Zurich Insurance Group Ltd · SIX:ZURN

Zurich Insurance — Debt Investor Presentation (November 2018)

36 slides from Zurich Insurance's debt investor presentation, November 2018

  1. Slide 1: Credit investor update

    Credit investor update November 2018 Zurich Insurance Group

  2. Slide 2: Our proposition to investors

    GROUP UPDATE Our proposition to investors A HIGHLY STABLE AND CASH GENERATIVE BUSINESS MODEL, SUPPORTED BY: A balanced Industry leading Stable, consistent Consistent growth and diverse capital levels and conservatively with scope to global business managed balance enhance returns sheet through capit

  3. Slide 3: One of few genuinely global insurers

    GROUP UPDATE One of few genuinely global insurers FY-17 KEY FACTS BOP BY BUSINESS AND REGION2 USD 63bn total revenues USD 315bn total group and unit linked investments 28% Property & Casualty 34% Life USD 3.8bn business operating profit (BOP) Farmers3 USD 3.0bn net income attributable to shareholder

  4. Slide 4: Genuinely global franchise with distinct capabilities

    GROUP UPDATE Genuinely global franchise with distinct capabilities NORTH AMERICA EMEA #5 in commercial insurance #4 insurance company overall #2 in crop insurance #2 in P&C, #3 in life #7 in US personal lines ASIA PACIFIC #8 in P&C, #6 in life Top 3 through Farmers Exchanges1 #5 in P&C, #12 in life

  5. Slide 5: Strong capital position and cash generation

    GROUP UPDATE Strong capital position and cash generation VERY STRONG FINANCIAL STRENGTH STRONG CAPITAL POSITION SST and Z-ECM ratio (%)1 AA- / outlook ‘stable’ 250% 217% 216% 196% 204% 200% 185% 189% Aa3 / outlook ‘stable’ 150% 127% 125% 132% 134% 114% 122% 121% A+ (Superior) / outlook ‘stable’ 100%

  6. Slide 6: 2017-2019 Financial targets

    GROUP UPDATE 2017-2019 Financial targets1 BOPAT ROE2 in excess of 12% and increasing, despite higher equity base USD 1.5bn in net savings by 2019 compared to the 2015 baseline Z-ECM target ratio of 100-120% Cash remittances in excess of USD 9.5bn over 2017-2019 period © Zurich 1 BOPAT ROE target to

  7. Slide 7: Well on track to achieve all 2017-2019 targets

    GROUP UPDATE Well on track to achieve all 2017-2019 targets BOPAT ROE (%)1 Z-ECM RATIO (%) CUMULATIVE CASH REMITTANCES (USDbn) 12.3% 134% >9.5 120% 12.1% >7.0 >12.0% 100% 3.7 FY-17 HY-18 Target2 Q3-18e3 Target range FY-17 & FY-18e 2017 - 2019 Target CUMULATIVE NET EXPENSE SAVINGS (USDm) ~USD 900m as

  8. Slide 8: Continued delivery across all businesses

    GROUP UPDATE Continued delivery across all businesses P&C LIFE FARMERS EXCHANGES1 COMBINED RATIO (%) BOP GROWTH (%) COMBINED RATIO (CR) (%) 104.9% 98.3% 99.5% 97.5% +17% 10.5% 6.6% 2.9% 3.0% 32.4% 32.5% 94.4% 91.8% 65.2% 64.5% -1.0% -2.5% HY-17 HY-18 HY-17 HY-18 HY-17 HY-18 Cat ER AY LR ex-cat PYD C

  9. Slide 9: 2018 updated outlook

    GROUP UPDATE 2018 updated outlook  NEP expected to be broadly stable P&C  Combined ratio to move towards the indicated 95-96% range by 2019  Investment income excluding gains expected to be stable versus the prior year Life  Low double-digit growth in BOP compared to prior year  Steady growth e

  10. Slide 10: A new strategy fit for purpose, now and in the future

    STRATEGIC UPDATE A new strategy fit for purpose, now and in the future Focus on the customer: We focus our significant investments on improving our quality of service and the experience of our customers. A laser focus on investing for the benefit of our customers will guide all that we do. Simplify:

  11. Slide 11: Key businesses strengthened while exiting non-core activities

    STRATEGIC UPDATE Key businesses strengthened while exiting non-core activities; Customer focus improved with tangible results CUSTOMER FOCUS YIELDING POSITIVE RESULTS IN RETAIL Leadership in Latin America strengthened NET PROMOTER SCORE CUSTOMER RETENTION HY-18 vs. FY-17 (ppts) HY-18 vs. FY-17 (ppts

  12. Slide 12: Leveraging new technologies to redesign customer interactions

    STRATEGIC UPDATE We are leveraging new technologies to redesign customer interactions, increase service offerings and digitize core processes STRENGTHENING OUR KNOWLEDGE NEW CAPABILITIES AND BROADER REINVENTING THE OF THE CUSTOMER SERVICE OFFERINGS CUSTOMER EXPERIENCE  Strengthened customer analyti

  13. Slide 13: Growing access to customers through bank and affinity partnerships

    STRATEGIC UPDATE We continue to grow our access to customers through new bank and affinity partnerships WE ARE BUILDING ON OUR SUCCESSFUL RECORD WE CONTINUE TO BUILD OUT OUR AFFINITY PARTNERSHIPS IN BANCASSURANCE Europe’s largest frequent flyer program – • Deal signed in Germany, Austria, Switzerlan

  14. Slide 14: Strengthened businesses, extracted capital from non-core portfolios

    STRATEGIC UPDATE We have strengthened our businesses, extracted capital from non- core portfolios and returned in 2017 ~USD 3.8bn to shareholders MAIN DIVESTMENTS AND MAIN ACQUISITIONS TYPE OF BUSINESS STRATEGIC RATIONALE CAPITAL ACTIONS DEAL Skills Distribution Scale Sale of P&C business in Middle

  15. Slide 15: Diversifying our Asian footprint

    STRATEGIC UPDATE Diversifying our Asian footprint, with increased scale in our key geographies FOOTPRINT AND GWP CONTRIBUTION • Leading position in Individual Life after acquisition of Macquarie Life and One Path Life from AUSTRALIA ANZ with distribution agreements with ANZ and IOOF P&C and Life • S

  16. Slide 16: Investment and Capital Management

    Investment and Capital Management

  17. Slide 17: ALM-focused strategy delivering consistent and sustainable excess returns

    INVESTMENT AND CAPITAL MANAGEMENT ALM-focused strategy delivering consistent and sustainable excess returns ASSET ALLOCATION ASSET QUALITY DURATION1 FY-17 total Group investments of USD 208bn FY-17 Group debt investments of USD 163bn 9.6 8.7 3% 1% 7% 5% 4% 2% 27% 5% 25% 4.5 4.3 17% 25% 79% Life P&C

  18. Slide 18: 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 STRUCTURE1 MOODY’S LEVERAGE & COVERAGE Financial leverage = Aa at 15-30% 12% 11% 10% 9% 26.4% 24.3% 24.1% 23.7% 13% 14% 17% 16% Earnings coverage = Aa at 8-12x 76% 76% 73% 75%

  19. Slide 19: 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 2.5 2.2 2.0 2.0 0.6 1.7 0.2 1.8 400 1.5 1.5 0.5 0.8 0.9 200 1.0 1.0 0.7 1.9 1.6 0.5 0.3 0.3 1.2 0.3 1.0 0.2 0 0.5 0.4 0.0 Jan

  20. Slide 20: Managing our risks conservatively to AA financial strength

    INVESTMENT AND CAPITAL MANAGEMENT Managing our risks conservatively to AA financial strength GROUP SOLVENCY RBC SPLIT (%)2 SST1 250% 223% 217% 216% 10% Market risk 225% 196% 204% 183% 185% 189% 5% 3% Reinsurance credit risk 200% 7% Premium and reserving risk 175% 46% 150% Natural catastrophe risk 12

  21. Slide 21: Solvency ratios resilient to market movements

    INVESTMENT AND CAPITAL MANAGEMENT Solvency ratios resilient to market movements Z-ECM IMPACT1,2 SST IMPACT1,2 Actual value as of FY-17 132% Actual value as of FY-17 216% Interest rate +100 bps 136% Interest rate +100 bps 223% Interest rate -100 bps 121% Interest rate -100 bps 195% USD appreciation +

  22. Slide 22: Clear dividend policy and capital management policy

    INVESTMENT AND CAPITAL MANAGEMENT We have a clear and transparent dividend policy and a clear capital management policy CAPITAL MANAGEMENT POLICY (Z-ECM, %) M&A CRITERIA  Financed from internal resources and immediately accretive to shareholders >140% Mitigating actions required 120%-140% Mitigatin

  23. Slide 23: Repackaging structure

    INVESTMENT AND CAPITAL MANAGEMENT Repackaging structure BACKGROUND  Under Swiss tax legislation securities issued by a borrower resident in Switzerland would carry 35% Swiss withholding tax which may not be recoverable by international investors. Using a repackaging vehicle allows a Swiss borrower

  24. Slide 24: Z-ECM and SST are more conservative than Solvency II

    APPENDIX Z-ECM and SST are more conservative than Solvency II PRIMARY DIFFERENCES – REQUIRED CAPITAL Most onerous Z-ECM SST1 Solvency II (Pillar 1) impact on ratio VaR 99.95% (~AA) ES 99% (~BBB) VaR 99.5% (~BBB), RISK MEASURE usually < ES 99% • Market Risk (including • Market Risk (including Interna

  25. Slide 25: Z-ECM and SST are more conservative than Solvency II

    APPENDIX Z-ECM and SST are more conservative than Solvency II PRIMARY DIFFERENCES – YIELD CURVES AND TRANSITIONALS Most onerous Z-ECM / SST1,2 Solvency II (Pillar 1) impact on ratio BASE RISK-FREE Swaps Swaps YIELD-CURVE ENTRY-POINT TO Use all available market data CHF: 25 years EXTRAPOLATION CHF: 3

  26. Slide 26: Z-ECM and SST are more conservative than Solvency II

    APPENDIX Z-ECM and SST are more conservative than Solvency II PRIMARY DIFFERENCES – OTHER KEY ELEMENTS Most onerous Z-ECM SST1 Solvency II (Pillar 1) impact on ratio Available Capital Liability Liability SENIOR DEBT Pre-tax Pre-tax Post-tax TAX Management view Legal entity view Legal entity view • I

  27. Slide 27: Strongly cash generative business reflected in high cash remittance

    APPENDIX We have a strongly cash generative business reflected in high cash remittance NET INCOME AND REMITTANCES 2012-20171 (USD) P&C LIFE FARMERS NON-CORE GFO2 GROUP NIAS 2012-17 12.0bn 6.2bn 6.3bn 0.3bn -4.9bn 19.9bn REMITTED 2012-17 12.5bn 4.4bn 6.6bn 1.0bn Ø PAYOUT 104% 71% 103% nm 95% 2017 – 2

  28. Slide 28: Streamlined organization with strengthened management

    APPENDIX A streamlined organization with strengthened management and continued investment in people LEADERSHIP TEAM FURTHER STRENGTHENED ACTIONS TAKEN Group Chief Executive Officer Group structure simplified Mario Greco BUSINESS HEADS FUNCTIONAL HEADS Slimmed down corporate center Farmers Group, Inc

  29. Slide 29: Reinsurance program in line with Group risk appetite

    APPENDIX Reinsurance program in line with Group risk appetite GROUP CATASTROPHE REINSURANCE PROTECTION (USDm) 200 105 200 200 750 750 200 750 200 350 750 250 456 250 250 300 7503 497 600 600 200 Europe US US Rest of World all perils Global aggregate cat treaty all perils1 all perils (excl. EQ) earth

  30. Slide 30: Reinsurance effective in protecting earnings during recent hurricanes

    APPENDIX Our reinsurance has been effective in protecting earnings during recent hurricanes saving ~USD 300m v 2015 structure ILLUSTRATIVE WALK FROM GROSS TO ULTIMATE NET LOSS Q3-17 NET IMPACT FROM SIGNIFICANT CAT (USDbn)4 FOR HURRICANES HARVEY, IRMA AND MARIA (USDbn) U.S. P&C market % of HY-17 shar

  31. Slide 31: Acquisition of ANZ's Life insurance business

    APPENDIX Acquisition of ANZ’s Life insurance business, compelling strategic and financial rationale  Creates a leading Australian life business with a 19% retail protection market share Leadership in  20 year strategic partnership with ANZ, a leading Australian banking group, for the distribution

  32. Slide 32: Acquisition of QBE's Latam business

    APPENDIX Acquisition of QBE’s Latam business, a unique opportunity to achieve leadership in Argentina on attractive terms  Transaction creates the leading insurer1 in the profitable and growing Argentine market Leadership in  Zurich to become #3 in P&C and #11 overall with ~8% market share Argenti

  33. Slide 33: Acquisition of Adira Insurance

    APPENDIX Acquisition of Adira Insurance, a unique opportunity to achieve a leadership position in an attractive Asian growth market  Acquisition of 80% stake in PT Asuransi Adira Dinamika (Adira Insurance) Transaction  Formation of two separate long term strategic partnerships with PT Bank Danamon

  34. Slide 34: 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’).

  35. Slide 35: For further information

    For further information CALL US VISIT OR FOLLOW US Investor Relations & 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 & Capital Management  Inves

  36. Slide 36: Credit investor update

    © Zurich Insurance Company Ltd Credit investor update 36

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