Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — FY2003 Earnings Presentation
38 slides from Zurich Insurance's earnings presentation, Feb 19, 2004
Slide 1: Annual Results Reporting 2003
Annual Results Reporting 2003 Analysts’ Conference Zurich, February 19, 2004
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 predictions of or indicate future events, trends, plans or objectives. Forward-looking statements include statements regarding our targeted profi
Slide 3: Agenda
Agenda • Introduction and overview James J. Schiro • Annual results 2003 Patrick O’Sullivan • Closing remarks James J. Schiro • Q&A © Zurich Financial Services - February 19, 2004 3
Slide 4: Introduction and overview
Introduction and overview James J. Schiro Chief Executive Officer February 19, 2004
Slide 5: Financial highlights
Financial highlights in USD millions 2003 2002 Change Total GWP and policy fees 48,919 41,423 18% Business operating profit 2,265 1,175 93% Net income 2,120 -3,362 nm IFRS ROE 12.5% 0.6% 11.9 pts Business operating profit ROE 9.3% 5.1% 4.2 pts Combined ratio 97.9% 111.4% 13.5 pts Embedded value oper
Slide 6: Slide 6
Slide 7: Annual results 2003
Annual results 2003 Patrick O’Sullivan Group Finance Director February 19, 2004
Slide 8: Net income by business segment
Net income by business segment in USD millions 2003 20021 Change General Insurance 1,883 435 333% Life Insurance 799 345 132% Farmers Management Services 604 563 7% Other Businesses -1,019 -139 -633% Corporate Center -481 -1,513 68% Net income, excluding net gain on divestments 1,786 -309 nm After-t
Slide 9: Business operating profit by business segment
Business operating profit by business segment in USD millions 2003 2002 Change General Insurance 2,149 387 455% Life Insurance 857 746 15% Farmers Management Services 970 916 6% Other Businesses -1,044 -141 -640% Corporate Center -667 -733 9% Total 2,265 1,175 93% © Zurich Financial Services - Febru
Slide 10: General Insurance financial highlights
General Insurance financial highlights in USD millions 2003 2002 Change Gross written premiums 36,250 29,830 22% Net earned premiums 27,197 20,285 34% Net underwriting result1 580 -728 nm Business operating profit 2,149 387 455% Net income1, 2 1,883 435 333% Loss ratio1 72.9% 77.9% 5.0 pts Expense r
Slide 11: General Insurance key performance indicators
General Insurance key performance indicators in USD millions 2003 2002 Change Combined ratio (%)2 Business operating profit Total 3 103.5 97.9 NA Corporate 824 716 15% NA Corp. 97.2 NA Consumer1 115 68 69% 97.1 Continental Europe 607 -80 nm 97.5 NA Cons. 98.7 UKISA 427 106 303% 106.8 Cont. Eur. Rest
Slide 12: Insurance reserves development
Insurance reserves development in USD millions 2003 2002 Losses and LAE reserves, net, at January 112.80 30,366 24,090 Losses and LAE paid -16,516 -14,239 Losses and LAE incurred Current year 19,254 15,478 Prior year 1,874 2,818 Other movements (FX and divestments) 2,035 2,219 Losses and LAE reserve
Slide 13: Life Insurance financial highlights
Life Insurance financial highlights in USD millions 2003 2002 Change GWP, policy fees & deposits 20,560 19,532 5% Business operating profit 857 746 15% Net income1 799 345 132% New business premiums (APE) 2,134 2,082 2% New business profit margin (as % of APE) 9.0% 6.1% 2.9 pts EV operating profit,
Slide 14: Life Insurance key performance indicators (1/2)
Life Insurance key performance indicators (1/2) in USD millions 2003 2002 Change New business margins (%) Business operating profit 6.1 Total 1 NA Consumer 245 326 -25% 9.0 Continental Europe 294 231 27% NA 14.4 Cons 31.1 UKISA 271 147 84% Cont 1.4 Rest of the World 39 42 -7% Eur 7.9 Centrally Manag
Slide 15: Life Insurance key performance indicators (2/2)
Life Insurance key performance indicators (2/2) in USD millions 2003 2002 Change EV operating return (%) EV operating profit 1 9.0 Total NA Consumer 318 384 -17% 10.5 Continental Europe 380 376 1% NA 10.9 Cons 10.0 UKISA 321 169 90% Cont. 14.3 Rest of the World 40 67 -40% Eur. 19.6 Total 1,059 996 6
Slide 16: Farmers Management Services financial highlights
Farmers Management Services financial highlights in USD millions 2003 2002 Change Management fees & other related revenue 1,885 1,799 5% Management & other expenses 900 871 3% Net investment result 77 60 28% Business operating profit 970 916 6% Net income1 604 563 7% Gross operating margin 52.3% 51.
Slide 17: Farmers Exchanges financial highlights
Farmers Exchanges1 financial highlights in USD millions 2003 2002 Change Net operating result2 258 -165 423 Combined ratio 101.9% 105.6% 3.7 pts Net surplus change 211 10 201 Ending surplus 3,684 3,473 211 Surplus ratio 36.7% 32.5% 4.2 pts RBC ratio 315% 279% 36 pts 1 The Farmers P&C Group of Compan
Slide 18: Other Businesses financial highlights
Other Businesses financial highlights in USD millions 2003 2002 Change Business operating profit -1,044 -141 nm of which: Centre -985 -77 nm other -59 -64 8% Net income1 -1,019 -139 nm of which: Centre -817 -67 nm other -202 -72 -181% 1 Excluding gains on divestments of businesses. 2002 is pre-provi
Slide 19: Corporate Center financial highlights
Corporate Center financial highlights in USD millions 2003 2002 Change Net underwriting income 52 -26 nm Total investment income/loss 600 -512 nm of which Bâloise -153 -544 72% Unallocated corporate expenses1 -356 -541 34% Interest expense -723 -687 5% Business operating profit -667 -733 9% Net resu
Slide 20: Investment highlights
Investment highlights in USD millions 2003 2002 Change Net investment income 7,004 6,230 12% Net realized capital gains/losses and impairments 547 -917 nm Net unrealized capital gains/losses1 264 -477 nm Net investment result 7,815 4,836 62% Total investment return2 4.9% 2.3% 2.6 pts 1 In operating
Slide 21: Shareholders' equity
Shareholders’ equity in USD millions 20'000 +2,120 18'000 +757 +42 -310 19,384 16'000 1 16,775 14'000 Balance at Change in net Translation Treasury stock Net income Balance at 2 Jan 1, 2003 unreal. gains adjustments trx and other Dec 31, 2003 on investments 1 Restated to reflect adoption of new acco
Slide 22: Return on equity
Return on equity in USD millions 2003 2002 Business Operating Profit1 1,586 = 9.3% 5.1% Average IFRS Equity2 16,984 Net Income3 2,120 = 12.5% 0.6% Average IFRS Equity2 16,984 1 After tax (2003 BOP = 2,265 less tax @ 30% = 1,586) 2 IFRS Equity (excluding preferred shares) beginning of the year 15,679
Slide 23: Closing remarks
Closing remarks James J. Schiro Chief Executive Officer February 19, 2004
Slide 24: Zurich Financial Services
@ ZURICH FINANCIAL SERVICES
Slide 25: Appendix
Annual Results Reporting 2003 Appendix
Slide 26: We have delivered on our commitments
We have delivered on our commitments Our commitments What we delivered Operational • Additional earnings of USD • Exceeded USD 1bn target improvement 1bn in 2003 through expense • Nearly doubled operating ROE reduction, improved pricing, and reduced combined ratio underwriting and claims management
Slide 27: Foreign currency impact – General Insurance
Foreign currency impact – General Insurance 2003 versus 2002 Growth in FX Growth local curr. impact in USD Total GWP and policy fees 13% 9% 22% Net investment income 8% 11% 19% Net realized and unrealized gains 333% 10% 343% Total insurance benefits and losses 15% 10% 25% © Zurich Financial Services
Slide 28: Foreign currency impact – Life Insurance
Foreign currency impact – Life Insurance 2003 versus 2002 Growth in FX Growth local curr. impact in USD Total GWP, policy fees and deposits -8% 13% 5% Insurance deposits -16% 10% -6% Total GWP and policy fees 0% 16% 16% Net investment income -3% 15% 12% Net realized and unrealized gains 108% -5% 103
Slide 29: Net income to business operating profit – full year
Net income to business operating profit – full year in USD millions 2003 2002 IFRS Net Income 2,120 -3,362 Adjust for: Special provisions 0 3,701 Adjust for: Restructuring provision 5 0 Adjust for: Net gain on divestments of businesses -351 -498 Adjust for: Realized and unrealized capital gains/loss
Slide 30: Net income to business operating profit – fourth quarter
Net income to business operating profit – fourth quarter in USD millions 2003 2002 IFRS Net Income 681 -682 Adjust for: Special provisions 0 640 Adjust for: Restructuring provision 44 0 Adjust for: Net gain on divestments of businesses -40 -35 Adjust for: Realized and unrealized capital gains/losses
Slide 31: Accounting bridge from IFRS net income to business operating profit
Accounting bridge from IFRS net income to business operating profit IFRS Net Special Gains and Real/unreal PH allocation Tax exp, adj Business income1 provisions losses on gains/losses, of real/unreal for life PH operating divestments excl cap mkt cap gains tax profit & banking Total 2003 2,120 5 -3
Slide 32: Survival ratios – Asbestos & Environmental exposures
Survival ratios – Asbestos & Environmental exposures 2003 2002 Gross 3-year Gross 3-year reserves1 survival reserves1 survival ratio ratio Asbestos 2,930 23.6 2,572 25.7 of which: US 1,915 19.1 1,906 23.5 of which: UK 1,015 42.1 666 36.1 Environmental 702 9.4 812 9.1 Total 3,632 18.3 3,384 17.9 1 in
Slide 33: Life IFRS equity adjusted to bridge EV
Life IFRS equity adjusted to bridge EV in USD billions 2003 Tangible assets in IFRS equity 6.9 DAC and other intangible assets 3.2 Goodwill 0.5 Life IFRS equity 10.6 Adjustments: Differences in tangible / net assets1 -2.3 Deduct DAC and other intangibles2 -3.2 Deduct goodwill -0.5 Subtotal adjustmen
Slide 34: Total investments by major category
Total investments by major category USD USD USD 122.8bn 163.8bn 176.0bn 100% 7% 5% 9% 6% 8% 12% 75% 64% 50% 57% 63% 25% 22% 22% 25% 0% 2001 2002 2003 Other investments Debt securities Common stock, including equity unit trusts Other equity securities © Zurich Financial Services - February 19, 2004 3
Slide 35: 98% of the bond portfolio is investment grade
98% of the bond portfolio is investment grade Bond portfolio ratings1 distribution as at December 31, 2003 BB and BBB below 0% 4% na 1% A 13% AA AAA 20% 62% 1 Lower of Moody's and S&P issuer ratings, if no rating available, internal ratings have been assigned © Zurich Financial Services - February 1
Slide 36: The bond portfolio diversification
The bond portfolio diversification Bond portfolio currency distribution as at December 31, 2003 Other 3.2% CHF 12.8% EUR 33.9% GBP 20.0% USD © Zurich Financial Services - February 19, 2004 30.1% 36
Slide 37: The equity portfolio diversification
The equity portfolio diversification Equity portfolio country distribution as at December 31, 2003 Other Switzerland 5.1% 8.8% UK 10.7% Europe 54.3% North America 21.1% © Zurich Financial Services - February 19, 2004 37
Slide 38: Credit quality of reinsurance counterparties / collateralization of recoverables
Credit quality1 of reinsurance counterparties / collateralization of recoverables AAA 4% AA Collateralized 17% 41% A 23% 1 Lower of Moody's and Not S&P issuer ratings, if no rating rated BB & BBB available, internal ratings have been assigned 7% below 5% 3% © Zurich Financial Services - February 19,
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