Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Q1 2009 Earnings Presentation
55 slides from Zurich Insurance's earnings presentation, May 7, 2009
Slide 1: Results Reporting for the Three Months to March 31, 2009
Results Reporting for the Three Months to March 31, 2009 Analysts and Media Presentation May 7, 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 Three Months to March 31, 2009 Dieter Wemmer Q&A Closing remarks James J. Schiro © Zurich Financial Services Ltd May 7, 2009 Results Reporting for the Three Months to March 31, 2009 3
Slide 4: Introduction
Introduction James J. Schiro Chief Executive Officer May 7, 2009
Slide 5: Financial highlights
Financial highlights in USD millions 2009 20081 Change for the three months to March 31 Business operating profit (BOP) 1,061 1,764 -40% Net income attributable to shareholders 362 1,427 -75% General Insurance combined ratio 95.8% 94.6% -1.2pts Global Life new business margin2 20.6% 22.2% -1.6pts Fa
Slide 6: Results for the Three Months to March 31, 2009
Results for the Three Months to March 31, 2009 Dieter Wemmer Chief Financial Officer May 7, 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 1,500 1,002 1,061 1,000 636 500 0 Q1-2008 Q2-2008 Q3-2008 Q4-2008 Q1-2009 Net income attributable to shareholders in USD millions 2,000 1,500 1,427 1,254 1,000 © Zurich Financial Services
Slide 8: Business operating profit by segment
Business operating profit by segment in USD millions 2009 20081 Change for the three months to March 31 General Insurance 889 1,189 -25% Global Life 222 340 -35% Farmers (including Farmers Re) 324 331 -2% Other Operating Businesses -46 -77 41% Total Core BOP 1,389 1,783 -22% Non-Core Businesses -328
Slide 9: Impact of financial markets on Business operating profit
Impact of financial markets on Business operating profit Financial market Total impact on BOP BOP in USD millions Q1-09 Q1-09 General Insurance 14 889 Global Life -87 222 Farmers (including Farmers Re) - 324 Other Operating Businesses -26 -46 Total Core -99 1,389 Non-Core Businesses -308 -328 Total
Slide 10: Top line development by segment
Top line development by segment in USD millions 2009 2008 Change Change for the three months to March 31 in LC1 General Insurance GWP and policy fees 9,814 11,191 -12% -3% Global Life GWP and policy fees (incl. insurance 5,529 5,397 2% 20% deposits)2 Annual Premium Equivalent (APE)3 721 722 - 16% Fa
Slide 11: Rate Change Monitor for personal and commercial lines
Rate Change Monitor1 for personal and commercial lines 3 months 2009 12 months 2008 Int’l Farmers Int’l Farmers 3 3 3 Exchanges2 GC NAC EGI Markets Exchanges2 GC NAC EGI Markets Personal Lines n/a n/a 1% 3% 3% n/a n/a 2% 1% 7% Commercial Lines 3% 2% 2% 3% n/a -5% -3% 1% 2% n/a EGI by country EGI by
Slide 12: General Insurance – key performance indicators
General Insurance – key performance indicators Business Operating Profit Combined ratio (%) Global 93.8 Corporate in USD millions 2009 2008 Change 97.2 for the three months to March 31 NA 96.6 Global Corporate 207 207 -0% Commercial 95.8 North America Commercial 311 338 -8% Europe 95.7 Europe Genera
Slide 13: General Insurance net expense ratio walk
General Insurance net expense ratio walk from 3 months 2008 to 3 months 2009 25.7% Expense ratio development Last eight discrete quarters 0.1% 24.7% 0.2% 26.6% 26.6% 26.1% 25.7% 0.2% 24.6% 25.2% 24.7% 24.7% 0.5% 12.1% 12.1% 12.6% 13.6% Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Commissions 3m09 Other t
Slide 14: Comparison of General Insurance loss ratio
Comparison of General Insurance loss ratio 3 months 2009 3 months 2008 70.0% 69.9% 70% 70% 66.2% 66.4% 65% 65% 1.6% 0.0% -5.5% USD USD 114m -383m 3.8% 0.0% -7.3% USD USD 301m -578m 60% Underlying PYD1 Major Large Reported Underlying PYD1 Major Large Reported Loss Ratio CAT2 Claims3 Loss Ratio Loss R
Slide 15: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2009 2008 Change Change for the three months to March 31 in LC1 Annual Premium Equivalent (APE) 721 722 - 16% New business value, after tax 149 160 -7% 5% New business margin, after tax2 20.6% 22.2% -1.6pts Business operating profit 222 340 -3
Slide 16: Global Life – new business indicators
Global Life – new business indicators in USD millions APE APE Change Change for the three months to March 31 in LC1 2009 2008 Bank Distribution 269 140 92% 121% IFA/Brokers 183 246 -26% -4% Agents 88 110 -20% -13% Corporate Life & Pensions 111 102 8% 30% International / Expats 46 101 -54% -51% Priva
Slide 17: Farmers Management Services – key performance indicators
Farmers – Farmers Management Services – key performance indicators in USD millions 2009 2008 Change for the three months to March 31 Management fees and other related revenues 623 589 6% Management and other related expenses 311 308 -1% Gross management result 311 281 11% Managed gross earned premiu
Slide 18: Farmers Re – key performance indicators
Farmers – Farmers Re – key performance indicators in USD millions 2009 2008 Change for the three months to March 31 Gross written premiums 1,056 409 158% Net underwriting result -25 9 nm Combined ratio 102.3% 97.7% -4.6pts CAT1 impact 3.8% 0.4% -3.4pts Business operating profit 2 31 -93% © Zurich Fi
Slide 19: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2009 2008 Change for the three months to March 31 Gross written premiums 4,152 4,027 3.1% Net underwriting result -80 -11 nm Combined ratio 102.2% 99.7% -2.5pts Adjusted combined ratio2 94.3% 92.4% -1.9pts CAT3 impact 4.5% 1.0% -3.5pts
Slide 20: Other Operating and Non-Core Businesses – BOP contribution
Other Operating and Non-Core Businesses – Business operating profit contribution in USD millions 2009 2008 Change for the three months to March 31 Other Operating Businesses -46 -77 40% Non-Core Businesses - Centre -61 -12 nm - Centrally managed businesses -271 -21 nm - Other run-off 3 13 77% Total
Slide 21: Investment performance of Group investments
Investment performance of Group investments in USD millions 2009 2008 Change for the three months to March 31 Net investment income 1,844 2,163 -15% Net capital losses/gains on investments and -1,028 10 nm impairments1 of which attributable to shareholders -683 13 nm Net investment result 816 2,173
Slide 22: 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) in USD millions for the three months to March 31, 2009 of which: impairments 0 -16 -15 -183 -303 -476 -536 Equity investments Debt investments Other investments -1’000 Total -1,028 Total -500 o
Slide 23: Group investments – unrealized losses
Group investments – unrealized losses Change in net unrealized losses on investments included in shareholders’ equity1 in USD millions for the three months to March 31, 2009 0 -105 -90 Equity investments Debt investments -1,222 Other investments -1’500 Total1 1,418 of which in: - GI 27% - Global Lif
Slide 24: Development of shareholders' equity
Development of shareholders’ equity in USD millions 24,000 23,000 362 689 689 21 22,257 22,103 22,000 229 21,000 20,000 19,000 Balance as of Net Income Change in net Cumulative Net actuarial Other Balance as of © Zurich Financial Services Ltd Dec 31, 2008 attributable unrealized Translation gains on
Slide 25: 2009 estimated economic and regulatory solvency
2009 estimated economic and regulatory solvency Sensitivities Statutory solvency ratio / Group’s Solvency I1 Unrealized losses on +21pts debt securities Dec. 31, 08 Impact Q1-09 Mar. 31, 09 160%2 -3pts 157% GI DAC +24pts Economic solvency ratio3 8 ~110% 7 ~102% ~95% Expected impact of Impact Q1-09 &
Slide 26: Updated economic solvency view for 2009
Updated economic solvency view for 2009 in USD billion1 Available Financial Resources (AFR) Estimated AFR as of Jan 1, 2009 + 27 • Movements in Q1-09 + 0 • Senior bond issue in April 2009 + 2 • PAG acquisition + 1 March 31 estimate for 2009 AFR + 30 Estimated 2009 economic solvency ratio Risk Based
Slide 27: Summary
Summary Strong and improving balance sheet Continued strong operational performance Profitable growth achieved in targeted areas TZW benefits and additional expense control actions © Zurich Financial Services Ltd May 7, 2009 Results Reporting for the Three Months to March 31, 2009 27
Slide 28: Q&A
Q&A © Zurich Financial Services Ltd May 7, 2009 Results Reporting for the Three Months to March 31, 2009 28
Slide 29: Closing remarks
Closing remarks James J. Schiro Chief Executive Officer May 7, 2009
Slide 30: Appendix
Appendix © Zurich Financial Services Ltd May 7, 2009 Results Reporting for the Three Months to March 31, 2009 30
Slide 31: Zurich is poised for profitable growth
Zurich is poised for profitable growth 16% 9% 6% Global Focus on volume growth1 Farmers Life IM 1% EGI 1% Legend for GI BDs IM International Markets GC EGI Europe General NAC Insurance GC Global Corporate -13% NAC North America Commercial © Zurich Financial Services Ltd Focus on margin enhancement 1
Slide 32: 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 33: 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 34: Business division BOP-ROE
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the three months to March 31 2009 2008 General Insurance 28.5% 27.1% Global Corporate 27.5% 22.1% North America Commercial 27.6% 22.6% Europe General Insurance 35.8% 42.8% International Markets 12.9% 0.9% GI Global Functions including
Slide 35: Group's Solvency I - sensitivities
Group’s Solvency I1 - sensitivities Statutory solvency ratio as of Mar 31, 2009: 157% Sensitivities: Equities (-10%) -1 pts Interest rate +100bp -5 pts Interest rate -100bp +5 pts © Zurich Financial Services Ltd 1 Solvency I requirements in accordance with the Swiss insurance supervisory law May 7,
Slide 36: Group's Solvency I calculation
Group’s Solvency I calculation in USD millions Mar 31, 09 Dec 31, 08 Dec 31, 08 finalized1 estimate2 Eligible equity Total equity 23,850 23,781 23,781 Net of intangibles, other assets and free -4,832 -3,892 -3,966 reserves for policyholder dividends Subordinated debt 3,582 3,683 3,683 Deferred polic
Slide 37: New segment reporting structure (IFRS 8): 3 months 2008
New segment reporting structure (IFRS 8): Business Operating Profit – 3 months 2008 in USD millions for the three months to March 31, 2008 Previous segment New segment reporting structure (IFRS8) reporting structure Global Farmers Other Operating Businesses Non-core Businesses Life Alternative Banki
Slide 38: New segment reporting structure (IFRS 8): Half Year 2008
New segment reporting structure (IFRS 8): Business Operating Profit – Half Year 2008 in USD millions for the six months ended June 30, 2008 Previous segment New segment reporting structure (IFRS8) reporting structure Global Farmers Other Operating Businesses Non-core Businesses Life Alternative Bank
Slide 39: New segment reporting structure (IFRS 8): 9 months 2008
New segment reporting structure (IFRS 8): Business Operating Profit – 9 months 2008 in USD millions for the nine months ended September 30, 2008 Previous segment New segment reporting structure (IFRS8) reporting structure Global Farmers Other Operating Businesses Non-core Businesses Life Alternative
Slide 40: New segment reporting structure (IFRS 8): FY 2008
New segment reporting structure (IFRS 8): Business Operating Profit – FY 2008 in USD millions for the year ended December 31, 2008 Previous segment New segment reporting structure (IFRS8) reporting structure Global Farmers Other Operating Businesses Non-core Businesses Life Alternative Banking Holdi
Slide 41: Development of Reserves for Losses and 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 -5,863 -5,398 Net losses and LAE incurred - Current year 5,792 6,123 - Prior years1 -72 -305 Foreign currency transla
Slide 42: Global Life – new business indicators
Global Life – new business indicators in USD millions APE APE Change Change NBV2 NBV2 Change for the three months to March 31 2009 2008 in LC1 2009 2008 Americas, of which 59 43 36% 51% 37 24 50% US 24 24 3% 3% 30 19 54% Latin America 34 19 77% 129% 7 5 36% United Kingdom 149 183 -18% 12% 15 16 -5%
Slide 43: Global Life - Assets under Management
Global Life - Assets under Management1 AuM decreased mainly due to currency translation and a reduction of the market value of assets Split of AuM Development of AuM in USD billions in USD billions 180 Balance as of 170 180 20 Jan 1, 2009 19 Inflows +5 90 94 Outflows -5 Market move- ments & other 2
Slide 44: Farmers Exchanges – financial highlights: strong premium growth
Farmers Exchanges1 – financial highlights: strong premium growth 6'000 42.0% in USD millions 2009 2008 for the three months to March 31 5'000 40.0% Gross written premiums 4,152 4,027 4'000 38.0% Net underwriting result -80 -11 Net surplus growth -34 30 3'000 36.0% Ending surplus 5,000 5,749 2'000 34
Slide 45: 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 three months to March 31 Auto 2,126 2,207 -4% Homeowners 1,012 970 4% Commercial P&C 330 319 3% Zurich Small Businesses 148 n/a n/a Workers’ Compensation 95 95 0% Specialty 413 403 3% Other 29 33
Slide 46: Farmers Exchanges – premium growth outperforming industry
Farmers Exchanges – premium growth outperforming industry GWP growth 8% Industry Growth Rate1 2008: -1.2% 2 2009 Forecast: -0.6% 6.5% 2 6.1% 2 6% 5.7% 5.7% 5.4% 5.0% 5.1% 4.6% 4% 3.2% 3.3% 3.1% 2.2% 2% 1.4% 0% 06 07 08 06 06 06 07 07 07 08 08 08 09 20 20 20 20 20 20 20 20 20 20 20 20 20 r r r hs hs
Slide 47: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the three months to March 31 20091 20081 Change Auto 100.0% 101.3% 1.3pts Homeowners 108.8% 100.3% -8.5pts Commercial P&C 96.5% 92.8% -3.7pts Zurich Small Business 103.7% N/A N/A Workers' Compensation 98.6% 89.6% -9.0pts Specialty 100.2% 99.7% -0.5pts Total 102
Slide 48: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio 120% Other Cats 115% Gustav 110% Midwest California Cats wildfires Ike 105% California Rita wildfires 100% Florida hurricanes Katrina 95% 90% © Zurich Financial Services Ltd Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 49: 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 March 31, 2009 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Private Equity Hedge Real Estate 3
Slide 50: Debt securities are of consistently high quality
Group Investments – Zurich’s debt securities are of consistently high quality (99% investment grade) As of March 31, 2009 Group Investments Debt securities USD 174bn USD 117bn credit rating: AAA 57.2% credit rating: AA Other Debt 98.9% 11.2% asset securities investment classes grade 33% 67% credit r
Slide 51: Debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 174bn (100%) As of March 31, 2009 Government and supranational bonds: USD 45bn (26%) Market/Cost1: 103% of which: 99% inv. grade 47%in General Insurance 71% AAA 46% in Global Life 10% AA 17% A 1% BBB
Slide 52: Corporate bonds are of high quality
Group Investments – Zurich’s Corporate bonds are of high quality Group Investments - USD 174bn (100%) As of March 31, 2009 Corporate bonds: USD 50bn (29%) Market/Cost: 94% Split by industries Split by credit rating 46% Banks, 99% inv. grade including 20%1 covered bonds 30% AAA 10% Cities, Ag
Slide 53: Banks Corporate bonds are of high quality and well diversified
Group Investments – Banks Corporate bonds are of high quality and well diversified Group Investments - USD 174bn (100%) As of March 31, 2009 Banks Corporate bonds: USD 23bn (13%) Market/Cost: 93% Split by seniority Split by credit rating 43% Covered bonds 100% inv. grade 46% Senior bonds 46%
Slide 54: Split of total MBS/ABS of USD 22bn
Group Investments – Split of total MBS/ABS of USD 22bn (13%) MBS/ABS: USD 22bn (13%) Market/Cost: 91% Group Investments 98% inv. grade USD 174bn (100%) 93% AAA includes: US MBS: USD 15.0bn (8.6%) Market/Cost: 92% 98% inv. grade; 97% AAA Debt US ABS1: USD 2.7bn (1.7%) securities Market/Cost: 93
Slide 55: Split of US MBS of USD 15.0bn
Group Investments – Split of US MBS of USD 15.0bn (8.6%) Group Investments US-MBS: USD 15.0bn (8.6%) Market/Cost: 92% USD 174bn (100%) 98% inv. grade 97% AAA Debt of which: securities US “Agency” MBS: USD 9.2bn (5.3%) Market/Cost: 104% 67% 100% AAA USD 0.8bn backed by GNMA USD 8.4bn backed
Zurich Financial Services — Q1 2009 Earnings Presentation on 6ix