Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — H1 2023 Earnings Presentation
61 slides from Zurich Insurance's earnings presentation, Aug 10, 2023
Slide 1: Strong start to the new financial cycle
Strong start to the new financial cycle Half year results 2023 August 10, 2023 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 Disclaimer Group results and outlook Dividend policy Property & Casualty (P&C) Customer KPIs Life P&C reinsurance program Farmers Farmers Exchanges details by line of business Group Function
Slide 3: Key highlights
Key highlights 3 © Zurich
Slide 4: Key messages
Key messages Excellent start to new BOP at USD 3.7bn in line with the record result achieved in the prior year, higher on a per share basis 1. financial cycle NIAS is up 6% to USD 2.5bn. USD EPS up 8%. BOPAT ROE at 22.9% P&C rates increasing in Rates increased by 6% for the Group, with Commercial In
Slide 5: Continuing to pursue our strategic vision, increased ambition for 2023-2025
Key highlights Continuing to pursue our strategic vision established in 2016, increased ambition for 2023-2025 financial cycle Consistent strategy, increased ambition Financial targets for 2023 – 20251 Deliver cross-cycle outperformance in Commercial based on technical excellence and opportunistic g
Slide 6: Strong profit growth and excellent return on equity
Key highlights Strong profit growth and excellent return on equity; earnings trajectory not affected by the transition to IFRS 9/17 Group BOP (USDbn)1 BOPAT ROE (%)2 6.1 22.9% 6.5 2023-2025 target 5.7 20% 17.8% 5.3 2.1% 3.1 14.2% 14.0% 4.2 H2 2.5 3.0 11.0% 2.5 15.7% 3.4 3.7 H1 2.8 2.7 1.7 2019 2020
Slide 7: Growth in Commercial and Retail P&C business
Key highlights Growth in Commercial and Retail P&C business driven by higher premium rates and net new business P&C GWP growth by driver P&C GWP growth by driver Retail and SME (USDm)1 Commercial (USDm)1 +9% +12% 7,867 13,936 18 124 364 730 109 119 214 467 7,198 12,496 HY-22 Rate change Exposure Net
Slide 8: Commercial rates above loss trends
Key highlights Commercial rates above loss trends and sequential improvement in 2023 driven by a re-acceleration in property P&C Commercial Commercial - North America Rate change (%)1 15% 18% 11% 11% 10% 11% Property 9% 9% 8% 7% Liability (excl. 10% 8% 10% 8% 8% 6% 6% financial lines) 6% Workers 0%
Slide 9: Retail rates show strong signs of improvement
Key highlights Retail rates show strong signs of improvement in 2023 mainly driven by hardening motor rates P&C Retail and SME EMEA - Retail Motor Rate change (%)1 5% 5% 1% 5% Switzerland 0% -1% -3% 4% 3% 3% 7% 7% 9% 8% 3% Germany 5% 5% 2% 2% 2% 4% 4% 1% Italy 0% Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23
Slide 10: Life business with capital efficient product mix
Key highlights Life business with capital efficient product mix and well diversified profit drivers Life reserves and liabilities1 FY-22 operating profit drivers (%)2 22% 51% 65% ~80% 75% 5% USD 189.3bn 6% 14% 2% 5% 9% 73% 4% <10% 25% <5% 24% 21% ~10% Zurich Allianz AXA Generali Unit-linked and inve
Slide 11: Farmers Exchanges top-line benefiting from pricing
Key highlights Farmers Exchanges1 top-line benefiting from continued focus on pricing, partially offset by impact of targeted non-rate actions GWP (USDm) California auto rate filings (%), Key actions selected peers, last 12 months3 +5%2 0 10 20 30 • Continued focus on increased pricing Peer 1 adequa
Slide 12: CFO update
@ ZURICH CFO update 12. ©Zurich
Slide 13: BOP in line with very strong HY-22 comparative period
Group – Business operating profit BOP in line with very strong HY-22 comparative period, 3% ahead in local currency terms BOP by region (USDm) BOP by business (USDm) +3% +3% In local currencies In local currencies 0% 0% 3,738 3,720 3,738 3,720 326 309 335 250 982 993 982 993 847 939 1,389 1,278 2,37
Slide 14: Commentary
Group – Business operating profit Commentary • Group business operating profit (BOP) was in line with very strong • By business, P&C BOP decreased 6% (2% in local currencies) HY-22 at USD 3.7bn, with 3% growth in local currencies compared with the prior year period which benefitted from a lower damp
Slide 15: Net income attributable to shareholders up 6%
Group – Net income attributable to shareholders Net income attributable to shareholders up 6% mainly due to improved financial market conditions BOP to NIAS walk (USDm) Key drivers 24.4% Effective tax rate 282 -64 • Group BOP of USD 3.7bn in line with -378 -28 HY-22 -861 • Net unfavorable impact of
Slide 16: Higher interest rates lead to increases of P&C locked-in rates
PAA - Discount and unwind mechanics Higher interest rates lead to increases of P&C locked-in rates and unwind of discount year over year Illustration of P&C locked-in rates and unwind of discount (USDbn, %) FY-23 illustrative FY-24 scenario Net reserves1 37 9 46 37 9 47 Average locked-in rates 1.0%
Slide 17: 2023 outlook
Group – Outlook 2023 outlook • Insurance revenue expected to grow by mid-single digit percentage year-on-year • Commercial Insurance expected to maintain high level of returns; Retail and SME expected to continue seeing improving results as the impact of price increases earns through • Losses from n
Slide 18: Strong growth supported by favorable rate environment
P&C – Top-line Strong growth supported by favorable rate environment HY-23 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 10,296 8% 5% Stable 8,267 7% North America 11,873 9%
Slide 19: Commentary
P&C – Top-line Commentary • Gross written premiums rose 10% on a like-for-like basis and 8% • In North America, gross written premiums grew 9% on a like-for- in U.S. dollar terms. All regions demonstrated strong growth like basis. Growth benefited from rate increases of 9% which supported by higher
Slide 20: P&C BOP down 6%, with underlying up 3%
P&C – BOP components P&C BOP down 6%, with underlying up 3% adjusting for prior year real estate gain and FX BOP by segment (USDm) BOP by component (USDm) +3% +3% In local currencies and In local currencies and adjusted for prior year real estate gain adjusted for prior year real estate gain -6% 2,3
Slide 21: Commentary
P&C – BOP components Commentary • HY-23 P&C BOP was USD 2,247m, 6% lower than in the previous • The impact of fee result, other result, and non-controlling year. In local currency, the HY-23 P&C BOP was 2% lower than in interests decreased USD 58m compared to the prior year period the previous year
Slide 22: Commercial maintains strong profitability while Retail and SME improve
P&C – Combined ratio by segment and customer unit Commercial maintains strong profitability while Retail and SME show signs of improvement compared to H2-22 AY combined ratio (CR) excl. catastrophes by region (%) AY CR excl. catastrophes by customer unit (%)1 -2.9ppts 94.1% 97.2% 95.0% 90.9% 93.5% 9
Slide 23: Commentary
P&C – Combined ratio by segment and customer unit Commentary • Following the first half / second half deterioration in 2022, there • The Commercial Insurance accident year combined ratio ex- has been a sequential improvement of the accident year catastrophes increased 1.8 percentage points compared
Slide 24: Combined ratio remains strong, impacted by loss cost assumptions
P&C – Combined ratio details Combined ratio remains strong, but impacted by conservative loss cost assumptions and mix-driven higher commissions P&C combined ratio walk (%) -0.4% 0.0% 92.9% 1.7% -1.0% 91.6% 2.2% -1.5% 0.2% HY-22 Undiscounted Cat Discount PYD Commissions Premium tax Other insurance H
Slide 25: Commentary
P&C – Combined ratio details Commentary • HY-23 P&C combined ratio of 92.9% increased 1.3 percentage • Prior year development of 1.5% was well within the indicated 1-2% points compared to the prior year period driven by a 0.5 range. All regions experienced favorable development. percentage point inc
Slide 26: P&C investment result benefits from higher reinvestment yields
P&C – Investment result P&C investment result benefits from increase in reinvestment yields, partially offset by a higher unwind of discount Investment result in BOP (USDm) Investment income yield of Group investments (%)1 3.4% 2.7% 765 73 HY-22 HY-23 676 Book yield2 2.4% 3.1% 1’087 Reinvestment yie
Slide 27: Commentary
P&C – Investment result Commentary • Net investment result in HY-23 increased 13% compared to the • The book yield for debt securities rose to 3.1% as reinvestment previous year as higher investment income and realized capital rates on debt securities increased by 2.0 percentage points to gains outp
Slide 28: Higher new business and top-line in Life
Life – New business and top-line Higher new business and top-line in Life, lower new business CSM driven by less favorable mix Long term insurance1 Short term insurance1 +17% -10% +8% +8% Like-for-like2 Like-for-like2 Like-for-like2 1,012 1,089 +13% -14% Insurance revenue (USDm) 8,242 625 7,283 181
Slide 29: Commentary
Life – New business and top-line Commentary • In the first half, PVNBP increased 13% in USD terms, and 17% on a • In Latin America, new business premiums increased 27% on a like-for-like basis. Growth in local currencies was partially offset by like-for-like basis, benefiting from higher sales in Br
Slide 30: CSM up 7% driven by underlying accretion
Life – Contractual service margin CSM up 7% driven by underlying accretion, favorable economic variances and FX CSM walk (USDm) HY-23 line of business split (USDm) 536 11,211 536 785 267 11’211 100% 10’496 13% -732 21% -142 Of which expected 20% return1 of ~USD 250m 46% Underlying CSM accretion2 ~US
Slide 31: Commentary
Life – Contractual service margin Commentary • The Contractual Service Margin (CSM) of the Life business • Amortization into the P&L reduced CSM by USD 732m. This increased 7% in HY-23, driven by a combination of favorable reflects a CSM amortization rate broadly in line with FY-22. economic varianc
Slide 32: Life BOP up 11%
Life – Business operating profit Life BOP up 11% driven by higher fee result, CSM amortization and more favorable experience BOP by region (USDm) BOP by component (USDm) +11% +18% 939 Like-for-like2 847 44 270 -226 206 -52 211 126 100 -217 939 126 812 227 Risk adj. 77 Release 589 513 CSM amort.3 735
Slide 33: Commentary
Life – Business operating profit Commentary • In the first half, the Group’s Life business generated BOP of USD • Fee result, which is predominantly driven by investment contracts 939m, 11% higher than in the prior year in USD terms. BOP did not written in EMEA, added USD 126m of BOP in HY-23. Stron
Slide 34: Higher AUM benefit fee result
Life – Assets under management, fee result, net investment result Higher AUM benefit fee result; one-off movements in 2022 affect year on year comparison for fee and investment result Assets under management Fee result (USDm)1 Net investment result (USDm) (USDbn) +6% 109 316 270 246 232 7 2 5 35 46
Slide 35: Commentary
Life – Assets under management, fee result, net investment result Commentary • In the Group’s life business, assets under management (AuM) • Life net investment result is predominantly driven by businesses increased 6% in the first half, driven by a combination of positive accounted for with the bui
Slide 36: Growth in Farmers Exchanges premiums drives increase in FMS income
Farmers Management Services – Overview Growth in Farmers Exchanges1 premiums drives increase in FMS income; Managed GEP margin in line with prior year Business operating profit (USDm) MGEP margin (%)2 +8% 934 6.7% 6.7% 863 15 874 918 -12 HY-22 HY-23 HY-22 HY-23 Fee result Net investment income and o
Slide 37: Commentary
Farmers Management Services – Overview Commentary • Farmers Management Services (FMS) BOP increased 8% compared to the prior year. This was driven by the higher earned premium base of the Farmers Exchanges1 (up 4% compared to HY-22), as well as favorable market impacts on investments backing employe
Slide 38: Farmers Life with improved new business metrics
Farmers Life and Farmers Re – Overview Farmers Life with improved new business metrics, BOP impacted by transaction costs related to announced transaction Business operating profit Farmers Life PVNBP Farmers Life NB CSM Farmers Life NBM (%)1 (USDm) (USDm)1 (USDm)1 436 13.5% 408 12.0% 119 2 59 52 55
Slide 39: Commentary
Farmers Life and Farmers Re – Overview Commentary • Farmers Life BOP of USD 90m was 23% below the prior year, impacted by transaction costs related to the reinsurance agreement announced in May. • Farmers Life present value of new business premiums (PVNBP) of USD 408m decreased 7% compared to prior
Slide 40: Group Functions and Non-Core Businesses BOP
Group Functions and Operations & Non-Core Businesses – BOP Group Functions impacted by higher interest rates; Non-Core Businesses with moderate operating loss Group Functions and Operations BOP (USDm) Non-Core Businesses BOP (USDm) -27 -142 -147 -89 -30 -14 -209 -271 -381 -432 HY-22 HY-23 HY-22 HY-2
Slide 41: Commentary
Group Functions and Operations & Non-Core Businesses – BOP Commentary • Group Functions and Operations reported net expenses of USD 432m compared to USD 381m in the prior-year period. The deterioration was mainly driven by the impact of higher interest rates in the Holding and Financing unit. • The
Slide 42: Very strong capital position with SST ratio at 263%
Group – Solvency Very strong capital position with SST ratio at 263% 267% 263% -6% 1% 14% -14% 1% +3% Equity markets +2% Credit spreads -3% FX SST ratio (%)1 -1% Interest rates FY-22 Assumption and Management Market Economic profit / Capital actions2 HY-23e model changes actions and other business g
Slide 43: Commentary
Group – Solvency Commentary • As of June 30, 2023, 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 263%, well above the Group’s SST ratio target of 160% or above. The ratio does not
Slide 44: Shareholders' equity reduction driven by dividend and buyback
Group – Balance sheet and capital structure Shareholders’ equity reduction driven by dividend payment and completion of the share buyback Shareholders’ equity (USDm)1 Capital structure (%)2 9% 10% -9% 17% 17% 26’199 2’492 5% 5% -3,877 23’843 56 345 -1,380 7 19% 20% 50% 48% FY-22 NIAS Dividend Curren
Slide 45: Commentary
Group – Balance sheet and capital structure Commentary • Shareholders’ equity declined by USD 2.4bn compared to year end 2022, mainly driven by the payment of the Group dividend of USD 3.9bn and completion of the share buyback program (further USD 0.4bn of shares repurchased in FY-22) which were par
Slide 46: 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 47: Appendix
Appendix 47 © Zurich
Slide 48: 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) +6% p.a. 24 NIAS2 payout ratio of ~75% 22 20 20 Dividend increases based on sustainable earnings growth FY-19 FY-20 FY-21 FY-22 Minimum target of prior year level 1 The dividend
Slide 49: Update on customer satisfaction and brand consideration
Customer KPIs Update on customer satisfaction and brand consideration tNPS HY-23 vs. FY-221 Brand consideration ranking3 15 14 15 15 15 Global +2.4 pts 47% 57% 53% 53% 60% EMEA +0.5pts Asia Pacific +1.2pts 33% 21% 33% 33% 27% Latin America +3.0 pts 21% 20% 13% 13% 13% Farmers Exchanges2 -6.3 pts 201
Slide 50: 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 200 435 115 300 Global surety excess of loss 1’200 300 U.S. property quota share 1’200 1’200 600 430 U.S. liability quota share
Slide 51: 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) +3% -4% 6’020 6’187 15.2 14.5 +6% 3’890 3’654 +12% -27% 2’028 2’014 1’816 1’467 Auto Home Specialty Business
Slide 52: Farmers Exchanges adverse Cat loss frequency
Farmers Exchanges1 – Combined ratio and surplus Farmers Exchanges experienced adverse Cat loss frequency, but remain focused on improving underwriting performance Combined ratio (%)2 Surplus (USDbn, %) 35.0% 15.1% 6.6% 7.1% 21.9% 13.1% 30.2% 3.1% 6.0 5.2 93.8% 96.6% 99.6% 98.9% 94.3% 93.9% Q1-22 Q2-
Slide 53: Very strong capital position; balance sheet resilient
Group – Solvency Very strong capital position; balance sheet resilient to market movements Group Swiss Solvency Test (%)1 Q1-23 SST sensitivities impact (ppts)2 300% 267% 263% Interest rate +50bps +19ppts 216% 221% 222% 204% 212% Interest rate -50bps -20ppts 200% 182% Equities +20% +6ppts ≥160% Equi
Slide 54: Well diversified capital base by business segment
Group – SST Components Well diversified capital base by business segment HY-23 Available Financial Resources (USDbn) HY-23 Risk Capital Split (%)2 6% Market risk Shareholders’ equity 23.8 7% 1% Premium and reserve risk 10% Dividend Accrual -2.1 Business risk 52% Natural catastrophe risk Net intangib
Slide 55: 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 14.0 14.2 2.6 Average debt 0.3 FY-22 FY-23e 2.2 cost (%) 2.0 0.4 8.9 9.0 Subordinated 3.8% 3.8% 0.2 1.8 Senior 1.6% 1.7% 0.8 1.2 1.1 2.3 Total 3.0% 3.0% 0.9 0.4
Slide 56: Well diversified and high-quality investment portfolio
Group – Investment portfolio Well diversified and high-quality investment portfolio HY-23 Group investments (%)1 HY-23 asset quality (%) HY-23 non-financial credit (%) USD 55bn USD 75bn Other 5% 0% 0% 4% 4% 2% 5% 4% 8% 18% Consumer 16% 5% non-cyclical 9% 33% 4% 33% 6% Utility 3% Consumer cyclical US
Slide 57: Well diversified high-quality credit and private debt exposure
Group – Investment portfolio Well diversified and high-quality credit and private debt exposure HY-23 rating of credit and private debt securities (%) USD 24.2bn USD 18.1bn USD 12.3bn USD 6.6bn USD 3.6bn USD 10.0bn 2% 0% 1% 1% 1% 11% 12% 0% 6% 4% 25% 26% 41% 18% 51% 35% 52% 89% 74% 48% 17% 31% 2% 18
Slide 58: Calculation of like-for-like growth
Alternative performance measures Calculation of like-for-like growth Like-for-like growth HY-22 (USDm) HY-23 (USDm) Business KPI L-F-L2 (%) Rep M&A Adj Rep FX M&A1 Adj1 P&C GWP 22,753 0 22,753 24,560 499 0 25,059 10% P&C Insurance revenue 18,648 0 18,648 20,163 360 0 20,523 10% Life – long-term PVNB
Slide 59: Other information
Other information 59 © Zurich
Slide 60: For further information
For further information i ital So iety Call us Visit or follow us Investor Relations and Rating Agency Management • Jon Hocking +41 44 628 18 34 • Björn Bierfreund +41 44 625 23 13 • Francesco Bonsante +41 44 628 00 68 • Samuel Han +41 44 625 32 57 Investor Relations website • Michèle Matlock +41 44
Slide 61: Thank you
Thank you Upcoming events • November 9, 2023 – Update for the nine months ended September 30, 2023 • November 16, 2023 – Investor update 2023, London ©©Zurich Zurich
Zurich Insurance Group — H1 2023 Earnings Presentation on 6ix