Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — FY2016 Earnings Presentation
85 slides from Zurich Insurance's earnings presentation, Feb 9, 2017
Slide 1: Annual results 2016
Annual results 2016 Investor presentation February 9, 2017 Zurich Insurance Group
Slide 2: Content
Content Use symbols to navigate through the document MAIN SECTION APPENDIX Key highlights General Insurance Group BOP & NIAS BOP Global Life General Insurance Farmers Exchanges Global Life Other Operating Businesses Farmers Group Investments Other Operating and Non-Co
Slide 3: Key messages
Key messages Good profitability across the Group Group Cost savings delivered and on track to deliver 2017-2019 targets General Underwriting improved across all regions, absolute costs reduced Insurance Further progress expected Continued execution of unit-linked and protection strategy Gl
Slide 4: Key financials
Key financials Earnings growth with strong cash generation and capital FY-16 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD FY-16 Target BOP BOPAT ROE1 11.6% 12 – 14% USD 4.5bn (+55%) FY-163 Target Z-ECM2 ~122% 100 – 120% NIAS Cumulative Cumulative USD 3.2bn Net cash 2014-16 2014-2016 (+74%) remit
Slide 5: Key achievements
Key achievements 2016 performance provides a solid basis for delivery in 2017+ GENERAL INSURANCE GLOBAL LIFE FARMERS EXCHANGES2 Combined Ratio (%) BOP growth in LC excl. SOI1 (USDm) GWP excl. run-off (USDm) 103.6% 98.4% 3.5% +5% 2.6% +13% 19,066 18,135 100.0% 97.4% 0.1% -1.6% FY-15 FY-16 2015 2016 F
Slide 6: Expense development
Expense development USD 300m run-rate direct expense savings delivered in 2016 DIRECT SPEND BASIS (USDbn)1 -0.3 10.3 -0.1 0.1 -0.3 9.9 2015A Disposals Acquisitions Spend 2016 adjusted 1 Values are in constant FY-15 FX for comparability. February 9, 2017 ? Annual results 2016 6
Slide 7: 2017 Outlook
2017 Outlook General NEP expected to be broadly stable CR to move towards the indicated 95-96% range by 2019 Insurance Investment income to decline driven by lower new money yields Overall BOP to remain broadly stable Global Life Underlying growth and in-force management offset by German Z
Slide 8: 2017-2019 Financial targets
2017-2019 Financial targets BOPAT ROE1 in excess of 12% and increasing, despite higher equity base USD 1.5bn in net savings by 2019 compared to the 2015 baseline Cash remittances in excess of USD 9.5bn over 2017-2019 period Z-ECM target ratio of 100-120% 1 Business Operating Profit after tax return
Slide 9: 2016 financial overview
@ ZURICH 2016 financial overview
Slide 10: Group – BOP and NIAS
Group – BOP and NIAS GI BOP restored with other businesses continuing growth BOP (USDm) NIAS (USDm) BOP TO NIAS (USDm) +55% 4,638 4,530 3,949 +74% 860 -548 -208 2,979 3,211 382 2,916 2,435 -1,539 864 268 1,273 1,300 1,344 1,842 4,530 30.7% tax rate 1,573 1,421 1,520 3,211 51 -960 -720 -758 -11 -227
Slide 11: General Insurance – Topline
General Insurance – Topline Stable and positive rates, volumes driven by profitability measures GWP GROWTH IN LC1 (%) RATE CHANGE2 (%) Q4-15 Q3-16 Q4-16 -8% GC 0% 1% 0% 1% 3% Ex. RCIS 11% -2% NAC 7% 0% 2% 1% -1% -4% EMEA -1% 2% 2% 2% 0% 0% IM 9% 5% 1% 1% 3% Ex. RCIS 0% 3% -4% Total3 2% 2% 2% 2% FY-1
Slide 12: General Insurance – Combined ratio over time
General Insurance – Combined ratio over time Management actions are delivering results COMBINED RATIO (%) 108.9% 108.6% 99.3% 100.0% 97.7% 99.0% 98.5% 98.5% 95.9% 95.6% 96.7% 96.7% 31.1% 32.8% 30.2% 30.9% 31.2% 31.6% 31.6% 30.3% 31.7% 33.7% 29.7% 31.4% 2.3% 6.7% 1.9% 3.0% 1.9% 1.4% 3.4% 1.1% 5.8% 1.
Slide 13: General Insurance – Combined ratio details
General Insurance – Combined ratio details AY LR ex-cat improving, expense ratio flat vs FY-15 LOSS RATIO (%) EXPENSE RATIO (%) 75.7% 32.8% 33.7% 31.7% 31.8% 31.2% 30.5% 71.8% 6.7% 14.0% 15.4% 3.5% 68.1% 14.0% 14.7% 13.9% 66.6% 13.7% 66.4% 1.9% 64.8% 2.3% 2.6% 1.6% 65.2% 68.2% 65.6% 67.0% 69.5% 65.0
Slide 14: General Insurance – Regional combined ratios
General Insurance – Regional combined ratios AY LR ex-cat improving in all areas, further actions needed in GC GC CR SPLIT (%) EMEA CR SPLIT (%) 113.9% 104.2% 95.1% 101.3% 95.4% 95.7% 22.7% Size by regions, 23.4% 31.1% 32.1% 31.4% 21.8% 4.7% 3.0% 4.6% FY-16 NEP (USDm): 1.8% 2.1% 2.2% 82.9% 80.4% 71.
Slide 15: General Insurance – BOP components
General Insurance – BOP components Increased BOP reflects continuing improvement BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) 2,979 2,435 98 -24 16 67 947 2,435 864 412 1,414 2,239 2,002 2,086 864 -112 -133 70 -95 -1,002 -108 -29 FY-14 FY-15 FY-16 FY-15 UWR Inv. Inc. RCG NTR NCI FY-16 Underwriting resul
Slide 16: Global Life – New business by product
Global Life – New business by product Growth in protection volumes, limited guarantee exposure APE1 (USDm) NBV1 (USDm) FY-16 NBM1 BY PRODUCT 5,082 912 917 4,772 11 84 Protection 45.4% 63 1,111 951 201 215 822 Corporate 924 16.2% Pensions 1,341 1,430 637 652 Unit Linked 11.5% 1,809 1,467 -35 FY-15 FY
Slide 17: Global Life – BOP by region
Global Life – BOP by region Strong BOP growth, particularly in Santander and APAC BOP BY REGION (USDm)1 KEY DRIVERS (USDm) +3% 1,273 1,344 1,300 1,344 52 92 1,300 95 -61 50 -19 -77 43 56 92 141 118 43 178 118 178 222 250 195 250 195 917 892 911 911 892 -59 -8 -26 -8 -26 FY-14 FY-15 FY-16 FY-15 EMEA
Slide 18: Global Life – Source of earnings
Global Life – Source of earnings Investment margin and expense savings drive BOP increase in LC BOP BY SOURCE OF EARNINGS (USDm) REGIONAL BOP & KPI (USDm) D FY-151 Reported BOP by region (% D vs. FY-15 reported) Loadings & fees 3,056 791 3,847 0% -34% 28% 2% nm nm Investment margin2 619 767 18% 911
Slide 19: Global Life – Net inflows & AuM
Global Life – Net inflows & AuM Higher net inflows and positive markets partially offset by FX NET INFLOWS BY REGION (USDbn)1 AUM DEVELOPMENT (USDbn)2 8.3 0.2 254 10 -17 256 8 7.2 35 36 0.5 2.5 6.0 0.7 2.1 0.9 103 105 2.2 0.7 0.8 5.1 3.9 116 115 2.5 -0.3 -0.1 -0.3 Balance as Net inflows Market FX Ba
Slide 20: Farmers Exchanges – Growth
Farmers Exchanges1 – Growth Rate increases drive growth, Eastern expansion gaining traction GWP GROWTH (%) EASTERN EXPANSION GWP3 (USDm) 5.5% 5.5% 5.5% 691 4.7% 3.8% 3.8% 3.9% 486 3.6% 3.1% 2.1% 256 113 36 4 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 2011 2012 2013 2014 2015 2016 Continuing Operations2 Total 1 P
Slide 21: Farmers Exchanges – Growth drivers
Farmers Exchanges1 – Growth drivers Rate increases impact new business production NET PROMOTER SCORE2 RETENTION3 79.9% 80.2% 79.9% 79.6% 43.0 43.5 43.3 43.2 79.2% 40.4 FY-15 Q1-16 HY-16 9m-16 FY-16 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 NET GAIN / LOSS OF AGENTS4 NEW BUSINESS COUNT GROWTH5 87 7.0% 4.9% 64 44
Slide 22: Farmers Exchanges – Profitability
Farmers Exchanges1 – Profitability Exceptionally high cat losses, unfavorable claims trend in Auto COMBINED RATIO2 (%) SURPLUS2 (USDbn) 38.5% 101.9% 103.9% 36.6% 37.0% 99.4% 6.0% 7.1% 5.2% 6.3 6.0 5.6 94.2% 95.9% 96.8% 5.4 5.5 5.5 0.9 0.5 0.1 FY-14 FY-15 FY-16 FY-14 FY-15 FY-16 Surplus ratio Catastr
Slide 23: Farmers – FMS and Farmers Re financials
Farmers – FMS and Farmers Re financials Higher fee income and special item drive FMS BOP BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 1,573 7.2% 7.1% 7.0% 101.2% 103.3% 1,520 98.3% 1,421 5.3% 6.7% 4.9% 1,383 1,360 1,478 93.4% 95.9% 96.6% 190 61 42 FY-14 FY-15 FY-16 FY-14 FY-15 FY-16 FY-14 FY-15 FY
Slide 24: Other Operating and Non-Core Businesses – BOP
Other Operating and Non-Core Businesses – BOP Lower gross HQ costs offset by reduced business unit recharges OOB BOP (USDm) NON-CORE BOP (USDm) 51 -200 -230 -282 -11 -520 -528 -678 -720 -758 -960 -227 FY-14 FY-15 FY-16 FY-14 FY-15 FY-16 Headquarters Holding & Financing1 Non-Core Businesses 1 Include
Slide 25: Group Investments – Investment income yield
Group Investments – Investment income yield1 Rising yields reduced the gap to accounting yield in Q4 GENERAL INSURANCE GLOBAL LIFE GROUP 2.41% 3.30% 2.81% Equity 2.41% Equity 3.02% Equity 2.67% 1.95% Reinvestment 2.64% Reinvestment 2.16% Yield at Yield at 2.68% 3.11% 2.90% ~2.0%2 ~1.7%2 Debt 2.48% D
Slide 26: Group – Balance sheet and capital structure
Group – Balance sheet and capital structure Decline of shareholders’ equity driven by Q4 movements SHAREHOLDERS’ EQUITY (USDm) CAPITAL STRUCTURE1 (%) 378 -626 10% 9% 10% 31,178 -879 30,660 14% 19% 20% 3,211 -2,602 76% 73% 70% FY-15 Dividend NIAS Net CTA Pension FY-16 FY-15 FY-16 Target URG/L plans &
Slide 27: Group – Solvency ratios
Group – Solvency ratios Strong capital position Z-ECM AND SST1 RATIO (%) YIELD CURVE MOVEMENT Swap rates (%) 196% 189% 3.0 167%2 2.5 122% 121% 122%2 2.0 114% 1.5 1.0 0.5 0.0 Years Z-ECM SST1 0 5 10 15 20 25 30 EUR end-September USD end-September FY-14 FY-15 9m-16 FY-16 EUR end-December USD end-Decem
Slide 28: Group – Cash remittances & dividend proposal
Group – Cash remittances & dividend proposal Overall good cash remittance, CHF 17 dividend maintained NET CASH REMITTANCES (USDbn) DIVIDEND PER SHARE (CHF) 3.7 3.9 1.7 2.8 2.4 2.0 0.9 17 17 17 17 17 17 17 16 15 0.9 0.4 11 1.5 1.2 1.1 0.5 0.1 0.1 -0.6 -0.8 -1.0 FY-14 FY-15 FY-16 2007 2008 2009 2010 2
Slide 29: Key messages
Key messages Good profitability across the Group Group Cost savings delivered and on track to deliver 2017-2019 targets General Underwriting improved across all regions, absolute costs reduced Insurance Further progress expected Continued execution of unit-linked and protection strategy Gl
Slide 30: 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’).
Slide 31: Appendix
@ ZURICH Appendix
Slide 32: GI – Q4-16 regional combined ratios
GI – Q4-16 regional combined ratios AY LR ex-cat improving, further actions needed in GC GC CR SPLIT (%) EMEA CR SPLIT (%) 115.2% 115.2% 113.6% 95.4% 22.8% 25.6% 98.9% 96.2% Size by regions, 34.0% 22.5% 8.7% 1.2% 32.5% 32.2% Q4-16 NEP (USDm): 2.4% 1.0% 11.8% 0.5% 82.6% 86.1% 72.7% 66.3% 68.5% 63.8
Slide 33: GI – Q4-16 BOP components
GI – Q4-16 BOP components Increased BOP reflects continuing improvement BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) 611 611 511 9 1 97 -14 33 52 518 501 521 -39 7 -22 16 701 -20 -605 -23 -120 -120 Q4-14 Q4-15 Q4-16 Q4-15 UWR Inv. Inc. RCG NTR NCI Q4-16 Underwriting result (UWR) Investment income (Inv.
Slide 34: GI – Loss and paid to ultimate triangles
GI – Loss and paid to ultimate triangles Favorable run-off of reserves in most accident years ULTIMATE NET LOSS AND PAID TO ULTIMATE RATIOS (%) KEY TAKEAWAYS AY 2009 2010 2011 2012 2013 2014 2015 2016 In the year 74.5% 75.8% 76.1% 72.4% 70.7% 67.4% 71.8% 68.3% Favorable PYD in all 1 year later 74.
Slide 35: GI – Ogden
GI – Ogden We are reserved at an assumed 1% Ogden rate CURRENT STATUS SENSITIVITIES Announcement of the outcome of the Group remains strongly reserved Ogden Tables review for bodily injury claims by the UK Ministry of Justice still 1-2% PYD range means roughly USD outstanding 400m of reserve r
Slide 36: GI – P&L impact of RCIS acquisition
GI – P&L impact of RCIS acquisition 2016 was a very good year for crop insurance IMPACT GENERAL INSURANCE IMPACT NAC FY-16 Total GI RCIS1 GI ex. RCIS FY-16 Total NAC RCIS1 NAC ex. RCIS GWP (USDm) 33,122 1,389 31,733 GWP (USDm) 11,917 1,389 10,528 NEP (USDm) 26,102 329 25,773 NEP (USDm) 8,056 329 7,7
Slide 37: GI – Rate change monitor
GI – Rate change monitor Rate increases driven by re-underwriting actions Q4-16 ZURICH RATE CHANGE ASSESSMENT Business Assessment Solid rate increases reflecting focus on re-underwriting but below prior year levels with lower Group levels in Latin America due to market pressures. Rate increase at pr
Slide 38: GI – Catastrophe reinsurance
GI – Catastrophe reinsurance1 Lower retention on global aggregate cat treaty CATASTROPHE REINSURANCE TREATIES1 (USDm) 10 200 105 10 200 10 200 750 10 200 Single global USD 200m treaty, which can be applied to any region2 750 750 10 350 750 421 350 350 Single global USD 750m treaty, which can be appl
Slide 39: GL – New business by pillar
GL – New business by pillar APE increasing with lower NBM driven by yields and mix Q4-16 KEY FINANCIALS1 APE (USDm) CLP single NBM PVNBP 1,678 premium 1,201 1,240 752 393 461 17.0% USD 13.1 bn USD 1.7 bn 483 424 432 443 384 346 Q4-14 Q4-15 Q4-16 KEY DRIVERS NBV (USDm) NBV decreased mainly from adver
Slide 40: GL – Q4-16 BOP by region
GL – Q4-16 BOP by region Good result in LatAm and APAC BOP BY REGION (USDm)1 KEY DRIVERS (USDm) +4% 312 312 308 299 299 -8 34 -3 24 -10 34 8 9 9 -3 13 38 35 38 35 57 46 61 46 61 28 215 216 200 216 200 -1 -10 -18 -10 -18 Q4-14 Q4-15 Q4-16 Q4-15 EMEA LatAm2 NA APAC Other FX2 Q4-16 Other APAC North Ame
Slide 41: Farmers Exchanges – Profitability in Q4
Farmers Exchanges1 – Profitability in Q4 Aggregate cat cover triggered in Q4 COMBINED RATIO2 (%) SURPLUS2 (USDbn) 106.6% 38.5% 102.7% 36.6% 37.0% 95.7% 6.7% 4.0% 2.0% 6.3 6.0 5.6 99.9% 98.7% 93.7% 5.4 5.5 5.5 0.9 0.5 0.1 Q4-14 Q4-15 Q4-16 FY-14 FY-15 FY-16 Surplus ratio Catastrophe losses CR (excl.
Slide 42: Farmers – FMS and Farmers Re financials in Q4
Farmers – FMS and Farmers Re financials in Q4 Special item benefits FMS BOP, cat limit reached at Farmers Re BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 450 7.2% 7.2% 7.0% 104.2% 420 98.9% 95.2% 5.8% 2.1% 1.8% 351 345 429 93.4% 98.4% 96.8% 355 75 -4 21 Q4-14 Q4-15 Q4-16 Q4-14 Q4-15 Q4-16 Q4-14 Q4
Slide 43: Farmers Exchanges – GWP
Farmers Exchanges1 – GWP Rate increases in Auto continue to drive growth DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) +3.3% +2.1% 19,714 4,611 4,706 19,077 7,859 9.9% 1,790 1,953 9.1% 7,151 -8.2% -8.7% 1,035 949 244 222 595 596 0.1% 145 144 -0.9% 5,013 5,248 4.7% 1,224 1,246 1.7% 2,292 2.5% 501 1.7% 2
Slide 44: Farmers Exchanges – PIF/VIF
Farmers Exchanges – PIF/VIF1 Rate increase take toll on Auto and Home PIF/VIF DEVELOPMENT OF PIF/VIF BY BUSINESS LINE (THOUSANDS) -1.7% -1.3% 19,016 18,689 18,935 18,689 8,109 8,255 8,330 8,255 +1.8% -0.9% -17.5% 909 750 785 750 -4.5% 757 711 -6.0% 732 711 -2.9% 4,800 4,835 0.7% 4,841 4,835 -0.1% 1.
Slide 45: Farmers Exchanges – Combined ratio
Farmers Exchanges – Combined ratio Exceptionally high cat losses, unfavorable claims trend in Auto COMBINED RATIO1 BY BUSINESS LINE (%) Auto 110.0% Auto 109.7% 108.2% 116.2% Bristol West2 100.1% Bristol West2 95.7% 106.1% 106.9% 21st Century 110.4% 21st Century 118.6% CA/HI2 98.7% CA/HI2 109.9% 99.5
Slide 46: Farmers Exchanges – Combined ratio history
Farmers Exchanges – Combined ratio history Exceptionally high cat losses in 2016 due to Texas storms QUARTERLY COMBINED RATIO (%) Incl. Incl. 17 Catastrophe Incl. 120 Ike & Gustav Events 13 Catastrophe Events Incl. 115 13 Catastrophe Incl. Incl. Events 13 Catastrophe Texas storms 110 Incl. Events Ir
Slide 47: Other Operating Businesses
Other Operating Businesses HQ cost savings passed on to business units QUARTERLY BOP SPLIT (USDm) -38 -24 -64 -51 -48 -51 -78 -77 -115 -82 -133 -134 -126 -171 -116 -146 -139 -170 -171 -177 -184 -193 -219 -249 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Headquarters Holding & Financing1 1 Include
Slide 48: Group Investments – Asset allocation
Group Investments – Asset allocation Sources of investment risk and return are balanced ASSET ALLOCATION1 RISK DIVERSIFICATION RISK DRIVERS2 Total Group Investments: USD 190bn 3% 6% 7% 0% 4% 100% 6% 2% 6% 29% 31% 23% 45% 12% 79% Sum of single Investment Investment security risks risks risk relative
Slide 49: Group Investments – Debt securities portfolio
Group Investments – Debt securities portfolio1 Debt securities portfolio is of a high quality BY CATEGORY BY RATING Total debt securities: USD 140bn 12% 1% 4% 21% 25% 47% 40% 16% 33% Government and government related bonds MBS/ABS2 AAA A Non-rated Corporate bonds AA BBB Non-investment grade 1 Accoun
Slide 50: Group Investments – Bond portfolio
Group Investments – Bond portfolio1 High quality and well diversified BY SEGMENT BY RATING BY COUNTRY Total bonds: USD 123bn 27% USA 8% 1% 9% United Kingdom 4% 16% 9% France 34% 9% Italy Bond 29% 8% Switzerland securities 8% Spain 8% Germany 64% 32% 3% Netherlands 59% 2% Australia
Slide 51: Group Investments – Government bonds & Other
Group Investments – Government bonds & Other1 High quality and well diversified BY SEGMENT BY RATING BY COUNTRY Total government bonds: USD 66bn 23% USA 8% 0% 14% Italy 4% 23% 10% Spain 32% 23% 9% France Bond 8% Switzerland securities 8% United Kingdom 4% 5% Germany 64% 3% Belgium 60
Slide 52: Group Investments – Corporate bonds
Group Investments – Corporate bonds1 High quality and well diversified BY SEGMENT BY RATING BY INDUSTRY Total corporate bonds: USD 57bn 48% Financial Institutions 7% 2% o/w 89% Banks 13% 4% o/w 4% Insurance 35% 18% Manufacturing Bond 13% 8% Utilities 33% securities 5% Oil & Gas 4% Telecom
Slide 53: Group – Z-ECM components
Group – Z-ECM components Well diversified capital base by risk type 9M-16 AFR1 COMPOSITION (USDbn) RBC1 BY RISK TYPE AND BUSINESS Market risk Shareholders equity 32 2% Re-ins credit risk 5% 5% 11% P&R risk2 Dividend accrual 2 54% Natural cat risk 21% Life insurance risk Net intangibles 18 Operationa
Slide 54: Group – Z-ECM sensitivities
Group – Z-ECM sensitivities1 Z-ECM resilient to market movements Z-ECM RATIO IMPACT2 Actual value as of HY-16 107% Interest rate +100 bps 112% Interest rate -100 bps 99% USD appreciation +10% 108% Equities +20% 109% Equities -20% 104% Credit spreads +100 bps3 89% CS excl. Euro sovereign +100 bps3 95
Slide 55: Group – EPS, BVPS and ROE calculations
Group – EPS, BVPS and ROE calculations1 EPS AND BVPS (CHF) BOPAT ROE AND ROE (%) No., CHF FY-15 FY-16 USDm, % FY-15 FY-16 Common shares issued 150.40m 150.61m SHE 31,178 30,660 Treasury shares 1.24m 1.20m Net URGL / CF hedges 2,850 3,227 Common shares outst. 149.16m 149.40m Adj. SHE 28,328 27,432 WA
Slide 56: Group – Currency impact
Group – Currency impact Unfavorable translational FX impact mainly in Global Life results FY-16 KEY RESULTS KPI USDm reported at constant currency BOP 4,530 +55% +62% Group NIAS 3,211 +74% +82% GWP 33,122 -3% 0% NEP 26,102 -7% -4% General Net underwriting result 412 +141% +141% Insurance Investment
Slide 57: Commentary
@ ZURICH Commentary
Slide 58: Page 3: Key messages
Page 3: Key messages 2016 represents a good result with improved profitability across all areas of the group. With a strong balance sheet and cash generation, the Group is well positioned to deliver further improvement in 2017 towards the Group’s targets and to execute on the strategic priorities ou
Slide 59: Page 4: Key financials
Page 4: Key financials Business operating profit (BOP) for the Group was USD 4,530m for 2016 and net income attributable to shareholders (NIAS) was USD 3,211m, with the fourth quarter continuing the recent improvement in results. The Group BOPAT ROE reached 11.6% for the year, moving towards the tar
Slide 60: Page 5: Key achievements
Page 5: Key achievements 2016 has seen significant improvement in profitability across the business, with the business showing a range of proof points against key management goals, including: In General Insurance re-underwriting efforts have resulted in a 2.6pt improvement in the accident year loss
Slide 61: Page 6: Expense development
Page 6: Expense development The FY-16 result includes net direct expense savings of USD 300m. These savings exclude Farmers, take into account FX and the impact of acquisitions and disposals during 2016, and come largely from General Insurance. These savings do not reflect the previously announced r
Slide 62: Page 7: 2017 Outlook
Page 7: 2017 Outlook Whilst there are uncertainties in the world, there are also signs of an improving backdrop in terms of growth both in the US and Europe. The precise direction of the new US administration on a range of issues from regulation to corporate taxation and infrastructure investment re
Slide 63: Page 8: 2017-2019 Financial targets
Page 8: 2017-2019 Financial targets Now turning to the four Group targets for the cycle 2017 to 2019. First the Group targets a ROE in excess of 12% over the 2017-2019 period. This assumes no major improvement in investment yields or the current pricing environment across the core markets, and refle
Slide 64: Page 10: Group – BOP and NIAS
Page 10: Group – BOP and NIAS BOP and NIAS both show a strong recovery in 2016 reflecting the improved profitability of General Insurance and solid delivery from Global Life and Farmers. The recovery in NIAS is more pronounced with lower restructuring costs and a lower tax rate together with the abs
Slide 65: Page 11: General Insurance – Topline
Page 11: General Insurance – Topline FY-16 gross written premium (GWP) was down 3% on a reported basis and flat compared to the prior year in local currency terms. Adjusted for the RCIS acquisition, GWP was 4% lower in local currency. This reduction is in line with expectations and driven by the ong
Slide 66: Page 12: General Insurance – Combined ratio over time
Page 12: General Insurance – Combined ratio over time The reported combined ratio (CR) for Q4-16 was 98.5%, which is slightly higher than the expected range of 97-98% and significantly improved compared to the same quarter in 2015. The quarter saw a lower accident year (AY) loss ratio excluding cata
Slide 67: Page 13: General Insurance – Combined ratio details
Page 13: General Insurance – Combined ratio details Looking at the AY loss ratio in more detail, large man-made losses in 2016 were 1.6 percentage points lower than in 2015, considering also the port explosions in Tianjin in Q3-15. In Q4-16 large losses were on a similar level as in Q3-16 and signif
Slide 68: Page 14: General Insurance – Regional combined ratios
Page 14: General Insurance – Regional combined ratios Looking at the performance by region: Global Corporate’s combined ratio of 104.2% for FY-16 is significantly lower than in FY-15. This is mainly driven by a favorable impact from prior year reserves, the absence of major catastrophes and exposure
Slide 69: Page 15: General Insurance – BOP components
Page 15: General Insurance – BOP components The General Insurance BOP for the full year was USD 2.4bn, which is a sharp improvement compared to the BOP result and the underwriting loss in 2015. This is also reflected in the combined ratio improvement of 5 percentage points. For Q4-16 BOP is USD 611m
Slide 70: Page 16: Global Life – New business by product
Page 16: Global Life – New business by product FY-16 Global Life new business APE volumes increased 7% in local currency compared to the prior year, with strong growth in LatAm driven by a large corporate protection contract in Zurich Chile, and in Spain where increases in individual savings volumes
Slide 71: Page 17: Global Life – BOP by region
Page 17: Global Life – BOP by region Global Life BOP increased 9% in local currency, or 3% compared to the prior year in US dollars, to USD 1.3bn. In EMEA, local currency BOP earnings increased by 6%, growing 2% in USD, where favorable experience relative to assumptions in the UK and positive market
Slide 72: Page 18: Global Life – Source of earnings
Page 18: Global Life – Source of earnings Adjusting for one-off Special Operating Items (SOIs) in both the current and prior years, the local currency BOP increase was 13%. Viewed by margin excluding SOIs, and beginning with revenues, loadings and fees decreased by 5 percent as reported, but remaine
Slide 73: Page 19: Global Life – Net inflows & AuM
Page 19: Global Life – Net inflows & AuM Net inflows were positive for the year, largely driven by sales through Bank Distribution partners in LatAm and EMEA, and Corporate Life & Pensions volumes in Switzerland. AuM increased by 1% during the year, as strong in flows and positive market movements w
Slide 74: Page 20: Farmers Exchanges – Growth
Page 20: Farmers Exchanges – Growth The Farmers Exchanges have continued to show good growth throughout 2016, particularly in Auto but also in Home. Growth in continuing operations was 5.1% for the year and 3.9% in the discrete fourth quarter. This is driven by higher average premiums in Auto and Ho
Slide 75: Page 21: Farmers Exchanges – Growth drivers
Page 21: Farmers Exchanges – Growth drivers The Farmers Exchanges Net Promotor Score and retention have been relatively stable despite the level of rate increases taken over the past year. New business production has declined in the latter part of the year as Farmers Exchanges continues to focus on
Slide 76: Page 22: Farmers Exchanges – Profitability
Page 22: Farmers Exchanges – Profitability Farmers Exchanges combined ratio for the year deteriorated by 2.0pts to 103.9% driven by a 2.7pts higher loss ratio for the following reasons: Exceptionally high cat losses exceeding USD 1.3bn, of which more than half related to Texas storms. There were r
Slide 77: Page 23: Farmers – FMS and Farmers Re financials
Page 23: Farmers – FMS and Farmers Re financials Farmers BOP increased USD 99m or 7.0% to USD 1.5bn, driven by a strong increase at FMS which was partly offset by a decline at Farmers Re. Fourth quarter FMS BOP of USD 429m included a USD 86m favorable impact of freezing the company’s pension plan ef
Slide 78: Page 24: Other Operating and Non-Core Businesses – BOP
Page 24: Other Operating and Non-Core Businesses – BOP Other Operating Businesses BOP loss of USD 758m was higher than previous year but below the guidance of USD 800m. At a gross level headquarter costs reduced by ~USD190m despite higher levels of performance related staff expenses, which were depr
Slide 79: Page 25: Group Investments – Investment income yield
Page 25: Group Investments – Investment income yield Annualized reinvestment yields for debt securities were around 2.0% for General Insurance and around 1.7% for Life, with the difference reflecting primarily the geographic composition of the two businesses. In Q4 the gap to the annualized accounti
Slide 80: Page 26: Group – Balance sheet and capital structure
Page 26: Group – Balance sheet and capital structure Shareholders’ equity declined slightly given the reduction of net unrealized capital gains in the fourth quarter, reflecting increases in yields and spreads and the negative impact of currency and the pension deficit movements over the year. The e
Slide 81: Page 27: Group – Solvency ratios
Page 27: Group – Solvency ratios The end-September Z-ECM ratio came in at 114%, in line with the estimate at the time of the Q3 results in November. By the end of the year the Z-ECM ratio is expected to have improved to 122%. The increase is mainly due to the increase in yields – particularly at the
Slide 82: Page 28: Group – Cash remittances & dividend proposal
Page 28: Group – Cash remittances & dividend proposal Cash remittance over the 2014-16 period of USD 10.4bn exceeds the original target of USD 9bn and is in line with the revised guidance of greater than USD 10bn. Cash remittance in 2016 was USD 2.8bn. Looking at the segments, remittances from Gener
Slide 83: Page 29: Key messages
Page 29: Key messages In summary, this result points to the improvement in General Insurance gaining traction, while both Global Life and Farmers continue to deliver steady growth. Management has also continued to execute against key strategic priorities, including: The simplification of the Group
Slide 84: For further information
For further information CALL US VISIT OR FOLLOW US Investor Relations Richard Burden +41 44 628 96 40 Aaron Beharelle +41 44 625 25 50 André Meier +41 44 625 37 75 Gianni Vitale +41 44 625 48 26 Rating Agency Management Michèle Matlock +41 44 625 28 50 Investor Relations website Financial result
Slide 85: Calendar
Calendar: March 21-22, 2017, Morgan Stanley European Financials Conference 2017, London March 29, 2017, Annual General Meeting 2017 May 11, 2017, Results for the three months ended March 31, 2017 May 30, 2017, DB Global Financials Conference 2017, New York June 7, 2017, Goldman Sachs 21st
Zurich Insurance Group — FY2016 Earnings Presentation on 6ix