Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — Investor Presentation (January 2002)
37 slides from Zurich Insurance's investor presentation, Jan 25, 2002
Slide 1: New Financial Reporting Structure
New Financial Reporting Structure Günther Gose Chief Financial Officer Presentation to analysts January 25, 2002
Slide 2: Disclaimer
Disclaimer This communication is directed only at persons who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc) of The Financial Services and Markets Act 2000 (Fi
Slide 3: Contents
Contents • Structure of new reporting • Financial information by new segment and region • Accounting and reporting issues 3 © Zurich Financial Services
Slide 4: New Segments and Regions - highlights
New Segments and Regions - highlights • We will report 7 business segments and one centrally managed “Corporate” segment to increase transparency and better reflect the underlying performance of each segment • Reinsurance will be split: – “Reinsurance - discontinued” and “Centre” will be disclosed s
Slide 5: New Segments and Regions
New Segments and Regions Changes in yellow New segments Old segments New regions Old regions Non-Life Non-Life N. America US Corporate Life Life N. America Asset Mgt Asset Mgt Consumer Farm. Mgt. Serv. Farm. Mgt. Serv. UKISA UK Capital Mkts & Reinsurance Banking Continental Switzerland Europe Centre
Slide 6: “Corporate” and “Other”
“Corporate” and “Other” • “Corporate” segment covers Group holding companies, financing companies and other Head Office entities • “Other” region will be only in Non-Life and Life insurance and comprises group central reinsurance vehicles (N-L), other entities that are not part of a region and inter
Slide 7: External vs Internal Regions
External vs Internal Regions Externally reported regions Internal management regions N. America N. America Corporate Corporate N. America N. America Consumer Consumer Latin America UKISA UKISA Asia Pacific Continental Continental Europe Europe Rest of World Management responsibility Reported under 7
Slide 8: Reconciliation of Internal Business Divisions & External Segments
Reconciliation of Internal Business Divisions & External Segments Segment NL Life AM Farmers Capital Centre Corporate Reinsurance Mgt. Markets & –discont. Internal Banking Region N. A. Corporate N.A. Consumer & Latin A. UKISA & Asia / Pacific Continental Europe ZGA Group Management 8 © Zurich Financ
Slide 9: External reporting - Disclosure
External reporting - Disclosure • Primary segmentation: Split consolidated numbers into the 8 business/corporate segments • Secondary segmentation: Geography – NL, Life: split into North America Corporate, North America Consumer, UKISA, Continental Europe, Rest of World (Latin America, Asia/Pacific)
Slide 10: What will be reported? - Business Segments
What will be reported? - Business Segments • “Schedule of industry segment data” - analyzes consolidated Group numbers by individual business segment • Full income statement • Simplified balance sheet and cash flow which meets IAS/US GAAP requirements, plus – NEW THIS YEAR • Debt and minority intere
Slide 11: What will be reported? - Regions
What will be reported? - Regions • “Statistical data per region” - For those business segments reported by region we will show summarized regional income statements and key balance sheet and other data – No major changes to existing statistical tables – Life embedded value by region 11 © Zurich Fina
Slide 12: Advantages of the new reporting structure
Advantages of the new reporting structure • Increases transparency and ease of use of financial statements – Introduction of “Corporate” allows performance of each business segment to be measured better – Clear identification of and disclosure of our business activities with further breakdown of the
Slide 13: Converium
Converium • “Reinsurance - discontinued” income up to 11 December 2001 will include Converium income statement plus any other retained run-off business • Post 11 December, “Reinsurance - discontinued” will show only retained run-off business results, balance sheet and cash flows • Slight differences
Slide 14: Scudder and Deutsche Bank transaction
Scudder and Deutsche Bank transaction • Scudder/Deutsche Bank transactions are 2002 events – Closing date in 2002 will determine final purchase/sale calculations (e.g. profit on sale, goodwill etc.) – Profit will be sale proceeds, less: net assets at 31/12/01 plus profit or loss from 1/1/02 to closi
Slide 15: Overview of changes in net income
Overview of changes in net income In USD million 1600 1514 Old segmentation 1400 New segmentation 1200 978 989 1000 800 559 559 600 460 400 314 230 101 200 51 0 0 -200 s e t e e * er en at ce f f Li Li rm em or an -400 on rp Fa r ag su N Co an in -600 Re m et -800 ss A -1000 -1037 -1200 *: sum of ba
Slide 16: Major changes in segments – 2000 IAS net income
Major changes in segments – 2000 IAS net income New Segment USD Mio Old Segment USD Change Mio in USD Mio Non-Life 1,514 Non-Life 460 1,054 Life 965 Life 978 -13 Asset Mgmt. 51 Asset Mgmt. 101 -50 Farmers 559 Farmers 559 - Capital Markets & 80 Reinsurance 230 84 Banking Centre 131 Reinsurance 103 Co
Slide 17: Major changes in segments – 2000 Normalized income
Major changes in segments – 2000 Normalized income New Segment USD Mio Old Segment USD Change Mio in USD Mio Non-Life 1,258 Non-Life 283 975 Life 991 Life -13 1,004 Asset Mgmt. 60 Asset Mgmt. 77 -17 Farmers 531 Farmers 531 - Capital Markets & 80 Reinsurance 201 147 Banking Centre 133 Reinsurance 135
Slide 18: Major changes in NL – 2000 net income
Major changes in NL – 2000 net income New Region USD Mio Old Region USD Mio Change in USD Mio N. A. Corp. 381 USA 402 N. A. Cons. 53 North America 434 North America 402 32 UKISA 346 UK 182 164 Switzerland 350 Rest of Europe 310 Cont. Europe 453 Cont. Europe 660 -207 Rest of World 1 Rest Of World 45
Slide 19: Major changes to the 2000 NL Combined Ratio
Major changes to the 2000 NL Combined Ratio Amounts in USD Mio., 8 Business 5 Business Change unless otherwise stated segments segments Net Earned Premiums 14,235 13,663 572 Net Losses Incurred 10,749 10,351 398 PH Dividends & Part. In 96 98 -2 Profits Net Technical Expenses 3,994 3,963 31 Ratios in
Slide 20: Major changes to the 2000 NL Combined Ratio by Region
Major changes to the 2000 NL Combined Ratio by Region New Region Percent Old Region Percent N. A. Corp. 107.4% USA 104.9% N. A. Cons. 97.5% UKISA 103.0% UK 105.1% Cont. Europe 105.4% Switzerland 105.7% Rest of Europe 105.3% Rest of World 107.6% Rest Of World 110.1% Other 88.1% Other Total 104.2% Tot
Slide 21: Major changes in Life - 2000 net income
Major changes in Life - 2000 net income New Region USD Mio Old Region USD Mio Change in USD Mio N. A. Corp. 25 USA 262 N. A. Cons. 258 North America 283 North America 262 21 UKISA 290 UK 298 -8 Cont. Europe 248 Switzerland 147 Rest of Europe 120 Cont. Europe 248 Cont. Europe 267 -19 Rest of World 51
Slide 22: Breakdown of Corporate segment
Breakdown of Corporate segment Corporate USD Mio Selected items from USD Mio old „non-life“ segment Premiums 217 Investment result 423 Operating & admin. -991 Non-technical -945 Expenses expenses Interest expense -620 Interest expense -640 Other -116 Net result -1,087 n.a. 22 © Zurich Financial Serv
Slide 23: IAS and US GAAP - Considerations
IAS and US GAAP - Considerations • IAS is our primary reporting standard, but future US Listing requires US GAAP as well • IAS is relatively prescriptive, but slightly more flexible and much less detailed than US GAAP BUT – SEC tends to use US GAAP to interpret IAS or “fill in the gaps” • IAS impose
Slide 24: MILES - accounting treatment
MILES - accounting treatment • MILES is a market index-linked exchangeable security, exchangeable into new ZFS shares • MILES will probably be recorded as a separate class of equity at issue price • The 1% “out-performance premium” will be deducted from the principal as a cost of equity • On convers
Slide 25: Zurich Capital Markets - accounting considerations
Zurich Capital Markets - accounting considerations • ZCM structures transactions, using operating debt for financing • Assets are classed as “trading” because ZCM intends to hold them for a short term • Mark to market movements in trading assets are recognized as “realized gains/losses” in income –
Slide 26: Capital allocation
Capital allocation Günther Gose Chief Financial Officer Presentation to Analysts January 25, 2002
Slide 27: Different types of capital & capital adequacy
Different types of capital & capital adequacy Regulatory • Based on local legal entities & local capital adequacy statutory accounting principles • Not consistent across individual countries • Consolidated ZFS view not possible Rating agencies • Based on IAS-Equity and other on- and capital adequacy
Slide 28: Capital adequacy
Capital adequacy • Regulatory view – Regulatory capital adequacy only makes sense at local level. – Zurich exceeds requirements for all of its major subsidiaries. • Rating agency view – Consolidated capital adequacy approach followed only by S&P and more recently AM Best – Although important, capita
Slide 29: S&P Capital adequacy
S&P Capital adequacy • Starts from IAS equity with adjustments (TAC) Total adjusted capital – Investment-related charges – Other credit-related charges • Ratio= CAR = Nonlife underwriting risk + Nonlife reserve risk + Life insurance risk + Noninsurance risk • Zurich Financial Services Group‘s ratio
Slide 30: Leverage at Group level
Leverage at Group level • Overall objective: “AA” rating category • Debt/Capital range for a “AA”: 15%-25% – Definitions used by rating agencies are not consistent – Zurich’s debt/capital ratio at Half Year 2001: 17%, i.e. higher end of “AA” range • Interest coverage is also a key ratio – Target ran
Slide 31: How Zurich uses its capital – An Example
How Zurich uses its capital – An Example • Equity is the primary capital Parent measure used for each of our Assets Liabilities businesses (with RBC) BU A 1,000 Equity 1,000 • At Group level, capital is raised Debt 300 in the form of both debt and BU B 300 equity • Therefore the Group benefits from
Slide 32: Actual IAS Capital as at 31.12.2000
Actual IAS Capital as at 31.12.2000 in USD millions Corporate E = -6,154 Non Life Life Asset Farmers Capital Centre Reinsurance Mgmt. Markets 9,984 10,017 2,262 2,165 627 559 1,214 Total Capital of Segments 26,828 Total Capital of “Corporate” -6,154 ZFS IAS Equity 20,674 + Subordinated and senior de
Slide 33: 2000 RoE by Segment
2000 RoE by Segment Segment IAS Equity IAS Net Income ROE 1) Non Life 9,984 1,514 15.1% Life 10,017 965 9.6% Asset Management 2,262 51 2.2% Farmers 2,165 559 20.8% Capital Markets & Bkg 627 80 13.2% Centre 559 131 27.1% Reinsurance 1,214 103 8.1% ∑ Business segments 26,828 3,403 12.4% Corporate -6,1
Slide 34: Appendix
Appendix 34 © Zurich Financial Services
Slide 35: Major changes to the 2000 NL NEP by Region
Major changes to the 2000 NL NEP by Region New Region USD Mio Old Region USD Mio Change in USD Mio N. A. Corp. 4,458 USA 4,967 N. A. Cons. 1,000 North America 5,458 North America 4,967 491 UKISA 2,696 UK 2,311 385 Cont. Europe 4,604 Switzerland 1,386 Rest of Europe 3,341 Cont. Europe 4,604 Cont. Eur
Slide 36: Major changes to the 2000 Life GWP & Insurance Deposits by Region
Major changes to the 2000 Life GWP & Insurance Deposits by Region New Region USD Mio Old Region USD Mio Change in USD Mio N. A. Corp. 222 USA 4,087 N. A. Cons. 3,996 North America 4,218 North America 4,087 131 UKISA 6,146 UK 5,804 342 Cont. Europe 4,719 Switzerland 2,615 Rest of Europe 2,456 Cont. E
Slide 37: HY 2001 results presentation: Leverage and capitalization
HY 2001 results presentation Leverage remains moderate and capitalization is strong In USD millions HY 2001 Y/E 2000 % change Total capital1 25'874 27'251 -5.1% Senior debt 4,420 4,346 +1.7% Senior debt/total capital 17.1% 15.9% +1.2%pts Zurich Insurance Rating2 - Moody’s Aa1 Aa1 Standard & Poor’s A
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