Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Investor Day (May 2015)
143 slides from Zurich Insurance's investor day presentation, May 21, 2015
Slide 1: Investor Day
Investor Day May 21, 2015 Zurich Zurich Insurance Group
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 TIMING TITLE SPEAKERS 09.45 – 10.00 On track to deliver our objectives Martin Senn 10.00 – 11.00 Global Life Kristof Terryn, Gary Shaughnessy & Nick Burnet 11.00 – 11.15 Break 11.15 – 12.05 General Insurance Mike Kerner & Thomas Hürlimann 12.05 – 12.45 Group Operations Robert Dickie 12.45 – 1
Slide 4: On track to deliver our objectives
On track to deliver our objectives Martin Senn, Chief Executive Officer
Slide 5: On track to deliver our objectives
GROUP CEO On track to deliver our objectives 2014-2016 TARGETS Our strategy remains the right one Target BOPAT ROE1 12 - 14% We expect to meet our targets Target Z-ECM2 100 – 120% Cumulative Further actions under way across each Net cash 3-year target of the three strategic cornerstones remittances
Slide 6: Clear strategy set out in 2013
GROUP CEO Clear strategy set out in 2013 GROUP STRATEGY KEY FOCUS AREAS Corporate Prioritizing investment 1 Commercial mid-market in distinctive positions Select retail Extract value from Global Life back books Managing other Continue to capture value from profitable, smaller 2 businesses
Slide 7: Updating the value proposition set out at the 2013 investor day
GROUP CEO Updating the value proposition we set out at the 2013 investor day CORE PRINCIPLES INVESTORS LIKE… Lower capital allocation to investment Solid defensive stock risks compared to peers Strong franchises, especially in General Continued strong capital position Insurance corporate and
Slide 8: External environment remains challenging
GROUP CEO External environment remains challenging KEY FACTORS FOR INDUSTRY 10 YR GOVT BOND YIELDS (%) Continued low bond yields, 6 U.S. especially in Europe 5 Germany Organic top-line outlook is fairly muted 4 UK 3 in key markets 2 Capital is fairly plentiful 1 Regulatory environment is evo
Slide 9: In a strong position to deal with financial implications
GROUP CEO In a strong position to deal with financial implications DISCUSSION AREAS WHAT THIS MEANS FOR US Target ROE range harder to Still expect to achieve our achieve given low yield & GI 12-14% ROE target in 2016 growth outlook Capital ratios impacted by low Capital remains very strong on al
Slide 10: No major strategic implications, but we need to be adaptable
GROUP CEO No major strategic implications, but we need to be adaptable First step taken in manage for value capital release, with more to come Lower growth means that we need to focus more on efficiency Data and digital will be key to the coming years, but linked also to efficiency May 21, 2015 Inve
Slide 11: Clear and focused priorities for the next 18 months
GROUP CEO Clear and focused priorities for the next 18 months GROUP STRATEGY PROGRESS TO DATE NEXT 18 MONTHS Prioritizing Investments in corporate, Continue actions under way in commercial and select retail markets Global Corporate, North America investment 1 Extension of Bansabadell JV, new C
Slide 12: Introducing the day
GROUP CEO Introducing the day TODAY’S TOPICS Progress in growth markets, and approach to in-force management GLOBAL LIFE New financial reporting, aligned to priorities; additional information on cash and actions to deliver >USD 50m BOP quarterly improvement Strategic update plus levers to impr
Slide 13: 18 months review: executing the strategy set out in 2013
GROUP CEO 18 months review: how we are executing the strategy we set out in 2013 We expect to deliver on our 2014-2016 targets We have made progress, but more actions needed in next 18 months Opportunities in efficiency will support our earnings growth ambitions Data and digital will be central to t
Slide 14: Global Life update
Global Life update Kristof Terryn, CEO Global Life
Slide 15: Key messages
GLOBAL LIFE Key messages Strategy/ Executing clear and focused Life insurance strategy; trends well positioned to respond to major trends Priority Achieving strong growth in Bank Distribution and Corporate investments Life & Pensions: FY-14 APE up 10% and 37% resp. vs. FY-13 Manage for Clear actions
Slide 16: At the 2013 Investor Day we shared our strategic pillars
GLOBAL LIFE At the 2013 Investor Day we shared our strategic pillars… GROUP STRATEGY WHAT IT MEANS FOR GLOBAL LIFE • Focusing on two global businesses Prioritizing investment 1 – Bank Distribution and Corporate Life & Pensions and in distinctive positions – Targeted local opportunities Managing othe
Slide 17: …and we executed
GLOBAL LIFE …and we executed GROUP STRATEGY WHAT WE HAVE DONE PROOF POINTS • Extended partnership with Banco Bank Distribution APE Prioritizing investment Sabadell to reach an additional up 10% in 2014 vs. 2013 1 2.4m customers in distinctive positions CLP1 APE up 37% • Investing into new market
Slide 18: Our strategy positions us well to respond to major trends
GLOBAL LIFE Our strategy positions us well to respond to major trends DEMAND CUSTOMER BEHAVIOR & SEGMENTS Government/ Hybrid customers / corporate generations Y and Z retrenchment Emerging Widening middle class protection gap Specific segments Aging population REGULATION TECHNOLOGY Decreasing tax be
Slide 19: Well positioned to address the challenges Life insurers are facing
GLOBAL LIFE Well positioned to address the challenges Life insurers are facing today MACRO CHALLENGES ZURICH STRENGTHS Low yield environment Largely matched ALM position / low duration gap Margin pressure and declining High share of unit-linked, protection demand for savings products and fee
Slide 20: Continuous profitable growth in Bank Distribution
GLOBAL LIFE Continuous profitable growth in Bank Distribution… ZURICH SANTANDER JV PROFITS1,2 (USDm) ZURICH BANSABADELL JV PROFITS1 (USDm) +22% CAGR 685 +21% CAGR 166 601 146 457 114 2012 2013 2014 2012 2013 2014 1 Profit before tax (local stat.), at 100%; Zurich stake in Zurich Santander Joint Vent
Slide 21: …and we see opportunity to accelerate growth
GLOBAL LIFE …and we see opportunity to accelerate growth WE HAVE ACHIEVED OUR AMBITION… …AND WE CAN ACHIEVE MORE Bank Distribution 2016 Ambition Bank Distribution APE1, USDm 21% CAGR 1,584 1,741 Double digit top line (APE) and 1,186 bottom line (BOP) growth per annum Select inorganic additions
Slide 22: In CLP we have a focused strategy
GLOBAL LIFE In CLP we have a focused strategy CLP HISTORY (APE, USDm) CLP STRATEGY Go-to-market approach based on: 1,908 – Focused distribution relationships with EBCs1 – Premium service proposition 1,394 – Holistic approach to customer and distributors in collaboration with Global Corporate 603
Slide 23: Gain in market share in CLP in the UK and Ireland
GLOBAL LIFE Gain in market share in CLP in the UK and Ireland UK CORPORATE TARGET MARKET1 IRELAND DOMESTIC CORPORATE MARKET1 Corporate Protection Group Risk 25.3%2 21.2% 12.5% 18.1% 11.6% 9.3% 5.5% 1.6% 2009 2012 2013 2014 2006 2012 2013 2014 Corporate Pensions Group Pensions, insured market 22.6% 1
Slide 24: Local market opportunities show mixed results
GLOBAL LIFE Local market opportunities show mixed results US AND UK IFA EMERGING MARKETS GROWTH1 Combined APE, USDm Combined APE, USDm 408 424 341 +19% 367 -13% 2013 2014 2013 2014 Strong growth of US IFA business Strengthening of management teams and restructuring distribution network in APAC
Slide 25: We have established In-force Management across markets and levers
GLOBAL LIFE We have established In-force Management across markets and levers THE ZURICH WAY OF IN-FORCE MANAGEMENT Management structure and reporting In-force value creation Examples levers 1 • Profit sharing Financial • Reserves • Fees 2 • Claims Operational • IT • Processes 3 • Re
Slide 26: In-force Management is business-as-usual in our four core markets
GLOBAL LIFE In-force Management is business-as-usual in our four core markets DEDICATED MANAGEMENT STRUCTURE A balanced approach to value management between In-force and Dedicated team with strong cross- New Business functional collaboration1 Local Head of In-force is a member of Additional,
Slide 27: FNWL Pilot is showing positive results
GLOBAL LIFE FNWL1 Pilot is showing positive results FNWL RETENTION PILOT Successful dedicated approach for FNWL lapse rate reduction2 2014 vs. 2013, % customer retention across all states Commission structure promoting portfolio persistency Sales quality training program Additional initiativ
Slide 28: Structural options following the recent transaction in the UK
GLOBAL LIFE We will continuously review structural options following the recent transaction in the UK DISPOSAL OF UK ANNUITY BOOK Transaction description Sale of a portfolio of UK annuities in payment Non-strategic portfolio – Zurich is not a specialist annuity player Group Capital Impact1 – Tra
Slide 29: Line of sight to USD 50m+ of quarterly BOP improvement
GLOBAL LIFE Despite economic headwinds, we have line of sight to USD 50m+ of quarterly BOP improvement ILLUSTRATIVE WALK TO QUARTERLY BOP > USD 350m IN 2016 (USDm) 350+ 20-25 Line of sight to USD 80-100m p.a. from In-force 30 - 40 Management 300 Bank Distribution 15 - 20 20 - 25 double digit BOP
Slide 30: Further efficiency enhancements required to adjust to market realities
GLOBAL LIFE Further efficiency enhancements required to adjust to market realities TARGETED GENERAL EXPENSE SAVINGS BY END OF 2016 (USDm) Key initiatives Proof point: 100 Process optimization, Support Procurement management incl. software robotics 10 Functions – UK Corporate Property rationaliza
Slide 31: Key messages
GLOBAL LIFE Key messages Strategy/ Executing clear and focused Life insurance strategy; trends well positioned to respond to major trends Priority Achieving strong growth in Bank Distribution and Corporate investments Life & Pensions: FY-14 APE up 10% and 37% resp. vs. FY-13 Manage for Clear actions
Slide 32: The Zurich Way of In-force Management
The Zurich Way of In-force Management Gary Shaughnessy, CEO UK Life
Slide 33: Key messages
GLOBAL LIFE Key messages Our In-force Management (IFM) strategy has identified ways Strategy to unlock significant and sustainable value Global The Zurich Way of IFM applies global levers to local markets approach and has been rolled-out to our Top 4 Business Units Results 2014 actions have already
Slide 34: Leveraging global capability to sustain value from in-force book
GLOBAL LIFE Leveraging global capability to sustain value from our substantial in-force book MARKET CONSISTENT EMBEDDED VALUE In-force Management (IFM) is key to ‘Managing for value’ FY-14 (USDbn) In 2014, we developed a unified Developed Markets approach to IFM and rolled it Growth 3.4 United out
Slide 35: IFM is business-as-usual in our four core markets
GLOBAL LIFE IFM is business-as-usual in our four core markets THE ZURICH WAY OF IFM GLOBAL FRAMEWORK A balanced approach to value 1 2 Financial management between In-force Structural 3 Operational and New Business 4 Persistency & growth Additional, sustainable value Improved customer experienc
Slide 36: 1. Structural
GLOBAL LIFE 1. Structural Identified disposal opportunities for sub-scale legacy books DISPOSAL OF UK ANNUITY BOOK Transaction description/rationale Transaction highlights and financial impact (as of 2014 year end) Sale of a non strategic portfolio of UK annuities in payment Statutory reserves,
Slide 37: 2. Financial
GLOBAL LIFE 2. Financial Enhanced value from asset management ASSET MANAGEMENT REVIEW CREDITING RATES Full review of asset management delivery Dynamic management of crediting rates by across USD 23bn AuM including block of business and select fees performance, risk and cost realignment to market
Slide 38: 3. Operational
GLOBAL LIFE 3. Operational Improving our service quality and operational efficiency OPERATIONS AND CLAIMS TEST & LEARN APPROACH Reducing process redundancy through six- Successful Zurich Way of Working sigma approach (Lean) (ZWoW) and Robotics Pilot wave 1 (test phase) in Corporate Savings Opera
Slide 39: 4. Persistency & growth (1/2)
GLOBAL LIFE 4. Persistency & growth Getting closer to our customers (1/2) CUSTOMER OPTIONS TEAMS (COT) FNWL3 RETENTION PILOT Dedicated in-force COT, using policy level Successful dedicated approach for VIF data to prioritize retention customer retention across all states with additional initiati
Slide 40: 4. Persistency & growth (2/2)
GLOBAL LIFE 4. Persistency & growth Getting closer to our customers (2/2) UP-SELL MATURITY MANAGEMENT Pilot activity – successful direct mailing Targeting high sum maturing policies allowing clients to increase cover through with simple reinvestment options a Guaranteed Insurability Option Pil
Slide 41: Translating in-force skills into UK Corporate Savings growth (1/2)
GLOBAL LIFE 4. Persistency & growth Translating the in-force skills into UK Corporate Savings growth (1/2) MORE VALUE FROM EXISTING PLANS MORE VALUE FROM EXISTING MEMBERS Dedicated Relationship Management Pension market changes have reinforced Team driving increases in member customer awareness
Slide 42: Translating in-force skills into UK Corporate Savings growth (2/2)
GLOBAL LIFE 4. Persistency & growth Translating the in-force skills into UK Corporate Savings growth (2/2) A PORTFOLIO APPROACH WORKPLACE/RETIREMENT CROSS-SELL We are leveraging our retail and corporate capabilities to deliver distinctive life/non-life GC UK workplace benefits packages1 3,121 clie
Slide 43: Confident to deliver USD 80-100m run-rate BOP by 2016
GLOBAL LIFE We remain confident to deliver USD 80-100m run-rate BOP by 2016 TANGIBLE ADDITIONAL DELIVERY IN 2014 ACCELERATING EXECUTION 2014 extra value from IFM actions in 2016 target: USD 80-100m BOP run-rate two out of four core markets, USDm from IFM actions in Germany, Switzerland, the UK and
Slide 44: Key messages
GLOBAL LIFE Key messages Our In-force Management (IFM) strategy has identified ways Strategy to unlock significant and sustainable value Global The Zurich Way of IFM applies global levers to local markets approach and has been rolled-out to our Top 4 Business Units Results 2014 actions have already
Slide 45: Global Life finance update
Global Life finance update Nick Burnet, CFO Global Life
Slide 46: Key messages
GLOBAL LIFE Key messages On track to achieve USD 50m quarterly run rate BOP BOP improvement Operating Operating cash will continue to improve with current Global Cash Life strategy Cash Strong cash remittance in 2014 and structural actions could Remittance free up additional USD 500m over the next t
Slide 47: Geographic overview of the Global Life Segment
GLOBAL LIFE Geographic overview of the Global Life Segment1 Global Life BOP 1,273 North America NBV 1,022 BOP 141 Reserves 221,900 Europe and Middle East NBV 120 BOP 917 Reserves 6,700 NBV 583 Reserves 195,000 Latin America Asia Pacific BOP 222 BOP 52 NBV 170 NBV 91 Reserves 15,200 Reserves 4,800 1
Slide 48: Segment overview of GL Key Metrics
GLOBAL LIFE Segment overview of GL Key Metrics SOURCE OF EARNINGS (USDm) COMMENTARY FOR TOTAL FY-14 Change vs. 2013 adj.1 Source of Earnings Loadings & Fees 4,336 6% results support the Global Life Strategy Technical Margin 1,159 4% Focus on Unit-Linked and Protection Investment Margin 541 -3%
Slide 49: Global Life has segmented how we evaluate business opportunities
GLOBAL LIFE Global Life has segmented the way we evaluate our business opportunities BLOCK OF BUSINESS KEY CHARACTERISTICS Manage for Value Large back books Accounted for 80% Largest contributor of Cash and BOP 2014 Cash Remittance Bank Joint Ventures Large contributor to APE, NBV and BOP ~20%
Slide 50: Overview of GL Key Metrics: Manage for Value
GLOBAL LIFE The Overview of GL Key Metrics Manage for Value SOURCE OF EARNINGS (USDm) MAIN KPIs (USDm) FY-14 Change vs. 2013 adj.1 USDm 2013 2014 Change APE 1,716 1,832 7% Loadings & Fees 3% NBV 353 350 -1% MCEV 14,247 13,938 -2% 1% Expected Free Surplus Generation2 654 709 8% Technical Margin Cash
Slide 51: Overview of GL Key Metrics: Bank Joint Ventures
GLOBAL LIFE The Overview of GL Key Metrics Bank Joint Ventures SOURCE OF EARNINGS (USDm) MAIN KPIs (USDm) FY-14 Change vs. 2013 adj.1 USDm 2013 2014 Change APE 946 1,140 21% Loadings & Fees 9% NBV 167 195 17% MCEV 1,294 1,242 -4% Expected Free Surplus Generation2 50 56 13% Technical Margin 19% Cash
Slide 52: Overview of GL Key Metrics: Developed Markets Growth
GLOBAL LIFE The Overview of GL Key Metrics Developed Markets Growth SOURCE OF EARNINGS (USDm) MAIN KPIs (USDm) FY-14 Change vs. 2013 adj.1 USDm 2013 2014 Change APE 1,332 1,865 40% Loadings & Fees 26% NBV 348 396 14% MCEV 3,194 3,435 8% Expected Free Surplus Generation2 -177 -201 n.m. Technical Marg
Slide 53: Overview of GL Key Metrics: Emerging Markets Growth
GLOBAL LIFE The Overview of GL Key Metrics Emerging Markets Growth SOURCE OF EARNINGS (USDm) MAIN KPIs (USDm) FY-14 Change vs. 2013 adj.1 USDm 2013 2014 Change APE 424 367 -13% Loadings & Fees 7% NBV 91 81 -11% MCEV 764 676 -11% Expected Free Surplus Generation2 5 49 n.m. Technical Margin -44% Cash
Slide 54: Further economic headwinds since the last Investor Day
GLOBAL LIFE We have seen further economic headwinds since the last Investor Day … EQUITY MARKETS CONTINUE GROWTH STRENGTHENING DOLLAR 130 120% 120 110% 110 100% 100 90% 90 80 80% 70 70% 01 2014 03 2014 05 2014 07 2014 09 2014 11 2014 01 2015 03 2015 01 2014 03 2014 05 2014 07 2014 09 2014 11 2014 01
Slide 55: Line-of-sight to 350m USD on a local currency basis
GLOBAL LIFE … and we still have line-of-sight to 350m USD on a local currency basis ILLUSTRATIVE WALK TO QUARTERLY BOP > USD 350m IN 2016 (USDm) 20-25 350+ 30-40 20-25 Average 3001 15-20 quarterly BOP in 2014 USD 318m (2014 avg. FX) 2013 VIF unwind In-force Developed/ Efficiency Ambition as Run-rate
Slide 56: Relative to competitors, new business investments remain high
GLOBAL LIFE Relative to competitors, our new business investments remain high … RE-INVESTMENT RATE 2014 NBV AS A % OF AVERAGE FY-14 EV 80% 5.3% 4.7% 4.8% 70% 4.6% 52% 44% Peer 1 Peer 2 Peer 3 Zurich Peer 1 Peer 2 Peer 3 Zurich May 21, 2015 Investor Day 56
Slide 57: Focus on new markets and products with shorter payback
GLOBAL LIFE … as we focus on new markets and products with shorter payback but higher new business strain PROTECTION NEW BUSINESS CASH FLOWS IRR 18% -0.9 Payback 4 years 60% UNIT LINKED IRR 12%-18% Payback 6 years -0.2 IRR 12% USD 1.3bn1 Payback 6 years TRADITIONAL -0.2 IRR 7% Payback 10 years
Slide 58: Operating Free Surplus generation to cash remittance
GLOBAL LIFE Operating Free Surplus generation to cash remittance MCEV FREE SURPLUS MOVEMENT IN 2014 (USDm) RECONCILIATION TO CASH REMITTANCE (USDm) USD billions 25 142 267 442 260 187 614 623 925 2,790 623 2,696 2014 Expected Expenses Economic Foreign Net 2014 Net Capital Tax Intercompany Other 2014
Slide 59: Track record of delivery above USD 500m commitment
GLOBAL LIFE Track record of delivery above USD 500m commitment, line of sight to increasing cash generation1 2012 – 2014 2015 & 2016 2017 ONWARDS We have exceeded the run rate in Run rate reduces with new The inflection point is expected to prior years through a strong business strain and investment
Slide 60: Key messages
GLOBAL LIFE Key messages On track to achieve USD 50m quarterly run rate BOP BOP improvement Operating Operating cash will continue to improve with current Global Cash Life strategy Cash Strong cash remittance in 2014 and structural actions could Remittance free up additional USD 500m over the next t
Slide 61: General Insurance update
General Insurance update Michael Kerner, CEO General Insurance
Slide 62: Key messages
GENERAL INSURANCE Key messages Strategy Our 2014 – 2016 strategy is confirmed, with global, remains regional and local initiatives underway the same Execution Strategy execution shows strong evidence of delivery, even amid in the face of operational and market challenges challenges On track to Addit
Slide 63: Key industry trends remain unchanged
GENERAL INSURANCE Key industry trends remain unchanged Evolving nature of globalization Ubiquity of data 70 Social globalization and accessible analytics 60 Political globalization Economic globalization 50 40 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 KOF World Globalization Index 20151 Re
Slide 64: Clear evidence of execution against 2014-2016 strategy
GENERAL INSURANCE Clear evidence of execution against 2014 – 2016 strategy GWP1, USDm WHAT WENT WELL Underlying growth2 in 2014 = 2.6% 36,096 36,335 Underwriting excellence 35,017 Customer strategies 2012 2013 2014 Extended warranty transaction in Brazil Turnarounds and exits BOP, USDm Rationalizati
Slide 65: How General Insurance will continue to deliver the Group's strategy
GENERAL INSURANCE How General Insurance will continue to deliver the Group’s strategy GROUP STRATEGY 2014-2016 WHAT DOES IT MEAN FOR GENERAL INSURANCE • Further execute customer strategies in priority Prioritizing investment markets, based on learnings from pilots 1 in distinctive positions • Priori
Slide 66: Retail strategy founded on deep customer understanding
GENERAL INSURANCE Retail strategy founded on deep customer understanding GAINED DETAILED INITIATED DELIVERY DEFINED ZURICH INSIGHTS INTO OF THE ENVISAGED DIFFERENTIATORS RETAIL CUSTOMERS CUSTOMER EXPERIENCE Understanding Omni-channel and of differentiated self-service capabilities needs, behavio
Slide 67: Back to growth in Switzerland
GENERAL INSURANCE Back to growth in Switzerland CUSTOMER ENHANCEMENTS PROOF POINTS OF IMPACT Simple & Increased growth Accessible Enhanced claims journey GWP personal lines (PL) local business growth, LC view Award winning web re-launch 1.7% 1.6% Agency development program 0.1% 0.1% 2012 2013
Slide 68: Customer focus impact starting to show in Italy
GENERAL INSURANCE Customer focus impact starting to show in Italy CUSTOMER ENHANCEMENTS PROOF POINTS OF IMPACT Simple & Increased growth Accessible Full claims experience redesign GWP YoY growth, local currency view 2.1% Expansion of advisory network -0.6% -0.6% Digital enhancements -9.3% -3.3
Slide 69: Award-winning practice from Spain embodies our brand attributes
GENERAL INSURANCE Award-winning practice from Spain embodies our brand attributes FROM OLD, BORING SNAIL MAIL TO PERSONALIZED, ANIMATED CONTENT… Launched in February 2014 for Motor and Home, to improve customer service, retention and brand awareness Emails opened improved1 from 17% to 40.5%, wit
Slide 70: In Brazil, focused on optimizing portfolio profitability
GENERAL INSURANCE In Brazil, we remain focused on optimizing portfolio profitability GI BRAZIL KEY PERFORMANCE INDICATORS1 Zurich GI Brazil GWP Zurich GI Brazil combined ratio2 BRLm % Market leader in mass consumer -7% 130.2% 131.2% business, typically with stable 112.1% 21.3% 24.8% 1,905 21.2% un
Slide 71: Middle East has achieved significant portfolio improvements
GENERAL INSURANCE Middle East has achieved significant portfolio improvements, now positioned for sustainable growth GI MIDDLE EAST1 KEY PERFORMANCE INDICATORS Gross Written Premium USDm2 Significant loss ratio improvements driven +10% by focus on risk quality, and improved 194 213 claims manageme
Slide 72: Turnaround in South Africa driven by underwriting and operations
GENERAL INSURANCE Turnaround in South Africa is driven through underwriting and operational improvements GI SOUTH AFRICA KEY PERFORMANCE INDICATORS Attritional loss ratio improved 5.7ppts1 Gross Written Premium ZARm -10% – Improved pricing consistency and accuracy facilitated corrective underwriti
Slide 73: Tactical 9 box grid for portfolio management
GENERAL INSURANCE One of our key portfolio management tools is the tactical 9 box grid TACTICAL 9 BOX GRID PORTFOLIO MANAGEMENT U/W2 loss CAY Combined Ratio U/W2 break-even U/W2 profit Tactical 9 Box Grid used to gain deep insights on each portfolio High 9 Examples of portfolios successfully RBR
Slide 74: Expense ratio increase mainly driven by non-technical expense shift and mix
GENERAL INSURANCE Expense ratio increase mainly driven by non-technical expense shift and mix effects EXPENSE RATIO DEVELOPMENT 2011 – 2014 (%) 26.9% 31.0% Other underwriting expenses Cost shifts include 2.5ppts from Other underwriting expenses (OUE) 16.2% reclassification of non-technical 0.3% 0.
Slide 75: Confident of achieving targeted profitability improvements
GENERAL INSURANCE We are confident of achieving targeted profitability improvements DIRECTIONAL COMBINED RATIO PROGRESSION 2014 – 2016 General Insurance Combined Ratio Combined Ratio % improvement 2-3ppts ~98.5% Turnaround Portfolio Commission2 OUE ~1% businesses Mgt +1ppts -1ppts -0.5ppts -2.5ppts
Slide 76: Key messages
GENERAL INSURANCE Key messages Strategy Our 2014 – 2016 strategy is confirmed, with global, remains regional and local initiatives underway the same Execution Strategy execution shows strong evidence of delivery, even amid in the face of operational and market challenges challenges On track to Addit
Slide 77: Global Corporate
Global Corporate Thomas Hürlimann, CEO Global Corporate
Slide 78: Key messages
GENERAL INSURANCE Key messages Track record Consistent topline growth, and healthy returns on capital of profitable based on delivering superior service to our customers growth Industry- Customer focus, international program capabilities, and leading state-of-the-art risk insight tools capabilities
Slide 79: Well diversified business with distinctive strengths
GENERAL INSURANCE Well diversified business with distinctive strengths OVERVIEW OF GLOBAL CORPORATE GWP1 split (by geography) Delivering over 25% of GI’s BOP in 2014 6% Europe, Middle East 4% & Africa More than 80% of employees are market-facing Serving ~25,000 customers through more than 39%
Slide 80: A history of growing our book
GENERAL INSURANCE A history of growing our book… TOP-LINE GROWTH AND RETENTION EVIDENCE OF SUCCESSFUL EXECUTION GWP1 2010-2014 (USDm) Strong, consistent growth driven by: CAGR: +5% 9,264 9,434 Increase in customer satisfaction 7,949 8,609 7,624 (Q1-15 retention: 90.5%) Strong increase in our int
Slide 81: …while improving our profitability
GENERAL INSURANCE …while improving our profitability… FOCUS ON PROFITABILITY AND UNDERWRITING DISCIPLINE AY loss ratio (excl. catastrophes) 2010-2014 Strong underlying profitability improvement -4.7ppts driven by: 76.4% 76.7% 74.3% 75.9% 71.7% Underwriting excellence Strong portfolio management
Slide 82: …through rigorous portfolio management
GENERAL INSURANCE …through rigorous portfolio management 9 BOX GRID SHOWS CLEAR PORTFOLIO IMPROVEMENTS 9-Box-Grid CAY Combined Ratio Re-underwriting actions on Development1 3 U/W loss 3 U/W break-even 3 U/W profit specific books of business 9 Disciplined tiering4 execution High RBRM2 Medium Low
Slide 83: Global Corporate has a clear customer focus
GENERAL INSURANCE Global Corporate has a clear customer focus CUSTOMER FOCUS DEMONSTRATED ACROSS THREE DIMENSIONS Serving customers’ most complex needs Deliver USD 3.6bn GWP from International Programs superior service Partnering with customers to create expert knowledge ~60,000 Risk Engineering
Slide 84: Customer satisfaction is at the core of our value proposition
GENERAL INSURANCE Customer satisfaction is at the core of our value proposition CUSTOMER NET PROMOTER SCORE RESULTS BY MARKET1 Regular stewardship meetings with our largest customers ensure swift Market 1 resolution of any issues Market 2 Market 3 Each international Market 4 program customer Mar
Slide 85: Market leading International Program Business capabilities
GENERAL INSURANCE We offer market leading International Program Business capabilities INTERNATIONAL PROGRAM OVERVIEW Offering International Program capabilities in 211 countries (61 countries with Zurich presence, 150 with distribution partners) Transformed the industry to structure compliant pr
Slide 86: My Zurich offers unrivaled digital capabilities
GENERAL INSURANCE Through My Zurich we offer unrivaled digital capabilities to our customers MY ZURICH – FACTS & FIGURES Using My Zurich our customers can: GWP on Customers My Zurich on My Zurich Globally manage their claims and international policies online and in real time USD 1.3bn 240 Run an
Slide 87: Zurich Risk Room delivers insights into risks
GENERAL INSURANCE Zurich Risk Room delivers insights into risks for our customers and us ZURICH RISK ROOM – FACTS & FIGURES 563 users, 96 companies, covering GWP in excess of USD 1bn Over 180 customer and broker presentations in 2014 Unique differentiator for Zurich and a powerful tool for eng
Slide 88: Zurich Onsite – changing the way we work with customers
GENERAL INSURANCE Zurich Onsite – changing the way we work with customers ZURICH ONSITE – HOW WE DELIVER TO THE CUSTOMER Zurich Onsite in action May 21, 2015 Investor Day 88
Slide 89: Continue to improve profitability of our book while growing
GENERAL INSURANCE We continue to improve the profitability of our book while growing TIERING RESULTS 2014 AY Loss Ratio excluding CAT shows strong improvement 93.7% -4.2ppts 90.4% 87.7% 75.9% 7.5% 71.7% 79.0% -4.5ppts 2.8% 1.4% 0.0% +0.3ppts Tier 4 Tier 3 Tier 2 Tier 1 2013 2014 Retention Zurich Rat
Slide 90: Further Combined Ratio improvements through underwriting focus
GENERAL INSURANCE Further Combined Ratio improvements through clear underwriting focus ACCIDENT YEAR COMBINED RATIO OUTLOOK AY Combined Percentage of total portfolio Further improvement of Combined Ratio Ratio driven by: Further tiering improvements < 95% 55% Continuous refinement of our technic
Slide 91: Increased focus on existing customers leads to growth potential
GENERAL INSURANCE Increased focus on existing customers leads to strong growth potential FOCUSING ON SELLING ONE OUR EXISTING PRODUCT CUSTOMER MORE TO WILL EVERY FIFTH FUEL OUR CUSTOMER FUTUREUSD CREATES GROWTH 1bn GWP No. of GWP customers 7% Product density 2014 Impact of illustrative product densi
Slide 92: Becoming more efficient through predictive analytics
GENERAL INSURANCE Becoming more efficient through the use of predictive analytics STEERING OUR PIPELINE TRIAGING PROCESS THROUGH THE POWER OF DATA We developed a predictive Probability to win very low low medium high model to improve our understanding of the likelihood to win a submission 71% 73%
Slide 93: Key messages
GENERAL INSURANCE Key messages Track record Consistent topline growth, and healthy returns on capital of profitable based on delivering superior service to our customers growth Industry- Customer focus, international program capabilities, and leading state-of-the-art risk insight tools capabilities
Slide 94: Efficiency & Technology
Efficiency & Technology Robert S. Dickie, Chief Operations & Technology Officer
Slide 95: Key messages
GROUP OPERATIONS & TECHNOLOGY Key messages Opportunity to improve Zurich’s expense position by at least USD 1bn identified; work under way since Q3 2014 We aim to achieve this by end 2018, with at least USD 300m delivered by end 2016 Prioritize investments in new technologies We are already taking a
Slide 96: Despite prior expense programs, expense improvement opportunity remains
GROUP OPERATIONS & TECHNOLOGY Despite prior expense programs Zurich still has an expense improvement opportunity ZURICH’S GENERAL EXPENSES1 (USDbn) KEY TRENDS 9.7 10.1 In support functions and IT: 9.3 9.5 9.3 Prior savings initiatives 2.9 Support 2.5 2.6 2.7 2.7 have helped to offset functions the
Slide 97: Expense improvement opportunity is at least USD 1bn
GROUP OPERATIONS & TECHNOLOGY Our expense improvement opportunity is at least USD 1bn COMMENTS COMPARISON BY STEP OF THE VALUE CHAIN1 (USDbn) Our 2014 General Expenses 2.9 2.3 compared to a sample of Support functions 10-12 peers in Europe and US remain high due to: 2.0 1.9 Information Complex mid
Slide 98: Actions to achieve at least USD 300m savings by end 2016
GROUP OPERATIONS & TECHNOLOGY Actions underway since Q3 2014 to achieve at least USD 300m underlying1 savings by end 2016 EXPECTED SAVINGS BY END 2016 BASELINE AND TARGET SAVINGS2 (USDbn) (USDm) 10.1 Total >300 Support 2.9 Functions Shared Services & ~55 Process streamlining Information 2.0 Location
Slide 99: Operations & Technology driving efficiency initiatives
GROUP OPERATIONS & TECHNOLOGY Operations & Technology is driving efficiency & effectiveness initiatives SOURCING & PROCUREMENT LOCATION FOOTPRINT & FACILITIES USD ~45m savings USD ~20m CRE&FM savings Expanding spend actively managed by Reducing number of properties & procurement renegotiatin
Slide 100: At least USD 1bn underlying savings by end 2018
GROUP OPERATIONS & TECHNOLOGY We aim to achieve at least USD 1bn underlying1 savings by end 2018 EXPECTED SAVINGS BY END 2018 BASELINE AND TARGET SAVINGS2 (USDbn) (USDbn) 10.1 Total >1.0 Support 2.9 Functions Shared Services & ~0.6 Process streamlining Information 2.0 Location footprint Technology ~
Slide 101: Shared service center development
GROUP OPERATIONS & TECHNOLOGY Shared service center development SHARED SERVICE ZURICH’S FTEs: SHARED SERVICES VS. TOTAL CENTER APPROACH Create at-scale 5-6 FTEs (excluding Farmers) global shared service centers Improve quality of service Standardize the Local ~97% Potential savings processes USD
Slide 102: Process streamlining to increase productivity
GROUP OPERATIONS & TECHNOLOGY Process streamlining to increase productivity and change our way of working ZURICH WAY OF WORKING PROGRAM (ZWOW) Productivity Streamlining Process Continuous improvement expectation ~5% productivity gain p.a. ~20% capacity freed up within 9- 12 months after implementati
Slide 103: Current technology strategy goes beyond efficiency improvements
GROUP OPERATIONS & TECHNOLOGY Focus of Zurich’s current technology strategy goes beyond efficiency improvements KEY ELEMENTS OF MID-TERM TECHNOLOGY STRATEGY Customer / Agent / Broker Interface Data & Analytics (ZWOW, Shared Services) Process Streamlining Information Security Applications IT Infrastr
Slide 104: Three technologies changing customer/agent/broker interface
GROUP OPERATIONS & TECHNOLOGY Three technologies are changing the way we support customer/ agent/ broker interface Utilizing new sources of data other than Big data / just industry data allows to price risks Risk insights significantly better. in Commercial Insurance See NAC section of December 2014
Slide 105: Zurich's response to disruptive technologies
GROUP OPERATIONS & TECHNOLOGY Zurich’s response to disruptive technologies 100+ In 2014 we reviewed 100+ technologies Technologies 12 We identified 12 disruptive technologies that would disrupt the insurance Disruptive technologies business model in the coming decade 4 Technologies Of the 12, 4 disr
Slide 106: 4 technology areas impacting the insurance value chain
GROUP OPERATIONS & TECHNOLOGY Zurich focuses on 4 technology areas impacting the insurance value chain and business model PERSISTENT CONTEXTUALITY AND UBIQUITY OF DATA AND ANALYTICS CONNECTIVITY Deep-dive on next pages Ubiquitous network Data-enhanced insights connectivity is changing allow improvem
Slide 107: Ubiquity of Data and Analytics
GROUP OPERATIONS & TECHNOLOGY Ubiquity of Data and Analytics ZURICH’S FOCUS OUR ACTIONS Build an industry-leading enterprise data Currently collaborating with and analytics capability Palantir across seven pilots leveraging key competencies Further enforce uniform data policies and of both com
Slide 108: Automation of Knowledge Work
GROUP OPERATIONS & TECHNOLOGY Automation of Knowledge Work ZURICH’S FOCUS OUR ACTIONS Leverage ‘machine learning’ to Exploration teams currently improve both risk pricing and claims deployed to prototype: assessments, reduce cost through more Automation across operations accurate damage estimate
Slide 109: Zurich's response to disruptive technologies
GROUP OPERATIONS & TECHNOLOGY Zurich’s response to disruptive technologies 100+ In 2014 we reviewed 100+ technologies Technologies 12 We identified 12 disruptive technologies that would disrupt the insurance Disruptive technologies business model in the coming decade 4 Technologies Of the 12, 4 disr
Slide 110: Example of Prototype (1/2)
GROUP OPERATIONS & TECHNOLOGY Example of Prototype (1/2) CONCEPT Concept: Digitize existing legacy applications Pilot BU/ Function locations: United States, United Kingdom, Italy, Spain, Switzerland, Farmers Cost to date: USD 300,000 CHALLENGE Highly complex processes and systems make custom
Slide 111: Example of Prototype (2/2)
GROUP OPERATIONS & TECHNOLOGY Example of Prototype (2/2) SOLUTION Provide seamless access to devices and applications from customer/ agent/ broker/ staff Utilize software robotics to reduce dependency on “legacy” application development change processes BENEFITS Flexibility Enable agents/ empl
Slide 112: Key messages
GROUP OPERATIONS & TECHNOLOGY Key messages Opportunity to improve Zurich’s expense position by at least USD 1bn identified; work under way since Q3 2014 We aim to achieve this by end 2018, with at least USD 300m delivered by end 2016 Prioritize investments in new technologies We are already taking a
Slide 113: Demonstrations & Lunch
Demonstrations & Lunch James Quin, Head of Investor Relations & Group Performance Management
Slide 114: Demonstrations & Lunch logistics
Demonstrations & Lunch LOGISTICS We have 5 demonstrations in the lunch breakout room: – MyZurich portal – Zurich Risk Room – UK Corporate Savings – GI retail: Examples of innovation – Zurich’s approach to Corporate & Social Responsibility Each demonstration will be run by a member of Zurich mana
Slide 115: 5 demonstrations
5 demonstrations SHORT SUMMARY Live demo of unique customer portal MyZurich portal One tool to oversee and manage policy data, claims and emerging risks Live demo of portal to understand impact of global risks Zurich Risk Room Award-winning tool demonstrating Zurich’s thought leadership and
Slide 116: Program for the afternoon
Program for the afternoon SCHEDULE 1. Please pick up a lunch bag outside the auditorium. 2. First demonstration starts at 12.50pm. We will let you know when we will restart each demonstration (approximately every 15 minutes). 3. At 2pm we will start the Q&A sessions: – We’ve divided you into 3 group
Slide 117: Finance update
Finance update George Quinn, Chief Financial Officer
Slide 118: Key messages
FINANCE Key messages Our capital position remains very strong, and Zurich operates in a stable regulatory environment We expect to deploy USD 3bn of excess capital in the next 18 months We will continue to focus our retail footprint We expect to achieve an ROE within our target range in 2016 May 21,
Slide 119: Recap on 2014 results
FINANCE Recap on 2014 results FY-14 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD FY-14 Target BOP BOPAT ROE1 11.1% 12 - 14% USD 4.6bn (-1%) FY-14 Target Z-ECM2 122% 100 – 120% NIAS Cumulative FY-14 Net cash 3-year target USD 3.9bn (-3%) remittances USD 3.7bn > USD 9bn 1 Business operating profit
Slide 120: Consistently strong solvency position
FINANCE Consistently strong solvency position FY-14 SOLVENCY RATIO DEVELOPMENT & HISTORICAL VIEW Z-ECM 9% -3% 127% 126% -14% 130% 119% 121% 122% 127% 7% -5% 120% 114% 110% 122% 110% 103% 3% 100% 90% 80% 70% FY-13 Business Ins. Market Market Model Cap. FY-14 FY-10 FY-11 HY-12 FY-12 HY-13 FY-13 HY-14
Slide 121: SST is more conservative than Solvency II
FINANCE SST is more conservative than Solvency II MORE CONSERVATIVE APPROACH SST & SOLVENCY II COMPARED EUR Solvency II SST The SST framework is on average more 4.50% stringent compared to Solvency II 4.00% For our entities in the EU, we estimate 3.50% Different that Solvency II ratios will be o
Slide 122: Stable regulatory environment
FINANCE Stable regulatory environment OPERATING UNDER SST – A WELL-ESTABLISHED AND STABLE FRAMEWORK The SST framework has been well established for several years. We do not expect that the introduction of Solvency II will have any immediate implications on the SST framework Recent changes to the
Slide 123: Resilient position in stress scenarios
FINANCE Resilient position in stress scenarios Z-ECM RATIO SCENARIO1 IMPACT ACTIONS RESULT IMPACT • Projected base case as at • Limited impact on • No corporate 122% end 16, plus: both Z-ECM AFR actions required 120% USD 3bn Slow burn • Lower growth than and RBC available for recovery planned deploy
Slide 124: Target capital structure
FINANCE Target capital structure OVERVIEW AND RATIONALE CURRENT AND TARGET STRUCTURE OF Z-ECM AFR (%) 100 100 Target capital structure minimizes 10 10 total cost of capital subject to maintaining our AA rating and 14 20 internal liquidity targets Capacity to increase leverage according to our ca
Slide 125: Group portfolio review: 2014 data
FINANCE Group portfolio review: 2014 data GROUP PORTFOLIO REVIEW1,2 BOPAT ROE: -10% 6% of Z-ECM Non-Core Business shown separately Manage for value capital slightly lower than in 2013 as % of total, mainly due to FX BOPAT ROE: 6% 30% of Z-ECM BOPAT ROE: 15% First step announced with UK annuity
Slide 126: Focusing our retail footprint
FINANCE Focusing our retail footprint ZURICH’S RETAIL FOOTPRINT Breakdown of Zurich’s Retail top-line by market share1 Currently in 27 markets (GI GWP, Global Life APE), % Leaders in only a few markets 14% 14% Largest 5 positions account for ~2/3rds 40% retail GWP/APE for both GI and GL 55% re
Slide 127: How we evaluate our retail footprint
FINANCE How we evaluate our retail footprint RETAIL INVESTMENT DECISION TREE Large market Focused strategy via with significant CP1 organic & inorganic y share? y moves Market profitable & good Zurich starting Need to command top- y point? tier market position n Priority Market? Are there Profitable
Slide 128: Drivers of profit improvement actions
FINANCE Drivers of profit improvement actions FY-14 ACTION FX / YIELD 2016 97.3% reported 2-3pt better ~5% FX impact CR, but ~98.5% ex combined ratio plus lower yields +0.3bn to General cats/pension gain +0.6bn BOP vs Insurance FY-14 USD 2.45bn BOP1 USD +0.6 to 0.9bn USD -0.3bn As reported FY-14 Get
Slide 129: We expect to deliver on the 12-14% ROE target
FINANCE We expect to deliver on the 12-14% ROE target BOPAT ROE (%) From previous slide 1% -1% >12% 1% 11.1% -0.5 10.6% Avg adjusted equity USD 3bn in flat given FX impact next 18 months FY-14 Normalizing Adjusted Profit Adjust FX translation Growth in avg Investment at 20161 cat losses, FY-14 impro
Slide 130: Opportunity to improve efficiency
FINANCE Opportunity to improve efficiency 2015-2016 2017-2018 USD 300m cost savings At least further USD 700m savings Support delivery of 12-14% ROE Streamlined objectives with less Objectives Implement first phase of 2018 operational infrastructure (building, transformation systems, FTE i
Slide 131: Key messages
FINANCE Key messages Our capital position remains very strong, and Zurich operates in a stable regulatory environment We expect to deploy USD 3bn of excess capital in the next 18 months We will continue to focus our retail footprint We expect to achieve an ROE within our target range in 2016 May 21,
Slide 132: Closing remarks
Closing remarks Martin Senn Chief Executive Officer
Slide 133: Biographies
@ ZURICH Biographies
Slide 134: Biography Martin Senn
Biography Martin Senn Chief Executive Officer Skills and experience Martin Senn (born 1957, Swiss citizen) has more than 35 years of experience in the insurance and finance industry, having held various senior executive positions across Europe, the U.S. and the Asia-Pacific region. Mr. Senn joined Z
Slide 135: Biography Kristof Terryn
Biography Kristof Terryn CEO Global Life Skills and experience Kristof Terryn (born 1967, Belgian citizen) began his career in 1993 in the banking industry, where he worked in capital markets. In 1997, he joined McKinsey & Company where he held various positions within the financial services practic
Slide 136: Biography Gary Shaughnessy
Biography Gary Shaughnessy UK Country Head & CEO UK Life Skills and experience Gary Shaughnessy (born 1966, British citizen) joined Zurich in June 2012 as CEO of UK Life and in August 2014 was appointed as UK Country Head. He also sits on the board of Zurich Life Insurance Company (ZLIC). Gary’s bac
Slide 137: Biography Nick Burnet
Biography Nick Burnet CFO Global Life Skills and experience Nicolas Burnet (born 1968, U.S. citizen) is a member of the Zurich Insurance Group’s Leadership Team and is the Chief Financial Officer (CFO) of the Global Life Segment. In this role he is responsible for leading the Global Life finance tea
Slide 138: Biography Michael Kerner
Biography Michael Kerner CEO General Insurance Skills and experience Michael Kerner (born 1965, U.S. citizen) joined Zurich in 1992 from the Continental Insurance Company and since then he has held a number of senior executive positions. These include Chief Operations Officer for Zurich North Americ
Slide 139: Biography Thomas Hürlimann
Biography Thomas Hürlimann CEO Global Corporate Skills and experience Thomas Hürlimann (born 1963, Swiss citizen), is Chief Executive Officer (CEO) of the Global Corporate business at the Zurich Insurance Group (Zurich). He joined Zurich in March 2003 as Global Head of Group Reinsurance. In 2005, he
Slide 140: Biography Robert Dickie
Biography Robert Dickie Chief Operations and Technology Officer Skills and experience Robert Dickie (born 1959, British citizen) held various senior positions with National Australia Bank Group in Australia and the UK from 1994 to 2000. From 2000 to 2002, he served as Managing Director, UK Enterpris
Slide 141: Biography George Quinn
Biography George Quinn Chief Financial Officer Skills and experience George Quinn (born 1966, British citizen) started his career at KPMG 1988 in London where he held several positions working with the insurance and reinsurance industry. He joined Swiss Re in 1999 as Chief Accounting Officer based i
Slide 142: 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 143: Calendar
Calendar: - June 2 - 3, DB Global Financials Conference 2015, New York - August 6, Half year results 2015 - September 29 - October 1, BoAML Conference, London - November 5, Results for the nine months to September 30, 2015 © Zurich Insurance Company Ltd