Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — 9M 2009 Earnings Presentation
58 slides from Zurich Insurance's earnings presentation, Nov 5, 2009
Slide 1: Results Reporting for the Nine Months to September 30, 2009
Results Reporting for the Nine Months to September 30, 2009 Analysts and Media Presentation November 5, 2009
Slide 2: Disclaimer and cautionary statement
Disclaimer and cautionary statement By participating in this conference call you agree to be bound by the following limitiations. Certain statements in this document are forward-looking statements, including, but not limited to, statements that are predications of or indicate future events, trends,
Slide 3: Agenda
Agenda Introduction James J. Schiro Results for the Nine Months Dieter Wemmer to September 30, 2009 Q&A Closing remarks James J. Schiro © Zurich Financial Services Ltd November 5, 2009 Results Reporting for the Nine Months to September 30, 2009 3
Slide 4: Introduction
Introduction James J. Schiro Chief Executive Officer November 5, 2009
Slide 5: Financial highlights
Financial highlights in USD millions 2009 20081 Change for the nine months to September 30 Business operating profit (BOP) 4,066 4,185 -3% Net income attributable to shareholders 2,163 2,834 -24% General Insurance combined ratio 96.9% 98.7% 1.9pts Global Life new business margin2 21.8% 22.4% -0.6pts
Slide 6: Results Reporting for the Nine Months to September 30, 2009
Results Reporting for the Nine Months to September 30, 2009 Dieter Wemmer Chief Financial Officer November 5, 2009
Slide 7: Business operating profit and net income by quarter
Business operating profit and net income by quarter Business operating profit in USD millions 2,000 1,764 1,785 1,513 1,658 1,491 1,500 1,761 1,002 1,061 1,660 1,392 1,447 1,346 1,000 636 845 500 Core BOP 3 127 44 Non-core BOP 0 -209 -146 -344 -331 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Net incom
Slide 8: General Insurance – key performance indicators
General Insurance – key performance indicators in USD millions 2009 2008 Change Change for the nine months to September 30 in LC1 GWP and policy fees 26,321 29,207 -10% -3% Rate change2 3.2% -1.4% 4.6pts Loss ratio 71.4% 73.4% 2.0pts Expense ratio 25.4% 25.3% -0.1pts Combined ratio 96.9% 98.7% 1.9pt
Slide 9: General Insurance – Rate Change Monitor for personal and commercial lines
General Insurance – Rate Change Monitor1 for personal and commercial lines 9 months 2009 Discrete Q3 2009 Int’l Total Int’l Total GC NAC EGI Markets GI GC NAC EGI Markets GI Personal Lines n/a n/a 2% 3% 2% n/a n/a 2% 2% 2% Commercial Lines 6% 3% 2% 5% 3% 7% 3% 3% 6% 3% EGI by country EGI by country
Slide 10: General Insurance – Compounded Rate Change 2008 - 2009
General Insurance – Compounded Rate Change1 2008 - 2009 9 months 2009 General Insurance – rate change 2008 - 2009 Int’l Total GC NAC EGI Markets GI Personal 5% n/a n/a 2% 3% 2% Lines 4.2% Commercial Lines 6% 3% 2% 5% 3% 4% 3.6% 3.0% EGI by country 3% Switzer- Rest of UK Germany land Italy Spain EGI
Slide 11: General Insurance net expense ratio walk from 9m08 to 9m09
General Insurance net expense ratio walk from 9m08 to 9m09 25.3% 25.4% Expense ratio development Last eight discrete quarters 0.1% 0.1% 0.3% 26.6% 26.6% 26.1% 25.7% 25.5% 25.1% 24.7% 24.7% 13.1% Other technical 12.9% expenses 12.2% Commissions 12.5% Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 9m08 Commi
Slide 12: Comparison of General Insurance loss ratio
Comparison of General Insurance loss ratio 9 months 2009 9 months 2008 75% 75% 73.4% 71.4% 70% 70% 67.4% 67.9% 65% 65% 7.2% 2.5% 0.0% 6.6% 4.2% 2.4% 60% 60% USD USD USD USD USD 552m -1,421m 989m -570m -1,720m 55% 55% Underlying PYD1 Major Large Reported Underlying PYD1 Major Large Reported Loss Rati
Slide 13: UK Asbestos review
UK Asbestos review in USD millions1 Europe Global Total for the nine months ended September 30 General Corporate General Insurance Insurance Gross asbestos increase 456 192 648 Net asbestos increase 364 154 518 Latency release -247 -75 -322 Total 117 79 196 of which accrued in Q2 82 34 116 of which
Slide 14: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2009 2008 Change Change for the nine months to September 30 in LC1 GWP and policy fees (incl. insurance 17,406 15,060 16% 32% deposits)2 Net inflows to Assets under Mgmt 2.6bn -2bn3 nm Annual Premium Equivalent (APE) 2,392 2,282 5% 17% New bus
Slide 15: Global Life – new business by pillar
Global Life – new business by pillar in USD millions APE APE Change Change for the nine months to September 30 in LC1 2009 2008 Bank Distribution 776 412 88% 108% IFA/Brokers 608 715 -15% 2% Agents 317 355 -11% -5% Corporate Life & Pensions 384 307 25% 45% International / Expats 183 277 -34% -36% Pr
Slide 16: Farmers – key performance indicators
Farmers – key performance indicators in USD millions 2009 2008 Change for the nine months to September 301 Farmers Management Services Managed gross earned premium margin2 7.2% 7.1% 0.1pts Business operating profit 992 919 8% Farmers Re Business operating profit 141 77 82% Farmers Exchanges2 Gross w
Slide 17: Acquisition of 21st Century – Update
Acquisition of 21st Century1 – Update GWP by distribution channel (Direct vs Agency) 9m09 GWP of USD 1.9bn reflects: Direct: negative residual effect of legacy 3000 2.5-2.8bn Agency brand issues and deterioration of US Direct economy – levels stabilizing GWP in USD m 2000 Agency: high lapse rates, l
Slide 18: Other Operating and Non-Core Businesses – Business operating profit contribution
Other Operating and Non-Core Businesses – Business operating profit contribution in USD millions 2009 2008 Change for the nine months to September 30 Other Operating Businesses -298 -542 45% of which: subordinated debt buy-back 210 - nm Non-Core Businesses - Banking activities -141 56 nm - Centrally
Slide 19: Investment performance of Group investments
Investment performance of Group investments in USD millions 2009 2008 Change for the nine months to September 30 Net investment income 5,569 6,534 -15% Net capital losses/gains on investments and -1,245 -1,807 nm impairments1 of which attributable to shareholders -1,277 -1,109 nm Net investment resu
Slide 20: Group investments – unrealized gains / losses
Group investments – unrealized gains / losses Change in net unrealized gains / losses on investments incl. in shareholders’ equity1 in USD millions 4,500 4500 4,327 4000 3500 3000 2500 2000 1500 1,395 1,385 1000 944 546 500 78 0 -12 -25 -105 -90 -500 Equity investments -1000 Debt investments -1,222
Slide 21: Development of shareholders' equity
Development of shareholders’ equity in USD millions 29,000 1,089 80 34 28,508 28,000 3,288 27,000 26,000 25,000 2,163 24,000 1,224 1,405 23,000 22,103 22,000 21,000 20,000 19,000 Balance as of Issuance of Dividends Net Income Change in Cumulative Net actuarial Other Balance as of © Zurich Financial
Slide 22: 2009 estimated economic and regulatory solvency
2009 estimated economic and regulatory solvency What if scenarios Statutory solvency ratio / Group’s Solvency I1 Debt securities at cost -6pts GI DAC +24pts Dec. 31, 08 Mar. 31, 09 Jun. 30, 09 Impact Q3-09 Sep. 30, 09 160%2 157% 180%4 +29pts 209%4 Economic solvency ratio3 15pts ~139% ~124% Impact Q3
Slide 23: Summary
Summary BOPaT-ROE above our target level of 16% Strong operating performance in our 3 operating businesses Maintained positive rate environment in General Insurance Profitable growth achieved in Global Life & Farmers Further consolidated strength of our balance sheet & solvency © Zurich Financial Se
Slide 24: Q&A
Q&A © Zurich Financial Services Ltd November 5, 2009 Results Reporting for the Nine Months to September 30, 2009 24
Slide 25: Closing remarks
Closing remarks James J. Schiro Chief Executive Officer November 5, 2009
Slide 26: Appendix
Appendix © Zurich Financial Services Ltd November 5, 2009 Results Reporting for the Nine Months to September 30, 2009 26
Slide 27: Focus on volume growth
Zurich is poised for profitable growth 17% 5% 8% Global Focus on volume growth1 Farmers Life IM EGI -1% 2% Legend for GI BDs IM International Markets GC EGI Europe General NAC Insurance GC Global Corporate -10% NAC North America Commercial © Zurich Financial Services Ltd Focus on margin enhancement
Slide 28: The Zurich Way and 2009 expense saving initiatives
The Zurich Way and 2009 expense saving initiatives The Zurich Way – Target of USD 2.7 billion for 2009 to 2011 We have comfortably achieved our USD USD 900m 2008 target. USD 800m Developing our three year plan, we 700m expect benefits of USD 2.7 billion for Total TZW 2009 to 2011 USD planned benefit
Slide 29: The Zurich Way initiatives – 2009 target
The Zurich Way initiatives – 2009 target by function by business USD 900m division USD 900m Growth/ USD 800m 21% Distribution USD 800m USD 700m USD 700m 39% Europe General 32% Insurance 21% 35% 30% Claims 31% 36% 16% 17% North America 23% Commercial 22% 28% 43% 29% U/W Global 34% 17% 15% Corporate 1
Slide 30: Business operating profit by segment
Business operating profit by segment in USD millions 2009 20081 Change for the nine months to September 30 General Insurance 2,508 2,578 -3% Global Life 1,157 1,232 -6% Farmers (including Farmers Re) 1,132 996 14% Other Operating Businesses -298 -542 45% Total Core BOP 4,499 4,264 6% Non-Core Busine
Slide 31: Top line development by segment
Top line development by segment in USD millions 2009 2008 Change Change for the nine months to September 30 in LC1 General Insurance GWP and policy fees 26,321 29,207 -10% -3% Global Life GWP and policy fees (incl. insurance 17,406 15,060 16% 32% deposits)2 Annual Premium Equivalent (APE)3 2,392 2,2
Slide 32: Business division BOP-ROE based on RBC-allocated IFRS equity
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the nine months to September 30 2009 2008 General Insurance 23.3% 21.7% Global Corporate 20.4% 5.5% North America Commercial 25.1% 18.6% Europe General Insurance 24.9% 37.6% International Markets 18.2% 18.4% GI Global Functions includ
Slide 33: Updated economic solvency view for 2009
Updated economic solvency view for 2009 in USD billions1 Available Financial Resources (AFR) Estimated AFR as of June 30, 2009 + 36 Movements in Q3-09 + 4 Estimated 2009 September 30 estimate for 2009 AFR + 40 economic solvency ratio Risk Based Capital (RBC) ~139% Estimated RBC as of June 30, 2009 +
Slide 34: Group's Solvency I calculation
Group’s Solvency I calculation in USD millions Sep 30, 091 Jun 30, 091 Mar 31, 09 Dec 31, 08 finalized2 Eligible equity Total equity 30,323 26,942 23,850 23,781 Net of intangibles, other assets and -4,338 -5,151 -4,832 -3,892 free reserves for ph dividends Subordinated debt 4,135 4,103 3,582 3,683 D
Slide 35: Group's Solvency I - sensitivities
Group’s Solvency I1 - sensitivities Solvency I ratio impact (in %) Solvency I impact (in USD bn) 100% 150% Base case 209% Interest rate +100 bps 175% -4.4 Interest rate -100 bps 247% 4.9 Equity markets -10% 201% -1.1 Credit spreads +100 bps 199% -1.3 © Zurich Financial Services Ltd 1 Solvency I requ
Slide 36: General Insurance – key performance indicators
General Insurance – key performance indicators Business operating profit Combined ratio (%) Global 96.8 Corporate in USD millions 2009 2008 Change 109.8 CAT 9.2 for the nine months to September 30 NA 97.1 Global Corporate 512 122 nm Commercial 100.0 CAT 3.1 North America Commercial 917 738 24% Europ
Slide 37: Development of Reserves for Losses and Loss Adjustment Expenses (LAE)
Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions 2009 2008 Net reserves for losses and LAE, as of January 1 52,986 54,712 Net losses and LAE paid 17,506 16,467 Net losses and LAE incurred 18,366 18,495 - Current year 18,899 19,420 - Prior years1 -533 -925 Foreign
Slide 38: Global Life – new business indicators
Global Life – new business indicators in USD millions APE APE Change Change NBV2 NBV2 Change for the nine months to September 30 2009 2008 in LC1 2009 2008 Americas, of which 176 173 2% 9% 100 92 9% US 70 76 -8% -8% 75 68 11% Latin America 106 97 9% 25% 25 24 6% United Kingdom 546 670 -19% 3% 70 73
Slide 39: Global Life – Embedded Value result
Global Life – Embedded Value result for the nine months to September 30 2009 2009 2008 2008 USD m Return4 USD m Return4 Opening Embedded Value 12,818 15,935 Expected contribution1,2 597 794 New business value2 520 511 Operating variance2,3 46 183 Total operating earnings2 1,163 11.8% 1,488 12.2% Eco
Slide 40: Global Life - Assets under Management
Global Life - Assets under Management1 AuM increased mainly due to currency translation and an increase of the market value of assets Split of AuM Development of AuM in USD billions in USD billions 211 Balance as of Jan 1, 2009 180 24 180 20 Inflows +19 104 95 Outflows -16 Market move- ments & other
Slide 41: Farmers – Farmers Management Services – key performance indicators
Farmers – Farmers Management Services – key performance indicators in USD millions 2009 2008 Change for the nine months to September 301 Management fees and other related revenues 1,973 1,831 8% Management and other related expenses -1,023 -956 -7% Gross management result 950 875 9% Managed gross ea
Slide 42: Farmers – Farmers Re – key performance indicators
Farmers – Farmers Re – key performance indicators in USD millions 2009 2008 Change for the nine months to September 30 Gross written premiums1 4,964 2,346 112% Net underwriting result 23 8 188% Combined ratio 99.4% 99.4% nm CAT2 impact 4.7% 3.8% -0.9pts Business operating profit 141 77 83% © Zurich
Slide 43: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2009 2008 Change for the nine months to September 30 Gross written premiums (indicative)2 13,300 12,699 4.7% Gross written premiums (statutory)3 14,621 13,125 11.4% Net underwriting result4 38 -1,148 n/m Combined ratio4 99.4% 108.6% 9.2
Slide 44: Integration of 21st Century shows rapid progress
Integration of 21st Century shows rapid progress Farmers has moved aggressively to restructure/integrate businesses: Agency Auto integration into Foremost effective Sep. 1, 2009 Rationalization of Direct operations (Woodland Hills, CA / Vestal, NY) Other back-office transition integration expected t
Slide 45: 21st Century - contribution
21st Century1 - contribution in USD millions 2009 for the nine months ended September 301 Farmers Management Services: Management fees and other related revenues 108 Management and other related expenses -67 Gross management result 41 Managed gross earned premium margin 6.4% Business operating profi
Slide 46: Farmers Exchanges – financial highlights
Farmers Exchanges1 – financial highlights 6'000 in USD millions 2009 2008 44.0% for the nine months to September 30 5'000 42.0% Gross written premiums2 13,300 12,699 4'000 40.0% Net underwriting result3 38 -1,148 38.0% 3'000 Net surplus growth 334 -685 36.0% 2'000 Ending surplus 5,368 5,034 34.0% 1'
Slide 47: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions 2009 2008 Change for the nine months to September 30 Auto1 6,758 6,535 3.4% Homeowners 3,527 3,404 3.6% Commercial P&C 981 953 2.9% Small Business Solutions2 445 219 103.4% Workers’ Compensation 238 255 -6.7% Specialty 1,
Slide 48: Farmers Exchanges – premium growth outperforming industry
Farmers Exchanges – premium growth outperforming industry GWP growth 8% Industry Growth Rate1 2008: -1.3% 2009 Forecast: -0.8% 6.5% 2,3 6.1% 23 6% 5.7% 5.7%, 5.4% 5.0% 5.1% 2 4.6% 4.7% 4% 2 3.2% 3.3% 3.1% 2.2% 2 1.8% 2% 1.4% 0% 06 07 08 09 06 06 06 07 07 07 08 08 08 09 09 20 20 20 20 20 20 20 20 20
Slide 49: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the nine months to September 30 20091 20081 Change Auto3 98.5% 100.5% 2.0pts Homeowners 104.5% 125.7% 21.2pts Commercial P&C 96.4% 98.7% 2.3pts Small Business Solutions4 104.3% 119.0% 14.7pts Workers' Compensation 99.1% 96.4% -2.7pts Specialty 104.8% 109.2% 4.4
Slide 50: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio 120% Other Cats 115% Gustav 110% Midwest Cats California Ike 105% wildfires Rita California wildfires Other Cats 100% Texas Florida hurricanes Katrina Hail CO/TX Hail- 95% storms © Zurich Financial Services Ltd 90% Q1 Q2
Slide 51: Zurich's investment portfolio profits greatly from diversification
Zurich’s investment portfolio profits greatly from diversification and is balanced in terms of risk Risk Allocation of Zurich’s investment portfolio as of September 30, 2009 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Private Equity Hedge Real Esta
Slide 52: Group Investments – debt securities of consistently high quality
Group Investments – Zurich’s debt securities are of consistently high quality (98% investment grade) As of September 30, 2009 Group Investments Debt securities USD 201bn USD 136bn credit rating: AAA 54.7% credit rating: AA Other Debt 98.4% 12.2% asset securities investment classes grade 32% 68% cred
Slide 53: Group Investments – debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 201bn (100%) As of September 30, 2009 Government and supranational bonds: USD 53bn (26%) Market/Cost1: 103% of which: 99% inv. grade 47%in General Insurance 70% AAA 46% in Global Life 12% AA 17% A 1%
Slide 54: Group Investments – Corporate bonds are of high quality
Group Investments – Zurich’s Corporate bonds are of high quality Group Investments - USD 201bn (100%) As of September 30, 2009 Corporate bonds: USD 61bn (30%) Market/Cost: 101% Split by industries Split by credit rating 46% Banks, 99% inv. grade including 18%1 covered bonds 29% AAA 9% Cities
Slide 55: Group Investments – Banks Corporate bonds high quality and diversified
Group Investments – Banks Corporate bonds are of high quality and well diversified Group Investments - USD 201bn (100%) As of September 30, 2009 Banks Corporate bonds: USD 28bn (14%) Market/Cost: 100% Split by seniority Split by credit rating 40% Covered bonds 100% inv. grade 46% Senior bonds
Slide 56: Group Investments – Split of total MBS/ABS
Group Investments – Split of total MBS/ABS of USD 24bn (12%) MBS/ABS: USD 24bn (12%) Market/Cost: 97% Group Investments 97% inv. grade USD 201bn (100%) 88% AAA includes: US MBS: USD 15.8bn (7.9%) Market/Cost: 100% 96% inv. grade; 91% AAA Debt US ABS1: USD 2.8bn (1.4%) securities Market/Cost: 1
Slide 57: Group Investments – Split of US MBS
Group Investments – Split of US MBS of USD 15.8bn (7.9%) Group Investments US-MBS: USD 15.8bn (7.9%) Market/Cost: 100% USD 201bn (100%) 96% inv. grade 91% AAA Debt of which: securities US “Agency” MBS: USD 9.5bn (4.7%) Market/Cost: 104% 68% 100% AAA USD 0.9bn backed by GNMA USD 8.6bn backe
Slide 58: Group investments – capital losses in P&L
Group investments – capital losses in P&L Net capital losses/gains on investments and impairments (in P&L) Equity investments Equity investments Debt investments of which: impairments Debt investments in USD millions Other investments in USD millions Other investments 500 500 124 118 0 0 -16 -23 -31
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