Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Merrill Lynch Conference (October 2001)
27 slides from Zurich Insurance's conference presentation, Oct 8, 2001
Slide 1: Merrill Lynch Conference: Building Competitive Advantage in a Volatile World
Zurich Financial Services Merrill Lynch Conference Building Competitive Advantage in a Volatile World Richard Johnson London October 8, 2001 © Zurich Financial Services
Slide 2: Overview
Overview Aftermath of September 11th Building competitive advantage Zurich’s exposure to volatile markets Summary © Zurich Financial Services
Slide 3: 11th September aftermath is unprecedented
11th September aftermath is unprecedented • Largest insured event in history • Industry “glue” will be tested via pools, treaties, and “spirals” • Capital constraints will result from combination of large insurance losses and weak financial markets • Inevitably insurance prices will rise and reinsur
Slide 4: Current loss estimates vary widely
Current loss estimates vary widely Insured loss amounts Low High (in $ billion) Line of insurance Workers comp. 3.0 5.0 Aviation 3.0 6.0 Commercial property 10.0 12.0 Life, AD & D 4.5 6.0 Liability 5.0 20.0 Business interruption 3.5 7.0 Other 1.0 2.0 Total 30.0 58.0 Source: Tillinghast - Towers Perr
Slide 5: Zurich has been affected in multiple ways
Zurich has been affected in multiple ways • Initial estimate of WTC losses currently under review with direct insurance and reinsurance losses very material • Operations largely intact • Indirect effects from weaker equity markets, even lower interest rates and lagged economic recovery • But Zurich’
Slide 6: And the strategic initiatives continue
And the strategic initiatives continue • Cost reductions progressing • Divestitures ongoing • Deutsche Bank transaction entering execution phase • Converium IPO plans continue unabated • Strategy articulated in April 2000 unfolding – Alliances and partnerships with Bank of America, ULICO and Deutsch
Slide 7: Overview
Overview Aftermath of September 11th Building competitive advantage Zurich’s exposure to volatile markets Summary © Zurich Financial Services
Slide 8: ZFS will continue to build competitive advantage through
ZFS will continue to build competitive advantage through • Focusing on customers and what we do best • Growing our business when others cannot • Increasing the efficiency of our operations • Using our capital strength to win business © Zurich Financial Services 8
Slide 9: We focus on providing solutions to our customers...
Focus We focus on providing solutions to our customers... • Organization – Over 300 SBUs targeting 38 m customers specific customer segments – 4 regions and 1 global Brokerage, Life business News, other... – Multi-channel distribution Customer Non • Offering Life – Full range of products Banking Ass
Slide 10: …and on what we do best
Focus …and on what we do best • Businesses where we have a competitive advantage and strong fundamentals • Divest non-strategic, mature, sub-scale or underperforming businesses • Implementation has already started – Disposal of Scudder and purchase of Deutsche Bank’s European insurance operations –
Slide 11: Strategic alliance and asset swap with Deutsche Bank has a strong rationale
Focus Strategic alliance and asset swap with Deutsche Bank has a strong rationale • Significant strengthening of Zurich’s market position in Continental Europe, especially in Germany • Well positioned to take advantage of rapidly growing life and pension markets in Germany, Italy & Spain • Adapting
Slide 12: It will transform Zurich's position in Continental Europe
It will transform Zurich’s position Focus in Continental Europe... Continental Europe before after Premiums €11.9bn €15.6bn Germany (Life) Rank 9 5 before after Mkt share 2.0% 2.7% Premiums €1.0bn €3.4bn Life prem. €5.5bn €8.9bn Mkt share life1.6% 5.6% Spain (Life) Italy (Life) before after before a
Slide 13: Strong positions in each of our key markets
Focus ...and will give us strong positions in each of our key markets UK Life Non-life Premiums $6.2bn $2.4bn Rank 7th 4th Market Share 4.3% 7% Continental Europe Premiums $14.4bn Rank 5th Market Share 2.7% US Commercial Personal* Life Premiums $8.5bn $11.8bn $4.1bn Rank 4th 3rd Market Share ~$4% 6.
Slide 14: Financial impact will be positive
Focus Financial impact will be positive • Acquisition of Deutsche Bank’s insurance operations at an attractive price – Zurich’s 80% share in Zurich Scudder (ex-Threadneedle) valued at $2.0bn – Acquisition price of approximately $1.1 bn for Deutsche Bank’s share in its European insurance operations •
Slide 15: Growth in non-life to offset temporary weakness in life and asset gathering
Growth Growth in non-life to offset temporary weakness in life and asset gathering • Strong and profitable growth prospects in non-life • Life and asset gathering have favourable long term potential but currently affected by market turmoil • Strategic partnerships/alliances to broaden customer reach
Slide 16: Zurich U.S. - 2001 Rate Monitoring Summary
Growth Zurich U.S. - 2001 Rate Monitoring Summary* 18.0% 15.9% 16.0% 14.7% 14.0% 12.2% 12.0% 10.6% 11.2% 10.0% 8.4% 8.0% 6.0% 6.0% 4.1% 4.0% 2.0% 1.0% -1.6% 0.0% -2.0% 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr May 1999 1999 1999 1999 2000 2000 2000 2000 2001 2001 *exclu
Slide 17: Growth is important in hard markets
Growth Growth is important in hard markets Industry 1984 - 1987 NWP Growth US Commercial Lines Cumulative NWP Growth 350% 300% Less than industry average 250% 200% 150% 100% 50% 0% IG a h a G s l ry au tn d gn er e ric l A er F& nd ta or st id Ae el .P st Zu Ci en US du nw rtf Fu av or St in Ha In &
Slide 18: As shown in the last hard market
Growth As shown in the last hard market Loss Ratios and Combined Ratios (averages for 1985-1989) 120% 112.8% 110% 106.5% 100% 90% 80% 68.9% 70% 66.5% 60% 50% 40% companies with less than average growth companies with greater than average rate (8) growth rate (4) © Zurich Financial Services Loss Rati
Slide 19: Strategic partnerships/alliances to broaden customer reach and product range
Strategic partnerships/alliances to broaden Growth customer reach and product range Europe • Deutsche Bank to sell Zurich insurance products to its 11m European customers • Zurich to offer Deutsche asset management products to its European customers • Bank of Scotland to provide banking products for
Slide 20: We are making significant efficiency gains in non life
Efficiency We are making significant efficiency gains in non life 25 34 20 32 15 30 10 28 5 26 0 24 -5 22 -10 20 1H 99 FY 99 1H 00 FY 00 1H 01 NL GPW growth (LHS) NL Expense ratio (RHS) GWP growth at constant FX rates © Zurich Financial Services 20
Slide 21: We have other efficiency initiatives
Efficiency We have other efficiency initiatives • GHO: USD 140 million annualized cost reduction plans on target • Planned cost savings in life of USD 100 million in the UK and up to USD 30 million in Switzerland • Global procurement: Groupwide implementation initiated, with our first platform insta
Slide 22: Our capital strength will allow us to win new business
Capital Our capital strength will allow us to win new business $bn % • Strong equity base of USD 70 60 19.3 bn as of June 30, 60 50 2001 50 40 40 • Equity in USD largely 30 30 unchanged since 30 June 20 20 2001 as bond gains and 10 10 favorable currency 0 - movements offset equity losses A G Sw ZFS
Slide 23: Overview
Overview Aftermath of September 11th Building competitive advantage Zurich’s exposure to volatile markets Summary © Zurich Financial Services
Slide 24: We have diversified profit sources
We have diversified profit sources Proportion of IAS net income by segment HY 2001 Reinsurance Europe 5% Farmers 14% 30% Life ins. and AM US 45% CH 45% 9% Non-life UK & Re 27% 25% Before results not allocated to regions and excluding “Rest of the World” © Zurich Financial Services 24
Slide 25: ...multi-channel distribution...
...multi-channel distribution... 2000 Premium breakdown • Agents by distribution channel* • Brokers • Strategic partners Other • Direct 6% Indep. agents Brokers • New Zurich: eZSB 28% 31% Exclusive agents 35% Non life and life gross written premium for US, UK, Switzerland and Germany © Zurich Financ
Slide 26: ...as well as diversified product lines in life and non-life
...as well as diversified product lines in life and non-life Life Premiums and Deposits Non- Life Premiums 1 H 2001 % 1 H 2001 % Group General 17% Liability 20% Auto 30% Unit- Accident linked 7% 52% Individual 31% Property 43% © Zurich Financial Services 26
Slide 27: Summary
Summary • Zurich is building competitive advantage through – focusing on customers and what we do best – growing our non-life franchise, especially in the US – improving our efficiency – using our capital strength to win business • Diversification reduces our exposure to volatile markets – diversifi
Zurich Financial Services — Merrill Lynch Conference (October 2001) on 6ix