Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Investor Day (December 2013)
135 slides from Zurich Insurance's investor day presentation, Dec 5, 2013
Slide 1: Investor Day 2013
Investor Day 2013 Zurich, 5 December 2013
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 predictions of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the “Group”).
Slide 3: Agenda
Agenda 09.30 Registration and welcome 09.45 – 09.50 Opening Remarks Tom de Swaan 09.50 – 10.30 Strategy Martin Senn 10.30 – 11.00 Finance Perspective Vibhu Sharma 11.00 – 11.20 Break 11.20 – 12.00 Global Life Kristof Terryn 12.00 – 12.45 Q&A part I 12.45 – 13.45 Lunch 13.45 – 14.35 General Insurance
Slide 4: Opening Remarks
Opening Remarks Tom de Swaan, Chairman Zurich Insurance Group
Slide 5: Strategy
Strategy Martin Senn, CEO Zurich Insurance Group
Slide 6: Building on our strengths as we move into a new phase
INTRODUCTION Building on our strengths as we move into a new phase Zurich Share Performance (in USD) Disciplined investment and focused underwriting have helped us outperform the sector since the credit crisis began 2013 Target Status Combined ratio We set ambitious targets for 2010 - 2013, Gr
Slide 7: What we will continue, change and improve
INTRODUCTION What we will continue, change and improve What will we Underwriting focus and investment discipline will continue to do remain unchanged Prioritizing investment in distinctive positions and What’s new managing other businesses for value What will we do Improving operating profitability
Slide 8: Our value proposition to investors is strong…but can be improved
OUR STARTING POINT Our value proposition to investors is strong…but can be improved Investors like… Investors question… Solid defensive stock Positioning in retail markets Strong franchises, especially in General Translating higher life new business value Insurance corporate and commercial i
Slide 9: Strong balance sheet and solid profitability underpin cash returns
OUR STARTING POINT Strong balance sheet and solid profitability underpin cash returns Strong solvency and profitability Returning ~30% of our current market capitalization in 5 years In USD billions In % Cumulative paid dividend, in USD billions 136% 11.8 6 140 126% 119% 121% 5 120 9.1 103% 95% 100
Slide 10: We generate a solid operating ROE, with room to improve
OUR STARTING POINT We generate a solid operating ROE, with room to improve BOPAT ROE1 over US 10 yr swap Focus areas 13.5% 12.1% 11.2% 10.5% General Insurance: profitability improved, still lagging local champions 10.3% 8.4% 9.7% 8.7% Global Life: good NBV growth, needs to translate more fully i
Slide 11: The global economic environment is improving
EXTERNAL DRIVERS The global economic environment is improving Continued emerging markets growth, Bond yields are beginning to reflect Mature markets are recovering Improving fundamentals Real GDP growth Emerging markets 10yr Government bond yields U.S. CAGR (%) % Mature markets Germany World average
Slide 12: Globalization drives the growth of cross border insurance
EXTERNAL DRIVERS Globalization drives the growth of cross border insurance Growing regulatory hurdles and Ongoing advancement of global trade protectionist pressures World exports Protectionist measures % of GDP implemented by G-20 countries Number 34 32 335 30 287 273 269 p28 26 24 22 20 18 © Zuric
Slide 13: Technology creates new opportunities for the insurance industry
EXTERNAL DRIVERS Technology creates new opportunities for the insurance industry … will drive significant change in the Increasing adoption of technology… coming years Number of subscribers, in billions Big Data Mobile Broadband 2.5 exabytes (2.5×1018) of data created daily Internet World populati
Slide 14: Customer needs are changing…
EXTERNAL DRIVERS Customer needs are changing… World ranking by Employee General revenue1, 2012 Benefits Insurance Corporate customers and intermediaries Broker 1 1 2 are beginning to request combined life and Broker 2 2 1 general insurance solutions in some market Broker 3 3 3 segments Broker 4 4
Slide 15: …creating opportunities we will capitalize on
EXTERNAL DRIVERS …creating opportunities we will capitalize on Our advantage, as a global and composite insurer Corporate Uniquely positioned as a Globalization and interconnectedness of risk corporate insurer with global drive need of global capabilities reach and composite proposition Compos
Slide 16: We are strong in Corporate and Commercial…work to do in Retail
EXTERNAL DRIVERS We are strong in Corporate and Commercial…work to do in Retail Breakdown of Zurich‘s GWP (2011) by market share per country Zurich’s market share (2011)1 GI-Corporate and 11 countries, 7% Commercial among which3 2% Above 5% Below 3% mid-market2 17% Australia From 3 to 5% Not categ
Slide 17: Cornerstones of our strategy
STRATEGY Cornerstones of our strategy Group Strategy Key focus areas Prioritizing investment Corporate 1 in distinctive positions Commercial mid-market Select retail Extract value from Global Life back books Managing other Continue to capture value from profitable, smaller 2 businesses for
Slide 18: Prioritizing investment in distinctive positions
PRIORITIZING INVESTMENTS Prioritizing investment in distinctive positions Target customer segments Corporate Commercial mid-market Retail (select markets) Risk participation Social status Bespoke Global Industry attractiveness Values Increase cross sell and Promote predictive Increase product-
Slide 19: Managing other businesses for value
MANAGING FOR VALUE Managing other businesses for value Group Portfolio Review Two thirds of our capital is allocated to BOPAT ROE: 5% priority markets and manage for value 33% of Z-ECM “as-is” markets One third of our capital is allocated to our other manage for value businesses BOPAT ROE: 13% 6
Slide 20: Growing our operating earnings
GROWING OPERATING EARNINGS Growing our operating earnings Efficiency Reducing complexity and overhead burdens Value Continuing operational transformation to extract more value extraction from our business Investment Enhancing excess investment returns through specific initiatives Risk Return while m
Slide 21: Delivering an attractive total return to our investors
NEW TARGETS Delivering an attractive total return to our investors Zurich’s targets for 2014 - 2016 Improving return on BOPAT ROE target 12 - 14%1 equity Maintaining a very Z-ECM ratio 100 - 120% strong capital position Generating high levels Net cash remittances to Group2 > USD 9bn of free cash flo
Slide 22: Story of the day
THE STORY OF THE DAY Story of the day Theme Key topics Speaker Finance Evaluating execution of our 2013 strategic targets perspective Outputs of the portfolio review Vibhu Sharma New profitability targets Building on bank distribution and CLP success Global Better back book and expense management Kr
Slide 23: What we will continue, change and improve
THE STORY OF THE DAY What we will continue, change and improve What will we Underwriting focus and investment discipline will continue to do remain unchanged Prioritizing investment in distinctive positions and What’s new managing other businesses for value What will we do Improving operating profit
Slide 24: Finance Perspective
Finance Perspective Vibhu Sharma, interim CFO Zurich Insurance Group
Slide 25: Group strategy: Finance perspective
KEY MESSAGES Group strategy Finance perspective Continue to generate good returns from underwriting capabilities Group Portfolio Review drives a more focused and differentiated strategy Tangible plans in place to grow our earnings and improve our ROE New targets and report card focused on de
Slide 26: Our 2010 - 2013 strategic targets
2010 - 2013 TARGETS Our 2010 - 2013 strategic targets General Insurance Improve Combined Ratio by 3 - 4 pts relative to Growth global competitors and hold market position Farmers Global Life Rank Top 5 of European-based global peers by New Business Value Global Global Life Life Farmers Market Mainta
Slide 27: In General Insurance, we did not achieve our relative target…
2010 - 2013 TARGETS In General Insurance, we did not achieve our relative target… Combined ratio (in % NEP) Achievements as reported, calendar year 2010 9m-13 AIG 116.8% 100.5% We improved our combined ratio by 2.6 percentage points Generali 98.8% 95.1% AXA1 99.3% 95.7% Our global peers have sho
Slide 28: …but we made significant progress in improving our profitability
2010 - 2013 TARGETS …but we made significant progress in improving our profitability in % NEP Achievements AY loss ratio1 75.8% 76.2% Prior year development 72.3% AY loss ratio improved by over 5 70.7% percentage points even including a 4.8% 4.2% 2.6% slightly higher impact from weather 2.0% and l
Slide 29: We have grown our new business value in Global Life
2010 - 2013 TARGETS We have grown our new business value in Global Life New Business Value, in USD millions Achievements 2009 9m-13 We have grown new business Prudential 1,770 Prudential 2,118 value organically in all regions except Europe Generali 1,572 AXA 1,975 Zurich Santander makes us a lea
Slide 30: Farmers focus turned to improve the profitability of the overall book
2010 - 2013 TARGETS Farmers focus turned to improve the profitability of the overall book 2012 Total Personal 2-year trend Rank Carrier Achievements Lines market share 2010 - 2012 1 StateFarm 18.5% 0.5 Farmers took rate action in 2012 based upon several years of 2 Allstate 9.7% 0.6 significant
Slide 31: On track to deliver savings in excess of the USD 500m target
2010 - 2013 TARGETS On track to deliver savings in excess of the USD 500m target 2010 - 2013 savings in mature markets Achievements In USD billions Inflation Streamlined processes and Savings target organisation of Operational Over-delivery and non-market facing 7.9 0.5 functions in Europe and Nor
Slide 32: Ambitious BOPAT ROE target has proved challenging…
2010 - 2013 TARGETS Ambitious BOPAT ROE target has proved challenging… Published BOPAT ROE and investment yields Key influences ROE (%) Yield (%) Shortfall against 2010-2013 plan in part due to the further 15 4.0 decline in yields compared to 12.9% plan assumptions 3.5 10.8% 3.0 (~1 percentage poi
Slide 33: …but we generate significant value from our underwriting capabilities
2010 - 2013 TARGETS …but we generate significant value from our underwriting capabilities BOPAT ROE excluding URGL1 over US 10 yr swap Key influences 13.5% Our return over risk free has remained in the 8% to 10% 12.1% 11.2% range, excluding unrealised gains, 10.5% even with high catastrophe losses
Slide 34: Key takeaways from 2010 - 2013
2010 - 2013 TARGETS Building on the last three years: key takeaways from 2010 - 2013 1 We continue to deliver attractive returns, driven by technical and underwriting discipline 2 We deliver sustainable underwriting profitability in GI with room to improve further 3 We now want to translate our GL g
Slide 35: Framework for Global Portfolio Review
PORTFOLIO REVIEW Framework for Global Portfolio Review Four categories Drivers of GPR1 decisions We have conducted an in- Priority Markets YES depth review of all our major business units and categorized Strategic attractiveness them based on a financial and YES (e.g. growth, size, strategic evalu
Slide 36: Results from Global Portfolio Review
PORTFOLIO REVIEW Results from Global Portfolio Review Number of business units, by GPR1 grouping Priority markets Markets with critical market Financial Assessment share and high returns Markets with high profitable Low Mid High growth potential High Strategic Assessment Manage for value 19 prio
Slide 37: Growing our operating earnings
2014 - 2016 STRATEGY Growing our operating earnings Key objectives Investing selectively in growth in priority markets General Improved combined ratio, more than offsetting lower investment Insurance income Growth in technical margins exceeding decline in the investment Global Life margin Ex
Slide 38: BOPAT ROE is our key target
2014 - 2016 STRATEGY BOPAT ROE is our key target BOPAT ROE based on Shareholders Equity excluding Unrealized Gains and Losses Description 12.0%- 14.0% We will measure our BOPAT ROE 13.5% based on Shareholder Equity 12.1% excluding Unrealized gains and 11.2% Losses 10.5% Operating improvement ini
Slide 39: Report card – to be used at a group level and by each segment
2014 - 2016 STRATEGY Report card – to be used at a group level and by each segment Focus Update Key strategic developments Investments in and initiatives 1 priority markets Customer proof points and metrics Growth in market share and margin Tangible proof points on managing these 2 Managing
Slide 40: Group strategy: Finance perspective
KEY MESSAGES Group strategy Finance perspective Continue to generate good returns from underwriting capabilities Group Portfolio Review drives a more focused and differentiated strategy Tangible plans in place to grow our earnings and improve our ROE New targets and report card focused on de
Slide 41: Global Life
Global Life Kristof Terryn, CEO Global Life
Slide 42: Key messages
Key messages The need for life insurance is strong and we are well positioned We have a track record of successful growth Over the next cycle, we will shift our focus towards more targeted growth while managing for value or turnaround / exit businesses where appropriate We will use our globa
Slide 43: The need for Life insurance is greater than ever
INTRODUCTION The need for Life insurance is greater than ever Government Retrenchment Corporate Retrenchment Austerity measures Reducing benefits Shift from defined benefit to Funding gap defined contribution New business entrants re-evaluating Fiscal prudency benefit options In a challe
Slide 44: We have a track record of successful growth
INTRODUCTION We have a track record of successful growth Target Status 30% of NBV from APME1 and 48% of NBV generated from 1 APME and Latin America as of Latin America 9m-13 Top 5 European-based global 4th in defined peer group as 2 insurer by New Business of 9m-13 Value (NBV) Cash remittance
Slide 45: Meeting our customers' needs through protection and unit-linked savings
INTRODUCTION Meeting our customers’ needs through protection and unit-linked savings 2012 APE Product Mix 2010 APE Product Mix (incl. Zurich Santander) 100% = USD 3,699m 100% = USD 4,767m 9% 4% 15% 7% 20% 5% 20% 11% 32% 15% 71% 89% © Zurich Insurance Company Ltd ZSIA 22% 41% Corporate Life Other
Slide 46: Decreased management expenses in mature markets
INTRODUCTION Decreased management expenses in mature markets Management Expense1, in USD millions Mature Markets Emerging Markets Total 1,876 2,503 2,453 1,865 2,243 2,256 1,805 -119 707 1,746 627 451 378 © Zurich Insurance Company Ltd 2010 2011 2012 2013F 2010 2011 2012 2013F 2010 2011 2012 2013F 1
Slide 47: Overall BOP impacted by lower investment yields
INTRODUCTION Overall BOP impacted by lower investment yields in USD millions CAGR 762 8741 596 617 Growth in Risk Margin +14% 1 3,547 3,483 3,095 3,261 Growth in Fee Income +4% 1,059 Reduction in Investment Margin2, 831 776 2 Increased Growth 579 Investments, and -18% Special Operating Items 1,477 1
Slide 48: Cornerstones of our strategy
STRATEGY Cornerstones of our strategy Group Strategy What does it mean for Global Life Prioritizing investment Focusing on two global businesses – 1 Bank Distribution and Corporate Life & Pension – and in distinctive positions Targeted Local Opportunities Building global capabilities for In-forc
Slide 49: Focus on a select number of growth opportunities
PRIORITIZING INVESTMENTS Focus on a select number of growth opportunities Serving the needs of our customers Global Capabilities Targeted Local Bank Corporate Life In-force Opportunities, Regions Distribution & Pensions Management e.g. Europe UK IFA North America US IFA Latin Brazil Am
Slide 50: Bank Distribution in Europe, Latin America and Asia-Pacific/Middle East
PRIORITIZING INVESTMENTS Bank Distribution1, in Europe, Latin America and Asia-Pacific/Middle East © Zurich Insurance Company Ltd 1 Selected bank distribution agreements only 5 December 2013 Investor Day 50
Slide 51: Zurich Santander delivers strong growth in local and IFRS profit
PRIORITIZING INVESTMENTS Zurich Santander delivers strong growth in local and IFRS profit Key Messages 9m-12 9m-13 USDm USDm 1 Growth in Life GWP & Insurance Deposits1 2,630 2,840 +8% 2 Growth in Life local statutory profits1 251 320 +27% +83% © Zurich Insurance Company Ltd 3 Growth in GL BOP2 71 13
Slide 52: CLP composite go-to-market approach and geographic expansion
PRIORITIZING INVESTMENTS CLP composite go-to-market approach and geographic expansion Past delivery – GC/CLP Cross-sell of Future opportunity – Territories covered by GC and CLP new business, APE in USD millions 129 102 93 57 Global Corporate and CLP Global Corporate only © Zurich Insurance Company
Slide 53: In the UK, we are growing corporate protection and corporate pensions
PRIORITIZING INVESTMENTS In the UK, we are growing corporate protection and corporate pensions UK Life and Pensions market overview Zurich market share in UK Corporate new business New Bus. Margin, 2013 Bubble size relative to APE Corporate Protection / Group Life 85.0 9.3% 7.7% 80.0 Annuities 4.4%
Slide 54: Targeted local opportunities
PRIORITIZING INVESTMENTS Targeted local opportunities US UK Continue to expand distribution Drive adviser adoption of the Retail partnerships with Brokerage General Platform and grow retail protection Agencies Add easy-to-understand savings and Establish relationships with Private income pro
Slide 55: Focus on selected growth, while managing for value, and turnaround
MANAGING FOR VALUE Focus on selected growth, while managing for value, and turnaround Key Performance Indicators by Business Classification business classifications, 2012, USD m 4,767 1,085 1’3381 Underperforming businesses or weak Optimize existing Turn- around markets 27% 32% business 60% Matu
Slide 56: Specific local actions include
MANAGING FOR VALUE Specific local actions include Hong Kong Stop offering retail Life products and services through the Tied Agents channel from Dec. 31, 2013 Increasing our focus on the IFA business where we are a top three player Put closed businesses in run-off In-force management focusing
Slide 57: Building global in-force management capabilities
MANAGING FOR VALUE Building global in-force management capabilities Value of business in-force, 2012, USD billions We have a clear UK 3.1 understanding of the value of our in-force books North America 2.1 7.9 Switzerland 2.0 Zurich’s in-force books have a value of USD 11.4bn of which the top 4 acc
Slide 58: We have successfully developed in-force capabilities in the UK
MANAGING FOR VALUE We have successfully developed in- force capabilities in the UK Organizational structure of UK Life business Benefits of dedicated in-force management UK Life Clear focus of in-force unit on BOP delivery (separation also facilitates BOP transparency for new business) Corporate R
Slide 59: Focused growth and in-force management drive operating earnings
GROWING OPERATING EARNINGS Focused growth and in-force management drive operating earnings Focused growth in Bank Distribution, CLP and targeted local opportunities Grow our total Improved persistency resulting from lapse revenues management Greater cross-sell/up-sell and recapture of maturity
Slide 60: We will revisit our operating model, which will have financial implications
GROWING OPERATING EARNINGS We will revisit our operating model, which will have financial implications Levers to increase BOP by 2016 Refocus business portfolio BOP growth Optimize in-force books Ongoing expense measures Expected financial impact in the next 3 quarters Operational model and platform
Slide 61: Global Life in-force portfolio cash generation capability
GROWING OPERATING EARNINGS Global Life in-force portfolio cash generation capability In-force cash generation capability, in USD billions1 1.6 Emerging markets Cash generation capability 1.4 Mature marrkets 2013-2018 0.5 0.3 1.2 1.1 The reduction of in-force cash 0.2 1.0 generation capability refl
Slide 62: Product focus provides shorter payback but higher new business strain
GROWING OPERATING EARNINGS Product focus provides shorter payback but higher new business strain Protection New Business cash flows IRR 16% Payback 4 years 60% Unit Linked IRR [12%-16%] Payback 6 years IRR 12% Payback 7 years Traditional IRR 6% Payback 12 years © Zurich Insurance Company Ltd
Slide 63: The actions we take should positively impact cash remittance
GROWING OPERATING EARNINGS The actions we take should positively impact cash remittance 2011 - 2013 2014 - 2016 2017 Onwards We have exceeded the run Shift of product mix and funding New business strategy is rate in prior years through of protection keeps cash expected to reach an inflection managem
Slide 64: Key messages
Key messages The need for life insurance is strong and we are well positioned We have a track record of successful growth Over the next cycle, we will shift our focus towards more targeted growth while managing for value or turnaround / exit businesses where appropriate We will use our globa
Slide 65: Appendix
© Zurich Insurance Company Ltd Appendix 5 December 2013 Investor Day 65
Slide 66: Bank Distribution in Europe, Latin America and Asia-Pacific/Middle East
PRIORITIZING INVESTMENTS Bank Distribution1, in Europe, Latin America and Asia-Pacific/Middle East Access to almost 60 millions customers, of which there are 14 millions in Europe, 43 millions in Latin America and over 1 millions in the Middle East © Zurich Insurance Company Ltd Successful manag
Slide 67: General Insurance
General Insurance Mike Kerner, CEO General Insurance
Slide 68: Key messages
INTRODUCTION Key messages Group Strategy What does it mean for General Insurance Prioritizing investment Investing in growth in markets where we enjoy clear 1 competitive advantages, while focusing on customer in distinctive positions value, data and analytics Managing other businesses to achiev
Slide 69: We continue to focus on improving our Combined Ratio
INTRODUCTION We continue to focus on improving our Combined Ratio Combined Ratio in % of net earned premiums, as reported 100% 98.9% 98.4% 97.9% 95.3% Over the past three years, our 95% Combined Ratio improved by 2.6 percentage points. 90% 2010 2011 2012 9m-13 Our Accident Year Loss Ratio improv
Slide 70: We are a truly global general insurance business
INTRODUCTION We are a truly global general insurance business North America GWP: USD 13.7bn YoY growth: +5% EMEA GWP: USD 17.9bn YoY growth: +1% Asia Pacific GWP: USD 2.8bn YoY growth: -1% Latin America GWP: USD 2.7bn YoY growth: +20% Zurich presence Zurich presence via distribution partners No pres
Slide 71: Three Zurich GI differentiators
INTRODUCTION Three Zurich GI differentiators 1 We leverage best practice from across the globe to aid local execution We assist customers in achieving superior risk management through distinctive 2 claims and risk engineering services We are – first and foremost – an underwriting organization, with
Slide 72: We are a world class underwriting organization
INTRODUCTION We are a world class underwriting organization Execute globally Embed global best practice Improve quality and consistency © Zurich Insurance Company Ltd TZW = The Zurich Way MPR = Managed Peer Review GUP = Global Underwriting Policy TUR = Technical Underwriting Review ZRP = Zuric
Slide 73: Our prior year development has been continuously favorable since 2006
INTRODUCTION Our prior year development has been continuously favorable since 2006 Prior year development on Group’s reserves1 for losses and loss adjustment expenses in USD millions 2'000 1'500 1'000 500 0 -500 -1'000 -1'500 -2'000 -2'500 -3'000 -3'500 © Zurich Insurance Company Ltd 2001 2002 2003
Slide 74: Our net loss reserves reflect a diversified portfolio
INTRODUCTION Our net loss reserves reflect a diversified portfolio GI reserves, split by business Key takeaways as of 9m-13 Total GI Net Loss Reserves 4% 2% 1% Global Corporate USD 55bn as of 4% North America Commercial September 30, 2013 6% 29% United Kingdom 4% Switzerland Although we operate
Slide 75: Ratios of paid to ultimate losses demonstrate reserving consistency
INTRODUCTION Ratios of paid to ultimate losses demonstrate reserving consistency Development of paid-losses/ultimate-losses ratio1 Key takeaways Accident year view, in % Overall consistent Year 12 months 24 months 36 months 48 months 60 months reserving approach over time 2008 36% 60% 70% 76% 81%
Slide 76: Development of paid to ultimate losses in our largest businesses
INTRODUCTION Development of paid to ultimate losses in our largest businesses Development of paid-losses/ultimate-losses ratio1 Key takeaways Accident year view, in % 12 Year months 24 36 48 60 GI Region months months months months 2008 49% 71% 78% 82% 85% This regional view Europe 2009 51% 74% 82
Slide 77: Zurich US reserves are well-positioned, compared to industry
INTRODUCTION Zurich US1 reserves are well- positioned, compared to industry All lines combined Workers compensation only Reserves-to-ultimate loss, accident year, in % Reserves-to-ultimate loss, accident year, in % Net as of 31 December 2012 Net as of 31 December 2012 80% 80% 60% 60% 40% 40% 20% 20%
Slide 78: We actively track external events and trends in our operating environment
INTRODUCTION We actively track external events and trends in our operating environment 1 Evolving nature of Ubiquity of data 2 globalization and accessible analytics In a challenging environment, Zurich is well positioned to meet customer needs 3 Retail revolution Climate change 4 and individual emp
Slide 79: 1. Evolving nature of globalization
INTRODUCTION 1. Evolving nature of globalization Dimensions of trend Zurich response Increased cross-border business Efficiently extend multinational insurance solution to smaller businesses Free flow of alternative capital Broader, deeper value proposition: market-leading underwriters, in-h
Slide 80: 2. Ubiquity of data and accessible analytics
INTRODUCTION 2. Ubiquity of data and accessible analytics Dimensions of trend Zurich response Use of data to drive pricing, risk Investments in data analytics in key selection, claims and sales insights parts of the insurance value chain Use of legacy, unstructured data Data mining of legacy
Slide 81: 3. Retail revolution and individual empowerment
INTRODUCTION 3. Retail revolution and individual empowerment Dimensions of trend Zurich response Customer interaction on their own Investments in systems and terms, on-the-go and through multiple organizational changes, extending to channels intermediaries and distribution partners, to provide a
Slide 82: 4. Climate change and increasing urbanization
INTRODUCTION 4. Climate change and increasing urbanization Dimensions of trend Zurich response Increasing frequency and severity of Risk engineering expertise, both natural catastrophes general and specific; reflect in risk selection and pricing Economically disadvantaged groups Risk educati
Slide 83: Active Portfolio Management – prioritizing investment in distinctive positions
PRIORITIZING INVESTMENTS Active Portfolio Management – prioritizing investment in distinctive positions Strategic management of portfolio Evaluation of our business, based on past-performance and our view of prospects, led us to divide our portfolio into two categories Invest in focus markets1 Man
Slide 84: Execution on our customer-focus priorities is well underway
PRIORITIZING INVESTMENTS Execution on our customer-focus priorities is well underway Executing across our six customer-focus priorities Listen and act upon customer insights Timeline Customer service / service expectations 2013 In-market Drive profitable implementation growth by focusing Customer
Slide 85: Advocate customers translate into more and sustainable business
PRIORITIZING INVESTMENTS Advocate customers translate into more and sustainable business Value of focusing on customers – Retail Example Average annual GI net Probability to leave Zurich Cumulative number of referrals premium by business in force within the next 12 months within the last 12 months (
Slide 86: Global Corporate's success is based on customer focus
PRIORITIZING INVESTMENTS Global Corporate’s success is based on customer focus Tangible results… …driven by global capabilities Gross written premium Customer retention in USD billions in % Largest international network with +13% +3.9pts 206 territories and 3‘000 people 8.6 90.5% 7.9 86.6% 87.7% 8
Slide 87: Becoming a learning organization is based upon three elements
PRIORITIZING INVESTMENTS Becoming a learning organization is based upon three elements Customers Data Employees Understanding and Fostering exchange Obtaining valuable and delivering on their true of knowledge and actionable insights needs and expectations best practices To create a sustainable comp
Slide 88: Leveraging predictive analytics is key to North America Commercial's success
PRIORITIZING INVESTMENTS Leveraging predictive analytics is key to North America Commercial’s sustainable success Ambition “…to consistently deliver distinctive risk insights, through a compelling value proposition to our customers and brokers, delivered through a simple Zurich Way of doing business
Slide 89: Our Australian SME platform is innovation in action
PRIORITIZING INVESTMENTS Our Australian SME1 platform is innovation in action In Australia, we rolled out a new capability in the middle market to provide a more consistent approach and quicker turnaround to brokers 2 This has helped us to grow total GWP through increasing New Business and Reten
Slide 90: We will respond to customer needs in chosen retail markets
PRIORITIZING INVESTMENTS We will respond to customer needs in chosen retail markets Redefinition of our go-to-market strategy to deliver superior value to our target customer sub-segments Omni-channel integrated approach Higher service levels at key “moments of Extensive research truth” towards de
Slide 91: We continue to invest in growing our share of Latin American markets
PRIORITIZING INVESTMENTS We continue to invest in growing our share of Latin American markets Latin America Brazil Gross written premium in USD millions, growth in % Gross written premium in USD millions, share in % 9m-13 3.7% 4,000 58% growth is 2,500 3,500 +20% 2.2% 23% 2,000 1.9% 3,000 2% 2,682 2
Slide 92: Active Portfolio Management – manage to hurdle ROE, or turnaround, exiting if needed
MANAGING FOR VALUE Active Portfolio Management – manage to hurdle ROE, or turnaround, exiting if needed Strategic management of portfolio Evaluation of our business, based on past-performance and our view of prospects, led us to divide our portfolio into two categories Invest in focus markets1 Man
Slide 93: Portfolio optimization drives growth in best performing portfolios
GROWING OPERATING EARNINGS Portfolio optimization drives growth in best performing portfolios Delivers long-term Clear profitability Portfolios are managed BOP; appetite Pursue growth according to profitability depends on tolerance High for short-term metrics and actions taken underwriting loss to
Slide 94: Tiering execution ensures that rerating action improves the portfolio
GROWING OPERATING EARNINGS Tiering execution ensures that rerating action improves the portfolio Rate change1 Retention rate Example portfolio, in %, 9m-13 Example portfolio, in %, 9m-13 16 Plan Rate Plan Retention 100 Actual Rate 2 Actual retention (adj. for CiUR*) 14 95 12 90 10 85 8 80 6 75 4 2 7
Slide 95: Our strengthened claims foundation is contributing to profitability
GROWING OPERATING EARNINGS Our strengthened claims foundation is contributing to profitability Leveraging internal expertise to Financial impact of initiatives deliver improvement initiatives in USD millions Improvement opportunities in 255 technical claims handling identified, resulting in a tail
Slide 96: We are actively tracking our Large Loss experience
GROWING OPERATING EARNINGS We are actively tracking our Large Loss experience Large Losses From 2010 to 2013 our large losses have increased in % of net earned premiums, as reported the combined ratio by 1.1% points. Small catastrophes and weather losses have Individual Large Losses increased sl
Slide 97: Energy underwriting guidelines changed in response to Large Losses
GROWING OPERATING EARNINGS Energy underwriting guidelines changed in response to Large Losses Energy as part of Global Underwriting Strategy Energy is a focus industry for Zurich, because of its critical relevance to the global economy New underwriting strategy implemented in January 2012 and up
Slide 98: We continue to manage our expenses
GROWING OPERATING EARNINGS We continue to manage our expenses Expense Ratio Net non-technical result1 in % of net earned premiums in % of net earned premiums Mature Markets International Markets2 2.5% 37.9% 38.0% 2.3% 35.4% 35.4% 34.5% 2.3% 1.9% 25.8% 25.8% 26.2% 25.0% 19.8% 19.5% 20.6% 20.6% 20.3%
Slide 99: Key messages
SUMMARY Key messages Group Strategy What does it mean for General Insurance Prioritizing investment Investing in growth in markets where we enjoy clear 1 competitive advantages, while focusing on customer in distinctive positions value, data and analytics Managing other businesses to achieve hur
Slide 100: Farmers
Farmers Jeff Dailey, CEO, Farmers Group, Inc.
Slide 101: Farmers' business model
INTRODUCTION Farmers’ business model Farmers Group, Inc. Farmers Exchanges1 Services Provides administration and • Bear underwriting risk and management handle claims • Underwriting • Own distribution assets • Collect premiums (exclusive sales force, direct • Policy administration call centers, etc.
Slide 102: Key messages
INTRODUCTION Key messages Farmers is building on its strengths to compete in a rapidly changing market Go-to-market strategy is focused on targeting value conscious customers Growth opportunity remains in the East and Farmers is gaining traction Focus is on improving Farmers Exchanges’ balan
Slide 103: U.S. Insurance market context – Farmers
INTRODUCTION U.S. Insurance market context – Farmers Share of Voice – YTD1 2013 Market environment 18.4% Geico 14.6% State Farm 11.6% Progressive U.S. P&C is a mature market with a 2007- 11.3% Allstate 2012 CAGR of 0.5% 5.5% Nationwide 3.3% Liberty Mutual 3.1% eSurance 3.0% Farmers Competition i
Slide 104: Foundation for Farmers consumer strategy – Customer segmentation
INTRODUCTION Foundation for Farmers consumer strategy – Customer segmentation Targeting demand via Confident Planners Auto&Home Auto&Home Consumer Life Consumer Life % of Segment Spend Spend Time Value Time Value Households (USD billions) (%) (USD billions) (%) Confident Planners 17% 69 28% 746 32%
Slide 105: Foundation for Farmers consumer strategy – Omni-channel approach
INTRODUCTION Foundation for Farmers consumer strategy – Omni-channel approach Channel preferences by segment Strongly prefer No strong Strongly prefer agent preference direct Total 18% 67% 15% Confident Planners 22% 64% 14% Relationship Seekers 45% 51% 4% Loyal Outsourcers 12% 73% 14% Do-it-Myselfer
Slide 106: Farmers strategy
INTRODUCTION Farmers strategy Cornerstones of Farmers strategy PRIORITIZING INVESTMENT IN DISTINCTIVE POSITIONS Focus on targeting value conscious customers Improve the customer experience Drive eastern expansion Focus on a single consumer facing brand MANAGING FOR VALUE Restore profitabil
Slide 107: Target customer focus, geographic expansion and efficiency to drive growth
PRIORITIZING INVESTMENTS Target customer focus, geographic expansion and efficiency to drive profitable Farmers Exchanges growth Go-to-market strategy Key initiatives Consumer focus strategy around target Converge consumer facing brands to a customer single Farmers brand − Products and services
Slide 108: Targeting the value conscious consumer
PRIORITIZING INVESTMENTS Targeting the value conscious consumer Innovate across the end-to-End Confident Planner experience How We How We What We How We How We Attract Sell Sell Service Reward Customer Agent Facing Product Service Show Acquisition Interaction Innovation Experience Appreciation Our
Slide 109: U.S. Personal Lines is an omni-channel journey
PRIORITIZING INVESTMENTS U.S. Personal Lines is an omni-channel journey One Brand: Path of consumers through the buying cycle Marketing Channels Majority of insurance shoppers begin on Word of Direct Call Broadcast Mouth Mail Agents Internet Center Become the web, while closing with an agent Aware
Slide 110: Improving customer experience critical to strategy – large growth lever
PRIORITIZING INVESTMENTS Improving customer experience critical to strategy – large growth lever Household retention by Net Promoter Score Focus on improving the customer experience at Farmers as measured by Net Promoter Score (NPS) Survey response segment This is critical to retaining Confident
Slide 111: Digital strategy to improve Net Promoter Score
PRIORITIZING INVESTMENTS Digital strategy to improve Net Promoter Score 2013 Farmers.com Unique Visitors Significant work to retool digital in thousands experience 1'500 − Measuring digital experience by both NPS and percentage of task accomplishment 1'250 Benefits of investing in digital − Dire
Slide 112: Eastern Expansion
PRIORITIZING INVESTMENTS Eastern Expansion Current Eastern Expansion Currently in 5 Eastern states with Farmers Agents (PA, NJ, GA, MD & NY) ME VT Strong results to date in our Eastern NY NH MA Expansion efforts CT RI PA − 479 agents and 398 additional licensed NJ MD DE producers in these states
Slide 113: Repositioning to improve profitability
MANAGING FOR VALUE Repositioning to improve profitability Managing for value: GWP in USD billions 2.0 Over the last two years profitability 9m-12 challenges have been more than weather. 1.5 9m-13 Significant repositioning of the non-core 1.0 Farmers book has created a decline of USD 0.5 350m compa
Slide 114: Repositioning 21st Century Direct
MANAGING FOR VALUE Repositioning 21st Century Direct 21st Century Direct Gross Written Premium, in USD millions Farmers repositions 21st Century Direct for 1,600 several reasons: 1,500 1,400 − Proprietary consumer research shows 1,300 there is no direct market, but rather 1,200 1,100 segments that
Slide 115: Progress has been made in improving expense structure
GROWING OPERATING EARNINGS Progress has been made in improving expense structure LAE and expense ratio improvement1,2 Farmers Exchanges reduced expenses by 3 points since 2011, while at the same time 50% investing in Eastern Expansion, distribution 46.0% 44.1% and customer experience initiatives 4
Slide 116: Strengthening Farmers Exchanges capital will lead to reduced reliance on reinsurance
GROWING OPERATING EARNINGS Strengthening Farmers Exchanges capital will lead to reduced reliance on reinsurance Farmers Exchanges surplus ratio Historically, and in accordance with NAIC2 guidelines Farmers Exchanges surplus has been presented including Farmers in USD millions Reinsurance Company1.
Slide 117: Key messages
SUMMARY Key messages Farmers is building on its strengths to compete in a rapidly changing market Go-to-market strategy is focused on targeting value conscious customers Growth opportunity remains in the East and Farmers is gaining traction Focus is on improving Farmers Exchanges’ balance sh
Slide 118: Appendix
© Zurich Insurance Company Ltd Appendix 5 December 2013 Investor Day 118
Slide 119: Farmers relationship to Zurich
APPENDIX Farmers relationship to Zurich What is “Farmers”? Farmers is a brand name beneficially owned by the Farmers Exchanges. The “Farmers Exchanges” are Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange and their subsidiaries and affiliates. The three Exchanges are
Slide 120: Cash and capital
Cash and capital Vibhu Sharma, Interim CFO Zurich Insurance Group
Slide 121: Key messages
CASH AND CAPITAL Key messages Strong financial position Capital flexibility and buffers to absorb volatility Operating free capital generation is improving Remit > USD 9bn in net cash to the holding company in 2014 - 2016, after central costs, while investing to grow the business © Zurich In
Slide 122: Three key factors underpin our dividend
CASH AND CAPITAL Three key factors underpin our dividend Z-ECM2 ratio at 121%1, SST 3 at 206%1 Balance sheet security Significant capital buffers absorb volatility Unrewarded investment risk is minimized Flexible capital structure enables a high proportion of free capital generated to be rem
Slide 123: We have a very strong balance sheet…
CASH AND CAPITAL We have a very strong balance sheet… Z-ECM1 Ratio SST2 Ratio Solvency I 121% 206% 261% As of 1 July 2013 As of 1 July 2013 As of 30 September 2013 Moody’s financial Moody’s earnings Financial strength leverage coverage rating 25% 8x AA range As of 31 December 2012 As of 31 December
Slide 124: ...with low capital volatility coming from investment risks compared to peers…
CASH AND CAPITAL ...with low capital volatility coming from investment risks compared to peers… Investment Risk Capital1 as percentage of Total Risk Capital Adjusted to 99.95% confidence level2 Key observation ALM/Market risk contribution 100% to total Z-ECM is estimated to be lower than at select
Slide 125: …and an efficient capital structure
CASH AND CAPITAL …and an efficient capital structure Strategy Key aspects Active capital management to minimise timing friction Manage local subsidiaries to between free capital generation and up streaming to the regulatory minimum plus group an adequate buffer for short Capital targets set and
Slide 126: Principles applied to Free Capital Generation
CASH AND CAPITAL Principles applied to Free Capital Generation Local statutory earnings after tax Volume related changes in capital requirements Operating Free Capital Generation Non-operating1 items © Zurich Insurance Company Ltd Free Capital Generation 1 Non-operating items are those not firmly de
Slide 127: How Free Capital Generation translates into cash paid to the centre
CASH AND CAPITAL How Free Capital Generation translates into cash paid to the centre Free Capital Generation Capital retained for redeployment Timing differences Regulatory/Other capital movements Management actions © Zurich Insurance Company Ltd Cash transferred to the centre 5 December 2013 Invest
Slide 128: Net Income to Free Capital Generation (2012)
CASH AND CAPITAL Net Income to Free Capital Generation (2012) 4.2 USD billions 3.9 Key Differences 0.3 3.7 0.8 1.3 -0.5 1.3 IFRS to local statutory 1.9 GI: Mainly tax loss carry 2.1 forward in U.S. GI otherwise 1.9 relatively similar to IFRS GL: Mainly intangibles 1.1 0.7 deferred in IFRS 0.5
Slide 129: Free Capital Generation to change in central liquidity (2012)
CASH AND CAPITAL Free Capital Generation to change in central liquidity (2012) USD billions 3.7 Key movements Net increase in central 1.4 liquidity after all cash flows Regulatory restrictions in 0.6 2.1 the U.S. and Europe GI 0.2 Timing differences mainly relate to Switzerland GI 2.7 and Ital
Slide 130: Very strong track record of remitting cash to group
CASH AND CAPITAL Very strong track record of remitting cash to group USD billions 3.7 Key messages 3.5 3.0 2010 and 2011 benefitted from ZNA1 surplus note repayments 2.8 2.1 2.6 2.5 2012 impacted by one-off 1.4 regulatory capital restrictions in the U.S. and Europe GI, and Germany GI reserve 0.6
Slide 131: Growing free capital generation underpins new remittance target
CASH AND CAPITAL Growing free capital generation underpins new remittance target Levers Key aspects BOPAT ROE 12 - 14% Profitability Grow operating profits Allocate capital efficiently to products and balance Growth sheets Prioritise investments Capital investment Stop investing in non-per
Slide 132: Key messages
CASH AND CAPITAL Key messages Strong financial position Capital flexibility and buffers to absorb volatility Operating free capital generation is improving Remit > USD 9bn in net cash to the holding company in 2014 - 2016, after central costs, while investing to grow the business © Zurich In
Slide 133: Closing Remarks
Closing Remarks Martin Senn, CEO Zurich Insurance Group
Slide 134: Cornerstones of our strategy
STRATEGY Cornerstones of our strategy Group Strategy Key focus areas Prioritizing investment Corporate 1 in distinctive positions Commercial Mid-Market Select retail Extract value from Global Life back books Managing other Continue to capture value from profitable, smaller 2 businesses for
Slide 135: 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 predictions of or indicate future events, trends, plans or objectives of Zurich Insurance Group Ltd or the Zurich Insurance Group (the “Group”).
Zurich Insurance Group — Investor Day (December 2013) on 6ix