Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — FY2023 Earnings Presentation
67 slides from Zurich Insurance's earnings presentation, Apr 22, 2024
Slide 1: Continued momentum – Annual results 2023
Continued momentum Annual results 2023 February 22, 2024 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 and U.S. crop business Farmers Farmers Exchanges details by line of
Slide 3: Key highlights
Key highlights 3 © Zurich
Slide 4: Key messages
Key messages Excellent start to new BOP of USD 7.4bn at record level. NIAS is up 10% to USD 4.4bn. BOPAT ROE at 23.1%. USD EPS up 12%, financial cycle adjusted EPS up 20%. Expect to exceed 10% EPS CAGR over 2023-2025 financial cycle P&C producing highly 10% like-for-like1 P&C BOP growth driven by st
Slide 5: Very strong start to the financial cycle
Key highlights Very strong start to the financial cycle, with performance supported by rate increases and business growth BOPAT ROE (%)1 Cash remittances EPS growth (%)2 SST (%)3 (USDbn) 23.1% 20% 233% >13.5 >20% ≥160% FY-24&25 12% 8% CAGR FY-23 4.8 FY-23 Target Cumulative Target FY-23 vs. FY-23 vs.
Slide 6: Robust profit growth and excellent return on equity
Key highlights Robust 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 +9% 7.4 23.1% 6.5 2023-2025 target 5.7 >20% 17.8% 5.3 3.7 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
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 continued net new business P&C GWP growth by driver P&C GWP growth by driver Commercial (USDm)1 Retail and SME (USDm)1 +10% +13% 26,338 15,364 634 329 626 782 233 269 901 23,945 13,580 404 FY-22 Rate chang
Slide 8: Commercial rates maintain strong momentum
Key highlights Commercial rates maintain strong momentum driven by property and motor P&C Commercial Commercial - North America Rate change (%)1 18% 19% 16% 15% 11% 11% 10% 11% Property 9% 9% 8% 7% 7% Liability (excl. 10% 8% 10% 8% 8% 8% 8% 6% 6% 6% 6% financial lines) Workers 0% comp -1% -1% -1% -1
Slide 9: Retail rates continue to show strong signs of improvement
Key highlights Retail rates continue to show strong signs of improvement mainly driven by hardening motor rates P&C Retail and SME EMEA - Retail Motor January Rate change (%)1 renewals 5% 6% 5% 6% Switzerland 1% 5% 5% 0% -1% -3% 4% 4% 3% 3% 7% 7% 9% 8% 8% 9% Germany 5% 5% 3% 2% 8% 7% 2% 2% 4% 4% Ita
Slide 10: Record-high level of BOP in Life
Key highlights Record-high level of BOP in Life, with best-in-class growth Life BOP (USDm) Life BOP growth (%) FY-16 to FY-22 CAGR (%)1 +9% p.a. 2,060 1,963 Zurich 10% 1,812 ~1,850 1,554 1,486 ~350 1,423 1,258 1,130 Allianz 4% 1,487 Generali 2% 2016 2017 2018 2019 2020 2021 2022 2022 2023 restated T
Slide 11: Consistent growth in Life top-line drives profit growth
Key highlights Consistent growth in Life top-line drives profit growth Long term insurance Short term insurance Investment contracts PVNBP1 (USDm) Insurance revenue (USDm) Fee revenue (USDm) +26% +9% +19% Like-for-like in FY-232 Like-for-like in FY-232 Like-for-like in FY-232 4,156 4,086 4,218 647 1
Slide 12: Farmers Exchanges show strong improvement in underwriting
Key highlights Farmers Exchanges1 show strong improvement in underwriting driven by rate actions and portfolio optimization GWP (USDm) Rate change (%) Combined ratio (%)2 Surplus ratio (%) 27,351 3% 26,519 151 733 15% 7% 7% 22% 13% 3% 10% 20% 1% FY-23: 34 – 38% Target range 33.5% 25,786 27,200 5% 10
Slide 13: Farmers Management Services capital light earnings stream
Key highlights Farmers Management Services produces a growing capital light earnings stream with 95% cash conversion Growth Capital and cash Valuation FMS BOP (USDm) Return on capital1 (%) Market P/E4 multiples 22x Return on +10% capital 1,970 14x 1,796 13x Group avg. Farmers Re2 FMS FY-22 FY-23 P&C
Slide 14: Continued strong cash remittance; dividend and share buyback
Key highlights Continued strong cash remittance; CHF 26 dividend per share proposed1 supplemented by a share buyback of up to CHF 1.1bn Cash remittances (USDbn) Dividend per share (CHF) Capital return +9% p.a. 4.6 4.8 26 4.4 0.1 24 1.3 1.4 1.6 22 Up to CHF 1.1bn Share buyback 0.8 0.9 0.9 3.2 3.2 3.3
Slide 15: CFO update
@ ZURICH CFO update 18 © Zurich
Slide 16: BOP at record level, 27% ahead in local currency
Group – Business operating profit BOP at record level, 27% ahead in local currency terms BOP by region (USDm) BOP by business (USDm) +27% +27% In local currencies In local currencies +21% +21% 7,381 7,381 6,123 586 6,123 588 565 2,296 477 2,296 2,086 2,086 2,060 1,487 2,000 2,755 3,634 3,893 2,294 2
Slide 17: Commentary
Group – Business operating profit Commentary • Group business operating profit (BOP) was at a record level of • By business, P&C BOP increased 7% (10% in local currencies) USD 7.4bn, with 27% growth in local currencies. compared with the prior year period driven by a strong performance in North Amer
Slide 18: NIAS is up 10% compared to prior year
Group – Net income attributable to shareholders NIAS is up 10% compared to prior year, with BOP growth partially offset by higher capital losses and restructuring costs BOP to NIAS walk (USDm) Net impact of capital gains / losses (USDbn)1 25.0% 557 -915 Effective tax rate -327 Mark-to-market -307 -1
Slide 19: Commentary
Group – Net income attributable to shareholders Commentary • Net impact of capital gains / losses was USD 0.9bn adverse for • Restructuring costs were USD 0.3bn for the full year and in-line the full year, with capital losses exceeding the positive mark-to- with guidance provided at the Investor Upd
Slide 20: Earnings per share adjusted for long term market assumptions
Adjusted Earnings per Share Earnings per share, adjusted for long term market assumptions for net capital gains, is up 20% Diluted Earnings per Share (USD) Commentary +20% • Target EPS growth1 is 8% CAGR for the 2023 to 2025 financial cycle 38.5 +12% • NIAS includes volatility from mark-to-market mo
Slide 21: 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, %) Combined ratio discount benefit4 FY-23 FY-24 scenario FY-25 scenario Net reserves1 38 9 47 39
Slide 22: Outlook
Group – Outlook Outlook • Insurance revenue expected to grow by mid-single digit percentage year-on-year • Investment income to benefit from reinvestment yields above book yields in 2024, current accident year Property & Casualty discount impact to be lower than prior year while FY-24 finance expens
Slide 23: Strong growth supported by favorable rate environment
P&C – Top-line Strong growth supported by favorable rate environment FY-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 18,058 7% 5% Increasing 17,170 7% North America 21,6
Slide 24: Commentary
P&C – Top-line Commentary • Gross written premiums rose 9% on a like-for-like basis and 7% in • In North America, gross written premiums grew 6% on a like-for- U.S. dollar terms. All regions demonstrated strong growth like basis. Growth benefited from rate increases of 9% which supported by higher p
Slide 25: P&C BOP up 10% in local currencies
P&C – BOP components P&C BOP up 10% in local currencies driven by a strong performance in North America BOP by segment (USDm) BOP by component (USDm) +10% +10% In local currencies In local currencies +7% 3,634 3,893 3,893 215 181 3,634 331 290 153 -151 257 3,186 2,030 2,928 2,647 1,300 1,376 1,529 8
Slide 26: Commentary
P&C – BOP components Commentary • P&C BOP was USD 3,893m, 7% higher than in the previous year. • The impact of fee result, other result, and non-controlling In local currency, the P&C BOP was 10% higher than in the interests decreased USD 151m compared to the prior year period previous year driven b
Slide 27: Commercial maintains solid profitability
P&C – Combined ratio by segment and customer unit Commercial maintains solid profitability with potential for strong improvement in Retail and SME AY combined ratio (CR) excl. catastrophes by region (%) AY CR excl. catastrophes by customer unit (%)1 95.7% 96.2% 92.2% 95.4% 96.3% 96.4% 97.8% 97.3% 89
Slide 28: Commentary
P&C – Combined ratio by segment and customer unit Commentary • In EMEA, the accident year combined ratio ex-catastrophes • In Latin America, the accident year combined ratio ex- deteriorated 0.6 percentage points compared to prior year mainly catastrophes deteriorated 0.1 percentage points compared
Slide 29: Combined ratio remains strong
P&C – Combined ratio details Combined ratio remains strong, discount benefit offset by higher mix-driven commissions P&C combined ratio walk (%) 94.5% 0.4% -0.2% 94.5% -0.9% 0.0% 0.1% 0.8% -0.2% FY-22 Undiscounted Cat Discount PYD Commissions Premium tax Other insurance FY-23 AY excl. Cat expenses F
Slide 30: Commentary
P&C – Combined ratio details Commentary • P&C combined ratio of 94.5% remained stable compared to the • Prior year development of 1.5% was well within the indicated 1-2% prior year period as a 0.9 percentage point decrease of the loss range. All regions experienced favorable development in 2023. rat
Slide 31: P&C investment result benefits from 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 2.9% 3.5% 1,529 225 FY-22 FY-23 1,376 Book yield2 2.6% 3.2% 2,191 Reinvestmen
Slide 32: Commentary
P&C – Investment result Commentary • Net investment result increased 11% compared to the previous • The book yield for debt securities rose to 3.2% as reinvestment year as higher investment income and realized capital gains rates on debt securities increased by 1.3 percentage points to outpaced the
Slide 33: Strong growth of new business and top-line in Life
Life – New business and top-line Strong growth of new business and top-line in Life Long term insurance1 Short term insurance1 +26% +10% +13% +9% Like-for-like2 Like-for-like2 Like-for-like2 2,042 2,311 +24% +5% Insurance revenue (USDm) 16,384 987 1,037 331 6 13,241 87 5 105 FY-22 FY-23 4,296 521 25
Slide 34: Commentary
Life – New business and top-line Commentary • In FY-23, PVNBP increased 24% in USD terms, and 26% on a • In North America, PVNBP was 36% lower on a like-for-like basis like-for-like basis, with growth in EMEA, Asia Pacific and Latin compared with the prior-year period, driven by lower sales in the A
Slide 35: CSM up 10%
Life – Contractual service margin CSM up 10% driven by underlying accretion, favorable economic variances and FX CSM walk (USDm) FY-23 line of business split (USDm) 1,037 11,526 1,037 651 11,526 100% 809 12% 10,496 20% -9 -1,457 Of which expected 22% return1 of ~USD 550m 45% Underlying CSM accretion
Slide 36: Commentary
Life – Contractual service margin Commentary • The Contractual Service Margin (CSM) of the Life business • Amortization into the P&L reduced CSM by USD 1,457m. This increased 10% in FY-23, driven by a combination of favorable reflects a CSM amortization rate broadly in line with FY-22. economic vari
Slide 37: Record high level of Life BOP
Life – Business operating profit Record high level of Life BOP, all regions contributing to growth BOP by region (USDm) BOP by component (USDm) +39% 2,060 113 592 -469 404 46 1,487 -430 256 2,060 275 373 442 1,623 Risk adj. 146 158 Release 1,268 994 CSM amort.2 1,465 -26 FY-22 FY-23 Insurance Insura
Slide 38: Commentary
Life – Business operating profit Commentary • In FY-23 the Life business generated BOP of USD 2,060m, 39% • Net investment result added USD 592m of BOP in FY-23, USD higher than in the prior year. BOP did not include the contribution 102m below prior year which benefited from a gain related to a of
Slide 39: 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) +12% 225 695 592 259 127 232 9 3 15
Slide 40: 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 12% in FY-23, driven by a combination of positive net accounted for with the buildin
Slide 41: Farmers Management Services overview
Farmers Management Services – Overview Growth in Farmers Exchanges1 premiums drives increase in FMS income, with MGEP margin at 7.0% Business operating profit (USDm) MGEP margin (%)2 0.4ppts +10% 7.0% 6.6% 1,970 1,796 28 23 1,773 1,942 FY-22 FY-23 FY-22 FY-23 Fee result Net investment income and oth
Slide 42: Commentary
Farmers Management Services – Overview Commentary • Farmers Management Services (FMS) BOP increased 10% compared to the prior year, driven by the higher gross earned premium base of the Farmers Exchanges1 (up 3% compared to FY-22) and managed gross earned premium margin of 7.0%. • The Managed Gross
Slide 43: Farmers Life and Farmers Re overview
Farmers Life and Farmers Re – Overview Farmers Life completed the reinsurance transaction; Farmers Re benefits from higher reinsurance share and interest income Farmers Re BOP (USDm) Farmers Re risk capital1 (% of total Farmers Life BOP (USDm) Group) 161 90 23 117 120 117 72 57 0.8% 57 57 0.3% 81 91
Slide 44: Commentary
Farmers Life and Farmers Re – Overview Commentary • Farmers Re BOP of USD 117m is USD 105m above prior year due to a lower combined ratio at a higher reinsurance participation percentage of 8.5%, compared to 1.75% in the prior year, and higher interest income. The full year results include reinsuran
Slide 45: 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 small operating loss Group Functions and Operations BOP (USDm) Non-Core Businesses BOP (USDm) -38 -292 -314 -58 -29 -288 -446 -486 -796 -830 FY-22 FY-23 FY-22 FY-23
Slide 46: Commentary
Group Functions and Operations & Non-Core Businesses – BOP Commentary • Group Functions and Operations reported net expenses of USD 830m compared to USD 796m 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 47: Very strong capital position with SST ratio at 233%
Group – Solvency Very strong capital position with SST ratio at 233% 267% -2% -6% 28% -6% -48% 233% +2% Credit spreads +3% Equity markets SST ratio (%)1 -6% Interest rates -6% FX FY-22 Assumption and Management Market Economic profit / Capital actions2 FY-23e model changes actions and other business
Slide 48: Commentary
Group – Solvency Commentary • As of Q4-23, 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 233%, well above the Group’s SST ratio target of 160% or above. • The ratio was 34
Slide 49: Shareholders' equity reduction
Group – Balance sheet and capital structure Shareholders’ equity reduction driven by dividend payment and completion of share buyback program in H1-23 Shareholders’ equity (USDm)1 Capital structure (%)2 9% 10% -5% 17% 16% 26,199 4,351 -3,877 5% 4% -440 745 -1,762 24,860 -355 19% 19% 50% 51% FY-22 NI
Slide 50: Commentary
Group – Balance sheet and capital structure Commentary • Shareholders’ equity declined by USD 1.3bn compared to year end • As a result, the proportion of debt in the IFRS based capital 2022, primarily driven by the payment of the Group dividend of USD structure increased marginally with a leverage r
Slide 51: 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 52: Appendix
Appendix 52 © Zurich
Slide 53: Continuing to reward our shareholders
Group – Dividend policy We are focused on continuing to reward our shareholders Dividend policy1 Dividend per share (CHF) NIAS2 payout ratio of ~75% 26 24 22 20 20 19 18 Dividend increases based on sustainable 17 earnings growth Minimum target of prior year level FY-16 FY-17 FY-18 FY-19 FY-20 FY-21
Slide 54: Update on customer satisfaction and brand consideration
Customer KPIs Update on customer satisfaction and brand consideration tNPS1 FY-23 vs. FY-22 Brand consideration ranking4 15 14 15 15 15 Global2 +3.6pts 47% 57% 53% 53% 60% EMEA +2.1pts Asia Pacific +3.3pts 33% 21% 33% 33% 27% Latin America +5.0 pts 21% 20% 13% 13% 13% Farmers Exchanges3 -10.3 pts 20
Slide 55: 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 115 300 300 Global surety excess of loss 1,200 300 1,200 U.S. liability quota share 1,200 600 423 600 300 461 200 Europe all pe
Slide 56: U.S. crop business – skew towards second half
P&C – U.S. crop business U.S. crop business – significant skew towards second half IFRS 17 H1-22 H2-22 FY-22 H1-23 H2-23 FY-23 Insurance revenue (USDm) 1,073 2,238 3,311 1,195 2,003 3,198 Insurance service result (USDm) 82 7 89 76 -92 -16 BOP (USDm) 78 -2 76 73 -102 -29 Combined ratio (%) 92.7% 99.7
Slide 57: 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) +5% -9% 12,648 15.2 12,064 13.9 +7% 8,169 7,647 +8% -17% 3,519 3,812 3,289 2,722 Auto Home Specialty Busines
Slide 58: Farmers Exchanges combined ratio and surplus
Farmers Exchanges1 – Combined ratio and surplus Farmers Exchanges1 saw a strong improvement in underwriting results as 2023 progressed Combined ratio (%)2 Surplus (USDbn, %) 35.0% 33.5% 15% 7% 7% 22% 13% 3% 10% 1% 6.0 6.0 94% 97% 100% 99% 94% 94% 91% 89% Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-
Slide 59: SST ratio well in excess of 160%
Group – Solvency Very strong capital position, SST ratio well in excess of 160% Group Swiss Solvency Test (%)1 Q3-23 SST sensitivities impact (ppts)2 300% 267% Interest rate +50bps +16ppts 233% 216% 221% 222% 204% 212% Interest rate -50bps -17ppts 200% 182% Equities +20% +8ppts ≥160% Equities -20% -
Slide 60: Well diversified capital base by business segment
Group – SST Components Well diversified capital base by business segment FY-23 Available Financial Resources (USDbn) FY-23 Risk Capital Split (%)2 Market risk Shareholders’ equity 24.9 6% 5% 7% 2% Premium and reserve risk Dividend Accrual -4.5 Business risk Share buyback accrual -1.3 54% Natural cat
Slide 61: 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 13.7 2.6 Average debt 0.3 FY-22 FY-23 cost (%) 2.2 2.0 8.9 Subordinated 3.8% 3.9% 0.2 1.8 0.4 8.6 Senior 1.6% 1.8% 0.8 1.2 1.2 2.3 Total 3.0% 3.1% 1.0 0.4
Slide 62: Well diversified and high-quality investment portfolio
Group – Investment portfolio Well diversified and high-quality investment portfolio FY-23 Group investments (%)1 FY-23 asset quality (%) FY-23 non-financial credit (%) USD 57bn USD 74bn Other 6% 4% 3% 0% 7% 0% 4% 4% 2% 6% 19% Consumer 15% non-cyclical 9% 33% 4% 32% 6% Utility 3% Consumer cyclical US
Slide 63: High-quality credit and private debt exposure
Group – Investment portfolio Well diversified and high-quality credit and private debt exposure FY-23 rating of credit and private debt securities (%) USD 24.3bn USD 18.7bn USD 12.4bn USD 5.9bn USD 4.0bn USD 8.6bn 2% 0% 1% 0% 1% 10% 12% 0% 7% 4% 29% 39% 18% 35% 51% 33% 51% 88% 50% 63% 13% 32% 3% 19%
Slide 64: Calculation of like-for-like growth
Alternative performance measures Calculation of like-for-like growth Like-for-like growth FY-22 (USDm) FY-23 (USDm) Business KPI L-F-L2 (%) Rep M&A/Other Adj Rep FX M&A/Other1 Adj1 P&C GWP 41,435 - 41,435 44,401 827 - 45,228 9% P&C Insurance revenue 39,164 - 39,164 42,293 470 - 42,763 9% Life – long
Slide 65: Other information
Other information 65 © Zurich
Slide 66: For further information
For further information Call us Visit or follow us Investor Relations and Rating Agency Management • Jon Hocking +41 76 478 73 96 • Francesco Bonsante +41 44 628 00 68 • Samuel Han +41 44 625 32 57 • Johannes Herholdt +41 44 625 25 53 Investor Relations website • Michèle Matlock +41 44 625 28 50 Fin
Slide 67: Thank you
Thank you Upcoming events • March 15, 2024 – Annual Report 2023 • April 10, 2024 – Annual General Meeting 2024 • May 16, 2024 – Update for the three months ended March 31, 2024 • August 8, 2024 – Half year results 2024 • November 7, 2024 – Update for the nine months ended September 30, 2024 • Novemb
Zurich Insurance Group — FY2023 Earnings Presentation on 6ix