Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — 9M 2015 Earnings Presentation
51 slides from Zurich Insurance's earnings presentation, Nov 5, 2015
Slide 1: Results for the nine months to September 30, 2015
Results for the nine months to September 30, 2015 Investor & Media presentation November 5, 2015 Zurich Insurance Group
Slide 2: Results overview
Results overview Martin Senn, Chief Executive Officer
Slide 3: Key messages
Key messages Q3 GI General Insurance operating loss of USD 0.2bn and combined results ratio of ~109% for Q3, in-line with preliminary indications Operational review of General Insurance has identified clear GI review action plan, first steps taken Life and Global Life and Farmers are on track Farmer
Slide 4: Key financials
Key financials Q3 results in-line with preliminary indications Q3-15 KEY RESULTS 9m-15 KEY RESULTS BOP BOP USD 0.3bn (-79%) USD 2.5bn (-35%) GI CR GI CR 108.9% 101.9% (+12.2pts) (+5.8pts) NIAS NIAS USD 0.2bn (-79%) USD 2.3bn (-27%) November 5, 2015 Results for the nine months to September 30, 2015 4
Slide 5: General Insurance – Review
General Insurance – Review Operational review has identified key actions 5 WORK STREAMS KEY ASPECTS OF REVIEW Financial Re-evaluating GI’s current underlying earnings power, with detailed plans in 1 base-lining and place for each business unit ambition setting Evaluate options to use reinsurance
Slide 6: General Insurance – Status update
General Insurance – Status update Plan to get back on track in 2016, reduce gap to peers in 2017+ 15 UNDERPERFORMING PORTFOLIOS1 COMMENTS 15 portfolios Rest of GI Key strengths to build on – Well diversified portfolio – Excellent franchises, including GC CY CR (%) 143% 94% – Strong technical found
Slide 7: Financial highlights
Financial highlights George Quinn, Chief Financial Officer
Slide 8: Group – Business operating profit
Group – Business operating profit Disappointing GI results, other businesses on track BOP BY SEGMENT (USDm)1 BOP TO NIAS WALK (USDm) -35% -79% 3,826 1,279 1,206 -106 3,567 323 755 786 2,124 2,467 2,494 -291 256 983 318 331 87 328 5 978 965 68 1,001 412 398 351 256 51.5% tax rate 1,108 1,153 24 207 1
Slide 9: General Insurance – Topline
General Insurance – Topline Rate environment consistent with previous quarters GWP GROWTH IN LC1 (%) RATE CHANGE2 (%) Q3-14 Q2-15 Q3-15 2% GC -2% 2% -1% 0% 9% 11% NAC -2% 0% 1% 1% -1% -2% EMEA 0% 2% 1% 1% -1% 20% IM 4% 5% 4% 6% 20% 6% Total3 1% 2% 1% 2% 4% Q3-15 Q3-14 Q3-13 1 In local currency. 2 GW
Slide 10: General Insurance – Combined ratio
General Insurance – Combined ratio Poor results in Global Corporate COMBINED RATIO SPLIT (%)1 COMBINED RATIO BY REGION (%)1 108.9% 97.4% 96.7% 2.3% 3.7% 137.6% 3.7% 3.0% GC 96.8% 101.1% NAC 96.3% 97.7% 99.2% EMEA 93.6% 96.8% 95.3% 107.8% IM 107.1% 108.9% Total 96.7% -1.6% 3.7% -3.1% 80% 90% 100% 110
Slide 11: General Insurance – Combined ratio walk
General Insurance – Combined ratio walk Results significantly impacted by non-recurring factors FY-14 NORMALIZED1 TO 9m-15 COMBINED RATIO 2.4% Tianjin loss, adverse PYD and low nat 1.3% 101.9% cat losses viewed as non-recurring 1.5% 1.3% ~1% 99.5% 0.8% 98.5% 2.3% 1.2% Current year loss ratio imp
Slide 12: General Insurance – Global Corporate
General Insurance – Global Corporate Turnaround actions in US COMBINED RATIO (%) COMMENTS 113.4% 94.3% 3.5% 95.7% 1.8% 3.3%5.9% North America and the impact of Tianjin Total are main drivers of poor results 96.6% 93.5% 99.8% 4.5 -5.8% 0.4% 4.4% Actions under way to fix US business: 98.6% 87.9% 1
Slide 13: General Insurance – BOP components
General Insurance – BOP components Negative BOP in Q3 due to underwriting loss BOP BREAK DOWN (USDm)1 KEY DRIVERS (USDm)1 786 nm 755 786 196 252 575 573 457 -879 -9 -8 -25 -14 25 -628 -50 -36 -67 -11 -183 38 -183 Q3-13 Q3-14 Q3-15 Q3-14 UWR Investment RCG NTR NCI Q3-15 Income Underwriting result Inv
Slide 14: Global Life – New business
Global Life – New business APE growth in EMEA offset by currency impacts with overall higher margin APE (USDm)1,4 NBM & NBV1,2,4 NET INFLOWS3 & AUM5 NBM (%) Net inflows (USDbn) -2% 22.4 22.8 23.9 2.1 1,153 1.0 1,148 1,127 14 37 36 12 55 29 9 38 46 -0.6 281 278 216 +3% NBV (USDm) AuM (USDbn) -4% 233
Slide 15: Global Life – BOP by region
Global Life – BOP by region EMEA drives a BOP increase, offset by currency impacts BOP BY REGION (USDm)1 KEY DRIVERS (USDm)1 -1% 331 331 37 -12 -6 35 -49 328 318 15 328 15 -7 9 47 13 4 47 13 4 18 40 40 46 65 65 38 38 58 225 233 225 233 188 -21 -21 Q3-13 Q3-14 Q3-15 Q3-14 EMEA Latin North APAC Other
Slide 16: Farmers Exchanges – KPIs
Farmers Exchanges1 – KPIs Top-line recovery continues, CR impacted by auto claims trends GWP GROWTH (%) COMBINED RATIO (%)3 SURPLUS4 (USDbn) 2.4% 102.0% 38.5% 2.3% 2.3% 36.7% 35.7% 98.6% 97.2% 5.9% 1.9% 3.7% 3.2% 6.3 6.4 5.9 0.6% 94.9% 94.0% 96.1% 5.0 5.4 5.5 1.0 0.9 0.9 Q3-14 Q4-142 Q1-15 Q2-15 Q3-
Slide 17: Farmers – KPIs
Farmers – KPIs Good FMS results, Farmers Re impacted by higher CR BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 412 7.5% 103.3% 398 351 98.5% 5.2% 97.1% 7.1% 3.7% 3.0% 7.0% 363 336 346 98.1% 94.8% 94.1% 49 62 4 Q3-13 Q3-14 Q3-15 Q3-13 Q3-14 Q3-15 Q3-13 Q3-14 Q3-15 Catastrophes 3 FMS FRe CR (excl. c
Slide 18: Group – Balance sheet and capital
Group – Balance sheet and capital Z-ECM above top end of target range at June 30 SHAREHOLDERS’ EQUITY (USDm) SOLVENCY RATIOS (%) 196% 217% 215% 209% 203% 31,883 207 -382 31,611 126% 129% 127% 122% 123% -714 617 HY-15 NIAS Net URG/L CTA Pension 9m-15 Z-ECM SST2 plans & other1 FY-13 HY-14 FY-14 HY-15
Slide 19: Key messages
Key messages Q3 GI General Insurance operating loss of USD 0.2bn and combined results ratio of ~109% for Q3, in-line with preliminary indications Operational review of General Insurance has identified clear GI review action plan, first steps taken Life and Global Life and Farmers are on track Farmer
Slide 20: 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 21: Appendix
@ ZURICH Appendix
Slide 22: GI – 9m-15 Combined ratio
GI – 9m-15 Combined ratio Large losses, adverse PYD and Tianjin lead to higher CR COMBINED RATIO SPLIT (%)1 COMBINED RATIO BY REGION (%)1 97.8% 101.9% 96.0% 3.7% 2.3% 1.3% 2.4% 113.4% GC 95.8% 98.0% NAC 96.3% 97.4% EMEA 96.7% 94.7% 98.0% 94.0% 103.0% IM 102.3% 101.9% Total 96.0% -2.6% -1.1% 0.3% 80%
Slide 23: GI – Combined ratio details
GI – Combined ratio details Higher AY loss ratio mainly due to large losses LOSS RATIO (%)1 EXPENSE RATIO (%)1 77.7% 30.5% 31.4% 30.9% 31.1% 29.7% 30.0% 3.7% 68.3% 70.5% 67.4% 2.3% 3.2% 66.4% 1.3% 65.8% 13.7% 14.0% 13.9% 14.1% 2.3% 3.7% 13.5% 13.7% 2.3% 3.0% 68.0% 67.5% 65.2% 66.6% 66.8% 64.4% 16.2%
Slide 24: GI – Loss ratio details
GI – Loss ratio details LR impacted by higher attritional losses and Tianjin LOSS RATIO (%)1 77.7% 69.4% 3.7% 67.4% 68.6% 68.4% 2.3% 67.7% 5.8% 65.7% 68.1% 3.7% 1.7% 65.9% 65.8% 65.3% 1.6% 1.9% 1.9% 3.4% 2.3% 3.0% 1.4% 67.8% 68.9% 68.0% 67.0% 66.4% 66.8% 65.6% 63.7% 64.4% 65.4% 66.3% 3.7% -0.3% -3.1
Slide 25: GI – North America auto liability
GI – North America auto liability Increases in claims frequency driving adverse results NORTH AMERICA AUTO LIABILITY LOSS RATIO AND NEP HISTORY North America Commercial (NAC) 610 572 557 AY LR estimates have increased over time as 432 PYD has impacted CY results 152 Reserves set on prudent basis
Slide 26: GI – Prior year development (PYD)
GI – Prior year development (PYD) Recent quarters PYD heavily impacted by two books GI PYD (%) 3.7% 2.0% 0.4% 2.4% 0.5% 0.5% 0.9% 1.1% 0.5% 0.2% 0.3% 0.2% 0.3% 0.1% 0.5% -0.7% -0.6% -0.1% -2.4% -2.1% -1.9% -2.6% -3.0% -0.8% -1.3% -1.6% -1.8% -1.5% Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 NAC & GCiN
Slide 27: GI Global Corporate – Large losses
GI Global Corporate – Large losses Study on property large losses completed and actions underway PROPERTY LARGE LOSSES1 COMMENTS Large loss ratio (%) NEP2 Significant large property loss experience USD 0.8bn 48% 40% in 2015, well above recent years and 25% 28% 23% Ø 33% expectations, mainly driven
Slide 28: GI Global Corporate – KPIs
GI Global Corporate – KPIs Clear set of actions identified to address performance issues 9m-15 KEY FINANCIALS1 GWP Zurich rate Combined USD 583m USD -263m Growth2 change3 Ratio 1% 0% 113% 113.4% 95.8% 22.7% 21.6% KEY DRIVERS 74.2% 90.7% Modest growth reflecting continued market pressure, and under
Slide 29: GI North America Commercial – KPIs
GI North America Commercial – KPIs Continued growth, uptick in combined ratio 9m-15 KEY FINANCIALS GWP Zurich rate Combined USD 703m USD 577m Growth1 change2 Ratio 6% 1% 98% 96.3% 98.0% 30.8% 31.3% KEY DRIVERS 65.6% 66.7% Modest growth with continued execution of strategic growth initiatives (incl
Slide 30: GI EMEA – KPIs
GI EMEA – KPIs Combined ratio impacted by large losses, mainly in UK 9m-15 KEY FINANCIALS1 GWP Zurich rate Combined USD 1,047m USD 625m Growth2 change3 Ratio 0% 2% 97% 94.0% 97.4% 30.6% 31.6% KEY DRIVERS 63.4% 65.8% 1% growth excluding Russia Retail4, expansion in Switzerland, Germany and Spain, o
Slide 31: GI International Markets – KPIs
GI International Markets – KPIs Lower AY loss ratio offset by turnaround actions 9m-15 KEY FINANCIALS GWP Zurich rate Combined USD 121m USD 82m Growth1 change2 Ratio 15% 5% 103% 102.3% 103.0% 41.5% 45.8% KEY DRIVERS 60.8% Growth mainly driven by the new extended 57.2% warranty distribution agreeme
Slide 32: GI – Rate change monitor
GI – Rate change monitor Increased pricing pressure in most regions Q3-15 ZURICH RATE CHANGE ASSESSMENT Business Assessment Moderate rate increases, below prior-year levels with market pressure, particularly in US Group property lines and across our Global Corporate markets, Australia and UK. Compet
Slide 33: GI – Natural catastrophe reinsurance
GI – Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES1 (USDm) 10 10 10 10 150 150 10 500 500 150 10 10 500 10 10 Single global USD 150m treaty, which can be applied to any region2 10 650 150 10 930 300 500 Single global
Slide 34: GL – New business by pillar
GL – New business by pillar Q3 NBV benefitting from higher swap rates and mix Q3-15 KEY FINANCIALS1,2 APE (USDm) CLP single 1,148 1,153 1,127 NBM PVNBP premium 469 339 407 346 434 382 23.9% USD 12.5bn USD 1.4bn 334 380 338 Q3-13 Q3-14 Q3-15 KEY DRIVERS NBV (USDm) CLP protection and pensions APE in
Slide 35: GL – Net inflows & Assets under management
GL – Net inflows & Assets under management Higher net inflows and asset growth offset by currency impacts NET INFLOWS BY REGION (USDbn)1,2 AUM DEVELOPMENT (USDbn) 6.1 266 1.1 6 0 -16 255 31 37 1.5 0.6 1.9 112 106 0.2 1.5 3.0 0.3 0.1 0.0 0.7 -0.3 0.0 -0.1 -0.1 122 113 -2.2 -1.8 Balance Net inflows Ma
Slide 36: Zurich Santander – Quarterly results
Zurich Santander – Quarterly results Continued growth offset in USD by adverse FX development PROFIT BEFORE TAX GI & LIFE (100%) INTANGIBLES AMORTIZATION (100%) 239 -18 -19 -18 -18 -18 -17 -16 -15 -13 163 173 177 176 -4 163 181 -6 -5 -4 171 159 156 170 174 163 168 -12 -11 -8 -7 -7 132 127 142 147 Q3
Slide 37: Farmers Exchanges – GWP
Farmers Exchanges1 – GWP Continued top-line recovery DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) +2.1% +2.3% 14,163 14,466 4,828 4,939 5,055 5,361 +6.1% 1,725 1,851 7.3% +3.8% -3.7% 762 791 266 256 469 467 -0.4% 157 159 +1.3% 3,709 3,788 +2.1% 1,330 1,368 +2.9% 1,724 1,791 +3.9% 562 580 +3.1% 1,563 1
Slide 38: Farmers Exchanges – PIF/VIF
Farmers Exchanges – PIF/VIF Policies-in-force slightly up for continuing operations DEVELOPMENT OF PIF/VIF1 BY BUSINESS LINE (THOUSANDS) +0.1% -0.2% 19,041 19,066 19,113 19,066 7,843 8,054 7,979 8,054 +2.7% +0.9% -4.7% 982 936 985 936 -5.0% 770 772 +0.3% 770 772 +0.3% 4,796 4,797 +0.0% 4,797 4,797 +
Slide 39: Farmers Exchanges – Combined ratio
Farmers Exchanges – Combined ratio Auto and Bristol West CR impacted by unfavorable claim trends COMBINED RATIO BY BUSINESS LINE (%)1 Auto 105.4% Auto 107.9% 99.5% 99.2% 105.9% 104.8% Bristol West2 102.3% Bristol West2 104.7% 21st Century 94.7% 21st Century 104.6% cont.3 98.0% cont.3 102.9% 97.8% 10
Slide 40: Farmers Exchanges – Combined ratio history
Farmers Exchanges – Combined ratio history Q3-15 impacted by California wildfires and auto claims trends QUARTERLY COMBINED RATIO (%) Incl. Incl. 17 Catastrophe Incl. 120 Ike & Gustav Events 13 Catastrophe Events Incl. 115 13 Catastrophe Incl. Events 13 Catastrophe 110 Incl. Events Incl. Irene Excl.
Slide 41: Other Operating Businesses
Other Operating Businesses Some catch-up in Headquarters expenses expected for Q4-15 QUARTERLY BOP SPLIT (USDm) 20 -7 -51 -64 -51 -48 -113 -143 -137 -191 -82 -224 -134 -171 -171 -146 -167 -184 -172 -149 -230 -213 -222 -219 -280 -286 -356 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Headquar
Slide 42: Group Investments – Asset allocation
Group Investments – Asset allocation Zurich’s sources of investment risk and return are balanced ASSET ALLOCATION1 RISK DIVERSIFICATION2 RISK DRIVERS2,3 Total Group Investments: USD 196bn 4% 6% 7% 1% 5% 2% 100% 9% 4% 32% 41% 25% 10% 42% 81% Sum of single Investment Investment security risks risks ri
Slide 43: Group Investments – Debt securities portfolio
Group Investments – Debt securities portfolio Debt securities portfolio is of a high quality BY CATEGORY BY RATING Total debt securities: USD 142bn 3% 13% 20% 24% 46% 41% 18% 36% Government and government related bonds MBS/ABS1 AAA AA A BBB Non-investment grade Corporate bonds 1 MBS = Mortgage backe
Slide 44: Group Investments – Investment income yield
Group Investments – Investment income yield1 Higher risk premium offset by lower yields and USD appreciation GENERAL INSURANCE GLOBAL LIFE GROUP 1.88% 2.59% 2.18% Equity 1.54% Equity 2.32% Equity 1.81% 1.38% Trade Yield 2.20% Trade Yield 1.56% 1.85% at ~2.2%2 2.30% at ~2.0%2 2.08% Debt 1.94% Debt 2.
Slide 45: Group – Economic capital models
Group – Economic capital models Continued strong solvency position Z-ECM RATIO DEVELOPMENT (%) SST1 RATIO DEVELOPMENT (%) 6% -2% 10% 1% -8% -4% 209% 1% 129% 10% 1% 6% 203% 123% 196% 122% FY-14 Business Ins. Market Market Cap. HY-15 HY-15 FY-14 Business Ins. Market Market Cap. HY-15 HY-15 profit Risk
Slide 46: Group – Z-ECM components
Group – Z-ECM components Well diversified capital base by risk type HY-15 AFR COMPOSITION (USDbn) RBC BY RISK TYPE AND BUSINESS1 8% Market risk Shareholders equity 32 5% Re-ins credit risk 3% 11% P&R risk2 Dividend accrual 1 49% Natural cat risk Life insurance risk 23% Net intangibles 18 Operational
Slide 47: Group – Solvency ratio sensitivities
Group – Solvency ratio sensitivities1 Solvency ratios resilient to market movements SOLVENCY RATIO IMPACT2 123% Actual value as of Q2-15 203% 124% Interest rate +100 bps 203% 121% Interest rate -100 bps 200% 127% Equities +20% 208% 120% Equities -20% 197% 111% Credit spreads +100 bps3 176% 113% CS e
Slide 48: Group – EPS, BVPS and ROE calculations
Group – EPS, BVPS and ROE calculations1 EPS AND BVPS (CHF) BOPAT ROE AND ROE (%) No., CHF FY-14 9m-15 USDm, % FY-14 9m-15 Common shares issued 149.64m 150.40m SHE 34,735 31,611 Treasury shares 1.29m 1.25m Net URGL / CF hedges 4,374 3,022 Common shares outst. 148.34m 149.15m Adj. SHE 30,362 28,589 WA
Slide 49: Group – Currency impact
Group – Currency impact Move in currency is mainly translational 9m-15 KEY RESULTS KPI USDm reported at constant currency BOP 2,494 -35% -32% Group NIAS 2,266 -27% -24% GWP 26,634 -6% +3% NEP 20,995 -7% +2% General Net underwriting result -398 nm nm Insurance Investment income 1’503 -9% -1% BOP 983
Slide 50: For further information
For further information CALL US VISIT OR FOLLOW US Investor Relations James Quin +41 44 625 21 10 Aaron Beharelle +41 44 625 25 50 André Meier +41 44 625 37 75 Gianni Vitale +41 44 625 48 26 Rating Agency Management Michèle Matlock +41 44 625 28 50 www.zurich.com Events Patricia Heina +41 44 625 38
Slide 51: Calendar
Calendar: - February 11, 2016, Annual Results 2015 - March 30, 2016, Annual General Meeting 2016 - May 12, 2016, Results for the three months to March 31, 2016 - August 11, 2016, Half year results 2016 - November 10, 2016, Results for the nine months to September 30, 2016 - December 1, 2016, Investo
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