Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — H1 2015 Earnings Presentation
56 slides from Zurich Insurance's earnings presentation, Aug 6, 2015
Slide 1: Half year results 2015
Half year results 2015 Investor & Media presentation August 6, 2015 Zurich Insurance Group
Slide 2: Results overview
Results overview Martin Senn, Chief Executive Officer
Slide 3: Key financials
Key financials ROE below target, strong Z-ECM and cash remittances HY-15 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD HY-15 Target BOP BOPAT ROE1 11.6% 12 - 14% USD 2.2bn (-15%) Q1-15 Target Z-ECM2 120% 100 – 120% NIAS Cumulative FC FY-15 Net cash 3-year target USD 2.1bn (-3%) remittances > USD
Slide 4: Report card – Group
Report card – Group Clear priorities for next 18 months GROUP STRATEGY HY-15 KEY ACTIONS 2015-2016 PRIORITIES Prioritizing Investments in corporate, Continue investments in NAC and commercial and select retail Global Corporate / CLP investment in 1 markets Targeted investments in select retail
Slide 5: Report card – General Insurance
Report card – General Insurance Further actions required on underperforming portfolios PRIORITY MARKETS1 MANAGE FOR VALUE GWP (USDm) BOP (USDm) Actions in South Africa starting to show progress, 20,511 1,681 with a 9ppt improvement in underlying LR in H1 19,995 25 52 1,832 1,540 1,751 1,694 75 N
Slide 6: Report card – Global Life
Report card – Global Life On track to deliver BOP improvement PRIORITY MARKETS (USDm)1 MANAGE FOR VALUE APE NBV BOP Exit of annuity book in UK 2,824 487 465 765 Starting to see BOP uplift from in-force 151 38 62 2,373 26 634 management actions 144 205 896 29 15 176 189 106 723 669 95 NEXT STEPS
Slide 7: Report card – Farmers Exchanges
Report card – Farmers Exchanges1 Continued progress in strategic execution NET PROMOTER SCORE2 RETENTION3 77.3% 77.4% 37.6 38.7 76.8% 34.4 34.4 35.0 75.9% 75.3% HY-14 9m-14 FY-14 Q1-15 HY-15 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 NET GAIN / LOSS OF AGENTS4 NEW BUSINESS COUNT GROWTH5 193 208 16.4% 45 77 10.5%
Slide 8: Key messages
Key messages General Combined ratio of 100% for Q2 and 98.3% for H1; actions Insurance under way to deliver on 2016 targets Global Life Good growth in APE and BOP, at constant currency Farmers Continued progress in strategic execution Cash Cash remittance expected for full year >USD 3.5bn, and remit
Slide 9: Financial highlights
Financial highlights George Quinn, Chief Financial Officer
Slide 10: Group – Business operating profit
Group – Business operating profit Lower operating result due to higher GI combined ratio BOP BY SEGMENT (USDm)1 BOP/NIAS RECONCILIATION (USDm) -24% -101 1,240 241 -293 937 92 943 801 21 62 562 460 24.5% tax rate 315 355 352 943 840 341 276 328 63 -232 -280 -184 -21 -16 Q2-13 Q2-14 Q2-15 Q2-15 RCG2 A
Slide 11: General Insurance – Topline
General Insurance – Topline Growth impacted by timing and market pressure GWP GROWTH IN LC1 (%) RATE CHANGE2 (%) Q2-14 Q1-15 Q2-15 -10% GC 11% 1% 1% -1% 14% 5% NAC -1% 2% 2% 1% 5% 0% EMEA 1% 2% 2% 1% -4% 12% IM -5% 3% 6% 4% 12% 0% Total3 3% 2% 2% 1% 6% Q2-15 Q2-14 Q2-13 1 In local currency. 2 GWP de
Slide 12: General Insurance – Combined ratio
General Insurance – Combined ratio AY CR impacted by large losses and higher expenses COMBINED RATIO SPLIT (%)1 COMBINED RATIO BY REGION (%)1 99.1% 100.0% 5.8% 95.6% 3.4% 2.3% 106.5% GC 97.5% 97.4% NAC 95.7% 97.7% EMEA 97.5% 93.4% 97.9% 93.6% 101.4% IM 99.9% 100.0% Total 95.6% -4.2% -0.1% -1.3% 80%
Slide 13: General Insurance – BOP components
General Insurance – BOP components Decline in BOP due to lower underwriting result BOP BREAK DOWN (USDm)1 KEY DRIVERS (USDm)1 801 -43% 801 -334 335 562 65 460 460 -42 -9 0 81 -38 568 587 508 -58 -104 -25 -24 -13 -16 Q2-13 Q2-14 Q2-15 Q2-14 UWR Investment RCG NTR NCI Q2-15 Income Underwriting result
Slide 14: Global Life – New business
Global Life – New business Strong APE growth in Europe, NBV impacted by low yields APE (USDm)1,4 NBM & NBV1,2,4 NET INFLOWS3 & AUM NBM (%) Net inflows (USDbn) -2% 27.6 22.2 1.6 18.7 0.3 1,272 1,251 14 55 34 22 42 42 -1.2 1,039 18 264 37 41 348 NBV (USDm) -16% AuM (USDbn) -6% 254 247 280 293 263 17 1
Slide 15: Global Life – BOP by region
Global Life – BOP by region Discrete quarter BOP increased 29% at constant currency BOP BY REGION (USDm)1 KEY DRIVERS (USDm)1 +13% 355 355 315 352 315 28 16 1 1 1 22 8 1 -6 16 9 46 36 22 46 46 40 46 58 58 51 60 51 223 232 215 223 232 -27 -27 Q2-13 Q2-14 Q2-15 Q2-14 EMEA Latin North APAC Other Q2-15
Slide 16: Global Life – BOP
Global Life – BOP Growth in local currency revenues and new business investment BOP BY SOURCE OF EARNINGS (USDm) REGIONAL BOP & KPI (USDm) D HY-141 nm -13% -7% 2% -73% Loadings & fees 1,558 406 1,964 8% 443 Inv. margin 226 338 -8% 111 111 100 29 Technical margin 664 13% -10 Operating costs -857 -6%
Slide 17: Farmers Exchanges – KPIs
Farmers Exchanges1 – KPIs Top-line recovery continues, lower cat losses vs prior years GWP GROWTH (%) COMBINED RATIO (%)3 SURPLUS4 (USDbn) 2.4% 111.7% 38.5% 2.3% 36.7% 37.1% 108.3% 1.9% 104.8% 16.2% 12.9% 6.3 6.5 10.0% 5.9 0.6% 5.0 5.4 5.5 95.5% 95.4% 94.8% -0.9% 1.0 0.9 0.9 Q2-14 Q3-14 Q4-142 Q1-15
Slide 18: Farmers – KPIs
Farmers – KPIs Margin in line with expectations BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 341 7.4% 110.4% 276 328 7.2% 105.5% 103.9% 15.0% 7.0% 12.4% 9.1% 349 362 329 95.4% 93.1% 94.8% -21 0 -73 Q2-13 Q2-14 Q2-15 Q2-13 Q2-14 Q2-15 Q2-13 Q2-14 Q2-15 Catastrophes 3 FMS FRe CR (excl. catastrophes)
Slide 19: Group – Balance sheet and capital
Group – Balance sheet and capital Continued strong solvency position SHAREHOLDERS’ EQUITY (USDm) SOLVENCY RATIOS (%) 35,410 217% 215% 196% -2,705 127% 126% 122% 120% 840 -1,923 31,883 401 -140 Q1-15 Dividend1 NIAS Net CTA Pension HY-15 Z-ECM SST3 URG/L (excl. plans & dividend) other2 FY-13 HY-14 FY-
Slide 20: Group – Free capital generation
Group – Free capital generation Strong free capital generation in 2014 2014 FREE CAPITAL GENERATION (USDbn) 3.6 3.6 3.1 2.8 1.1 1.1 0.8 0.0 0.5 General 2.4 2.5 2.5 Insurance, 2.5 Farmers, 1.1 1.1 1.1 Non-Core -0.2 -0.2 -0.2 and OOB -1.0 -1.0 -1.0 IFRS NIAS Accounting Local Vol. rel. FCG 0.6 differen
Slide 21: Group – Net cash remittances
Group – Net cash remittances Very strong conversion of IFRS earnings to FCG and cash BOPAT (USDbn) OPERATING FCG (USDbn) CASH REMITTANCES (USDbn) 3.4 3.1 3.7 3.5 3.2 >3.5 2.9 2.4 2.5 2.4 2.3 2.5 2.4 1.1 0.6 0.9 1.0 0.5 0.6 1.0 1.1 1.0 1.1 1.2 0.9 0.0 -0.2 0.0 -0.2 0.0 0.1 -0.8 -0.8 -1.0 -1.0 -1.0 -1
Slide 22: Key messages
Key messages General Combined ratio of 100% for Q2 and 98.3% for H1; actions Insurance under way to deliver on 2016 targets Global Life Good growth in APE and BOP, at constant currency Farmers Continued progress in strategic execution Cash Cash remittance expected for full year >USD 3.5bn, and remit
Slide 23: 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’).
Slide 24: Appendix
@ ZURICH Appendix
Slide 25: GI – HY-15 Combined ratio
GI – HY-15 Combined ratio AY CR impacted by large losses and higher expenses COMBINED RATIO SPLIT (%)1 COMBINED RATIO BY REGION (%)1 98.1% 98.3% 95.7% 3.7% 2.4% 2.1% 101.0% GC 95.2% 96.4% NAC 96.3% 97.2% EMEA 96.7% 94.5% 97.3% 94.2% 101.0% IM 99.9% 98.3% Total 95.7% -2.3% -0.9% -1.4% 80% 85% 90% 95%
Slide 26: GI – Combined ratio details
GI – Combined ratio details Uptick in AY loss ratio and expense ratio LOSS RATIO (%)1 EXPENSE RATIO (%)1 69.4% 31.5% 31.6% 29.7% 30.5% 29.7% 29.7% 68.3% 5.8% 68.4% 3.2% 66.9% 66.4% 3.4% 14.0% 14.1% 2.4% 65.9% 13.5% 13.7% 13.4% 13.1% 2.3% 2.3% 67.5% 65.2% 65.9% 67.8% 63.7% 66.3% 16.2% 16.9% 17.5% 16.
Slide 27: GI – Loss ratio details
GI – Loss ratio details LR impacted by higher attritional but also cat losses LOSS RATIO (%)1 69.4% 67.4% 68.6% 68.4% 5.8% 1.7% 68.1% 67.7% 3.7% 65.7% 65.8% 65.9% 1.9% 65.3% 3.4% 1.6% 1.9% 3.0% 1.4% 2.3% 66.4% 67.8% 66.8% 68.9% 65.6% 63.7% 64.4% 67.0% 65.4% 66.3% -0.3% -1.8% -0.1% -1.6% -0.8% -1.5%
Slide 28: GI Global Corporate – KPIs
GI Global Corporate – KPIs Modest growth, CR impacted by higher large and cat losses HY-15 KEY FINANCIALS1 GWP Zurich rate Combined USD 418m USD 214m Growth2 change3 Ratio 1% 0% 101% 101.0% 95.2% 23.3% 21.8% KEY DRIVERS 73.4% 77.7% Modest growth reflecting continued market pressure, particularly i
Slide 29: GI North America Commercial – KPIs
GI North America Commercial – KPIs Modest growth, combined ratio flat HY-15 KEY FINANCIALS GWP Zurich rate Combined USD 469m USD 469m Growth1 change2 Ratio 3% 1% 96% 96.3% 96.4% 30.8% 32.2% KEY DRIVERS 65.5% 64.1% Modest growth with continued execution of strategic growth initiatives and increase
Slide 30: GI EMEA – KPIs
GI EMEA – KPIs Combined ratio impacted by large losses and one-offs HY-15 KEY FINANCIALS1 GWP Zurich rate Combined USD 692m USD 426m Growth2 change3 Ratio 0% 2% 97% 94.2% 97.2% 30.1% 31.5% KEY DRIVERS 64.1% 65.8% 1% growth excluding Russia Retail4, expansion in Switzerland, Germany and Spain, offs
Slide 31: GI International Markets – KPIs
GI International Markets – KPIs Lower AY loss ratio offset by higher expenses HY-15 KEY FINANCIALS GWP Zurich rate Combined USD 97m USD 71m Growth1 change2 Ratio 12% 5% 101% 99.9% 101.0% 40.7% 43.1% KEY DRIVERS 59.2% 57.8% Growth mainly driven by the new extended warranty distribution agreement in
Slide 32: GI – Rate change monitor
GI – Rate change monitor Increased pricing pressure across the globe Q2-15 ZURICH RATE CHANGE ASSESSMENT Business Assessment Moderate rate increases, below prior year levels with market pressure, particularly in US Group property lines and across our Global Corporate markets, Australia and UK. Compe
Slide 33: GI – Natural catastrophe reinsurance
GI – Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES1 (USDm) 10 10 10 10 150 150 10 500 500 150 10 10 500 10 10 Single global USD 150m treaty, which can be applied to any region2 10 650 150 10 930 300 500 Single global
Slide 34: GL – New business by pillar
GL – New business by pillar NBV impacted by interest rate reductions and product mix effects Q2-15 KEY FINANCIALS1,2 APE (USDm) CLP single 1,272 1,251 NBM PVNBP 1,039 premium 419 457 290 408 463 406 18.7% USD 12.9 bn USD 2.5 bn 340 390 389 Q2-13 Q2-14 Q2-15 KEY DRIVERS NBV (USDm) 254 247 CLP prote
Slide 35: GL – Net inflows & Assets under management
GL – Net inflows & Assets under management Higher net inflows and asset growth offset by currency impacts NET INFLOWS BY REGION (USDbn)1,2 AUM DEVELOPMENT (USDbn) 3.4 0.0 0.1 266 263 3 2 -8 1.0 31 34 0.4 0.9 0.1 112 106 1.0 1.9 0.0 0.3 0.2 0.4 -0.1 -0.3 -0.2 122 123 -1.7 -1.2 Balance Net inflows Mar
Slide 36: GL North America – Key financials
GL North America – Key financials Slight deterioration in BOP, adjusted for distorting impacts BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-141 160 Loadings & fees 195 1 196 7% 100 84 Inv. margin 11 -47% 59 57 37 43 Technical margin 80 14% -42 Operating costs -66 5% HY-13 HY-14
Slide 37: GL Latin America – Key financials
GL Latin America – Key financials Local currency BOP growth BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-141 142 128 Loadings & fees 358 15 373 11% 119 122 119 111 83 Inv. margin 61 6% 69 Technical margin 102 -9% Operating costs -108 -3% HY-13 HY-14 HY-15 Acquisition costs -317
Slide 38: GL EMEA – Key financials
GL EMEA – Key financials Strong growth in Loadings & fees and Technical margin BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-141 920 Loadings & fees 782 375 1,157 5% 111 Inv. margin 124 235 -10% 476 443 412 384 279 276 234 Technical margin 390 21% Operating costs -529 -7% HY-13 H
Slide 39: GL APAC – Key financials
GL APAC – Key financials Volume driven growth in fee and technical margins BOP BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPI (USDm) D HY-141 50 Loadings & fees 70 16 86 36 40 6% 30 29 29 Inv. margin 25 -8% -10 Technical margin 50 19% -53 Operating costs -80 -12% HY-13 HY-14 HY-15 Acquisition cos
Slide 40: Global Life – MCEV free surplus roll-forward
Global Life – MCEV free surplus roll-forward Positive development offset by dividends and capital movements FREE SURPLUS DEVELOPMENT (USDm) 157 -96 65 -28 848 -878 -703 143 -332 -150 2,696 1,722 Opening Cash strain Expected Expected Expense Other Economic Dividends Injections Other Foreign Closing f
Slide 41: Zurich Santander – Quarterly results
Zurich Santander – Quarterly results Continued growth offset in USD by adverse FX development PROFIT BEFORE TAX GI & LIFE (100%) INTANGIBLES AMORTIZATION (100%) 239 176 -20 -18 -19 -18 -18 -18 -17 -16 -15 163 173 177 -5 -4 163 -8 -7 -7 -6 135 171 170 174 168 181 -13 -12 -11 159 156 163 123 132 127 Q
Slide 42: Farmers Exchanges – GWP
Farmers Exchanges1 – GWP Continued top-line recovery DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) +2.1% +1.9% 9,335 9,527 4,760 4,848 4,203 4,305 +2.4% 2,062 2,124 3.0% 2,379 2,420 +1.7% 1,305 1,331 +2.0% 885 908 +2.6% +0.8% 448 451 496 535 +7.8% 240 242 +1.0% 1,162 1,211 4.2% 607 632 +4.2% 210 148 -2
Slide 43: Farmers Exchanges – PIF/VIF
Farmers Exchanges – PIF/VIF1 Policies in force returned to growth DEVELOPMENT OF PIF/VIF1 BY BUSINESS LINE (THOUSANDS) +0.4% +0.1% 19,041 19,113 19,093 19,113 9,710 9,747 +0.4% 9,733 9,747 +0.1% 4,797 +0.0% 4,794 4,797 +0.1% 4,796 415 415 +0.1% 414 415 +0.1% 982 985 +0.3% 1,009 985 -2.4% 2,980 3,034
Slide 44: Farmers Exchanges – Combined ratio
Farmers Exchanges – Combined ratio Auto and Bristol West CR impacted by unfavorable claim trends COMBINED RATIO BY BUSINESS LINE (%)1 103.5% 106.5% Auto Auto 100.9% 104.1% 95.1% 107.0% Home Home 106.1% 118.5% EA Business 96.6% EA Business 96.3% Insurance 101.8% Insurance 104.9% 106.4% 108.6% Bristol
Slide 45: Farmers Exchanges – Combined ratio history
Farmers Exchanges – Combined ratio history Q2-15 catastrophe losses more benign than in previous years QUARTERLY COMBINED RATIO (%) Incl. Incl. 17 Catastrophe Incl. 120 Ike & Gustav Events 13 Catastrophe Events Incl. 115 13 Catastrophe Incl. Events 13 Catastrophe 110 Incl. Events Incl. Irene Excl. 1
Slide 46: Other Operating Businesses
Other Operating Businesses H&F benefitting from lower interest costs & FX one-offs QUARTERLY BOP SPLIT (USDm) 20 -7 -43 -51 -64 -51 -113 -143 -137 -191 -82 -224 -134 -188 -171 -146 -167 -184 -172 -149 -232 -230 -213 -222 -280 -286 -356 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Headquarte
Slide 47: Group Investments – Asset allocation
Group Investments – Asset allocation Zurich’s sources of investment risk and return are balanced ASSET ALLOCATION1 RISK DIVERSIFICATION2 RISK DRIVERS2,3 Total Group Investments: USD 197bn 4% 6% 1% 4% 9% 2% 100% 24% 7% 5% 9% 41% 25% 50% 80% Sum of single Investment Investment security risks risks ris
Slide 48: Group Investments – Debt securities portfolio
Group Investments – Debt securities portfolio Debt securities portfolio is of a high quality BY CATEGORY BY RATING Total debt securities: USD 142bn 2% 13% 20% 24% 44% 43% 18% 36% Government and government related bonds MBS/ABS1 AAA AA A BBB Non-investment grade Corporate bonds 1 MBS = Mortgage backe
Slide 49: Group Investments – Investment income yield
Group Investments – Investment income yield1 Higher risk premium offset by lower yields and USD appreciation GENERAL INSURANCE GLOBAL LIFE GROUP 1.22% 1.95% 1.54% Equity 1.03% Equity 1.71% Equity 1.29% 1.33% Trade Yield 1.92% 1.39% Trade Yield 1.22% at ~2.4%2 1.54% at ~2.1%2 1.38% Debt 1.28% Debt 1.
Slide 50: Group – Economic capital models
Group – Economic capital models Continued strong solvency position Z-ECM RATIO DEVELOPMENT (%) SST1 RATIO DEVELOPMENT (%) 3% 0% -3% 5% -5% 215% -8% -2% 122% -2% 0% -9% 0% 0% 120% 196% FY-14 Business Ins. Market Market Model Cap. Q1-15 HY-14 Business Ins. Market Market Model Cap. FY-14 profit Risk2 r
Slide 51: Group – Z-ECM components
Group – Z-ECM components Well diversified capital base by risk type Q1-15 AFR COMPOSITION (USDbn) RBC BY RISK TYPE AND BUSINESS 8% Market risk Shareholders equity 35 4% Re-ins credit risk 8% 2% P&R risk1 Dividend accrual 3 51% Natural cat risk 24% Life insurance risk Net intangibles 16 Operational r
Slide 52: Group – Solvency ratio sensitivities
Group – Solvency ratio sensitivities1 Solvency ratios resilient to market movements SOLVENCY RATIO IMPACT2 122% Actual value as of FY-14 196% 126% Interest rate +100 bps 200% 117% Interest rate -100 bps 190% 126% Equities +20% 201% 119% Equities -20% 191% 108% Credit spreads +100 bps3 167% 112% CS e
Slide 53: Group – EPS, BVPS and ROE calculations
Group – EPS, BVPS and ROE calculations1 EPS AND BVPS (CHF) BOPAT ROE AND ROE (%) No., CHF FY-14 HY-15 USDm, % FY-14 HY-15 Common shares issued 149.64m 150.40m SHE 34,735 31,883 Treasury shares 1.29m 1.25m Net URGL / CF hedges 4,374 3,405 Common shares outst. 148.34m 149.15m Adj. SHE 30,362 28,478 WA
Slide 54: Group – Currency impact
Group – Currency impact Move in currency is mainly translational HY-15 KEY RESULTS KPI USDm reported at constant currency BOP 2,238 -15% -10% Group NIAS 2,059 -3% +2% GWP 18,669 -7% +3% NEP 13,928 -7% +2% General Net underwriting result 230 -64% -66% Insurance Investment income 988 -9% -2% BOP 1,166
Slide 55: For further information
For further information CALL US VISIT OR FOLLOW US Investor Relations James Quin +41 44 625 21 10 Aaron Beharelle +41 44 625 25 50 André Meier +41 44 625 37 75 Gianni Vitale +41 44 625 48 26 Rating Agency Management Michèle Matlock +41 44 625 28 50 www.zurich.com Events Patricia Heina +41 44 625 38
Slide 56: Calendar
Calendar: - September 29 - October 1, BoAML Conference, London - November 5, Results for the nine months to September 30, 2015 - February 11, 2016, Annual Results 2015 © Zurich Insurance Company Ltd
Zurich Insurance Group — H1 2015 Earnings Presentation on 6ix