Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — H1 2022 Earnings Presentation
61 slides from Zurich Insurance's earnings presentation, Aug 11, 2022
Slide 1: Consistent delivery drives strong H1 performance
Consistent delivery drives strong H1 performance Half year results 2022 August 11, 2022 Investor and media presentation Zurich Insurance Group
Slide 2: Content
Content MAIN SECTIONS OTHER IMPORTANT INFORMATION (use symbols to navigate through the document) (use symbols to navigate through the document) Key highlights Disclaimer Group results and outlook Dividend policy Property & Casualty (P&C) Customer KPIs Life P&C reinsurance program Farmers Farmers Exc
Slide 3: Key messages
Key messages Consistent execution of group strategy drives strongest ever underlying H1 performance, Broad-based strength with outstanding delivery across all businesses; HY-22 BOP up 25% to USD 3.4 billion Improved customer Net promoter score improved in most major markets with ~0.9m net new custom
Slide 4: Group fully expects to exceed 2022 targets
KEY HIGHLIGHTS Group fully expects to exceed 2022 targets BOPAT ROE (%)1 CASH REMITTANCES EPS GROWTH (%) 2 SST (%)4 (USDbn) 262% 7.3% 15.7% >14% >11.5 ≥5% p.a. ≥160% FY-22e FY-21 4.4 FY-20 3.4 HY-22 Target Cumulative Target FY-19 to FY-21 Target HY-22e Target to FY-21 2020-2022 CAGR3 1 Annualized bu
Slide 5: Special share buyback of ~CHF 1.8bn
KEY HIGHLIGHTS Special share buyback of ~CHF 1.8bn to offset expected earnings dilution from our German life back book transaction 1 CAPITAL ALLOCATION AND PRIORITIES Sale of life back book1 ~+8ppts Allocation decisions based SST ratio impact 3 on strategic priorities ~USD 20bn Reduction in net rese
Slide 6: Increased customer satisfaction drives higher retention and net customer growth
KEY HIGHLIGHTS In Retail, increased customer satisfaction drives higher retention and net customer growth HIGHER CUSTOMER SATISFACTION IMPROVED RETENTION2 NET CUSTOMER GROWTH3 ACROSS THE GROUP1 +2% Latin America +3ppts EMEA 56.4m +0 +1 Farmers 0.9m Exchanges4 +8 +2 EMEA +1ppts 55.5m -1 Farmers Asia
Slide 7: Disciplined execution drives outstanding results in Commercial Insurance
KEY HIGHLIGHTS Disciplined execution drives outstanding financial results in Commercial Insurance NEP GROWTH (%)1 RATE CHANGE (%)2 CLAIMS TREND (%) COMBINED RATIO (%) North America (HY-22) 13% 13% 14% 13% 100% 97% 100% 94% Property 89% 28% 28% 29% 28% 9% 28% Liability 2% 4% 6% Motor 72% 69% 69% 65%
Slide 8: Higher reinvestment rates supporting P&C investment income
KEY HIGHLIGHTS Higher reinvestment rates supporting P&C investment income, with the gap to book yield closed as of HY-22 P&C INVESTMENT INCOME (USDm) P&C INVESTMENT YIELDS (%) P&C DURATION (# YEARS) 3 946 967 4.9 4.8 4.8 918 901 4% 890 4.4 837 3% 2% 1% 0% HY-21 HY-22 HY-17 HY-18 HY-19 HY-20 HY-21 HY
Slide 9: Life earnings continue to grow
KEY HIGHLIGHTS Life earnings continue to grow, while exposure to capital intensive savings reduces both in new business and in-force APE BY PRODUCT (%) RESERVES BY PRODUCT (%) LIFE BOP (USDm) +13% 903 10% 5% 802 22% 34% 90% 95% 78% 66% HY-21 HY-22 HY-21 HY-222 HY-21 HY-22 Savings & annuity Tradition
Slide 10: Farmers Exchanges gross written premiums increase
KEY HIGHLIGHTS Farmers Exchanges1 gross written premiums increase driven by MetLife integration, stable retention levels and focus on rate GWP (USDm) RETENTION (%)2 RATE CHANGE (%) +15% 13,503 82.5 82.9 11,726 6.6 1.4 HY-21 HY-22 HY-21 HY-22 HY-21 HY-22 FY-22e © Zurich 1 For all references to Farmer
Slide 11: Delivering on our ambition for a sustainable future
KEY HIGHLIGHTS Delivering on our ambition for a sustainable future PROGRESS TO-DATE 1 98% -21% Use of renewable energy in Reduced CO2e intensity in financed operations corporate emissions vs. 2019 ~USD 300m GWP and policy fees generated • MSCI rating upgraded to -73% +11% from sustainable solutions2
Slide 12: Delivering on our ambition for a sustainable future
KEY HIGHLIGHTS Delivering on our ambition for a sustainable future COMMENTARY • In 2021 we made a number of ambitious climate targets public as part • We are further focusing on offering sustainable solutions to our of our Net Zero commitment for 2050. These include a reduction of customers. One exa
Slide 13: Key messages
Key messages Consistent execution of group strategy drives strongest ever underlying H1 performance, Broad-based strength with outstanding delivery across all businesses; HY-22 BOP up 25% to USD 3.4 billion Improved customer Net promoter score improved in most major markets with ~0.9m net new custom
Slide 14: CFO update
@ ZuRICH CFO update
Slide 15: Strong results drive increase in Group BOP
GROUP – BUSINESS OPERATING PROFIT Strong results across all regions and business lines drive increase in Group BOP BOP BY REGION (USDm) +29% BOP BY BUSINESS (USDm) +29% in local currencies in local currencies +25% +25% 3,393 3,393 305 2,714 325 2,714 893 201 21 290 893 778 778 903 1,244 802 855 2,05
Slide 16: Strong results drive increase in Group BOP
GROUP – BUSINESS OPERATING PROFIT Strong results across all regions and business lines drive increase in Group BOP COMMENTARY • Overall Group business operating profit increased strongly in the • By business, P&C earnings increased by 32% (36% in local first half of the year, with BOP up 25% in U.S.
Slide 17: Net income attributable to shareholders up 1%
GROUP – NET INCOME ATTRIBUTABLE TO SHAREHOLDERS Net income attributable to shareholders up 1% compared to HY-21, despite recognition of negative mark-to-market effects BOP TO NIAS WALK (USDm) KEY DRIVERS 23.9% • Group BOP of USD 3.4bn up 25% Effective tax rate compared to HY-21 driven by 235 -268 -2
Slide 18: 2022 outlook
GROUP – OUTLOOK 2022 outlook • Commercial pricing expected to remain in excess of loss cost inflation • Net earned premium growth is expected to be in the mid-to-high single digit range in local currencies PROPERTY & CASUALTY • Losses from natural catastrophes anticipated to be around ~3.5ppts • Inv
Slide 19: 2022 outlook
GROUP – OUTLOOK 2022 outlook COMMENTARY P&C: Farmers: • Rising interest rates in 2022 to date mean that reinvestment yields • Gross written premium development at the Farmers Exchanges are above book yields at HY-22. Based on these conditions, P&C including the acquired MetLife U.S. P&C business is
Slide 20: Strong growth and rate change across all regions
P&C – TOP-LINE Strong growth and rate change across all regions HY-22 TOP-LINE DEVELOPMENT TOTAL RATE CHANGE (%)2 GWP like-for-like GWP (USDm) Rate change (%)2 Rate change outlook growth (%) 1 8.1% EMEA 10,349 9% 5% Stable 7.2% 5.9% North America 11,346 14% 9% Stable 3.8% Asia Pacific 1,687 16% 3% S
Slide 21: Strong growth and rate change across all regions
P&C – TOP-LINE Strong growth and rate change across all regions COMMENTARY • Gross written premiums rose 13% on a like-for-like basis and 8% in • North America grew 14% on a like-for-like basis, with crop insurance U.S. dollar terms. All regions demonstrated strong growth supported contributing abou
Slide 22: Higher revenues drive significant increase in P&C BOP
P&C – BOP COMPONENTS Higher revenues and underwriting improvements drive significant increase in P&C BOP BOP (USDm) BREAK DOWN BY COMPONENT (USDm) +9% vs. HY-21 adjusted1 +32% +32% 2,055 2,055 108 1,889 170 1,559 62 1,559 62 890 111 837 118 1,235 837 830 1,219 1,177 865 620 711 -205 -51 -3 -187 -119
Slide 23: Higher revenues drive significant increase in P&C BOP
P&C – BOP COMPONENTS Higher revenues and underwriting improvements drive significant increase in P&C BOP COMMENTARY • HY-22 P&C BOP was USD 2,055m, 32% higher than in the previous • Investment income was USD 53m above prior year levels driven by year. The improvement was supported by higher prices f
Slide 24: Portfolio quality demonstrated by improved combined ratio
P&C – COMBINED RATIO DETAILS Portfolio quality demonstrated by further improvement in the combined ratio COMBINED RATIO (%) LOSS RATIO (%) EXPENSE RATIO (%) AY excl. Cat AY excl. Cat Excl. and COVID1 90.6% 90.1% -0.6ppts and COVID1 59.5% 59.0% -0.5ppts COVID1 31.1% 31.1% -0.1ppts 93.9% 91.9% 62.6% 3
Slide 25: Portfolio quality demonstrated by improved combined ratio
P&C – COMBINED RATIO DETAILS Portfolio quality demonstrated by further improvement in the combined ratio COMMENTARY • The combined ratio of 91.9% in the first half was 2 percentage points • Catastrophes and weather-related losses for the first half totaled better than in the prior year period. The a
Slide 26: Strong improvement in Commercial driven by North America
P&C – COMBINED RATIO BY SEGMENT AND CUSTOMER UNIT Strong improvement in Commercial driven by North America AY COMBINED RATIO (CR) EXCL. CATASTROPHES AND COVID-19 BY REGION (%)1 AY CR EX CATASTROPHES AND COVID-19 BY CUSTOMER UNIT (%) 1 +0.2ppts +1.3ppts +1.1ppts -1.5ppts -1.7ppts -2.6ppts 96.7% 96.9%
Slide 27: Strong improvement in Commercial driven by North America
P&C – COMBINED RATIO BY SEGMENT AND CUSTOMER UNIT Strong improvement in Commercial driven by North America COMMENTARY • In EMEA, the accident year combined ratio ex-catastrophes and • The Commercial Insurance accident year combined ratio ex- COVID-19 deteriorated by 1.1 percentage points mainly due
Slide 28: Reinvestment yield exceeds book yield
P&C – INVESTMENT RESULT Reinvestment yield exceeds book yield, supporting P&C investment income INVESTMENT RESULT IN BOP (USDm) INVESTMENT INCOME YIELD OF GROUP INVESTMENTS (%) 1 2.5% 2.7% 899 839 62 HY-21 HY-22 837 890 BOOK & REINVESTMENT YIELD OF DEBT SECURITIES (%) 2 -51 HY-21 HY-22 2.9% 2.4% 2.4
Slide 29: Reinvestment yield exceeds book yield
P&C – INVESTMENT RESULT Reinvestment yield exceeds book yield, supporting P&C investment income COMMENTARY • Investment income in HY-22 was up 6% (USD 53m) compared to the prior-year period, driven by improving investment yields. • This was offset by realized capital losses of USD 51m, mainly driven
Slide 30: Life BOP up 13%
LIFE – BUSINESS OPERATING PROFIT Life BOP up 13% driven by underlying growth and improved COVID-19 claims experience BOP (USDm) +13% 903 802 84 903 15 36 37 3 -2 -21 15 802 111 197 167 -27 204 36 90 155 172 175 172 +2% 537 excl. COVID-19 and disposals 503 536 535 27 -26 -137 HY-21 HY-22 HY-21 COVID-
Slide 31: Life BOP up 13%
LIFE – BUSINESS OPERATING PROFIT Life BOP up 13% driven by underlying growth and improved COVID-19 claims experience COMMENTARY • In EMEA, Life BOP increased by 6% to USD 536m on a reported • In Asia Pacific, Life BOP decreased by 10% to USD 155m on a basis. This benefited from the absence of COVID-
Slide 32: Strong growth in net inflows; AuM affected by markets
LIFE – PREMIUMS, NET INFLOWS AND ASSETS UNDER MANAGEMENT Strong growth in net inflows; AuM affected by unfavorable markets and the reclassification of assets to held for sale GWP AND DEPOSITS (USDbn) NET INFLOWS BY SEGMENT (USDbn) ASSETS UNDER MANAGEMENT (USDbn) +0% +60% like-for-like 1 +47% like-fo
Slide 33: Strong growth in net inflows; AuM affected by markets
LIFE – PREMIUMS, NET INFLOWS AND ASSETS UNDER MANAGEMENT Strong growth in net inflows; AuM affected by unfavorable markets and the reclassification of assets to held for sale COMMENTARY • In the Group’s Life business, gross written premiums and deposits • Net inflows of USD 3.1bn were 47% higher tha
Slide 34: APE up 3% like-for-like
LIFE – NEW BUSINESS AND NEW BUSINESS MIX APE up 3% on a like-for-like basis with growth driven by capital efficient savings and protection products APE (USDm)1 NBV (USDm)1 NBM (%)1 NEW BUSINESS MIX (%) +3% -10% HY-22 APE1 like-for-like 2 like-for-like 2 5% -4% -4.0ppts 21% -15% USD 40% 1,911 1,838 5
Slide 35: APE up 3% like-for-like
LIFE – NEW BUSINESS AND NEW BUSINESS MIX APE up 3% on a like-for-like basis with growth driven by capital efficient savings and protection products COMMENTARY • During the first half, Life new business annual premium equivalent • In North America, APE sales increased 33% on a like-for-like basis, (A
Slide 36: Lower investment result in Life
LIFE – INVESTMENT RESULT Lower investment result in Life driven by market impacts and FX movements, partially offset by higher reinvestment yield INVESTMENT RESULT IN BOP, GROSS OF PH (USDm)1 INVESTMENT INCOME YIELD OF GROUP INVESTMENTS (%) 2 3.4% 2.5% 1,733 246 1,232 HY-21 HY-22 1,487 1,515 BOOK &
Slide 37: Lower investment result in Life
LIFE – INVESTMENT RESULT Lower investment result in Life driven by market impacts and FX movements, partially offset by higher reinvestment yield COMMENTARY • The Life investment result, which is gross of policyholder sharing, reduced by 29% to USD 1.2bn in HY-22, driven by realized capital losses f
Slide 38: Growth in Farmers Exchanges drives increase in fees
FARMERS MANAGEMENT SERVICES – OVERVIEW Growth in Farmers Exchanges1 drives increase in fees with partial offset from MetLife integration costs BUSINESS OPERATING PROFIT (USDm) MGEP MARGIN (%) 2 +14% 832 6.8% 6.7% 728 846 756 -28 -14 HY-21 HY-22 HY-21 HY-22 Gross management result Net investment inco
Slide 39: Growth in Farmers Exchanges drives increase in fees
FARMERS MANAGEMENT SERVICES – OVERVIEW Growth in Farmers Exchanges1 drives increase in fees with partial offset from MetLife integration costs COMMENTARY • Farmers Management Services (FMS) BOP increased 14% compared to the prior year. This was mainly driven by growth in the premium base of the Farm
Slide 40: Farmers Life BOP and APE in line with HY-21
FARMERS LIFE AND FARMERS RE – OVERVIEW Farmers Life BOP and APE in line with HY-21, NBV drop driven by mix and market impacts; Farmers Re BOP improved BOP (USDm) FARMERS LIFE APE FARMERS LIFE NBV FARMERS LIFE NBM (%)1 (USDm)1 (USDm)1 50 61 58 151% 2 38 86% 36 31 60 60 -10 HY-21 HY-22 HY-21 HY-22 HY-
Slide 41: Farmers Life BOP and APE in line with HY-21
FARMERS LIFE AND FARMERS RE – OVERVIEW Farmers Life BOP and APE in line with HY-21, NBV drop driven by mix and market impacts; Farmers Re BOP improved COMMENTARY • Farmers Life BOP of USD 60m was in line with the prior year. • Farmers Re BOP of USD 2m was USD 12m higher than in the prior Negative ma
Slide 42: Group Functions and Non-Core Businesses BOP
GROUP FUNCTIONS AND OPERATIONS & NON-CORE BUSINESSES – BOP Group Functions benefiting from lower HQ expenses; Non-Core Businesses driven by negative market impacts GROUP FUNCTIONS AND OPERATIONS BOP (USDm) NON-CORE BUSINESSES BOP (USDm) 21 -142 -192 -92 -15 -22 -210 -232 -366 -446 HY-21 HY-22 HY-21
Slide 43: Group Functions and Non-Core Businesses BOP
GROUP FUNCTIONS AND OPERATIONS & NON-CORE BUSINESSES – BOP Group Functions benefiting from lower HQ expenses; Non-Core Businesses driven by negative market impacts COMMENTARY • Group Functions and Operations reported net expenses of USD 366m compared to USD 446m in the prior-year period. The improve
Slide 44: Strong underlying capital generation
GROUP – SOLVENCY Strong underlying capital generation combined with favorable market impact from rising yields 16% -16% 262% 46% 212% -6% 11% 48% Interest rates SST ratio (%)1 -4% Credit spreads 2% FX -1% Equity 1% Real estate FY-21 Assumption and Management Market Economic profit / Capital actions3
Slide 45: Strong underlying capital generation
GROUP – SOLVENCY Strong underlying capital generation combined with favorable market impact from rising yields COMMENTARY • As of June 30, 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 estimat
Slide 46: Decline in shareholders' equity
GROUP – BALANCE SHEET AND CAPITAL STRUCTURE Decline in shareholders’ equity driven by dividend payment, net unrealized losses and currency movements SHAREHOLDERS’ EQUITY (USDm) CAPITAL STRUCTURE (%) 1 -27% 37,881 2,204 -3,521 10% 12% -1,167 -8,347 18% 21% 27,780 730 71% 67% FY-21 NIAS Dividend Curre
Slide 47: Decline in shareholders' equity
GROUP – BALANCE SHEET AND CAPITAL STRUCTURE Decline in shareholders’ equity driven by dividend payment, net unrealized losses and currency movements COMMENTARY • Shareholders’ equity declined by USD 10.1bn compared to year end • During the first half, the Group redeemed USD 1bn of perpetual 2021, ma
Slide 48: 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 49: Appendix
@ ZuRICH Appendix
Slide 50: We are focused on 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% +5% p.a. 22 20 20 19 18 Dividend increases based on sustainable earnings growth FY-17 FY-18 FY-19 FY-20 FY-21 Minimum target of prior year level © Zuri
Slide 51: Update on brand consideration
BRAND CONSIDERATION Update on brand consideration BRAND CONSIDERATION 15 14 15 15 # of markets2 Awareness 53% 53% 60% 57% Consideration 21% 33% 27% 40% Preference 21% 13% 13% 7% 20191 2020 2021 2022 Ownership Top 3 Top 5 Below top 5 © Zurich 1 Re-calibrated on a comparable basis with 2020 and 2021.
Slide 52: Balance sheet and large loss volatility managed through reinsurance
PROPERTY AND CASUALTY Balance sheet and large loss volatility well managed through reinsurance GROUP CATASTROPHE REINSURANCE PROTECTION (USDm) MAIN ADDITIONAL TREATIES Global property per risk 200 115 200 Global surety excess of loss 1,200 200 1,200 200 U.S. property quota share 1,200 250 550 398 90
Slide 53: All lines contributed to premium growth at Farmers Exchanges
FARMERS EXCHANGES1 – GWP, PIF, COMBINED RATIO BY LINE, AND SURPLUS All lines of businesses contributed to premium growth at the Farmers Exchanges1 GROSS WRITTEN POLICIES-IN-FORCE COMBINED RATIO (%) 2 SURPLUS PREMIUM (USDm) (000’s) 104.8% 104.4% 11.8% 9.2% +15% -1% 93.1% 95.2% 40.8% 13,503 15,742 15,
Slide 54: Very strong capital position
GROUP – SOLVENCY Very strong capital position GROUP SWISS SOLVENCY TEST (%) 1 Q1-22 SST SENSITIVITIES IMPACT (ppts)2 300% 262% Interest rate +50bps +15ppts 216% 221% 222% 212% 204% Interest rate -50bps -17ppts 200% 182% Equities +20% +8ppts ≥160% Equities -20% -8ppts 100% Credit spreads +100bps3 -19
Slide 55: Well diversified capital base by business segment
GROUP – SST COMPONENTS Well diversified capital base by business segment HY-22 AVAILABLE FINANCIAL RESOURCES (USDbn) HY-22 RISK CAPITAL SPLIT (%) 1 6% Market risk 7% 1% Shareholders equity 27.8 Premium and reserve risk 10% Business risk 54% Natural catastrophe risk Dividend accrual -1.8 22% Life ins
Slide 56: 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 15.1 2.2 13.9 1.9 Average debt 0.4 FY-21 FY-22e 0.2 cost (%) 1.7 9.8 Subordinated 4.1% 4.2% 1.4 8.7 0.7 1.3 1.2 0.3 Senior 1.6% 1.5% 1.0 0.3 0.9 0.4 1.8 1.7 Tot
Slide 57: High quality investment portfolio
GROUP – INVESTMENT PORTFOLIO High quality investment portfolio with diversified exposure across sectors and asset classes HY-22 GROUP INVESTMENTS (%)1 HY-22 ASSET QUALITY (%) HY-22 NON-FINANCIAL CREDIT BY SECTOR (%) USD 59bn USD 79bn Transportation 2 Technology 5% 3% 0% Government 5% 2% 7% 0% 5% Oth
Slide 58: Highly diversified credit and private debt portfolio
GROUP – INVESTMENT PORTFOLIO Highly diversified credit and private debt portfolio HY-22 RATING OF CREDIT, PRIVATE DEBT SECURITIES (%) USD 24.6bn USD 18.9bn USD 12.9bn USD 7.3bn USD 4.2bn USD 11.2bn 3% 0% 1% 2% 1% 9% 13% 7% 4% 24% 27% 44% 19% 53% 32% 51% 88% 70% 18% 45% 33% 3% 17% 23% 5% 5% 1% 2% Non
Slide 59: Calculation of adjusted P&C combined ratio and like-for-like growth
ALTERNATIVE PERFORMANCE MEASURES Calculation of adjusted P&C combined ratio and like-for-like growth P&C COMBINED RATIO (%) LIKE-FOR-LIKE GROWTH HY-22 HY-21 (USDm) HY-22 (USDm) HY-22 COVID-19 L-F-L3 KPI combined ratio KPI combined ratio impact 1 (%) excl. COVID-191 Rep M&A Adj Rep FX M&A2 Adj2 AY lo
Slide 60: For further information
For further information CALL US VISIT OR FOLLOW US INVESTOR RELATIONS AND RATING AGENCY MANAGEMENT Jon Hocking +41 44 628 18 34 Björn Bierfreund +41 44 625 23 13 Francesco Bonsante +41 44 628 00 68 Samuel Han +41 44 625 32 57 Michèle Matlock +41 44 625 28 50 EVENTS Patricia Heina +41 44 625 38 44
Slide 61: Thank you
Thank you UPCOMING EVENTS • September 27, 2022: IFRS 17 education event (live webcast) • November 10, 2022: Update for the nine months ended September 30, 2022 • November 16, 2022: Investor Day, Zurich © Zurich Insurance Company Ltd
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