Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Investor Day (January 2002)
46 slides from Zurich Insurance's investor day presentation, Jan 25, 2002
Slide 1: Business Division Continental Europe
Business Division Continental Europe Axel Lehmann Jürg Hauswirth Analyst Day January 25, 2002
Slide 2: Disclaimer
Disclaimer This communication is directed only at persons who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc) of The Financial Services and Markets Act 2000 (Fi
Slide 3: European update - meeting objectives
European update - meeting objectives • Outline key figures of the Business Division • Overview on Business Division strategy • Status report on Deutscher Herold Integration • Outline response to Group Life challenge in Switzerland © Zurich Financial Services 3
Slide 4: Executive Board Business Division Continental Europe
Executive Board Business Division Continental Europe Axel Hans-Jürg José Cela Markus Jürg Lehmann Bernet Hongler Hauswirth CEO CEO CEO CEO CFO Continental Switzerland Southern Continental Continental Europe Europe Europe Europe and CEO Corporate Northern Europe © Zurich Financial Services 4
Slide 5: Agenda
Agenda • Opening Remarks Axel Lehmann • Financial Overview Jürg Hauswirth • Building strength in Europe Axel Lehmann – Eureka – Deutscher Herold Integration • Group Life Switzerland Jürg Hauswirth • Q&A © Zurich Financial Services 5
Slide 6: Continental Europe accounted for 19% of Non-Life GWP in 2000
Continental Europe accounted for 19% of Non-Life GWP in 2000 ZFS Continental Europe Other Countries GWP Non-Life 19% 23% Switzerland (5.6 bn) before DB 27% transaction Italy 13% Germany 81% Spain 23% (24.1 bn) 14% 19% GWP Non-Life (5.9 bn) Other Countries Switzerland 22% after DB 26% transaction Ita
Slide 7: With Deutsche Bank insurance operations, C/E now accounts for 40% of the Group's life business
With Deutsche Bank insurance operations, C/E now accounts for 40% of the Group’s life business ZFS Continental Europe Rest GWP and 29% 14% Italy (4.7 bn) Switzerland Deposits Life 7% 55% Spain before DB 5% transaction Germany 71% 19% (11.6 bn) Rest 40% Italy 9% GWP and (7.8 bn) 8% Switzerland Deposi
Slide 8: Major Continental European markets are Switzerland, Germany, Italy and Spain
Major Continental European markets are Switzerland, Germany, Italy and Spain Germany Continental Europe Life Non-Life Life & Non-Life Premiums $3.1bn $1.7bn Premiums $13.7bn Market share 5.4% 3.6% Rank 5 Rank 4 8 Market share 2.7% Switzerland Life Non-Life Premiums $2.6bn $1.5bn Market share 13.0% 1
Slide 9: Net Income After Tax 2000 (IAS) Continental Europe
Net Income After Tax 2000 (IAS) Continental Europe 5% 8% 5% Switzerland Germany Spain 24% Italy 58% Rest 701 m US$ © Zurich Financial Services excl. Deutsche Bank transaction, Neckura, Winterthur Austria 9
Slide 10: Key Figures
Key Figures Continental Europe (US$ m) 2000 1999 Net Income after Tax Total 701 726 Non-Life GWP 5,554 6,032 Combined ratio 105.4% 102.7% Life GWP 4,719 5,229 Embedded Value Return 9.5% 11.5% EV Hurdle (Discount Rate) 8.0% 7.7% Exchange rate influence 99/00: $ <-> € -13.5% $ <-> CHF -11.1% © Zurich
Slide 11: Premiums Non-Life
Premiums Non-Life 2000 (US$ m) GWP NEP Continental Europe 5,554 4,604 Switzerland 1,516 1,386 Germany 1,313 1,078 Spain 763 625 Italy 729 620 GWP: Gross Written Premiums, NEP: Net Earned Premiums © Zurich Financial Services excl. Deutsche Bank transaction, Neckura, Winterthur Austria 11
Slide 12: Key Indicators Non-Life
Key Indicators Non-Life 2000 (in %) LR ER CR Continental Europe 74.9 28.6 105.4 Switzerland 71.0 28.4 105.5 Germany 76.6 27.1 104.0 Spain 77.0 26.2 103.3 Italy 77.8 27.4 105.2 LR: Loss Ratio, ER: Expense Ratio; CR: Combined Ratio CR = LR + ER + Policyholder Dividends & Participation in Profits Ratio
Slide 13: Premiums Life
Premiums Life 2000 (US$ m) GWP Deposits Continental Europe 4,719 464 Switzerland 2,615 42 Germany 877 0 Spain 228 80 Italy 320 61 GWP: Gross Written Premiums incl. Deposits excl. Deutsche Bank transaction, Neckura, Winterthur Austria © Zurich Financial Services 13
Slide 14: Key Indicators Life
Key Indicators Life 2000 (US$ m) New Bus. APE New Bus. EV Discount Premium Margins return Rate Cont. Europe 1,407 339 -2.1 % 9.5 % 8.0% Switzerland 566 123 -11.4 % 7.7 % 7.5% Germany 249 72 8.5 % 22.8 % 8.0% Spain 108 20 -10.9 % 3.7 % 9.0% Italy 177 38 15.4 % 33.6 % 9.0% APE: Annual Premiums Equival
Slide 15: Non-Life Rate increases enforced by Zurich in 2001/2002
Non-Life Rate increases enforced by Zurich in 2001/2002 Examples Corporate Retail Switzerland 10-40% 0-5% Germany ~20% 0-5% Spain 10-35% 0-10% Increases depending on segment and size of account © Zurich Financial Services 15
Slide 16: Current trends
Current trends • Strong rate increases in Corporate Sector throughout Continental Europe, but moderate in Retail Sector • Intense underlying trends for increased savings in life, particularly in Germany, Spain and Italy • Markets still largely “on a country level” – harmonization will take time • Co
Slide 17: Agenda
Agenda • Opening Remarks Axel Lehmann • Financial Overview Jürg Hauswirth • Building strength in Europe Axel Lehmann – Eureka – Deutscher Herold Integration • Group Life Switzerland Jürg Hauswirth • Q&A © Zurich Financial Services 17
Slide 18: The need for a European view
The need for a European view pre-acquisition status • Numerous market presences with only Strategic positioning marginal contributions • Core markets with good penetration Market driven • Some divergent initiatives with initiatives and duplication of efforts growth opportunities • Lack of comprehens
Slide 19: Project Eureka - objectives
Project Eureka - objectives • Strengthen the position through a common Continental European strategy • Focus on core markets • Define optimal management structure • Focus on key business initiatives – measurable impact on profitable growth & efficiency – at Continental European level © Zurich Financ
Slide 20: Key questions to tackle
Key questions to tackle short term mid to long term • What is the strategic vision • How to position ZFS strategic for the organization after favorably in growth positioning the Deutsche Bank markets? transaction? • Which new business models are worth pursuing? • Which quick wins are • How does an g
Slide 21: Project organization with 13 key initiatives
Project organization with 13 key initiatives Roles and responsibilities Strategic Direction Team (Key executives from each sub-region and CEC) • Articulation of Strategy • Recommendation for Continental European Growth Efficiency & business model and Shared Services organizational structure - Bankin
Slide 22: How the business division Continental Europe will look like by March 2002
How the business division Continental Europe will look like by March 2002 short term mid to long term • Marginal (S)BUs being • Most promising options strategic for future positioning positioning identified for divestment identified/implemented “growth” • major ongoing initiatives • Small number of
Slide 23: Agenda
Agenda • Opening Remarks Axel Lehmann • Financial Overview Jürg Hauswirth • Building strength in Europe Axel Lehmann – Eureka – Deutscher Herold Integration • Group Life Switzerland Jürg Hauswirth • Q&A © Zurich Financial Services 23
Slide 24: Market Overview Germany
Market Overview Germany • 4th largest insurance market worldwide at GWP US$ 105bn in 2000 • Expected average annual growth rate of 3% in Non-Life and 7% in Life in 2002* • Above-average growth potential in the life and wealth accumulation business • Riester Pension Reform • Economies of scale and sy
Slide 25: Zurich/Deutscher Herold will become No 4 in the life business
Zurich/Deutscher Herold will become No 4 in the life business… Life Business Non-Life Business Top Life Market share Top Non-Life Market share players ranking 2000 players ranking 2000 1. Allianz 14.9% 1. Allianz 19.2% 2. Generali/AMB 10.6% 2. Generali/AMB 6.1% 3. Ergo/Munich-Re 9.7% 3. Ergo/Munich-
Slide 26: ...and will have leading positions in specific segments
…and will have leading positions in specific segments We are … # 2 in the unit-linked business # 1 in the non-life direct business … and have access to about 7 million customers of Deutsche Bank © Zurich Financial Services 26
Slide 27: Solid growth in the life market, market share gain in the non-life market
Solid growth in the life market, market share gain in the non-life market* Total Zurich/Deutscher Herold Life Zurich/Deutscher Herold 6.5bn 5.3bn 10.1bn CAGR: 8.8bn Zurich 7.5% GWP (DM) Herold 6.3% Total 6.6% CAGR: Market 6.9% Total 4.6% 1997 2000 GWP (DM) Market 2.4% Non-life Zurich/Deutscher Herol
Slide 28: Zurich and Deutscher Herold are two strong partners
Zurich and Deutscher Herold are two strong partners… Zurich Germany Deutscher Herold • Founded 1875 (Agrippina 1844) • Founded 1922 • 2.0 m customers in Germany • 2.4 m customers in Germany • Approximately 3,000 employees • Approximately 3,000 employees • - Integrated in the Zurich Financial • - Mar
Slide 29: ...with complementary distribution channels
…with complementary distribution channels Share of new Zurich* & business; Deutscher Herold Zurich* Deutscher Herold 2000 Life Non-life Life Non-life Life Life Non-life Tied Agents 34% 78% 45% 35% 37% 43% 45% Brokers 16% 10% 45% 56% 24% 45% 48% Bank 39% 4% 10% 31% 10% 1% Direct 9% 7% Others 11% 8% 8
Slide 30: Vision of the "new" Zurich Germany
Vision of the “new“ Zurich Germany • We are a recognized leader in the German financial services industry for risk protection, retirement savings and wealth accumulation - “shaping the future” - innovative - high-performance © Zurich Financial Services 30
Slide 31: Integrating product and segment driven structures into cohesive organizational model
Integrating product and segment driven structures into cohesive organizational model Zurich CEO Consumer Commer- Credit & Life/ Zurich Consumer Corporate Direct cial Surety Health Invest Asset Corporate Business Units Distribution Manage- IT Develop- Finance Central Services ment ment Shared VHDB CE
Slide 32: Zurich/Deutscher Herold have three main organizational issues
Zurich/Deutscher Herold have three main organizational issues Distribution- and Market- Management Support Units/ Product and Shared Services Services Manufacturing Entire Company © Zurich Financial Services 32
Slide 33: Organizational Model: Distribution and Market-Management
Organizational Model: Distribution and Market-Management Premiums Zurich Agents Herold Agents 2.5 bn Consumer IFA Multi-level Bonnfinanz (Agents) Commercial Brokers 0.8 bn Other distri- bution channels 0.3 bn Direct (incl. Neckura) DB24 1.2 bn Bank/ Strat. DB PB ... (2000, in USD, rounded, Partners
Slide 34: Organizational Model: Product and Services Manufacturing
Organizational Model: Product and Services Manufacturing Premiums Consumer 1.7 bn Non-life Commercial Customer Direct Life / 3.1 bn Health Bank/ Strat. (2000, in USD, rounded, Partners without Health) © Zurich Financial Services 34
Slide 35: Organizational Model: Support Units/ Shared Services
Organizational Model: Support Units/ Shared Services HR and Corporate Development Consumer Non-life Commercial Finance IT Customer Direct Life / Health Bank/ Strat. Partners © Zurich Financial Services 35
Slide 36: Organizational Model (with additional organizational units)
Organizational Model (with additional organizational units) HR and Corporate Development Investment Consumer Management Non-life Commercial Finance Credit & IT Surety Customer Direct Life / Corporate Health Bank/ Strat. Partners © Zurich Financial Services 36
Slide 37: Next steps of the integration process
Next steps of the integration process 2001 2002 Dec Jan Feb Mar Apr Phase I Final Decision Strategy and Strategic Direction Phase II SBU- and Profit Strategy/ Processes/ Implementatio Center Strategies, Business Structures n Planning Structures Model Managemen Nominations t Phase III* Transformation
Slide 38: Agenda
Agenda • Opening Remarks Axel Lehmann • Financial Overview Jürg Hauswirth • Building strength in Europe Axel Lehmann – Eureka – Deutscher Herold Integration • Group Life Switzerland Jürg Hauswirth • Q&A © Zurich Financial Services 38
Slide 39: Group life – a highly regulated market in Switzerland
Group life – a highly regulated market in Switzerland Group Life (2nd pillar) • Compulsory since 1.1.1985 • Federal law on the occupational old-age survivors' and disability benefit plans (in German: BVG) • Highly regulated • Very similar to social security • Significant political influence © Zurich
Slide 40: Zurich holds 14% of the private insurers Group Life market share
Zurich holds 14% of the private insurers Group Life market share Total Pension Fund 20% Market Switzerland held by private insurers Approx. 250 bn US$ (Zurich holds 14% of the Assets under market share belonging to Management private insurers ) 80% held by autonomous pension funds & banks Switzerlan
Slide 41: Zurich is a significant market player
Zurich is a significant market player • Zurich Switzerland is represented in this market with two brands Zurich / Genevoise Vie, and • 4 Strategic Business Units focus on different customer segments • Premiums in 2000 for Group Life: US$ 1,795m (69% of total Life premiums) Periodic premiums: US$ 707
Slide 42: The development of longevity is not reflected in the annuity conversion rate
The development of longevity is not reflected in the annuity conversion rate • The current annuity conversion rate of 7.2% stipulated by the Government is too high • Based on current values, the conversion rate would have to be between 6.2 and 6.6% • The minimum guaranteed interest rate of 4% is too
Slide 43: Key issues of the Group Life business
Key issues of the Group Life business • High sensitivity of business to the 2 key components - conversion rate of 7.2% and - interest rate of 4% • Change in at least one of the components necessary to return to profitable margins over the short term • High costs of exiting the business © Zurich Fina
Slide 44: Action steps taken by Zurich in 2001/2002
Action steps taken by Zurich in 2001/2002 • Zurich reduced the planholder participation in profit-sharing in 2001 significantly. For 2002, Zurich will reduce the participation to a minimum. • Zurich strengthens its efficiency and effectiveness in group life through the creation of a Competence Cente
Slide 45: Agenda
Agenda • Opening Remarks Axel Lehmann • Financial Overview Jürg Hauswirth • Building strength in Europe Axel Lehmann – Eureka – Deutscher Herold Integration • Group Life Switzerland Jürg Hauswirth • Q&A © Zurich Financial Services 45
Slide 46: © Zurich Financial Services
© Zurich Financial Services 46
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