Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Debt Investor Presentation (December 2020)
44 slides from Zurich Insurance's debt investor presentation, December 2020
Slide 1: Credit investor update
Credit investor update December 2020
Slide 2: Our proposition to investors
GROUP OVERVIEW Our proposition to investors Resilient Strategy A balanced Industry Stable, Focus on customers and diverse leading capital consistent and and underwriting global business levels with conservatively discipline strong liquidity managed balance sheet Focus on the customer + Simplify Inno
Slide 3: A truly global and highly diversified group
GROUP OVERVIEW A truly global and highly diversified group KEY FACTS1 A BALANCED GLOBAL BUSINESS3 USD 52bn Total revenues (excl. result on UL investments) BOP by business (%) BOP by region (%) USD 205bn Total group investments (economic view) 8% 6% 26% 32% USD 5.3bn Business operating profit (BOP) 4
Slide 4: Genuinely global franchise with distinct capabilities
GROUP OVERVIEW Genuinely global franchise with distinct capabilities NORTH AMERICA #4 in commercial insurance #2 in crop insurance #7 in US personal lines ASIA PACIFIC through Farmers Exchanges2 EMEA #5 in P&C, #3 in life #4 insurance company overall #9 in P&C Top 3 #11 in P&C, #9 in life Global com
Slide 5: COVID-19 remains an earnings event; P&C claims remained stable
GROUP OVERVIEW COVID-19 remains an earnings event; P&C claims net of frequency benefits remained stable at USD 450m1 as of 9m-20 HY-20 COVID-19 GROUP BOP IMPACT (USDm)2 HY-20 PROPERTY & CASUALTY CLAIMS 3% P&C claims 750 8% ~USD 8% Property P&C frequency benefits, premium refunds 303 450m USD Liabili
Slide 6: Our strategy and flexible operating model position us for industry change
GROUP STRATEGY Our strategy and flexible operating model position us to take advantage of industry change EXTERNAL ENVIRONMENT OUR STRATEGY OUR OPERATING MODEL COMMERCIAL RETAIL Customer revolution Focus on the GROUP customer Geopolitical and Brand Go to market Go to market Products Products economi
Slide 7: Continued execution on all strategic priorities
GROUP STRATEGY Continued execution on all strategic priorities STRENGTHENED CUSTOMER FOCUS NEW DISTRIBUTION PARTNERSHIPS INNOVATIVE PROPOSITIONS NPS1 Retention1 +25% 2 Sales1 +2 0 +3 +5 n.m.3 +4 Winner of Gold award – Efma Accenture Innovation in Insurance Awards -3 +3 REALLOCATION OF CAPITAL SUPPOR
Slide 8: Simple execution, higher ambition
GROUP TARGETS Simple execution, higher ambition 2016 – 2019 ACHIEVEMENTS 2020 – 2022 AMBITION SIMPLIFIED AND FLEXIBLE ORGANIZATION Delayered structure Simplified IT landscape BOPAT ROE1 >14% Simplified products and services Cumulative cash IMPROVED EFFICIENCY remittances USD >11.5bn Over-delivered o
Slide 9: Unchanged Group targets with levers to drive ROE expansion
GROUP TARGETS Unchanged Group targets but with levers to further drive ROE expansion impacted by macro-economics ILLUSTRATIVE BOPAT ROE DEVELOPMENT AS SHOWN AT 2019 INVESTOR DAY (%) Current view ~15% ~0.5% ~1.0-1.5% 13.5% ~0.75-1.5% ~1.5-2.0% ~2.0-2.5% ~1.0-1.5% HY-191 Growth in Investment income Bu
Slide 10: Property & Casualty
Property & Casualty © Zurich
Slide 11: Leading commercial insurer, and one of the few genuinely global players
PROPERTY & CASUALTY Leading commercial insurer, and one of the few genuinely global players FOOTPRINT BUSINESS MIX CUSTOMER UNITS FY-19 Gross written premiums by region (%)1 FY-19 Gross written premiums by line of business (%) FY-19 Gross written premiums by customer unit (%)1 8% 9% 8% 21% 35% 20% 4
Slide 12: We show continuous improvement in the P&C combined ratio
PROPERTY & CASUALTY We show continuous improvement in the P&C combined ratio AY LOSS RATIO EXCLUDING OTHER UNDERWRITING EXPENSE (OUE) COMMISSION RATIO (%)2 CATASTROPHES (%)1 RATIO (%)2 +2.3ppts -2.3ppts 16.9% 17.0% 65.7% -1.9ppts 15.9% 64.7% 15.4% 14.7% 63.6% 14.2% 14.1% 63.4% 13.5% 0.4% 63.0% FY-16
Slide 13: Combined ratio and BOP improved strongly
PROPERTY & CASUALTY Combined ratio and BOP improved strongly COMBINED RATIO (%) BUSINESS OPERATING PROFIT (USDm) -1.7ppts 100.9% +6% 2,878 98.1% 97.8% 96.4% 211 2,437 2,085 31.8% 31.7% 32.4% 32.1% 67 127 1,546 2.6% 5.8% 4.0% 3.2% 191 1,961 1,891 1,932 1,847 65.7% 64.7% 63.6% 63.4% 922 485 574 -133 -
Slide 14: Good GWP growth and acceleration of commercial rate increases
PROPERTY & CASUALTY Good GWP growth and acceleration of commercial rate increases; APAC and LatAm reductions driven by travel and mass consumer business 9M-20 TOPLINE DEVELOPMENT TOTAL RATE CHANGE (%)2 GWP like-for-like Rate change GWP (USDm) Rate change (%)2 growth (%)1 outlook 12% EMEA 12,376 7% 4
Slide 15: Balance sheet and large loss volatility well managed through reinsurance
PROPERTY & CASUALTY Balance sheet and large loss volatility well managed through reinsurance GROUP CATASTROPHE REINSURANCE PROTECTION (USDm) GLOBAL SURETY EXCESS OF LOSS • Designed to manage earnings volatility 200 • North America: USD 350m coverage per customer in excess of 115 USD 50m retention 20
Slide 16: Our reinsurance has been effective in protecting earnings
PROPERTY & CASUALTY Our reinsurance has been effective in protecting earnings and reducing earnings volatility Q3-17 NET IMPACT FROM SIGNIFICANT CAT (USDbn)1 LOWER LARGE LOSS VOLATILITY (ppts)3 U.S. P&C market % of HY-17 share (%)2 SH equity AIG 3.0 2.4% 5% 3% Chubb 1.9 3.3% 8ppts Allstate 0.9 5.1%
Slide 17: Life
© Zurich Life
Slide 18: Our life business is where others want to be
LIFE Our life business is where others want to be; low risk and focused on protection and unit-linked business FOOTPRINT BUSINESS MIX DISTRIBUTION MIX FY-19 Annual premium equivalent by region (%) FY-19 Annual premium equivalent by line of business (%) FY-19 Annual premium equivalent by pillar (%) S
Slide 19: Our focus on protection business positions life well for low yields
LIFE Our focus on protection business positions our life business well for ongoing low yields PROTECTION GWP (USDbn) GWP SPLIT (%) +18% 8.0 1% 0% 3% 7% 5% 2% 7.0 34% 6.0 51% 5.0 13% 4.0 +14% +7% 99% 91% 93% 3.0 +50% 19% 2.0 52% +13% 1.0 29% 0.0 EMEA Latin America Asia Pacific North America Total EME
Slide 20: Revenue streams have low market dependency
LIFE Revenue streams have low market dependency DRIVERS OF IFRS PROFITABLITIY (USDm) INCOME Policy charges and fees mainly designed to cover distribution Loadings & fees 2,667 823 3,489 costs Inv. margin 690 Returns on our assets, plus share of returns on policyholder assets Technical margin 1,055 R
Slide 21: Growing life business with less reliance on investment margins
LIFE We have a growing life business with less reliance on investment margins BUSINESS OPERATING PROFIT (USDm) SHARE OF INCOME FROM FEES, LOADINGS AND TECHNICAL MARGINS (%, AVERAGE FY-16-19)1 +10% 1,554 1,486 88% 1,258 319 269 75% 75% 1,130 204 64% 249 296 186 31 76 132 1,010 1,037 889 831 -85 -2 1
Slide 22: Farmers
a FARMERS INSURANCE Farmers ie) FARMERS INSURANCE
Slide 23: A unique business structure
FARMERS EXCHANGES1 A unique business structure Zurich owned Policyholders owned Farmers Group, Inc. Farmers Exchanges1 Provides non-claims and ancillary services to the Exchanges Services Carry underwriting risk and handle claims, as well as own the Farmers (e.g. underwriting, policy administration,
Slide 24: Leading player in the U.S. personal lines insurance
FARMERS EXCHANGES1 Leading player in the U.S. personal lines insurance U.S. PERSONAL LINES FY-19 GWP BY LINE OF FY-19 GWP BY STATE (%) MAIN DISTRIBUTION MARKET SHARE (%)2 BUSINESS (%) CHANNELS State Farm 16.6% 1% Berkshire 9.7% 10% Exclusive 30% ~11,600 agents Progressive 9.1% 13% 43% USD 20.7bn 49%
Slide 25: Farmers Exchanges drives growth through its customer-centered strategy
FARMERS EXCHANGES1 Farmers Exchanges1 drives growth through its customer-centered strategy ACCELERATING EXECUTION ON KEY …WHILE INNOVATING AND EXPANDING GWP (USDbn) FOCUS AREAS… INTO NEW SEGMENTS Improve customer experience +2% Millennials and loyalty 20,325 20,656 19,908 125 17 435 Rideshare & Enha
Slide 26: Continued improvement in Farmers Exchanges surplus ratio
FARMERS EXCHANGES1 Continued improvement in Farmers Exchanges1 surplus ratio COMBINED RATIO (%)2 SURPLUS3 101.6% 41.5% 99.9% 100.0% 38.7% 39.5% 7.3% 6.9% 6.8% 6.0 5.5 5.5 94.3% 93.0% 93.2% FY-17 FY-18 FY-19 FY-17 FY-18 FY-19 Catastrophe losses Combined ratio (excl. catastrophe losses) Surplus ratio
Slide 27: Stable contribution to Group earnings, driven by fee-based business
FARMERS Stable contribution to Group earnings, primarily driven by Farmers Management Services fee-based business BUSINESS OPERATING PROFIT (USDm) KEY DRIVERS 8.00% 1,707 Farmers Re participation in the 1,692 1,643 15 all lines quota share treaty (%) 57 43 1.00% 236 0.25% 220 176 1,026 1,048 1,069 1
Slide 28: Leveraging Zurich's strength to increase stable fee earnings
ACQUISITION OF METLIFE INC.’S U.S. P&C BUSINESS Leveraging Zurich’s strength to increase stable fee earnings and Key messages support Farmers Exchanges strategy Zurich to increase share of Farmers Exchanges1 GWP to increase ~18%2 with corresponding increase in FMS3 earnings from stable fee earnings
Slide 29: Purchase price of USD 3.94bn co-financed by Zurich and Farmers Exchanges
ACQUISITION OF METLIFE INC.’S U.S. P&C BUSINESS Purchase price of USD 3.94bn to be co-financed by Zurich and the Farmers Exchanges1, with expected closing in Q2 2021 SIMPLIFIED TRANSACTION STRUCTURE •1 Zurich provides an internal loan to its subsidiary Farmers Group, Inc. (FGI) that is funded from i
Slide 30: Investment and capital management
Investment and capital management © Zurich
Slide 31: Strong capital position and cash generation
INVESTMENT AND CAPITAL MANAGEMENT Strong capital position and cash generation VERY STRONG FINANCIAL STRENGTH Z-ECM AND SST RATIO (%) AA- (very strong) / outlook ‘positive’ 240% 221% 222% 217% 216% Aa3 (excellent) / outlook ‘stable’ 204% 200% 196% 193% 189% 185% A+ (superior) / outlook ‘stable’ 160%
Slide 32: Proven balance sheet flexibility through leverage and coverage at Aa levels
INVESTMENT AND CAPITAL MANAGEMENT Proven balance sheet flexibility through leverage and coverage at Aa levels GROUP CAPITAL STRUCTURE (%)1 MOODY’S FINANCIAL LEVERAGE (%) & EARNINGS COVERAGE 12% 11% 10% 9% 12% 11% 26.4% 25.5% 24.3% 24.1% 13% 14% 17% 16% 15% 23.4% 22.6% 16% 13.2 76% 76% 73% 75% 72% 74
Slide 33: Low cost of risk, strong ratings and balanced maturity profile
INVESTMENT AND CAPITAL MANAGEMENT Low cost of risk, strong ratings and balanced maturity profile CDS SPREAD AMONG BEST OF PEERS (bps)1 BALANCED REFINANCING NEEDS (USDbn)2 600 2.1 400 2.0 0.2 200 0.6 1.8 1.6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Zurich Axa Generali Allianz 0.5 0
Slide 34: ALM-focused and lower risk strategy delivering excess returns
INVESTMENT AND CAPITAL MANAGEMENT ALM-focused and lower risk strategy delivering consistent and sustainable excess returns FY-19 ASSET ALLOCATION FY-19 ASSET QUALITY FY-19 DURATION (# years)1 70 91 11.6 2% 5% 21% 5% 33% 9.0 7% 15% 2% USD 205bn 35% 25% 4.4 4.8 3% 33% 78% 25% 3% 5% 0% 2% Government an
Slide 35: Z-ECM and SST are more conservative than Solvency II
INVESTMENT AND CAPITAL MANAGEMENT Z-ECM and SST are more conservative than Solvency II General information Most onerous impact Z-ECM SST SOLVENCY II Risk measure Value at risk 99.95% (~AA) Expected shortfall 99% (~BBB) Value at risk 99.5% (~BBB) • Market risk (including • Market risk (including Inte
Slide 36: Z-ECM and SST are more conservative than Solvency II
INVESTMENT AND CAPITAL MANAGEMENT Z-ECM and SST are more conservative than Solvency II Yield curves and transitionals Most onerous impact Z-ECM SST1 SOLVENCY II Swaps (EUR, GBP, USD) Base for risk-free yield curves Swaps Government bond (CHF) Swaps Use all available market data CHF: 15 years CHF: 25
Slide 37: Sustainability
Sustainability © Zurich
Slide 38: Delivery against our ambition is widely recognized by external assessors
SUSTAINABILITY Delivery against our ambition is widely recognized by external assessors OUR RATINGS1 OUR LONG-TERM COMMITMENT ‘AA’ rating1 #1 in insurance group2 Leader, #4 in insurance group3 OUR ENGAGEMENT PARTNERS Absolute Score of 4.4 • Lead author of the World Economic Forum Global Risk Report
Slide 39: We delivered strong progress against our priorities
SUSTAINABILITY We delivered strong progress against our priorities, enhancing the resilience of our business, our employees and communities • Established Group-wide Climate approach to align our business with a 1.5°C future • Contributed to the development of carbon footprint methodologies in cooper
Slide 40: Zurich embeds ESG issues in all aspects of the business
SUSTAINABILITY Zurich embeds environmental, social and governance issues in all aspects of the business An independent and diverse Board ensuring effective corporate governance and strategic CORPORATE oversight, and fostering ESG integration in the business GOVERNANCE A remuneration architecture ens
Slide 41: Other important information
Other important information © Zurich
Slide 42: For further information
For further information CALL US VISIT OR FOLLOW US Investor Relations and Rating Agency Management Richard Burden +41 44 628 96 40 Francesco Bonsante +41 44 628 00 68 Samuel Han +41 44 625 32 57 Michèle Matlock +41 44 625 28 50 Gianni Vitale +41 44 625 48 26 Group Treasury and Capital Management Chr
Slide 43: Disclaimer
Disclaimer 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). FORWARD-LOOKING STATEMENTS
Slide 44: © Zurich Insurance Company Ltd
© Zurich Insurance Company Ltd
Zurich Insurance Group — Debt Investor Presentation (December 2020) on 6ix