Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Q3 2011 Earnings Presentation
58 slides from Zurich Insurance's earnings presentation, Nov 10, 2011
Slide 1: Results Reporting for the nine months to September 30, 2011
Results Reporting for the nine months to September 30, 2011 Analysts and Media Presentation November 10, 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: Nine months 2011 Results Key Messages
Nine months 2011 Results Key Messages Strong Q3 net income supported by sound risk management actions Solid underlying Q3 operating results with continued underwriting discipline Resilient top-line growth in both mature and emerging markets Capital and solvency quality maintained © Zurich Financial
Slide 4: Financial highlights
Financial highlights in USD millions 2011 20101 Change for the nine months to September 30 Business operating profit (BOP) 3,258 3,537 -8% Net income attributable to shareholders 3,210 2,399 34% General Insurance combined ratio 98.8% 97.7% -1.0pts Global Life new business value2 729 589 24% Farmers
Slide 5: Business operating profit and net income by quarter
Business operating profit and net income by quarter Business operating profit in USD millions 1,500 1,333 1,254 1,248 1,287 1,117 1,035 1,000 854 500 0 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Net income attributable to shareholders in USD millions 1,500 1,331 1,239 1,029 1,000 931 71
Slide 6: Business operating profit by segment
Business operating profit by segment in USD millions 2011 2010 Change for the nine months to September 30 General Insurance 1,732 1,972 -12% Global Life 1,005 1,098 -8% Farmers (including Farmers Re) 1,096 1,295 -15% Other Operating Businesses -588 -573 -3% Total BOP Operating business segments 3,24
Slide 7: General Insurance – key performance indicators
General Insurance – key performance indicators in USD millions 2011 2010 Change Change for the nine months to September 30 in LC1 GWP and policy fees 27,047 25,528 6% 0% Rate change2 3.4% 2.0% 1.4pts Loss ratio 72.3% 71.0% -1.4pts Expense ratio 26.4% 26.7% 0.3pts Combined ratio 98.8% 97.7% -1.0pts B
Slide 8: General Insurance – Rate Change Monitor and GWP performance
General Insurance – Rate Change Monitor1 and GWP performance 9 months 2011 Discrete Q3 2011 Int’l Total Int’l Total GC NAC Europe Markets GI GC NAC Europe Markets GI Personal Lines n/a n/a 5% 2% 5% n/a n/a 5% 3% 5% Commercial Lines 3% 3% 2% 6% 3% 3% 4% 2% 8% 4% Continued focus on profitability in th
Slide 9: General Insurance – comparison of loss ratio
General Insurance – comparison of loss ratio 9 months 2011 9 months 2010 75% Loss ratio development 72.3% Discrete quarters USD 200m / 0.9% 71.0% US weather in Q2-11 Underlying loss ratio (tornadoes, hail) 70% 76.9% 72.1% 69.8% 71.0% 71.4% 71.4% 68.9% 66.4% 65% 64.4% 9.1% 7.5% 3.9% 1.0% 60% 4.2% 3.0
Slide 10: General Insurance – expense ratio walk from 9m10 to 9m11
General Insurance – expense ratio walk from 9m10 to 9m11 26.7% 26.4% Change year-over-year Expense ratio development Other tech Discrete quarters 14.0% expenses 13.7% 27.0% 26.9% 26.3% 27.2% 26.6% 26.3% 26.4% -0.0 -0.3 -0.2 -0.1 12.7% Commissions 12.7% e pe W s x i on ng Ta es ex er U ns ha iss ium
Slide 11: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2011 2010 Change Change for the nine months to September 30 in LC1 GWP and policy fees (incl. insurance 19,350 18,894 2% -4% deposits) Net inflows to Assets under Mgmt 1,572 3,747 -58% -60% Annual Premium Equivalent (APE) 2,770 2,495 11% 4% Ne
Slide 12: 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 September 30 2011 20101 in LC2 2011 2010 in LC2 Bank Distribution 135 157 -19% 467 628 -30% IFA/Brokers 130 144 -16% 705 713 -7% Agents 85 91 -10% 349 334 -2% International / Expats 66 47 30% 23
Slide 13: Farmers – key performance indicators
Farmers – key performance indicators in USD millions 2011 2010 Change for the nine months to September 30 Farmers Management Services Managed gross earned premium margin1 7.3% 7.4% -0.1pts Business operating profit 1,020 1,048 -3% Farmers Re Business operating profit 76 248 -69% Farmers Exchanges1 G
Slide 14: Investment performance of Group Investments
Investment performance of Group Investments in USD millions 2011 2010 Change for the nine months to September 30 Net investment income 5,454 5,307 3% Net capital gains/(losses) on investments and 2,162 981 nm impairments1 of which attributable to shareholders 1,593 344 nm Net investment result 7,616
Slide 15: Group Investments – Exposures to Eurozone peripheral and bank corporate bonds
Group Investments – Exposures to Eurozone peripheral and bank corporate bonds Group Investments - USD 198bn (100%) As of September 30, 2011 Subordinated Bank Italy, Spain, Portugal, Ireland, Greece Corp. bonds USD 12bn 5.7bn Italy Debt USD 3bn 5.0bn Spain 6% securities 0.5bn Portugal 73% 0.5
Slide 16: Development of shareholders' equity in Q3 2011
Development of shareholders’ equity in Q3 2011 in USD millions 33,000 577 -832 1,239 -220 37 31,874 32,000 31,073 31,000 30,000 29,000 28,000 27,000 26,000 25,000 24,000 Balance as of Net Income Change in net Cumulative Net actuarial Other Balance as of © Zurich Financial Services Ltd June 30, 2011
Slide 17: 2011 estimated economic and regulatory solvency
2011 estimated economic and regulatory solvency Statutory solvency ratio SST solvency ratio3 (Group’s Solvency I1) +19pts -5pts 256% 223% 225% 242% 232% SST ratio expected to remain above 200% at the end of Q3-11. FINMA expected to approve the Group’s SST model during 2012. Dec 31 June 30 Movements
Slide 18: Nine months 2011 Results Key Messages
Nine months 2011 Results Key Messages Strong Q3 net income supported by sound risk management actions Solid underlying Q3 operating results with continued underwriting discipline Resilient top-line growth in both mature and emerging markets Capital and solvency quality maintained © Zurich Financial
Slide 19: Appendix
Appendix © Zurich Financial Services Ltd November 10, 2011 Results Reporting for the Nine Months to September 30, 2011 19
Slide 20: Top line development by segment
Top line development by segment in USD millions 2011 2010 Change Change for the nine months to September 30 in LC1 General Insurance GWP and policy fees 27,047 25,528 6% 0% Global Life GWP, policy fees and insurance 19,350 18,894 2% -4% deposits Annual Premium Equivalent (APE)2 2,770 2,495 11% 4% Fa
Slide 21: Development of shareholders' equity in 9 months 2011
Development of shareholders’ equity in 9 months 2011 in USD millions 33,000 295 -423 3,210 -152 31,905 -1,916 -476 31,874 32,000 226 31,000 -795 30,000 29,000 28,000 27,000 26,000 25,000 24,000 Balance as of Dividends1 Currency Net Income Change in Cumulative Net actuarial Redemption Other Balance a
Slide 22: 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 2011 2010 General Insurance 13.0% 17.4% Global Corporate 7.0% 21.9% North America Commercial 18.0% 21.3% Europe 18.3% 17.0% International Markets -12.5% 3.1% GI Global Functions including Group Reinsura
Slide 23: 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 12% 8% Other2 13% Market/ALM risk 10% General Operational risk 37% Farmers1 Insurance Business risk 1% 50% 4% P&R risk3 Re-ins credit risk Global Life Life insurance risk 28%
Slide 24: 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 25: 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 26: 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 27: 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 10.5 103.2 for the nine months to September 30 Corporate 93.7 CAT4 1.0 Global Corporate 232 591 -61% CAT4 96.3 NA 0.8 Commercial 96.6 North America Commerc
Slide 28: General Insurance – Rate Change Monitor for personal and commercial lines
General Insurance – Rate Change Monitor1 for personal and commercial lines 9 months 2011 Discrete Q3 2011 Int’l Total Int’l Total GC NAC Europe Markets GI GC NAC Europe Markets GI Personal Lines n/a n/a 5% 2% 5% n/a n/a 5% 3% 5% Commercial Lines 3% 3% 2% 6% 3% 3% 4% 2% 8% 4% Europe by country Europe
Slide 29: 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 nine months to September 30 in LC1 Global Corporate 6,528 5,917 10% 4% North America Commercial 7,278 7,408 -2% -2% Europe 10,366 9,745 6% -3% International Markets 3,358 2,857 18% 10% GI Globa
Slide 30: General Insurance – written rate change 2008 through 9m-2011
General Insurance – written rate change 2008 through 9m-2011 General Insurance – rate change 2008 through 9 months 2011 5% 4.2% 3.9% 3.9% 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 November 10, 2011 Results Re
Slide 31: Development of Reserves for Losses and Loss Adjustment Expenses (LAE)
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 56,014 55,944 Net losses and LAE paid -16,938 -17,178 Net losses and LAE incurred 16,728 17,756 - Current year 17,699 18,605 - Prior years1 -972 -850 Forei
Slide 32: 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 nine months to September 30 2011 2010 in LC2 2011 2010 in LC2 North America 36 48 -24% 82 71 15% Latin America 52 40 21% 231 155 40% Europe 385 391 -8% 1,908 1,848 -4% United Kingdom 106 89 14% 784 6
Slide 33: Global Life - Assets under Management
Global Life - Assets under Management1 AuM have fallen compared to January 1, 2011 on a local currency basis, due to the fall in the markets affecting unit-linked funds Split of AuM Development of AuM in USD billions in USD billions 222 Balance as of 217 Jan 1, 2011 222 25 25 Inflows +21 103 101 Out
Slide 34: Farmers Management Services – key performance indicators
Farmers – Farmers Management Services – key performance indicators in USD millions 2011 2010 Change for the nine months to September 30 Management fees and other related revenues 2,071 2,096 -1% Management and other related expenses -1,077 -1,072 0% Gross management result 995 1,024 -3% Managed gros
Slide 35: Farmers Re – key performance indicators
Farmers – Farmers Re – key performance indicators in USD millions 2011 2010 Change for the nine months to September 30 Gross written premiums1 2,261 3,722 -39% Net underwriting result -30 101 nm Combined ratio 101.3% 97.7% -3.6Pts CAT2 impact 7.5% 4.5% -3.0Pts Business operating profit 76 248 -69% ©
Slide 36: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2011 2010 Change for the nine months to September 30 Gross written premiums 13,903 13,860 0.3% Net underwriting result2 -1,049 228 nm Expense ratio 34.0% 32.9% -1.1pts Loss ratio 73.2% 65.2% -8.0pts Combined ratio2 107.1% 98.1% -9.0pts
Slide 37: Farmers Exchanges – Update on 21st Century
Farmers Exchanges – Update on 21st Century1 GWP by distribution channel (Direct vs Agency) GWP in Q3-11 of USD 507m reflects: 1000 Agency Direct Direct: Q3 new business 726 continues to be strong. Total GWP in USD m 152 595 600 536 Brand Awareness continues to 118 101 500 57 482 488 437 494 458 507
Slide 38: Farmers Exchanges – financial highlights
Farmers Exchanges – financial highlights 50.0% 6'000 in USD millions 2011 2010 48.0% for the nine months to Sept. 30 5'000 46.0% Gross written premiums 13,903 13,860 44.0% 4'000 Net underwriting result1 -1,049 228 42.0% 3'000 40.0% Net surplus growth -353 304 38.0% Ending surplus 5,606 6,060 2'000 3
Slide 39: 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 nine months to September 30 Auto1 7,331 7,269 0.9%1 of which 21st Century Direct 1,459 1,398 4.4%1 Homeowners 3,414 3,452 -1.1% Commercial P&C 988 976 1.3% Small Business Solutions 471 437 7.7% Wo
Slide 40: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions Q3-11 Q3-10 Change for the three months to September 30 Auto 2,495 2,458 1.5% of which 21st Century Direct 507 479 5.7% Homeowners 1,216 1,213 0.2% Commercial P&C 323 314 2.9% Small Business Solutions 159 143 10.7% Worker
Slide 41: Farmers Exchanges – premium growth
Farmers Exchanges – premium growth GWP growth1 12% 10.1% 10% 9.1% 8% 6.5% 5.7% 6.1% 5.4% 5.7% 5.4% 6% 5.1% 5.0% 4.7% 4.6% 4.2% 4% 3.3% 3.1% 3.2% 2.9% 2.2% 1.8% 2% 1.4% 1.1% 0.7% 0% 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M FY 3M 6M 9M -0.4% -2% © Zurich Financial Services Ltd ‘06 ‘07
Slide 42: Farmers Exchanges – Policies in Force 9 months 2011 (1/2)
Farmers Exchanges – Policies in Force 9 months 2011 (1/2) 2010 9M-11 Sep-2011 in thousand policies Ending Change Ending # % Auto 11,678 288 2.5% 11,966 of which 21st Century Direct 2,308 103 4.5% 2,411 Homeowners 5,109 -3 0.1% 5,106 Commercial P&C 359 11 3.1% 370 Small Business Solutions 209 -4 -1.9
Slide 43: Farmers Exchanges – Policies in Force Q3-11 (2/2)
Farmers Exchanges – Policies in Force Q3-11 (2/2) June Q3-11 Sep in thousand policies 2011 Change 2011 Ending # % Ending Auto 11,904 62 0.5% 11,966 of which 21st Century Direct 2,372 39 1.6% 2,411 Homeowners 5,106 0 0.0% 5,106 Commercial P&C 367 3 0.8% 370 Small Business Solutions 205 0 0.0% 205 Wor
Slide 44: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the nine months to September 30 20111 20101 Change Auto2 104.1% 96.3% -7.8pts Homeowners 108.7% 101.3% -7.4pts Commercial P&C 114.6% 97.1% -17.5pts Small Business Solutions 126.4% 100.0% -26.4pts Workers' Compensation 112.3% 101.5% -10.8pts Specialty 115.1% 100
Slide 45: Farmers Exchanges – development of the combined ratio
Farmers Exchanges – development of the combined ratio Quarterly combined ratio Incl. 120% 17 Catastrophe CAT1 impact Incl. Events Ike & Gustav 115% 110% Incl. Incl. California Incl. Irene wildfires Rita & Katrina 105% Incl. California wildfires 100% 95% 90% © Zurich Financial Services Ltd 85% Q1 Q2
Slide 46: Farmers Exchanges – Competitor Snapshot
Farmers Exchanges – Competitor Snapshot September 2011 Growth vs. GAAP Combined Ratio – Overall P&C 1, 3 June 2011 Growth NPW % 10 4 USAA3 GEICO 6 Progressive Travelers Hartford 2 State Farm3 Mercury 2 Liberty Mutual3 Farmers Nationwide3 Allstate -2 -6 American Family3 -10 © Zurich Financial Service
Slide 47: Other Operating and Non-Core Businesses – Business operating profit contribution
Other Operating and Non-Core Businesses – Business operating profit contribution in USD millions 2011 2010 Change for the nine months to September 30 Other Operating Businesses -588 -573 -3% Non-Core Businesses - Centre 96 -12 nm - Banking activities -73 -314 77% - Other centrally managed businesses
Slide 48: 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, 2011 Asset allocation (%) Risk diversification Risk exposure (%)2 and matching (%)1 100 Hedge Funds / Real Estate Private Equity 4
Slide 49: Zurich's debt securities are of consistently high credit quality
Group Investments – Zurich’s debt securities are of consistently high credit quality (98.1% investment grade) As of September 30, 2011 Group Investments Debt securities USD 198bn USD 145bn credit rating: AAA 38.8%1 credit rating: AA Other Debt 98.1% 28.4%1 asset securities investment classes grade 2
Slide 50: Group Investments – Zurich's debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 198bn (100%) As of September 30, 2011 Government and supranational bonds: USD 61bn (31%) Market/Cost1: 103% of which: 98% inv. grade 43%in General Insurance 53% AAA 49% in Global Life 34% AA 11% A 1%
Slide 51: Group Investments – Government & supranational bonds are well diversified
Group Investments – Government & supranational bonds are well diversified Group Investments - USD 198bn (100%) As of September 30, 2011 Government and supranational bonds: USD 61bn1 (31%) Market/Cost: 103% of which: 98% inv. grade 43% in General Insurance 53% AAA 49% in Global Life 34% AA
Slide 52: Group Investments – Eurozone Government & supranational bonds are well diversified
Group Investments – Eurozone Government & supranational bonds are well diversified Group Investments - USD 198bn (100%) As of September 30, 2011 Eurozone Government and supranational bonds: USD 27bn (14%) Market/Cost (M/C): 100% of which: Split by credit rating 28% in General Insurance 97% inv.
Slide 53: Group Investments – Zurich's Corporate bonds are of high quality
Group Investments – Zurich’s Corporate bonds are of high quality Group Investments - USD 198bn (100%) As of September 30, 2011 Corporate bonds: USD 61bn (31%) Market/Cost: 103% Split by industries Split by credit rating 40% Banks, 99% inv. grade including 14.7%1 covered bonds 23% AAA 9% Citi
Slide 54: 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 198bn (100%) As of September 30, 2011 Banks Corporate bonds: USD 25bn (12%) Market/Cost: 101% Split by seniority Split by credit rating 36% Covered bonds 99% inv. grade 51% Senior bonds
Slide 55: Group Investments – Split of total MBS/ABS of USD 24bn (12%)
Group Investments – Split of total MBS/ABS of USD 24bn (12%) Group Investments - USD 198bn (100%) MBS/ABS: USD 24bn (12%) As of September 30, 2011 Market/Cost: 103% 98% inv. grade 42% AAA includes: US MBS: USD 14.9bn (7.5%) Market/Cost: 105% 97% inv. grade; 23% AAA Debt US ABS1: USD 4.0bn (2.0
Slide 56: Group Investments – Split of US MBS of USD 14.9bn (7.5%)
Group Investments – Split of US MBS of USD 14.9bn (7.5%) Group Investments - USD 198bn (100%) As of September 30, 2011 US-MBS: USD 14.9bn (7.5%) Market/Cost: 105% 97% inv. grade 23% AAA Debt of which: securities US “Agency” MBS: USD 10.2bn (5.1%) Market/Cost: 106% 73% 98% AA+ USD 3.2bn backe
Slide 57: 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 1,241 1250 1,146 250 1000 750 6
Slide 58: 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 2,198 2000 1,782 1500 1000 791 500 233 -82 72 80 71 0 -500 -514 -589 Equity investments -1000 -870 Debt investments -1,207 Other investments -1500 Q1-20
Zurich Insurance Group — Q3 2011 Earnings Presentation on 6ix