Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — 9M 2010 Earnings Presentation
60 slides from Zurich Insurance's earnings presentation, Nov 4, 2010
Slide 1: Results Reporting for the nine months to September 30, 2010
Results Reporting for the nine months to September 30, 2010 Analysts and Media Presentation November 4, 2010
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: Introduction
Introduction Martin Senn Chief Executive Officer November 4, 2010
Slide 4: Results for the nine months to September 30, 2010
Results for the nine months to September 30, 2010 Dieter Wemmer Chief Financial Officer November 4, 2010
Slide 5: Business operating profit and net income by quarter
Business operating profit and net income by quarter Business operating profit in USD millions 2,000 1,500 1,259 1,240 1,027 1,000 500 0 Q1-2010 Q2-2010 Q3-2010 Net income attributable to shareholders in USD millions 2,000 1,500 1,000 935 751 © Zurich Financial Services Ltd 707 500 0 Q1-2010 Q2-2010
Slide 6: Financial highlights
Financial highlights in USD millions 2010 20091 Change for the nine months to September 30 Business operating profit (BOP) 3,526 4,066 -13% Net income attributable to shareholders 2,393 2,935 -18% General Insurance combined ratio 97.8% 96.9% -0.9pts Global Life new business value2 571 520 10%2 Farme
Slide 7: Business operating profit by segment
Business operating profit by segment in USD millions 2010 20091 Change for the nine months to September 30 General Insurance 1,961 2,508 -22% Global Life 1,098 1,157 -5% Farmers (including Farmers Re) 1,295 1,132 14% Other Operating Businesses -573 -298 -92% Total Core BOP 3,781 4,499 -16% Non-Core
Slide 8: General Insurance – key performance indicators
General Insurance – key performance indicators in USD millions 2010 2009 Change Change for the nine months to September 30 in LC1 GWP and policy fees 25,528 26,321 -3% -3% Rate change2 2% 3% -1pts Loss ratio 71.0% 71.4% 0.4pts Expense ratio 26.8% 25.4% -1.4pts Combined ratio 97.8% 96.9% -0.9pts Busi
Slide 9: General Insurance – Rate Change Monitor for personal and commercial lines
General Insurance – Rate Change Monitor1 for personal and commercial lines 9 months 2010 Discrete Q3 2010 Int’l Total Int’l Total GC NAC EGI Markets GI GC NAC EGI Markets GI Personal Lines n/a n/a 5% 0% 4% n/a n/a 5% 0% 5% Commercial Lines 1% -1% 1% 5% 1% 0% 0% 1% 6% 1% EGI by country EGI by country
Slide 10: General Insurance – comparison of loss ratio development
General Insurance – comparison of loss ratio 9 months 2010 9 months 2009 75% Loss ratio development Discrete quarters 71.4% Underlying loss ratio 71.0% 70% 73.0% 72.2% 70.0% 71.2% 69.5% 69.8% 71.0% 67.4% 66.4% 65% 2.5% 0.0% 6.6% 7.5% 3.9% 1.0% 60% USD USD USD USD USD 800m -200m -1,567m 552m -1,421m
Slide 11: General Insurance – net expense ratio walk from 9m09 to 9m10
General Insurance – net expense ratio walk from 9m09 to 9m10 25.4% 26.8% Change year-over-year Expense ratio development Other tech Discrete quarters 12.9% expenses 14.1% 1.2% 1.4% 26.7% 26.9% 27.0% 26.4% 25.7% 25.5% 25.1% 12.5% Commissions 12.7% 0.2% 0.0% e pe W s x i on ng Ta es ex er U ns ha iss
Slide 12: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2010 2009 Change Change for the nine months to September 30 in LC1 GWP and policy fees (incl. insurance 18,894 17,406 9% 10% deposits)2 Net inflows to Assets under Mgmt 3,747 2,629 43% Annual Premium Equivalent (APE) 2,495 2,392 4% 7% New busi
Slide 13: Global Life – new business by pillar
Global Life – new business by pillar in USD millions NBV NBV Change APE APE Change for the nine months to Sep 30 1 1 2010 2009 in LC 2010 2009 in LC Bank Distribution 145 128 20% 628 762 -13% IFA/Brokers 142 113 26% 713 621 16% Agents 87 126 -30% 334 317 6% Corporate Life & Pensions 86 63 35% 409 38
Slide 14: Farmers – key performance indicators
Farmers – key performance indicators in USD millions 2010 2009 Change for the nine months to September 301 Farmers Management Services Managed gross earned premium margin2 7.4% 7.2% 0.2pts Business operating profit 1,048 992 6% Farmers Re Business operating profit 248 141 76% Farmers Exchanges2 Gros
Slide 15: Other Operating and Non-Core Businesses – Business operating profit contribution
Other Operating and Non-Core Businesses – Business operating profit contribution in USD millions 2010 2009 Change for the nine months to September 30 Other Operating Businesses -573 -298 -92% Non-Core Businesses - Banking activities -314 -141 nm - Centrally managed businesses 74 -417 nm - Centre -12
Slide 16: Investment performance of Group investments
Investment performance of Group investments in USD millions 2010 2009 Change for the nine months to September 30 Net investment income 5,307 5,569 -5% Net capital gains/(losses) on investments and 981 -1,325 nm impairments1 of which attributable to shareholders 344 -1,331 nm Net investment result 6,
Slide 17: Development of shareholders' equity in 2010
Development of shareholders’ equity in 2010 in USD millions 33,000 2,845 494 32,000 907 80 31,011 31,000 30,000 29,304 2,210 2,393 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 Balance as of Dividends Net Income Change in Cumulative Net actuarial Other Balance as of © Zurich
Slide 18: 2010 estimated economic and regulatory solvency
2010 estimated economic and regulatory solvency Statutory solvency ratio Economic solvency ratio3 (Group’s Solvency I1) +19pts -6pts ~136% 245% 232% ~124% 195% ~114% -5pts -2pts -3pts Dec 31 June 30 Impact in Impact Sep 30 Jan 1 June 30 Movements Impact Impact Sep 30 est. est. in AFR and from from e
Slide 19: Appendix
Appendix © Zurich Financial Services Ltd November 4, 2010 Results Reporting for the Nine Months to September 30, 2010 19
Slide 20: The Zurich Way
The Zurich Way The Zurich Way – Target of USD 0.9 billion annually for 2010 and 2011 USD USD USD We have comfortably achieved our USD 900m 900m 900m 2009 target. USD 800m Developing our plan, we expect benefits 700m of USD 0.9 billion for 2010 and 2011 USD 7 major TZW workstreams with continuing 500
Slide 21: The Zurich Way initiatives – 2010 target
The Zurich Way initiatives – 2010 target by function by business division USD 900m USD 900m USD 900m USD 900m USD 800m 17% USD 800m 33% Growth/ Europe General 33% Distribution 42% Insurance 32% 35% 32% 19% North America 17% Commercial 31% Claims 22% 22% 13% Global Corporate 30% 17% 34% 12% 24% Globa
Slide 22: Top line development by segment
Top line development by segment in USD millions 2010 2009 Change Change for the nine months to September 30 in LC1 General Insurance GWP and policy fees 25,528 26,321 -3% -3% Global Life GWP and policy fees (incl. insurance 18,894 17,406 9% 10% deposits)2 Annual Premium Equivalent (APE)3 2,495 2,392
Slide 23: Business division BOP-ROE based on RBC-allocated IFRS equity
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the nine months to September 30 2010 2009 General Insurance 17.2% 24.1% Global Corporate 21.9% 21.1% North America Commercial 21.2% 26.0% Europe General Insurance 16.0% 25.8% International Markets 2.9% 18.8% GI Global Functions includ
Slide 24: Zurich RBC by segment and risk type for 2010
Zurich RBC by segment and risk type for 2010 Capital Allocation: Total RBC estimate: USD 35 billion1,4 USD 33billion Farmers1 Other2 9% 12% 11% Market/ALM risk 10% 37% Operational risk 1% Business risk General 4% P&R risk3 Insurance Global Life Re-ins credit risk 51% 27% Life insurance risk 25% Natu
Slide 25: 2010 estimated economic and regulatory solvency
2010 estimated economic and regulatory solvency What if scenarios Statutory solvency ratio / Group’s Solvency I1 Dec 31, 09 June 30, 10 Impact Q3-10 Dividend4 Sept 30, 10 Debt securities at cost -33pts 195%2 232% +19pts -6pts 245% GI DAC +25pts Economic solvency ratio3 ~136% ~124% -5pts -2pts 5 -3pt
Slide 26: Updated economic solvency view for 2010
Updated economic solvency view for 2010 in USD billions1 Available Financial Resources (AFR) Estimated AFR as of June 30, 2010 + 36 Movements in Q3-10 + 3 Dividend accrual2 - 1 Senior debt maturing <12 months - 1 Estimated 2010 Sept 30 estimate for 2010 AFR + 37 economic solvency ratio ~114% Risk Ba
Slide 27: Strong economic solvency
Strong economic solvency1 in USD billions (rounded) 40 Change from EV to MCEV 41 38 35 37 34 Available to policyholders 30 33 29 30 30 30 28 28 25 27 26 27 27 26 23 20 21 15 10 5 RBC AFR RBC AFR RBC AFR RBC AFR RBC AFR RBC AFR RBC AFR RBC AFR RBC AFR Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1
Slide 28: Estimation of Available Financial Resources (AFR) as of Sept. 30, 2010
Estimation of Available Financial Resources (AFR) as of Sept. 30, 2010 in USD billions (rounded) 45 40 (2) 35 9 39 37 30 (2) 31 17 25 29 20 (16) 15 10 5 0 Reported Dividend 1 Net Net intangibles 2 Value of in- Financial debt3 Total AFR Capital Net AFR shareholders' accrual shareholders' force busine
Slide 29: Group's Solvency I calculation
Group’s Solvency I calculation in USD millions Sep 30, 10 Jun 30, 10 Mar 31, 10 Dec 31, 09 finalized2 Eligible equity Total equity 32,361 29,986 29,876 31,104 Net of intangibles and other assets -6,994 -6,855 -7,305 -7,456 Free reserves for policyholder dividends 4,090 3,076 3,208 2,799 Subordinated
Slide 30: Group's Solvency I - sensitivities
Group’s Solvency I - sensitivities1 Solvency I ratio impact (in %) Monetary impact on IFRS equity as of Sep 30, 2010 (in USD bn) 100% 150% Base case 245% Interest rate +100 bps 205% -4.7 Interest rate -100 bps 286% 4.8 Equity markets -10% 238% -0.8 Credit spreads +100 bps 233% -1.4 © Zurich Financia
Slide 31: 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 2010 2009 Change Global 1.0 93.7 for the nine months to September 30 Corporate 96.8 Global Corporate 591 512 15% 96.6 NA Commercial 97.1 North America Commercial 850 917 -7% Europ
Slide 32: General Insurance - Gross written premiums and policy fees
General Insurance - Gross written premiums and policy fees In USD millions 2010 2009 Change Change for the nine months to September 30 in LC1 Global Corporate 5,917 5,999 -1% -2% North America Commercial 7,408 7,553 -2% -3% Europe General Insurance 10,378 11,214 -7% -7% International Markets 2,229 1
Slide 33: General Insurance – written rate change 2008 through 9 months 2010
General Insurance – written rate change 2008 through 9 months 2010 General Insurance – rate change 2008 through 9m10 5% 4.2% 3.6% 3.7% 2.1% 2.3% 2.0% 1.7% 1.2% 0% -0.7% 2008 -2.4% 2009 -3.0% 2010 -4% Q1 Q2 Q3 Q4 © Zurich Financial Services Ltd November 4, 2010 Results Reporting for the Nine Months t
Slide 34: Development of Reserves for Losses and Loss Adjustment Expenses (LAE)
Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions 2010 2009 Net reserves for losses and LAE, as of January 1 55,903 52,986 Net losses and LAE paid -17,178 -17,506 Net losses and LAE incurred - Current year 18,597 18,899 - Prior years1 -841 -533 Foreign currency tr
Slide 35: Global Life – new business by region/country
Global Life – new business by region/country in USD millions NBV2 NBV2 Change APE APE Change for the nine months to September 30 2010 2009 in LC1 2010 2009 in LC1 Americas, of which 91 100 -9% 226 176 32% US 49 75 -35% 71 70 1% Latin America 42 25 67% 155 106 51% United Kingdom 103 70 48% 618 546 14
Slide 36: Global Life - Assets under Management
Global Life - Assets under Management1 AuM increased due to market recovery and a positive development of net policyholder flows Split of AuM Development of AuM in USD billions in USD billions 221 215 Balance as of 27 Jan 1, 2010 215 25 Inflows +21 103 102 Outflows -17 Market move- ments & other2 +7
Slide 37: Farmers – Farmers Management Services – key performance indicators
Farmers – Farmers Management Services – key performance indicators in USD millions 2010 2009 Change for the nine months to September 301 Management fees and other related revenues 2,096 1,973 6% Management and other related expenses 1,072 1,023 5% Gross management result 1,024 950 8% Managed gross e
Slide 38: Farmers – Farmers Re – key performance indicators
Farmers – Farmers Re – key performance indicators in USD millions 2010 2009 Change for the nine months to September 30 Gross written premiums 3,7221 4,9642 -25% Net underwriting result 101 23 nm Combined ratio 97.7% 99.4% 1.7pts CAT3 impact 4.5% 5.5% 1.0pts Business operating profit 248 141 76% © Zu
Slide 39: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2010 2009 Change for the nine months to September 30 Gross written premiums 13,860 13,300 4.2% Net underwriting result2 228 38 nm Combined ratio2 98.1% 99.4% 1.3pts Adjusted combined ratio3 90.8% 92.6% 1.8pts CAT4 impact 4.8% 5.8% 1.0pt
Slide 40: Acquisition of 21st Century – Update
Acquisition of 21st Century1 – Update GWP by distribution channel (Direct vs Agency) GWP in Q3-10 of USD 488m reflects: 1000 Direct: levels rebounding – Agency Q3-10 shows increasing renewals and 726 Direct GWP in USD m 152 higher new business applications 595 600 500 536 482 488 compared to previou
Slide 41: 21st Century - contribution
21st Century1 - contribution in USD millions 2010 2009 for the nine months to September 301 Farmers Management Services: Management fees and other related revenues 263 108 Management and other related expenses 131 67 Gross management result 132 41 Business operating profit 123 34 Farmers Exchanges:
Slide 42: 21st Century Direct - Policies in Force - turned positive in June 2010
21st Century Direct - Policies in Force - turned positive in June 2010 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% Note: Change month over month in policies in force of 21st Century Direct Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- 09 09 09 09 09 09 10 10 10 10
Slide 43: Farmers Exchanges – financial highlights
Farmers Exchanges – financial highlights in USD millions 2010 2009 50.0% 6'000 for the nine months to Sep 30 48.0% Gross written premiums 13,860 13,300 5'000 46.0% 44.0% Net underwriting result1 228 38 4'000 42.0% Net surplus growth 304 334 40.0% 3'000 38.0% Ending surplus 6,060 5,368 2'000 36.0% Su
Slide 44: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions 2010 2009 Change for the nine months to September 30 Auto1 7,269 6,657 9.2% Homeowners 3,452 3,527 -2.1% Commercial P&C 976 981 -0.6% Small Business Solutions 437 445 -1.8% Workers’ Compensation 216 238 -9.2% Specialty 1,
Slide 45: Farmers Exchanges – premium growth outperforming industry
Farmers Exchanges – premium growth outperforming industry GWP growth2 11% Industry Growth Rate1 10.1% 2009: -1.4% 9.1% 2010 Forecast: 2.7% 8% 6.5% 6% 6.1% 5.7% 5.7% 5.4% 5.4% 5.0% 5.1% 4.6% 4.7% 4.2% 4% 3.2%3.3% 3.1% 2.2% 2% 1.8% 1.4% 0% © Zurich Financial Services Ltd 3M 6M 9M FY 3M 6M 9M FY 3M 6M
Slide 46: Farmers Exchanges – Policies in Force Q3-10 shows improved trend
Farmers Exchanges – Policies in Force Q3-10 shows improved trend Q2-10 Q3-10 Q3-10 Ending Change Ending in thousand policies # % Auto 9,401 -16 0% 9,385 Homeowners 5,189 -50 -1% 5,139 Commercial P&C 356 1 0% 357 Small Business Solutions 218 -3 -1% 215 Workers’ Compensation 47 1 2% 48 Specialty 2,741
Slide 47: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the nine months to September 30 20101 20091 Change Auto2 96.0% 95.7% -0.3pts Homeowners 101.3% 104.5% 3.2pts Commercial P&C 97.1% 96.4% -0.7pts Small Business Solutions 100.0% 104.3% 4.3pts Workers' Compensation 101.5% 99.1% -2.4pts Specialty 98.7% 104.8% 6.1pt
Slide 48: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio 120% Other Cats 115% Midwest Gustav 110% Cats California Ike 105% wildfires Other California Cats Midwest Rita CO/TX wildfires Cats Hail- 100% Florida Texas storms hurricanes Midwest Katrina Hail Cats 95% 90% 85% © Zurich
Slide 49: Competitor Snapshot - Overall
Competitor Snapshot - Overall Growth vs. GAAP Combined Ratio – Overall P&C1, 4 June 2010 Growth 10 Industry6 September 2010 102.3% NPW % FY10 Industry Forecast 8 USAA4 6 Progressive Liberty Mutual4 GEICO5 2, 3 4 Farmers incl. 21C Industry6 State Farm4 2.7% 2 Travelers 0 Allstate Hartford American Fa
Slide 50: Zurich's investment portfolio benefits greatly 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 September 30, 2010 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Real Estate Private Equity 50
Slide 51: Group Investments – Zurich's debt securities are of consistently high quality
Group Investments – Zurich’s debt securities are of consistently high quality (98% investment grade) As of September 30, 2010 Group Investments Debt securities USD 199bn USD 145bn credit rating: AAA 52.1% credit rating: AA Other Debt 98.3% 12.1% asset securities investment classes grade 27% 73% cred
Slide 52: Group Investments – Zurich's debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 199bn (100%) As of September 30, 2010 Government and supranational bonds: USD 55bn (27%) Market/Cost1: 105% of which: 99% inv. grade 46%in General Insurance 71% AAA 45% in Global Life 11% AA 16% A 1%
Slide 53: Group Investments – Government & supranational bonds are well diversified
Group Investments – Government & supranational bonds are well diversified Group Investments - USD 199bn (100%) As of September 30, 2010 Government and supranational bonds: USD 55bn1 (27%) Market/Cost: 105% of which: 99% inv. grade 46% in General Insurance 71% AAA 45% in Global Life 11% AA
Slide 54: Group Investments – Eurozone Government & supranational bonds are well diversified
Group Investments1 – Eurozone Government & supranational bonds are well diversified As of September 30, 2010 Eurozone Government and supranational bonds: USD 23bn (100%) Market/Cost: 105% of which: Split by credit rating 33% in General Insurance 99% inv. grade 66% in Global Life 45% AAA 18
Slide 55: Group Investments – Zurich's Corporate bonds are of high quality
Group Investments – Zurich’s Corporate bonds are of high quality Group Investments - USD 199bn (100%) As of September 30, 2010 Corporate bonds: USD 65bn (33%) Market/Cost: 105% Split by industries Split by credit rating 42% Banks, 99% inv. grade including 15%1 covered bonds 24% AAA 9% Cities
Slide 56: Group Investments – 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 199bn (100%) As of September 30, 2010 Banks Corporate bonds: USD 28bn (14%) Market/Cost: 104% Split by seniority Split by credit rating 36% Covered bonds 99% inv. grade 48% Senior bonds
Slide 57: Group Investments – Split of total MBS/ABS of USD 25bn (13%)
Group Investments – Split of total MBS/ABS of USD 25bn (13%) MBS/ABS: USD 25bn (13%) Market/Cost: 102% Group Investments 97% inv. grade USD 199bn (100%) 83% AAA includes: US MBS: USD 15.5bn (7.8%) Market/Cost: 105% 96% inv. grade; 87% AAA Debt US ABS1: USD 4.2bn (2.1%) securities Market/Cost:
Slide 58: Group Investments – Split of US MBS of USD 15.5bn (7.8%)
Group Investments – Split of US MBS of USD 15.5bn (7.8%) Group Investments US-MBS: USD 15.5bn (7.8%) Market/Cost: 105% USD 199bn (100%) 96% inv. grade 87% AAA Debt of which: securities US “Agency” MBS: USD 9.1bn (4.6%) Market/Cost: 105% 73% 100% AAA USD 2.3bn backed by GNMA USD 6.8bn backe
Slide 59: 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 1500 500 1,342 1000 4 0 -3 -13
Slide 60: 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 5500 5,176 5000 4500 4000 3500 3000 2,477 2500 2000 1,815 1500 1000 884 380 441 500 230 115 Equity investments 39 30 46 0 Debt investments -169 Other in
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