Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — H1 2008 Earnings Presentation
43 slides from Zurich Insurance's earnings presentation, Aug 13, 2008
Slide 1: Half Year Results Reporting 2008
Half Year Results Reporting 2008 Analysts and Media Presentation Zurich, August 13, 2008
Slide 2: 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 predications of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our targeted prof
Slide 3: Agenda
Agenda • Introduction James J. Schiro • Half Year Results 2008 Dieter Wemmer • Q&A © Zurich Financial Services - Half Year Results Reporting 2008 - August 13, 2008 3
Slide 4: Introduction
Introduction James J. Schiro Chief Executive Officer Zurich, August 13, 2008
Slide 5: Financial highlights
Financial highlights in USD millions 2008 20071 Change for the six months to June 30 Business operating profit 3,549 3,284 8% Net income attributable to shareholders 2,681 2,676 0% General Insurance combined ratio 96.2% 96.5% 0.3pts Global Life new business margin2 22.4% 24.1% -1.7pts Farmers Mgmt S
Slide 6: Zurich is poised for profitable growth
Zurich is poised for profitable growth 9% 9% 9% Global IB Focus on volume growth1 Farmers Life 6% EGI Legend for GI BDs IB International Businesses GC EGI Europe General NAC Insurance GC Global Corporate -6% -2% NAC North America Commercial Focus on margin enhancement 1 Volume growth measured as gro
Slide 7: Half Year Results 2008
Half Year Results 2008 Dieter Wemmer Chief Financial Officer Zurich, August 13, 2008
Slide 8: Business operating profit by segment
Business operating profit by segment in USD millions 2008 20071 Change for the six months to June 30 General Insurance 2,236 1,838 22% Global Life 766 721 6% Farmers Management Services 617 672 -8% Corporate Functions -261 -417 37% Total Core Business operating profit 3,359 2,814 19% Other Businesse
Slide 9: Top line development by segment
Top line development by segment in USD millions 2008 2007 Change Change for the six months to June 30 in LC1 Gross written premiums and policy fees General Insurance 20,593 19,026 8% 1% Global Life (incl. insurance deposits)2 10,395 10,427 0% -8% Other Businesses 1,078 1,210 -11% -11% Annual Premium
Slide 10: Rate Change Monitor for personal and commercial lines
Rate Change Monitor1 for personal and commercial lines EGI by country by division Switzer- Rest of EGI Farmers UK Germany land Italy Spain Ireland Europe Total IB NAC GC Exchanges2 Half year Personal Lines 8% 1% 0% 0% 5% -12% 1% 1% 1% n/a n/a 5% Commercial Lines -3% 1% 0% 0% 4% -14% 1% -1% 4% -5% -8
Slide 11: General Insurance – key performance indicators
General Insurance – key performance indicators Business Operating Profit Combined ratio (%) in USD millions 2008 2007 Change Global 100.5 for the six months to June 30 Corporate 94.3 Global Corporate 347 389 -11% NA 97.4 North America Commercial 628 767 -18% Commercial 92.9 Europe General Insurance
Slide 12: General Insurance net expense ratio walk from HY 2007 to HY 2008
General Insurance net expense ratio walk from HY 2007 to HY 2008 0.7% 25.6% 0.7% 24.2% 1 HY07 Expense Ratio Commission Administration and HY08 Expense Ratio other expenses 1 Commission has increased mainly due to the effect of writing greater amounts of higher commission, lower loss ratio business ©
Slide 13: Comparison of General Insurance loss ratio allowing for major CAT and PYD
Comparison of General Insurance loss ratio allowing for major CAT and PYD HY 2008 HY 2007 75% 75% 72.3% 70.5% 70% 70% -4.6% 66.8% 66.5% -7.6% -3.9% 65% 3.8% 65% 2.7% 0.0% USD USD USD USD USD USD 609m 0m -1,202m 390m -566m -658m 60% 60% Underlying Major Large Reported Underlying Major Large Reported
Slide 14: Development of Reserves for Losses and Loss Adjustment Expenses (LAE)
Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions 2008 2007 Net reserves for losses and LAE, as of January 1 54,712 50,814 Net losses and LAE paid -11,119 -9,482 Net losses and LAE incurred - Current year 12,408 11,457 - Prior years1 -586 -465 Currency translation
Slide 15: Reinsurance program protects against CAT severity and frequency
Reinsurance program protects against CAT severity and frequency all figures in Global Top Layer Catastrophe Cover - USD 200 USD millions US Catastrophe European Catastrophe Rest of World Treaty1 2008 Treaty1 2008 Catastrophe Treaty1 USD 200 2008 Excess of loss protection USD 200 Retention USD 2,130
Slide 16: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2008 2007 Change Change for the six months to June 30 in LC1 Annual Premium Equivalent (APE) 1,528 1,323 15% 9% New business value, after tax 342 319 7% 0% New business margin, after tax2 22.4% 24.1% -1.7pts Embedded value operating profit 891
Slide 17: Global Life – emerging markets are growing strongly and profitably
Global Life – emerging markets are growing strongly and profitably in USD millions APE APE Growth NBM1 NBM1 for the six months to June 30 2008 2007 2008 2007 ZIS2 252 213 18% 20.9% 20.5% Hong Kong 45 51 -11% 28.6% 45.2% Latin America 43 35 23% 28.0% 18.8% Total Emerging markets 340 299 14% 22.8% 24.
Slide 18: Global Life Embedded Value result
Global Life Embedded Value result for the six months to June 30 2008 2008 2007 2007 USD m Return4 USD m Return4 Opening Embedded Value 15,935 14,092 Expected operating profit1,2 522 428 New business value2 342 319 Operating variance2 27 2543 Total operating profit2 891 10.8% 1,001 12.3% Economic var
Slide 19: Farmers Management Services – key performance indicators
Farmers Management Services – key performance indicators in USD millions 2008 2007 Change for the six months to June 30 Management fees and other related revenues 1,196 1,093 9% Management and other related expenses -622 -552 -13% Gross management result 574 542 6% Managed gross earned premium margi
Slide 20: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2008 2007 Change for the six months ended June 30 Gross written premiums (statutory)2 8,710 7,780 12% Gross written premiums (excl. SB transfer)3 8,225 7,780 5.7% Net underwriting result4 -527 72 nm Combined ratio 104.2% 97.7% -6.5pts A
Slide 21: Other Businesses and Corporate Functions – Business operating profit contribution
Other Businesses and Corporate Functions – Business operating profit contribution in USD millions 2008 2007 Change for the six months to June 30 Other Businesses: - Farmers Re 54 88 -38% - Centre 4 116 -97% - Other 131 267 -51% Total Other Businesses 190 471 -60% Corporate Functions -261 -417 37% ©
Slide 22: Investment performance of Group investments
Investment performance of Group investments in USD millions 2008 2007 Change for the six months to June 30 Net investment income 4,402 4,282 3% Net capital losses/gains on investments and -426 503 nm impairments of which attributable to shareholders 9 440 -98% Net investment result 3,975 4,785 -17%
Slide 23: Development of shareholders’ equity
Development of shareholders’ equity in USD millions 32,000 2,681 2,082 31,000 30,000 624 28,804 141 28,945 2,412 29,000 28,000 27,000 288 26,796 26,000 25,000 24,000 Balance Dec Change in Restated Net Income Dividends Share Change in Other Balance as of 31, 2007 as accounting Balance as of attributa
Slide 24: Financial highlights
Financial highlights in USD millions 2008 20071 Change for the six months to June 30 Business operating profit 3,549 3,284 8% Net income attributable to shareholders 2,681 2,676 0% General Insurance combined ratio 96.2% 96.5% 0.3pts Global Life new business margin2 22.4% 24.1% -1.7pts Farmers Mgmt S
Slide 25: Q&A
Q&A © Zurich Financial Services - Half Year Results Reporting 2008 - August 13, 2008 25
Slide 26: Appendix
Appendix © Zurich Financial Services - Half Year Results Reporting 2008 - August 13, 2008 26
Slide 27: The Zurich Way – Target of USD 2.4 billion for 2008 to 2010
The Zurich Way – Target of USD 2.4 billion for 2008 to 2010 Total planned benefits • We have comfortably achieved our 2008 to 2010: 2007 target. USD 2.4 billion • We expect benefits of USD 2.4 billion from 2008 to 2010 USD 800m • 14 TZW workstreams with over 400 USD 700m initiatives, with increasing
Slide 28: The Zurich Way initiatives – 2008 target
The Zurich Way initiatives – 2008 target by function by business USD 800m division USD 800m USD 700m USD 700m Growth/ 32% Distribution Europe General 21% 35% Insurance 31% USD 500m USD 500m 16% 36% 17% Claims 18% North America 22% 34% Commercial 16% 28% 43% Global 34% U/W 20% 17% Corporate 36% 15% 1
Slide 29: Business division BOP-ROE based on RBC-allocated IFRS equity
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the six months to June 30 2008 2007 General Insurance 28.9% 28.5% - Global Corporate 19.7% 25.1% - North America Commercial 22.0% 31.5% - Europe General Insurance 41.0% 28.5% - International Businesses 21.5% 17.1% - Group Reinsurance
Slide 30: Global Life – new business indicators
Global Life – new business indicators in USD millions APE APE Change Change NBV2 NBV2 Change for the six months to June 30 2008 2007 in LC1 2008 2007 United States 51 59 -14% -14% 47 57 -18% United Kingdom 472 440 7% 7% 49 56 -11% Germany 333 218 53% 33% 104 64 63% Switzerland 62 52 20% 2% 21 19 13%
Slide 31: Farmers Exchanges – financial highlights: strong premium growth
Farmers Exchanges1 – financial highlights: strong premium growth 6'000 42.0% in USD millions 2008 2007 for the six months to June 30 5'000 40.0% Gross written premiums2 8,285 7,780 4'000 38.0% Net underwriting result3 -527 72 3'000 36.0% Net surplus growth3 -239 284 Ending surplus3 5,479 5,558 2'000
Slide 32: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions 2008 2007 Change for the six months ended June 30 Auto 4,326 3,971 8.9% Homeowners 2,180 2,078 4.9% Commercial P&C 637 629 1.3% Zurich Small Business 601 0 N/A Workers’ Compensation 174 186 -6.5%2 Specialty 843 839 0.5% O
Slide 33: Farmers Exchanges – premium growth outperforming industry
Farmers Exchanges – premium growth outperforming industry GWP growth Industry Growth Rate1 2007 Estimate: 0.3% 8% 2008 Forecast: -0.5% 2 6.5% 6% 5.4% 5.7% 5.0% 5.1% 4.6% 4% 3.3% 3.2% 2.2% 2% 1.4% 0% 06 07 06 07 08 06 6 07 7 8 00 00 00 20 20 20 20 20 20 20 s2 s2 s2 ar ar s s ar r ar th th th th th ea
Slide 34: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the six months to June 30 20081 20071 Change Auto 101.7% 99.7% -2.0pts Homeowners 114.5% 93.8% -20.7pts Commercial P&C 93.1% 96.0% 2.9pts Zurich Small Business 101.9% n/a n/a Workers’ Compensation 95.9% 94.3% -1.6pts Specialty 101.9% 92.3% -9.6pts Total 104.2%
Slide 35: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio 115% 110% California 105% wildfires Rita California wildfires 100% Florida hurricanes Katrina 95% 90% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2002 2003 2004 2005 2006 2007 2008 © Zuri
Slide 36: Competitor Analysis - Overall
Competitor Analysis - Overall Growth vs. GAAP Combined Ratio1 4 Growth NPW % Industry June 2008 100.9% March 2008 8.0 Farmers2, 3 FY08 Industry Estimate 6.0 GEICO5 4.0 2.0 4 0.0 Travelers Industry State Farm -0.5% Allstate -2.0 Hartford Safeco Progressive -4.0 -6.0 Mercury -8.0 84 88 92 96 100 104 C
Slide 37: 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 June 30, 2008 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Private Equity 62 Hedge Real Estate
Slide 38: Group Investments – debt securities are of very high quality
Group Investments – Zurich’s debt securities are of a very high quality (99.2% investment grade) As of June 30, 2008 Group Investments Debt securities USD 195bn USD 123bn credit rating: AAA 62.0% credit rating: AA Other Debt 99.2% 13.0% asset securities investment classes grade 37% 63% credit rating
Slide 39: Group Investments – Zurich’s debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 195bn (100%) As of June 30, 2008 Government and supranational bonds: USD 45bn (23%) 100% inv. grade 77% AAA 6% AA 16% A 1% BBB Corporate bonds: USD 52bn (26%) 98% inv. grade Debt 33% AAA securities 6
Slide 40: Group Investments – Split of total MBS/ABS of USD 27bn
Group Investments – Split of total MBS/ABS of USD 27bn (14%) MBS/ABS: USD 27bn (14%) Group Investments 100% inv. grade USD 195bn (100%) 94% AAA includes: US MBS: USD 17.2bn (8.8%) 100% inv. grade 99% AAA Debt see further details on next slide securities US ABS1: USD 3.3bn (1.7%) 99% inv.
Slide 41: Group Investments – Split of US MBS of USD 17.2bn
Group Investments – Split of US MBS of USD 17.2bn (8.8%) Group Investments US-MBS: USD 17.2bn (8.8%) USD 195bn (100%) 100% inv. grade 99% AAA Debt of which: securities US “Agency” MBS: USD 9.6bn (4.9%) 63% 100% AAA USD 1.1bn backed by GNMA USD 8.5bn backed by FNMA and FHLMC Other asset US
Slide 42: Group Investments – Exposure to US sub-prime remains very small
Group Investments – Exposure to US sub-prime remains very small (0.11%) and of high quality Group Investments US sub-prime: USD 220m (0.11%) USD 195bn (100%) 98% inv. grade 66% AAA Limited downgrades by rating agencies since December 2007: USD 70m Debt Minimal impairments in HY08: USD 10m se
Slide 43: Group Investments – Exposure to CDO remains very small
Group Investments – Exposure to CDO remains very small (0.22%) and of high quality Group Investments CDO: USD 430m (0.22%) USD 195bn (100%) 100% inv. grade 78% AAA 92% backed by UK bank loans (CLOs) and 8% by other types of collateral assets Debt Minimal impairments in HY08: USD 5m securitie
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