY-23 Rate ch
Slide 9: Retail P&C rates continue to show strong improvement
Key highlights Retail P&C rates continue to show strong improvement, Commercial rates aligned with loss cost trends in key lines P&C - Rate change (%) North America Commercial – EMEA Motor Retail – Rate change (%) Rate change (%) 10 20 20 8 15 15 6 10 10 4 5 5 2 0 0 0 -5 -5 Q1-22 Q2-22 Q3-22 Q4-22 Q
Slide 10: Commercial Insurance continues to improve the portfolio composition
Key highlights Commercial Insurance continues to improve the portfolio composition U.S. Mid-Market GWP U.S. Accident & Health GWP U.S. Excess & Surplus GWP (USDbn)1 (USDbn) (USDbn) +16% +13% 1.0 +27% 0.6 0.6 0.6 0.9 0.5 0.5 0.7 0.4 0.7 0.4 0.3 0.6 0.4 0.4 FY-20 FY-21 FY-22 FY-23 FY-24e FY-20 FY-21 F
Slide 11: Cover-More to reinforce its position through acquisition of AIG personal travel
Key highlights Cover-More to reinforce its position as a leading global travel insurer through the acquisition1 of AIG personal travel Increased GWP2 Strengthened footprint3 Profitable scale4 21% Fee income + 45% underwriting USD 46% 10% Mid-to-high result 54% 2bn single digit COR ~95% growth 10% 59
Slide 12: Life reports a record high level of first half BOP
Key highlights Life reports a record high level of first half BOP, underpinned by a capital-efficient balance sheet Life reserves and liabilities1 Life BOP (USDbn) 2.1 2.0 27% 1.8 1.6 1.5 1.4 1.1 1.3 1.1 1.1 1.0 USD 217bn 0.8 0.8 0.6 0.9 4% H2 0.6 69% 0.9 1.0 0.8 0.9 0.7 0.8 0.7 H1 0.6 0.6 2016 2017
Slide 13: Consistent top-line growth in Life driven by protection and unit-linked
Key highlights Consistent top-line growth in Life drives profit expansion, fueled by protection and unit-linked Long term insurance Short term insurance Investment contracts PVNBP1 (USDm) Insurance revenue (USDm) Fee revenue (USDm) +5% +12% +9% Like-for-like in HY-24 vs. HY-232 Like-for-like in HY-2
Slide 14: Farmers Exchanges improves underlying COR and surplus ratio
Key highlights Farmers Exchanges1 improves underlying COR and surplus ratio remains in target range despite maturity of surplus notes GWP (USDm) Combined ratio (%)2 Surplus ratio (%) +5% 14,257 13,572 9% 7% 17% 6% 15% 34-38% HY-24 34.5% Target range 95% 99% 94% 90% 80% HY-23 HY-24 H1-22 H2-22 H1-23
Slide 15: CFO update
@ ZURICH CFO update 18 © Zurich
Slide 16: BOP at record level, up 10% in local currency terms
Group – Business operating profit BOP at record level, up 10% in local currency terms BOP by region (USDm) BOP by business (USDm) +10% +10% In local currencies In local currencies +7% +7% 3,988 3,988 3,720 3,720 297 335 260 1,115 250 993 1,115 993 939 1,048 1,278 1,267 2,247 2,224 1,366 1,505 -27 -4
Slide 17: Commentary
Group – Business operating profit Commentary • Group business operating profit (BOP) of USD 4.0bn was at a • By business, P&C BOP decreased 1% in U.S. dollars but increased record level for a first half year period, with 10% growth in local 3% in local currencies compared with the prior year as high
Slide 18: NIAS is up 21% compared to prior year
Group – Net income attributable to shareholders NIAS is up 21% compared to prior year from BOP growth, higher net capital gains and lower restructuring and other costs BOP to NIAS walk (USDm) Net impact of capital gains / losses (USDm)1 267 26 311 -133 -107 Mark-to-market (FVTPL securities and 742 1
Slide 19: Commentary
Group – Net income attributable to shareholders Commentary • Net impact of capital gains was USD 267m for the first six • Restructuring costs were USD 133m for the first six months months compared to a USD 64m loss in prior year. Favorable compared to USD 151m in prior year. mark-to-market performan
Slide 20: Outlook remains unchanged since February
Group – Outlook Outlook remains unchanged since February • Insurance revenue expected to grow by mid-single digit percentage year-on-year • Investment income to benefit from reinvestment yields above book yields in 2024, FY-24 finance expense (unwind) Property & Casualty expected to be ~USD 1.2bn •
Slide 21: Growth outlook remains supported by rate environment
P&C – Top-line Growth outlook remains supported by rate environment HY-24 top-line development GWP like-for-like growth Insurance revenue Insurance revenue GWP (USDm) Rate change (%)2 Rate change outlook (%)1 (USDm) like-for-like growth (%)1 EMEA 11,134 7% 4% Stable 8,989 8% North America 11,604 (2%
Slide 22: Commentary
P&C – Top-line Commentary • Gross written premiums rose 3% on a like-for-like basis and in • In North America, gross written premiums declined 2% on a like- U.S. dollar terms. Growth was supported by higher premium rates for-like basis and in U.S. dollars. The decline was mainly driven by of 5% on a
Slide 23: P&C BOP up 3% in local currencies
P&C – BOP components P&C BOP up 3% in local currencies BOP by segment (USDm) BOP by component (USDm) +3% +3% In local currencies In local currencies -1% 2,247 2,224 2,247 2,224 130 122 33 150 145 9 -65 1,854 1,863 1,240 1,236 777 781 765 797 313 373 -49 -60 -371 -436 HY-23 HY-24 HY-23 Insurance Net
Slide 24: Commentary
P&C – BOP components Commentary • P&C BOP was USD 2,224m, 1% lower than in the previous year. In • The net impact of fee result, other result, and non-controlling local currency, the P&C BOP was 3% higher compared to the interests deteriorated by USD 65m compared to the prior year previous year driv
Slide 25: Commercial maintains attractive returns while Retail and SME improves
P&C – Combined ratio by segment and customer unit Commercial maintains attractive returns while profitability improvement actions continue in Retail and SME AY combined ratio (COR) excl. catastrophes by region (%) AY COR excl. catastrophes by customer unit (%)1 95.0% 96.3% 95.0% 96.7% 94.4% 95.1% 96
Slide 26: Commentary
P&C – Combined ratio by segment and customer unit Commentary • In EMEA, the accident year combined ratio ex-catastrophes • In Latin America, the accident year combined ratio ex- increased 1.3 percentage points compared to prior year mainly catastrophes increased 0.7 percentage points compared to the
Slide 27: Combined ratio increase driven by small and medium sized events
P&C – Combined ratio details Combined ratio increase driven by accumulation of small and medium sized events and mix-driven commissions P&C combined ratio walk (%) 0.6% 0.3% 93.6% 0.4% 92.9% -0.4% -0.1% -0.1% -0.1% HY-23 Undiscounted Cat Discount PYD Commissions Premium tax Other insurance HY-24 AY
Slide 28: Commentary
P&C – Combined ratio details Commentary • P&C combined ratio of 93.6% increased 0.7 percentage points • Prior year development of favorable 1.6% was well within the compared to the prior year period as higher losses driven by indicated 1-2% range and 0.1 percentage points higher than in the higher c
Slide 29: P&C investment result benefits from reinvestment yields
P&C – Investment result P&C investment result benefits from increase in reinvestment yields and favorable hedge fund performance Investment result in BOP (USDm) Investment income yield of Group investments (%)1 3.4% 3.7% 797 765 152 HY-23 HY-24 73 Book yield2 3.1% 3.5% 1,233 Reinvestment yield2 4.9%
Slide 30: Commentary
P&C – Investment result Commentary • Net investment result increased 4% compared to the previous year as higher investment income and realized capital gains outpaced the increase of the unwind of discount. • Investment income was up 13% (USD 146m) compared to the prior-year period, driven by investm
Slide 31: Life saw protection premium growth and positive net inflows
Life – Top-line and net inflows Life saw protection premium growth and positive net inflows in unit-linked and investment contracts Protection Unit-linked and investment Savings and annuities contracts Gross written premiums (USDm) Net inflows (USDm) Net inflows (USDm) 11% -36% 4,883 1,396 4,389 97
Slide 32: Commentary
Life – Top-line and net inflows Commentary • In HY-24, Life protection premiums grew 11% compared to the • The savings and annuities business saw net outflows of USD prior year, driven primarily by EMEA and Latin America. In EMEA, 1.2bn in HY-24 mainly driven by outflows in EMEA, most notably in gro
Slide 33: Record high level of Life BOP, all drivers contribute
Life – Business operating profit Record high level of Life BOP, all drivers contribute to growth; strong increase in EMEA BOP by driver (USDm) BOP by region (USDm) Δ Y-o-Y Δ Y-o-Y (USDm, %) (USDm, %) Long-term insurance: 818 +6 (+1%) EMEA 724 +135 (+23%) Profit release1 Short-term insurance: 255 +27
Slide 34: Commentary
Life – Business operating profit Commentary • In HY-24 the Life business generated BOP of USD 1,048m, an all- • BOP further benefited from a higher net investment result, up time high for the first half. All key profit drivers contributed to USD 20m year on year, favorable claims experience in EMEA,
Slide 35: BOP growth driven by increase in CSM, revenues and AuM
Life – BOP drivers BOP growth driven by increase in CSM, revenues and AuM Long term insurance (USDm) Short term insurance (USDm) Investment contracts (USDm) +2% +25% +10% 12,876 13,107 1,363 102,136 112,753 1,666 1,692 1,089 213 11,211 11,415 Revenues 1,089 +6% 1,150 CSM Risk adjustment (RA) Increas
Slide 36: Commentary
Life – BOP drivers Commentary • For long term insurance contracts, the key driver of operating • Investment contracts generated USD 120m of fee result, 10% performance is the release of profits which are embedded in the higher than in the prior year, in line with a corresponding increase contractual
Slide 37: CSM up 2% year on year
Life – Contractual service margin CSM up 2% year on year; 4% increase in H1 in local currencies CSM walk (USDm) HY-24 line of business split (USDm) 2% 543 11,415 543 729 273 182 11,526 11,415 11,211 6% -729 20% 18% -380 25% Of which expected return1 of ~USD 270m 27% 47% Underlying CSM accretion2 ~US
Slide 38: Commentary
Life – Contractual service margin Commentary • The Contractual Service Margin (CSM) of the Life business • Amortization into the P&L reduced CSM by USD 729m. This decreased 1% in HY-24 on a reported basis, with a 4% growth in reflects a CSM amortization rate broadly in line with HY-23. local currenc
Slide 39: Growth in Farmers Exchanges premiums drives increase in FMS income
Farmers Management Services – Overview Growth in Farmers Exchanges1 premiums drives increase in FMS income, with MGEP margin at 7.0% FMS business operating profit (USDm) MGEP margin (%)2 +10% 1,026 934 11 6.7% 7.0% 15 1,015 918 HY-23 HY-24 HY-23 HY-24 Fee service result Net investment income and oth
Slide 40: Commentary
Farmers Management Services – Overview Commentary • Farmers Management Services (FMS) has a record first half BOP of USD 1,026m, which is USD 92m, or 10%, higher compared to the prior year. This increase is driven by the higher gross earned premium base at the Farmers Exchanges1, lower operating exp
Slide 41: Farmers Re benefits from improved underwriting; Farmers Life BOP
Farmers Re and Farmers Life – Overview Farmers Re benefits from improved underwriting at Farmers Exchanges1; Farmers Life BOP reflects reinsurance transaction Farmers Re BOP (USDm) Farmers Life BOP (USDm) 90 72 81 8 91 7 31 -30 -30 -74 HY-23 HY-24 HY-23 HY-24 CSM amortization Net investment result O
Slide 42: Commentary
Farmers Re and Farmers Life – Overview Commentary • Farmers Re BOP of USD 81m is USD 111m above prior year following improved underwriting results at the Farmers Exchanges1 and a higher reinsurance participation percentage. Effective December 31, 2023, the Farmers Reinsurance All Lines Quota Share t
Slide 43: Group Functions and Non-Core Businesses BOP
Group Functions and Operations & Non-Core Businesses – BOP Group Functions reported higher investment result; Non-Core Businesses with adverse PYD on run-off portfolios Group Functions and Operations BOP (USDm) Non-Core Businesses BOP (USDm) -27 -40 -147 -144 -14 -4 -210 -271 -358 -432 HY-23 HY-24 H
Slide 44: Commentary
Group Functions and Operations & Non-Core Businesses – BOP Commentary • Group Functions and Operations reported net expenses of USD 358m compared to USD 432m in the prior-year period. The improvement is driven by higher average invested assets, higher reinvestment rates and lower external debt expen
Slide 45: Very strong capital position with SST ratio at 232%
Group – Solvency Very strong capital position with SST ratio at 232% 16% 234% 12% 232% -17% -11% -1% +0% Credit spreads +3% Equity markets SST ratio (%)1 +7% Interest rates +3% FX FY-23 Assumption and Management Market Economic profit / Capital actions2 HY-24e model changes actions and other busines
Slide 46: Commentary
Group – Solvency Commentary • As of HY-24, the Group’s Swiss Solvency Test (SST) ratio based on the Group's Internal Model as approved by the Swiss Financial Market Supervisory Authority (FINMA) was estimated at 232%, well above the Group’s SST ratio target of 160% or above. • The ratio was 1ppts lo
Slide 47: Shareholders' equity reduction driven by annual dividend payment
Group – Balance sheet and capital structure Shareholders’ equity reduction driven by annual dividend payment in the first half of the year Shareholders’ equity (USDm) Capital structure (%)1 10% 10% -3% 16% 17% 3,026 24,860 4% 4% 101 121 170 24,119 19% 19% -4,156 -3 51% 50% FY-23 NIAS Dividend Curren
Slide 48: Commentary
Group – Balance sheet and capital structure Commentary • Shareholders’ equity declined by USD 0.7bn compared to year end 2023, primarily driven by the payment of the Group annual dividend of USD 4.2bn in the first half of the year. These impacts were partially offset by net income attributable to sh
Slide 49: Disclaimer and cautionary statement
Disclaimer and cautionary statement Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the Group). Fo
Slide 50: Appendix
Appendix 50 © Zurich
Slide 51: We are focused on continuing to reward our shareholders
Group – Dividend policy We are focused on continuing to reward our shareholders Dividend policy1 Dividend per share (CHF) NIAS2 payout ratio of ~75% 26 24 22 20 20 19 18 Dividend increases based on sustainable 17 earnings growth Minimum target of prior year level FY-16 FY-17 FY-18 FY-19 FY-20 FY-21
Slide 52: Update on customer satisfaction and brand consideration
Customer KPIs Update on customer satisfaction and brand consideration tNPS1 HY-24 vs. FY-23 Brand consideration ranking4 13% 13% 13% Global2 +3.5pts 21% 20% 20% 27% 21% 33% 33% EMEA +2.3pts 33% 40% Asia Pacific +5.6pts 60% 57% 53% 53% 47% Latin America +2.7 pts 40% Farmers Exchanges3 -9.4 pts 2019 2
Slide 53: Reinsurance program protecting our balance sheet
P&C – Reinsurance program Reinsurance program protecting our balance sheet Group catastrophe reinsurance protection (USDm) Main additional treaties Global property per risk 115 300 300 Global surety excess of loss 1,200 300 1,200 U.S. liability quota share 1,200 600 422 600 300 460 200 Europe all pe
Slide 54: Strong new business and top-line growth driven by protection and unit-linked
Life – New business and top-line Strong new business and top-line growth driven by protection and unit-linked Long term insurance1 Short term insurance1 +5% +2% +25% +12% Like-for-like2 Like-for-like2 Like-for-like2 1,363 +1% 1,089 +3% Insurance revenue (USDm) 8,242 8,510 536 543 181 332 3 9 HY-23 H
Slide 55: Farmers Exchanges GWP and PIF
Farmers Exchanges1 – GWP and PIF Continued pricing actions drive increase in premiums, while rate and non-rate actions adversely impact PIF Gross written premiums (USDm) Policies-in-force (m) +6% -5% 6,577 13.9 6,187 13.2 +5% 3,899 4,091 +6% -1% 1,991 2,109 1,495 1,480 Auto Home2 Specialty2 Business
Slide 56: Farmers Exchanges continue to improve underlying underwriting results
Farmers Exchanges1 – Combined ratio and surplus Farmers Exchanges1 continue to improve underlying underwriting results Combined ratio (%)2 Surplus (USDbn, %) 33.6% 34.5% 15% 7% 7% 22% 13% 3% 10% 6.3 1% 22% 6.0 9% 94% 97% 100% 99% 94% 94% 91% 89% 81% 79% Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-2
Slide 57: Very strong capital position, SST ratio well in excess of 160%
Group – Solvency Very strong capital position, SST ratio well in excess of 160% Group Swiss Solvency Test (%)1 Q1-24 SST sensitivities impact (ppts)2 300% 267% Interest rate +50bps +15ppts 234% 232% 216% 221% 222% 204% 212% Interest rate -50bps -16ppts 200% 182% Equities +20% +7ppts ≥160% Equities -
Slide 58: Well diversified capital base by business segment
Group – SST components Well diversified capital base by business segment HY-24 Available Financial Resources (USDbn) HY-24 Risk Capital Split (%)2 IFRS Shareholders’ equity 24.1 4% 7% 2% Market risk Dividend Accrual -2.1 6% Premium and reserve risk Business risk Share buyback accrual -1.2 57% Natura
Slide 59: Low average debt cost and balanced maturity profile
Group – Debt Low average debt cost and balanced maturity profile Debt (USDbn) and average debt cost (%) Balanced refinancing needs (USDbn)1 13.7 13.5 2.6 Average debt 0.3 FY-23 FY-24e 2.2 cost (%) 2.0 0.4 8.6 8.5 Subordinated 3.9% 4.0% 0.2 1.8 Senior 1.8% 1.9% 0.8 1.2 1.1 2.3 Total 3.1% 3.3% 0.9 0.4
Slide 60: Well diversified and high-quality investment portfolio
Group – Investment portfolio Well diversified and high-quality investment portfolio HY-24 Group investments (%)1 HY-24 asset quality (%) HY-24 non-financial credit (%) USD 54bn USD 71bn Other 5% 4% 3% 0% 0% 4% 5% 3% 7% 6% 19% Consumer 14% non-cyclical 9% 33% 5% 31% 6% Utility 3% 6% Consumer cyclical
Slide 61: Well diversified and high-quality credit and private debt exposure
Group – Investment portfolio Well diversified and high-quality credit and private debt exposure HY-24 rating of credit and private debt securities (%) USD 23.1bn USD 18.5bn USD 12.0bn USD 6.0bn USD 3.4bn USD 8.2bn 2% 0% 1% 1% 2% 10% 11% 0% 8% 4% 29% 35% 18% 31% 50% 34% 52% 87% 53% 67% 13% 32% 4% 18%
Slide 62: Calculation of like-for-like growth
Restatements and alternative performance measures Calculation of like-for-like growth Like-for-like growth HY-23 (USDm) HY-24 (USDm) Business KPI L-F-L2 (%) Rep M&A/Other1 Adj Rep FX M&A/Other1 Adj1 P&C GWP 24,560 (257) 24,303 25,342 877 (1,177) 25,042 3% P&C Insurance revenue 20,163 (219) 19,944 21
Slide 63: Other information
Other information 63 © Zurich
Slide 64: For further information
For further information Call us Visit or follow us Investor Relations and Rating Agency Management • Jon Hocking +41 76 478 73 96 • Francesco Bonsante +41 44 628 00 68 • Samuel Han +41 44 625 32 57 • Johannes Herholdt +41 44 625 25 53 Investor Relations website • Michèle Matlock +41 44 625 28 50 Fin
Slide 65: Thank you
Thank you Upcoming events • November 7, 2024 – Update for the nine months ended September 30, 2024 • November 21, 2024 – Investor Update in London ©©Zurich Zurich
Zurich Insurance Group — H1 2024 Earnings Presentation on 6ix