Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Q1 2011 Earnings Presentation
52 slides from Zurich Insurance's earnings presentation, May 5, 2011
Slide 1: Results Reporting for the Three Months to March 31, 2011
Results Reporting for the Three Months to March 31, 2011 Analysts and Media Presentation May 5, 2011
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 predications of or indicate future events, trends, plans or objectives of Zurich Financial Services Ltd or the Zurich Financial Services Group (t
Slide 3: Financial highlights
Financial highlights in USD millions 2011 2010 Change for the three months ended March 31 Business operating profit (BOP) 849 1,259 -33% Net income attributable to shareholders 637 935 -32% General Insurance combined ratio 103.6% 99.0% -4.6pts Global Life new business value1 230 189 22% Farmers Mgmt
Slide 4: Q1 2011 Results Key Messages
Q1 2011 Results Key Messages Solid underlying business performance Reported result significantly impacted by cats and large losses Focus on pricing discipline and portfolio management Strong capital base and Swiss Solvency Test ratio Deliver to our customers when it matters most © Zurich Financial S
Slide 5: Business operating profit by segment
Business operating profit by segment in USD millions 2011 2010 Change for the three months ended March 31 General Insurance 276 621 -56% Global Life 362 351 3% Farmers (including Farmers Re) 380 462 -18% Other Operating Businesses -174 -199 13% Total BOP Operating business segments 844 1,235 -32% No
Slide 6: General Insurance – key performance indicators
General Insurance – key performance indicators in USD millions 2011 2010 Change Change for the three months ended March 31 in LC1 GWP and policy fees 10,101 10,010 1% -2% Rate change2 2.6% 2.3% 0.3pts Loss ratio 77.0% 72.2% -4.8pts Expense ratio 26.6% 26.9% 0.3pts Combined ratio 103.6% 99.0% -4.6pts
Slide 7: General Insurance – Rate Change Monitor
General Insurance – Rate Change Monitor1 for personal and commercial lines 3 months 2011 12 months 2010 Int’l Total Int’l Total GC NAC Europe Markets GI GC NAC Europe Markets GI Personal Lines n/a n/a 5% 1% 4% n/a n/a 5% 0% 5% Commercial Lines 2% 2% 1% 7% 2% 1% 0% 1% 5% 1% Europe by country Europe b
Slide 8: General Insurance – comparison of loss ratio
General Insurance – comparison of loss ratio Q1-2011 Q1-2010 80% Loss ratio development 77.0% 72.2% Discrete quarters Underlying loss ratio 75% 73.0% 72.2% 71.4% 77.0% 70.0% 71.2% 69.5% 69.8% 71.0% 70% 66.2% 8.4% 6.6% 65.5% 65% 3.5% 2.8% 3.8% 6.8% 60% USD USD USD USD USD USD 262m -477m -588m 247m -2
Slide 9: General Insurance – expense ratio walk from Q1-10 to Q1-11
General Insurance – expense ratio walk from Q1-10 to Q1-11 26.9% 26.6% Change year-over-year Expense ratio development Other tech Discrete quarters 14.3% expenses 14.3% -0.3 -0.3 26.7%26.9%27.0%26.4%26.9%26.6% 25.7%25.5%25.1% 12.6% Commissions 12.3% 0.0 0.0 e pe W s x i on ng Ta es ex er U ns ha iss
Slide 10: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2011 2010 Change Change for the three months ended March 31 in LC1 GWP, policy fees and insurance 6,379 6,744 -5% -7% deposits Net inflows to Assets under Mgmt 285 1,369 -79% -81% Annual Premium Equivalent (APE) 849 833 2% 0% New business valu
Slide 11: Global Life – new business by pillar
Global Life – new business by pillar in USD millions NBV NBV Change APE APE Change for the three months ended March 31 in LC2 2 2011 20101 2011 2010 in LC Bank Distribution 43 56 -22% 148 221 -32% IFA/Brokers 39 49 -21% 229 246 -8% Agents 26 23 13% 108 97 10% International / Expats 20 14 36% 70 64 5
Slide 12: Farmers – key performance indicators
Farmers – key performance indicators in USD millions 2011 2010 Change for the three months ended March 31 Farmers Management Services Managed gross earned premium margin1 7.1% 7.4% -0.3pts Business operating profit 329 351 -6% Farmers Re Business operating profit 51 111 -54% Farmers Exchanges1 Gross
Slide 13: Investment performance of Group investments
Investment performance of Group investments in USD millions 2011 2010 Change for the three months ended March 31 Net investment income 1,780 1,779 - Net capital gains/(losses) on investments and (81) 191 nm impairments1 of which attributable to shareholders (54) 22 nm Net investment result 1,699 1,9
Slide 14: Development of shareholders' equity in Q1 2011
Development of shareholders’ equity in Q1 2011 in USD millions 33,000 31,984 1,914 32,000 31,000 795 637 319 581 62 103 30,133 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 Balance as of Dividends1 Currency Net Income Change in net Cumulative Net actuarial Other
Slide 15: 2011 estimated economic and regulatory solvency
2011 estimated economic and regulatory solvency Statutory solvency ratio SST solvency ratio3 (Group’s Solvency I1) 257% 257% ~114% 230% 1% -8% +13pts -6pts 230% 223% 222% 239% 232% Dec 31 Movements Impact Mar 31 Movements Impact Jan 1 1 July Jan 1 20102 in Q1-11 from 2011 in AFR and 2010 2010 from 2
Slide 16: Conceptual bridge from SST to the internal RBC model
Conceptual bridge from SST to the internal RBC model Economic Solvency compared to SST Scope Operational and business risk 200% 180% for General Insurance are not 180% reflected in SST 160% 140% ALM 120% 100% Treatment of scenarios is more 100% conservative in RBC than in SST 80% 60% Calibration 40%
Slide 17: Q1 2011 Results Key Messages
Q1 2011 Results Key Messages Solid underlying business performance Reported result significantly impacted by cats and large losses Focus on pricing discipline and portfolio management Strong capital base and Swiss Solvency Test ratio Deliver to our customers when it matters most © Zurich Financial S
Slide 18: Appendix
Appendix © Zurich Financial Services Ltd May 5, 2011 Results Reporting for the Three Months to March 31, 2011 18
Slide 19: Top line development by segment
Top line development by segment in USD millions 2011 2010 Change Change for the three months ended March 31 in LC1 General Insurance GWP and policy fees 10,101 10,010 1% -2% Global Life GWP, policy fees and insurance 6,379 6,744 -5% -7% deposits Annual Premium Equivalent (APE)2 849 833 2% 0% Farmers
Slide 20: Business division BOP-ROE based on RBC-allocated IFRS equity
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the three months ended March 31 2011 2010 General Insurance 6.5% 15.7% Global Corporate -14.3% 24.8% North America Commercial 18.4% 21.2% Europe 28.0% 19.0% International Markets -64.2% -3.8% GI Global Functions including Group Reinsu
Slide 21: Zurich Internal RBC by segment and risk type for 2011
Zurich Internal RBC by segment and risk type for 2011 Capital Allocation: Total RBC estimate: USD 36 billion1 USD 34 billion Farmers1 8% 12% Other2 13% Market/ALM risk 10% General Operational risk 37% Insurance Business risk 1% 50% 4% P&R risk3 Global Life Re-ins credit risk Life insurance risk 28%
Slide 22: Reconciling SST to the internal RBC model over time
Reconciling SST to the internal RBC model over time Internal RBC model compared to SST over time The ratio between the SST solvency and the internal 300% economic solvency are fairly stable but not constant over 250% time 200% RBC and SST capital move in the same direction Capital Ratio 150% 180% es
Slide 23: Reconciling SST to the internal RBC model as of Jan 1, 2011
Reconciling SST to the internal RBC model as of Jan 1, 2011 Economic Solvency compared to SST Scope 250% Operational and business risk 223% for General Insurance are not 200% reflected in SST ALM 150% Treatment of scenarios is more 119% conservative in RBC than in SST 100% Calibration 50% SST calibr
Slide 24: General Insurance – BOP and Combined ratio by business
General Insurance – BOP and Combined ratio by business Business operating profit Combined ratio (%) CAT4 in USD millions 2011 2010 Change Global 25.5 122.9 for the three months ended March 31 Corporate 91.4 CAT4 3.0 Global Corporate -152 226 nm 98.5 NA Commercial 97.0 North America Commercial 254 27
Slide 25: General Insurance – Gross written premiums and policy fees
General Insurance - Gross written premiums and policy fees In USD millions 2011 2010 Change Change for the three months ended March 31 in LC1 Global Corporate 2,635 2,490 6% 3% North America Commercial 2,197 2,253 -3% -3% Europe 4,453 4,485 -1% -4% International Markets 1,047 865 21% 15% GI Global F
Slide 26: General Insurance – written rate change 2008 through Q1-2011
General Insurance – written rate change 2008 through Q1-2011 General Insurance – rate change 2008 through Q1-2011 5% 4.2% 3.6% 3.7% 2.3% 2.6% 2.7% 2.1% 2.0% 1.7% 1.2% 0% -0.7% 2008 2009 -2.4% 2010 -3.0% 2011 -4% Q1 Q2 Q3 Q4 © Zurich Financial Services Ltd May 5, 2011 Results Reporting for the Three
Slide 27: Development of Reserves for Losses and Loss Adjustment Expenses
Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions 2011 2010 Net reserves for losses and LAE, as of January 1 55,976 55,903 Net losses and LAE paid -5,739 -5,886 Net losses and LAE incurred 5,864 6,168 - Current year 6,136 6,359 - Prior years1 -272 -192 Foreign cur
Slide 28: Global Life – new business by region/country
Global Life – new business by region/country in USD millions NBV1 NBV1 Change APE APE Change for the three months ended March 31 2011 2010 in LC2 2011 2010 in LC2 North America 11 11 0% 23 20 13% Latin America 12 11 8% 58 49 14% Europe 116 134 -14% 601 631 -5% United Kingdom 25 18 30% 221 177 21% Ge
Slide 29: Global Life – Assets under Management
Global Life - Assets under Management1 AuM was flat compared with January 1, 2011 on a local currency basis Split of AuM Development of AuM in USD billions in USD billions 230 222 Balance as of 26 Jan 1, 2011 222 25 Inflows +6 105 101 Outflows -6 Market move- ments & other2 -1 99 96 Currency +8 tran
Slide 30: Farmers Management Services – key performance indicators
Farmers – Farmers Management Services – key performance indicators in USD millions 2011 2010 Change for the three months ended March 31 Management fees and other related revenues 682 703 -3% Management and other related expenses -366 -361 -1% Gross management result 316 342 -8% Managed gross earned
Slide 31: Farmers Re – key performance indicators
Farmers – Farmers Re – key performance indicators in USD millions 2011 2010 Change for the three months ended March 31 Gross written premiums1 707 1,495 -53% Net underwriting result 14 60 -77% Combined ratio 98.1% 96.3% -1.8pts CAT2 impact 1.0% 0.5% -0.5pts Business operating profit 51 111 -54% © Zu
Slide 32: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2011 2010 Change for the three months ended March 31 Gross written premiums 4,497 4,573 -1.7% Net underwriting result2 -87 195 -144.6% Expense ratio 34.6% 33.1% -1.5pts Loss ratio 67.2% 62.8% -4.4pts Combined ratio2 101.8% 95.9% -5.9pts
Slide 33: Update on 21st Century
Update on 21st Century1 GWP by distribution channel (Direct vs Agency) GWP in Q1-11 of USD 494m reflects: 1000 Agency Direct: levels rebounding – 726 Direct GWP in USD m Q1-11 shows higher new business 152 595 600 500 536 482 488 494 applications compared to previous 574 118 101 57 437 63 42 9 quart
Slide 34: Farmers Exchanges – financial highlights
Farmers Exchanges – financial highlights 50.0% 6'000 in USD millions 2011 2010 48.0% for the three months to March 31 5'000 46.0% Gross written premiums 4,497 4,573 44.0% 4'000 Net underwriting result1 -87 195 42.0% 3'000 40.0% Net surplus growth 90 139 38.0% Ending surplus 6,049 5,895 2'000 36.0% 3
Slide 35: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions 2011 2010 Change for the three months ended March 31 Auto1 2,466 2,483 -0.7%1 of which 21st Century Direct 495 479 3.4% Homeowners 990 1,016 -2.6% Commercial P&C 323 327 -1.3% Small Business Solutions 154 145 5.7% Workers
Slide 36: Farmers Exchanges – premium growth
Farmers Exchanges – premium growth GWP growth2 13% Industry Growth Rate1 2010 Estimate: 2.1% 10% 10.1% 9.1% 8% 6.5% 6.1% 6% 5.4%5.7% 5.7% 5.4% 5.0% 5.1% 4.7% 4.6% 4.2% 4% 3.2%3.3% 3.1% 2.9% 2.2% 1.8% 2% 1.4% 0% 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M -0.4%3 -2% © Zurich Financ
Slide 37: Farmers Exchanges – Policies in Force Q1-11
Farmers Exchanges – Policies in Force Q1-11 2010 Q1-11 March in thousand policies Ending Change 2011 # % Ending Auto 11,678 98 1 11,776 of which 21st Century Direct 2,308 13 1 2,321 Homeowners 5,109 -8 0 5,101 Commercial P&C 359 1 0 360 Small Business Solutions 209 -3 0 206 Workers’ Compensation 49
Slide 38: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the three months ended March 31 20111 20101 Change Auto2 105.5% 96.4% -9.1pts Homeowners 94.0% 91.0% -3.0pts Commercial P&C 115.0% 97.8% -17.2pts Small Business Solutions 104.4% 103.5% -0.9pts Workers' Compensation 109.4% 98.6% -10.8pts Specialty 94.0% 100.1% 6
Slide 39: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio 120% Incl. Ike & Gustav CAT impact 115% 110% Incl. Incl. Rita & California Katrina 105% wildfires Incl. California wildfires 100% 95% 90% 85% © Zurich Financial Services Ltd Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 40: Farmers – Competitor Snapshot - Overall
Farmers – Competitor Snapshot - Overall Growth vs. GAAP Combined Ratio – Overall P&C1, 3 March 2011 Growth NPW % December 2010 USAA3 GEICO Liberty Mutual3 Progressive Hartfor d State Farm3 Travelers Mercury Farmers excl. 21st C Allstate Agency in run-off2, 4 Farmers2 American Family3 Nationwide3 Com
Slide 41: Other Operating and Non-Core Businesses – BOP contribution
Other Operating and Non-Core Businesses – Business operating profit contribution in USD millions 2011 2010 Change for the three months ended March 31 Other Operating Businesses -174 -199 13% Non-Core Businesses - Centre 16 -5 nm - Banking activities 1 -3 nm - Other centrally managed businesses -2 5
Slide 42: Zurich's investment portfolio benefits from diversification
Zurich’s investment portfolio benefits greatly from diversification and is balanced in terms of risk Risk Allocation of Zurich’s investment portfolio As of March 31, 2011 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Real Estate Private Equity 46 Hed
Slide 43: Debt securities are of consistently high credit quality
Group Investments – Zurich’s debt securities are of consistently high credit quality (97.5% investment grade) As of March 31, 2011 Group Investments Debt securities USD 202bn USD 143bn credit rating: AAA 51.7% credit rating: AA Other Debt 97.5% 12.7% asset securities investment classes grade 29% 71%
Slide 44: Zurich's debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 202bn (100%) As of March 31, 2011 Government and supranational bonds: USD 57bn (28%) Market/Cost1: 100% of which: 99% inv. grade 42%in General Insurance 67% AAA 48% in Global Life 13% AA 15% A 3% BBB
Slide 45: Government & supranational bonds are well diversified
Group Investments – Government & supranational bonds are well diversified Group Investments - USD 202bn (100%) As of March 31, 2011 Government and supranational bonds: USD 57bn1 (28%) Market/Cost: 100% of which: 99% inv. grade 42% in General Insurance 67% AAA 48% in Global Life 13% AA 15
Slide 46: Eurozone Government & supranational bonds are well diversified
Group Investments1 – Eurozone Government & supranational bonds are well diversified Group Investments - USD 202bn (100%) As of March 31, 2011 Eurozone Government and supranational bonds: USD 25bn (13%) Market/Cost: 97% of which: Split by credit rating 30% in General Insurance 100% inv. grade 6
Slide 47: Zurich's Corporate bonds are of high quality
Group Investments – Zurich’s Corporate bonds are of high quality Group Investments - USD 202bn (100%) As of March 31, 2011 Corporate bonds: USD 61bn (30%) Market/Cost: 101% Split by industries Split by credit rating 43% Banks, 99% inv. grade including 15.4%1 covered bonds 24% AAA 8% Cities,
Slide 48: Banks Corporate bonds are of high quality and well diversified
Group Investments – Banks Corporate bonds are of high quality and well diversified Group Investments - USD 202bn (100%) As of March 31, 2011 Banks Corporate bonds: USD 26bn (13%) Market/Cost: 100% Split by seniority Split by credit rating 36% Covered bonds 99% inv. grade 50% Senior bonds 40%
Slide 49: Split of total MBS/ABS of USD 26bn
Group Investments – Split of total MBS/ABS of USD 26bn (13%) Group Investments - USD 202bn (100%) MBS/ABS: USD 26bn (13%) As of March 31, 2011 Market/Cost: 102% 98% inv. grade 84% AAA includes: US MBS: USD 16.4bn (8.1%) Market/Cost: 104% 97% inv. grade; 88% AAA Debt US ABS1: USD 3.9bn (1.9%) s
Slide 50: Split of US MBS of USD 16.4bn
Group Investments – Split of US MBS of USD 16.4bn (8.1%) Group Investments - USD 202bn (100%) As of March 31, 2011 US-MBS: USD 16.4bn (8.1%) Market/Cost: 104% 97% inv. grade 88% AAA Debt of which: securities US “Agency” MBS: USD 10.3bn (5.1%) Market/Cost: 105% 71% 100% AAA USD 2.7bn backed b
Slide 51: Group investments – capital losses in P&L
Group investments – capital losses in P&L Net capital losses/gains on investments and impairments (in P&L) Equity investments Equity investments Debt investments of which: impairments Debt investments in USD millions Other investments in USD millions Other investments 500 500 57 0 0 -5 -8 -52 -86 -4
Slide 52: Group investments – unrealized gains / losses
Group investments – unrealized gains / losses Change in net unrealized gains / losses on investments incl. in shareholders’ equity1 in USD millions 1500 1000 500 233 0 -82 -500 -1000 -1,207 Equity investments -1500 Debt investments Other investments -2000 Q1-2011 1 Total -1,055 of which in: - Genera
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