Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Zurich Financial Services — 9M 2008 Earnings Presentation
46 slides from Zurich Insurance's earnings presentation, Nov 13, 2008
Slide 1: Results Reporting for the Nine Months to September 30, 2008
Results Reporting for the Nine Months to September 30, 2008 Analysts and Media Presentation November 13, 2008
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. Forward-looking statements include statements regarding our targeted prof
Slide 3: Agenda
Agenda Introduction James J. Schiro Results for the Nine Months Dieter Wemmer to September 30, 2008 Q&A © Zurich Financial Services November 13, 2008 Results Reporting for the Nine Months to September 30, 2008 3
Slide 4: Introduction
Introduction James J. Schiro Chief Executive Officer November 13, 2008
Slide 5: Financial highlights
Financial highlights in USD millions 2008 20071 Change for the nine months ended September 30 Business operating profit 4,185 4,910 -15% Net income attributable to shareholders 2,834 4,185 -32% General Insurance combined ratio 98.7% 96.9% -1.8pts Global Life new business margin2 22.4% 24.0% -1.6pts
Slide 6: The Zurich Way and 2009 expense saving initiatives
The Zurich Way and 2009 expense saving initiatives The Zurich Way – Target of USD 2.7 billion for 2009 to 2011 We are well on track to achieve our USD USD 900m 2008 target. USD 800m Developing our three year plan, we 700m expect benefits of USD 2.7 billion for Total TZW 2009 to 2011 USD planned bene
Slide 7: Results for the Nine Months to September 30, 2008
Results for the Nine Months to September 30, 2008 Dieter Wemmer Chief Financial Officer November 13, 2008
Slide 8: Business operating profit by segment
Business operating profit by segment in USD millions 2008 20071 Change for the nine months ended September 30 General Insurance 2,578 2,779 -7% Global Life 1,224 1,090 12% Farmers Management Services 919 1,005 -9% Corporate Functions -542 -577 6% Total Core Business operating profit 4,179 4,297 -3%
Slide 9: Top line development by segment
Top line development by segment in USD millions 2008 2007 Change Change for the nine months ended September 30 in LC1 Gross written premiums and policy fees General Insurance 29,207 27,323 7% 1% Global Life (incl. insurance deposits)2 15,054 15,365 -2% -8% Other Businesses 2,768 1,824 52% 52% Annual
Slide 10: Rate Change Monitor for personal and commercial lines
Rate Change Monitor1 for personal and commercial lines 9 months 2008 EGI by country by division Switzer- Rest of EGI Farmers UK Germany land Italy Spain Ireland Europe Total IB NAC GC Exchanges2 Personal Lines 9% 1% -1% 2% 5% -12% 1% 2% 1% n/a n/a 7% Commercial Lines -2% 1% -1% 0% 4% -11% 0% -1% 6%
Slide 11: General Insurance – key performance indicators
General Insurance – key performance indicators Business Operating Profit Combined ratio (%) 109.8 Global in USD millions 2008 2007 Change Corporate 95.0 for the nine months ended Sept. 30 100.0 Global Corporate 122 580 -79% NA Commercial 94.6 North America Commercial 738 1,087 -32% Europe 95.6 Europ
Slide 12: General Insurance net expense ratio walk
General Insurance net expense ratio walk from 9 months 2007 to 9 months 2008 0.1% 25.3% 0.6% 24.6% 1 9m07 Expense Ratio Commission Administration and 9m08 Expense Ratio other expenses © Zurich Financial Services 1 Commission has increased mainly due to the effect of writing greater amounts of higher
Slide 13: Comparison of General Insurance loss ratio allowing for major CAT and PYD
Comparison of General Insurance loss ratio allowing for major CAT and PYD 9 months 2008 9 months 2007 75% 75% 73.4% 72.3% 70% 7.2% 70% 5.5% 67.9% 65.9% 4.1% 65% 2.4% 65% 3.4% 2.5% USD USD USD USD USD USD 989m -570m -1,720m 558m -761m -1,219m 60% 60% Underlying Major Large Reported Underlying Major L
Slide 14: Development of Reserves for Losses and Loss Adjustment Expenses (LAE)
Development of Reserves for Losses and Loss Adjustment Expenses (LAE) in USD millions 2008 2007 Net reserves for losses and LAE, as of January 1 54,712 50,814 Net losses and LAE paid -16,467 -14,347 Net losses and LAE incurred - Current year 19,420 17,454 - Prior years1 -925 -648 Currency translatio
Slide 15: Global Life – key performance indicators
Global Life – key performance indicators in USD millions 2008 2007 Change Change for the nine months ended September 30 in LC1 Annual Premium Equivalent (APE) 2,282 2,002 14% 9% New business value, after tax 511 480 6% 1% New business margin, after tax2 22.4% 24.0% -1.6pts Business operating profit
Slide 16: Global Life's acquisitions in Spain
Global Life’s acquisitions in Spain Acquisitions of 50% stakes in the insurance operations of Banco Sabadell and Caixa Sabadell in Spain. Long-term strategic banc-assurance agreements with both banks. Zurich becomes the 2nd largest insurer in Spain1, one of the most attractive insurance markets in E
Slide 17: Farmers Management Services – key performance indicators
Farmers Management Services – key performance indicators in USD millions 2008 2007 Change for the nine months ended September 30 Management fees and other related revenues 1,831 1,679 9% Management and other related expenses -956 -863 -11% Gross management result 875 816 7% Managed gross earned prem
Slide 18: Farmers Exchanges – key performance indicators
Farmers Exchanges1 – key performance indicators in USD millions 2008 2007 Change for the nine months ended September 30 Gross written premiums (statutory)2 13,125 12,292 7% Gross written premiums3 12,699 11,970 6% Net underwriting result -1,082 -89 nm Combined ratio 108.6% 98.6% -10.0pts Adjusted co
Slide 19: Other Businesses and Corporate Functions – Business operating profit contribution
Other Businesses and Corporate Functions – Business operating profit contribution in USD millions 2008 2007 Change for the nine months ended September 30 Other Businesses: - Farmers Re 77 124 -38% - Centre -5 220 nm - Other -66 271 nm Total Other Businesses 6 615 -99% Corporate Functions -542 -577 6
Slide 20: 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 of which: impairments Equity investments Debt investments Debt investments Other investments Other investments in USD millions in USD millions 1000 820 1000 478 500 230 500 1
Slide 21: Group investments – unrealized losses
Group investments – unrealized losses Change in net unrealized losses on investments incl. in shareholders’ equity1 Equity investments Debt investments in USD millions Other investments 500 72 11 0 -54 -33 -76 -144 -212 -500 -602 -1000 -1500 -1,596 -2000 -2500 -2,342 -3000 -2,937 -3,077 -3500 Q1-08
Slide 22: Investment performance of Group investments
Investment performance of Group investments in USD millions 2008 2007 Change for the nine months ended September 2008 Net investment income 6,552 6,383 3% Net capital losses/gains on investments and -1,807 1,083 nm impairments1 of which attributable to shareholders -1,109 874 nm Net investment resul
Slide 23: Development of shareholders' equity
Development of shareholders’ equity in USD millions 32,000 2,090 31,000 2,834 1,045 30,000 28,945 3,481 29,000 28,000 27,000 26,000 945 25,000 318 23,900 24,000 23,000 22,000 21,000 20,000 19,000 Restated Net Income Dividends Share Change in net Currency Other Balance as of © Zurich Financial Servic
Slide 24: Update on capital and solvency position as of September 30, 2008
Update on capital and solvency position as of September 30, 2008 in USD billion or % Sep 30 Oct 31 2008 2008 EST Economic capital buffer1 6bn 5bn Economic capital ratio1 121% 116% Group’s Solvency I ratio2 171% 159% Capital and solvency position remains strong © Zurich Financial Services 1 Economic
Slide 25: Summary
Summary Strong capital position High quality investment portfolio Continued strength of operating performance Increased TZW targets by USD 100m p.a. through 2011 Achieved growth in targeted areas Improving GI rate environment © Zurich Financial Services Competitive advantage November 13, 2008 Result
Slide 26: Q&A
Q&A © Zurich Financial Services November 13, 2008 Results Reporting for the Nine Months to September 30, 2008 26
Slide 27: Appendix
Appendix © Zurich Financial Services November 13, 2008 Results Reporting for the Nine Months to September 30, 2008 27
Slide 28: Zurich is poised for profitable growth
Zurich is poised for profitable growth 9% 10% 9% Global Focus on volume growth1 Farmers Life 6% IB EGI Legend for GI BDs IB International Businesses GC EGI Europe General NAC Insurance GC Global Corporate -2% -3% NAC North America Commercial © Zurich Financial Services Focus on margin enhancement 1
Slide 29: The Zurich Way initiatives – 2009 target
The Zurich Way initiatives – 2009 target by function by business USD 900m division USD 900m Growth/ USD 800m 21% Distribution USD 800m USD 700m USD 700m 39% Europe General 32% Insurance 21% 35% 30% Claims 31% 36% 16% 17% North America 23% Commercial 22% 28% 43% 29% U/W Global 34% 17% 15% Corporate 1
Slide 30: Business division BOP-ROE based on RBC-allocated IFRS equity
Business division BOP-ROE1 based on RBC-allocated IFRS equity for the nine months ended September 30 2008 2007 General Insurance 23.6% 27.1% - Global Corporate 5.5% 24.0% - North America Commercial 18.6% 28.3% - Europe General Insurance 38.0% 25.7% - International Businesses 21.7% 16.3% - Group Rein
Slide 31: Global Life – new business indicators
Global Life – new business indicators in USD millions APE APE Change Change NBV2 NBV2 Change for the nine months ended September 30 2008 2007 in LC1 2008 2007 United States 76 87 -13% -13% 68 80 -15% United Kingdom 670 649 3% 5% 73 87 -16% Germany 484 350 38% 22% 165 106 56% Switzerland 84 70 20% 4%
Slide 32: Global Life – emerging markets are growing strongly and profitably
Global Life – emerging markets are growing strongly and profitably in USD millions APE APE Growth NBM1 NBM1 for the nine months ended September 30 2008 2007 2008 2007 ZIS2 374 333 12% 20.1% 20.4% Hong Kong 65 83 -22% 24.6% 43.4% Latin America 97 55 78% 24.4% 22.7% Total Emerging markets 536 470 14%
Slide 33: Farmers Exchanges – financial highlights: strong premium growth
Farmers Exchanges1 – financial highlights: strong premium growth 6'000 42.0% in USD millions 2008 2007 for the nine months to Sept. 30 5'000 40.0% Gross written premiums2 12,699 11,970 Net underwriting result -1,082 -89 4'000 38.0% Net surplus growth -685 299 3'000 36.0% Ending surplus 5,034 5,574 2
Slide 34: Farmers Exchanges – gross written premiums by line of business
Farmers Exchanges – gross written premiums by line of business in USD millions 2008 2007 Change for the nine months ended September 30 Auto 6,535 6,198 5.4% Homeowners 3,404 3,245 4.9% Commercial P&C 953 928 2.7% Zurich Small Businesses 2191 N/A N/A Workers’ Compensation 255 266 -4.1%2 Specialty 1,2
Slide 35: Farmers Exchanges – premium growth outperforming industry
Farmers Exchanges – premium growth outperforming industry GWP growth 8% Industry Growth Rate1 2007 Estimate: -0.5% 2008 Forecast: 0.0% 6.5%2 6.1%2 6% 5.7% 5.4% 5.0% 5.1% 4.6% 4% 3.2% 3.3% 2.2% 2% 1.4% 0% 3 months Half year 9 months Full year 3 months Half year 9 months Full year 3 months Half year 9
Slide 36: Farmers Exchanges – combined ratio
Farmers Exchanges – combined ratio for the nine months to September 30 20081 20071 Change Auto 100.5% 99.7% -0.8pts Homeowners 125.7% 95.0% -30.7pts Commercial P&C 98.7% 95.3% -3.4pts Zurich Small Business 119.0% N/A N/A Workers' Compensation 96.4% 96.7% 0.3pts Specialty 109.2% 94.4% -14.8pts Total
Slide 37: 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 wildfires Ike 105% California Rita wildfires 100% Florida hurricanes Katrina 95% 90% © Zurich Financial Services Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 38: Competitor Analysis - Overall
Competitor Analysis - Overall Growth vs. GAAP Combined Ratio1,6 Growth NPW % Industry4 102.4% September 2008 8.0 June 2008 Farmers2,3 GEICO5 FY08 Industry Estimate 4.0 Liberty Mutual6 Travelers State Farm6 Industry4 0.0 0.0% Progressive Allstate Safeco Hartford American Family6,7 Nationwide6 -4.0 Me
Slide 39: Zurich's investment portfolio profits greatly from diversification
Zurich’s investment portfolio profits greatly from diversification and is balanced in terms of risk Risk Allocation of Zurich’s investment portfolio as of September 30, 2008 Asset allocation (%) Risk diversification Risk exposure (%)1 and matching (%) 100 Hedge Funds / Private Equity 62 Hedge Real E
Slide 40: Zurich's debt securities are of a very high quality (99.3% investment grade)
Group Investments – Zurich’s debt securities are of a very high quality (99.3% investment grade) As of September 30, 2008 Group Investments Debt securities USD 180bn USD 116bn credit rating: AAA 63.0% credit rating: AA Other Debt 99.3% 12.1% asset securities investment classes grade 36% 64% credit r
Slide 41: Group Investments – Zurich's debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 180bn (100%) As of September 30, 2008 Government and supranational bonds: USD 43bn (24%) of which: 99% inv. grade 48%in General Insurance 76% AAA 46% in Global Life 7% AA 15% A 1% BBB Corporate bonds
Slide 42: Group Investments – Zurich's debt securities are well balanced
Group Investments – Zurich’s debt securities are well balanced Group Investments - USD 180bn (100%) As of September 30, 2008 Corporate bonds: USD 47bn (26%) Split by industries Split by credit rating 44% Banks, 99% inv. grade including 17%1 covered bonds 33% AAA 9% Cities, Agencies, Cantons,
Slide 43: Group Investments – Split of total MBS/ABS of USD 26bn
Group Investments – Split of total MBS/ABS of USD 26bn (14%) MBS/ABS: USD 26bn (14%) Group Investments 100% inv. grade USD 180bn (100%) 95% AAA includes: US MBS: USD 16.7bn (9.3%) 99% inv. grade 99% AAA Debt see further details on next slide securities US ABS1: USD 3.3bn (1.8%) 99% inv.
Slide 44: Group Investments – Split of US MBS of USD 16.7bn
Group Investments – Split of US MBS of USD 16.7bn (9.3%) Group Investments US-MBS: USD 16.7bn (9.3%) USD 180bn (100%) 99% inv. grade 99% AAA Debt of which: securities US “Agency” MBS: USD 9.6bn (5.3%) 64% 100% AAA USD 0.9bn backed by GNMA USD 8.7bn backed by FNMA and FHLMC Other asset US C
Slide 45: Exposure to US sub-prime remains very small (0.11%)
Group Investments – Exposure to US sub-prime remains very small (0.11%) and of high quality Group Investments US sub-prime: USD 193m (0.11%) USD 180bn (100%) 96% inv. grade 66% AAA Limited downgrades by rating agencies since December 2007: USD 101m Debt Minimal impairments in 9m08: USD 14m s
Slide 46: Exposure to CDO remains very small (0.46%)
Group Investments – Exposure to CDO remains very small (0.46%) and of high quality Group Investments CDO: USD 821m (0.46%) USD 180bn (100%) 100% inv. grade 90% AAA We added roughly USD 0.5bn of a AAA rated bespoke CLO tranche providing Debt securities exposure to US and European credits 42%
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