Zurich Insurance Group Ltd · SIX:ZURN
Zurich Insurance — Q1 2016 Earnings Presentation
62 slides from Zurich Insurance's earnings presentation, May 12, 2016
Slide 1: Results for the three months to March 31, 2016
Results for the three months to March 31, 2016 Investor & Media presentation May 12, 2016 Zurich Insurance Group
Slide 2: Content
Content Use symbols to navigate through the document MAIN SECTION APPENDIX Key highlights General Insurance Group BOP BOP Global Life General Insurance Farmers Exchanges Global Life Other Operating Businesses Farmers Group Investments Group Balance sheet and capi
Slide 3: Key messages
Key messages General Improved in line with expectations, further progress Insurance anticipated throughout the year Global Life Underlying improvement continues, masked by strong USD Growth in continuing operations of the Farmers Exchanges Farmers reflected in fee income Capital Very strong capital
Slide 4: Key financials
Key financials Good BOP result, but more remains to be done Q1-16 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD Q1-16 Target BOP BOPAT ROE1 10.9% 12 - 14% USD 1.1bn (-16%) Q1-16 estimate3 Target Z-ECM2 ~110% 100 – 120% NIAS Cumulative FY-14 & FY-15 Net cash 3-year target USD 0.9bn (-28%) remittan
Slide 5: Group – Business Operating Profit
Group – Business Operating Profit GI improving, other businesses on track BOP BY SEGMENT (USDm) BOP TO NIAS WALK (USDm) 1,381 -16% -55 1,295 220 1,087 81 -388 880 706 -19 51 542 29.5% tax rate 319 319 1,087 317 875 415 391 343 25 24 -172 -146 -139 Q1-16 RCG1 Accounting SH Other4 Q1-16 -61 BOP and re
Slide 6: General Insurance – Topline
General Insurance – Topline Premium decline mainly driven by focus on profitability GWP GROWTH IN LC1 (%) RATE CHANGE2 (%) Q1-15 Q4-15 Q1-16 -11% GC 10% 1% 1% 2% -2% -4% NAC 2% 2% 0% 2% -2% -3% EMEA 1% 1% 2% 3% -1% 1% IM 12% 5% 5% 5% 3% -5% Total3 5% 2% 2% 3% 0% Q1-16 Q1-15 Q1-14 1 In local currency
Slide 7: General Insurance – Tiering results
General Insurance – Tiering results1 Results encouraging, line of sight to further CR improvement Q1-16 RATE INCREASES BY TIER2 (%) Q1-16 RETENTION BY TIER2 (%) Tier 1 Tier 1 Tier 2 Tier 2 Tier 3 Tier 3 Tier 4 Tier 4 Total 2.5% Total 81% 1 GI overall results based on tiered business for Global Corpo
Slide 8: General Insurance – Loss ratio details
General Insurance – Loss ratio details AY Loss ratio improving in Q1-16 LOSS RATIO (%) 77.7% 75.7% 3.7% 68.4% 2.3% 6.7% 68.1% 66.1% 65.7% 65.8% 65.3% 65.9% 1.9% 3.4% 1.1% 1.9% 3.0% 1.4% 2.3% 68.0% 69.5% 67.0% 65.6% 63.7% 64.4% 65.4% 66.3% 66.5% 3.7% -1.8% -0.1% -1.6% -0.8% -1.5% -1.3% -0.5% -1.5% Q1
Slide 9: General Insurance – Combined ratio
General Insurance – Combined ratio Combined ratio in line with expectations COMBINED RATIO SPLIT (%) COMBINED RATIO BY REGION (%) 108.9% 108.6% 96.7% 100.0% 3.7% 6.7% 97.7% 99.3% 2.3% 1.4% 3.4% 1.1% GC 113.9% 96.5% NAC 98.2% 94.8% 99.2% EMEA 102.5% 101.3% 96.8% 97.9% 98.1% 96.5% IM 103.3% 97.7% Tota
Slide 10: General Insurance – BOP components
General Insurance – BOP components Reduction in BOP also driven by market volatility BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) 880 706 -23% -80 706 12 308 -124 542 34 -5 230 542 150 560 537 425 45 -3 -34 -36 -30 -24 Q1-15 UWR Investment RCG NTR NCI Q1-16 Q1-14 Q1-15 Q1-16 Income Underwriting result I
Slide 11: Global Life – New business & Net Inflows
Global Life – New business & Net Inflows Strong new business value growth offsets decrease in APE APE (USDm)1,2 NBM & NBV1,2,3 NET INFLOWS & AUM4 NBM (%) Net inflows (USDbn) -10% 27.0 24.4 19.2 2.3 1,192 1.8 0.6 1,101 11 46 31 1,071 17 49 28 42 34 12 241 +25% NBV (USDm) AuM (USDbn) +1% 265 215 254 2
Slide 12: Global Life – BOP by region
Global Life – BOP by region Local currency improvements in all regions except North America BOP BY REGION (USDm)1 KEY DRIVERS (USDm) 0% 319 319 317 319 27 -19 8 4 317 7 13 14 -34 20 13 20 77 54 35 54 35 52 54 52 54 253 210 216 210 216 -10 -11 -7 -11 -7 -8 Q1-14 Q1-15 Q1-16 Q1-15 EMEA LatAm North APA
Slide 13: Farmers Exchanges – KPIs
Farmers Exchanges1 – KPIs Continued growth, unusually high Q1 catastrophe losses GWP GROWTH (%) COMBINED RATIO2 (%) SURPLUS2 (USDbn) 104.2% 37.8% 38.9% 36.0% 3.6% 3.1% 8.6% 96.5% 6.6 2.5% 93.8% 6.1 5.9 1.6% 2.3% 2.3% 1.9% 5.1 5.6 94.0% 95.6% 5.4 92.2% 1.0 0.9 0.5 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q1-14
Slide 14: Farmers – KPIs
Farmers – KPIs Stable FMS results, underwriting loss at Farmers Re BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 415 7.3% 105.8% 391 343 8.9% 7.0% 7.0% 95.6% 2.2% 93.1% 340 1.2% 330 347 96.9% 93.4% 91.9% 75 61 -4 Q1-14 Q1-15 Q1-16 Q1-14 Q1-15 Q1-16 Q1-14 Q1-15 Q1-16 Catastrophes FMS FRe CR (excl. c
Slide 15: Group – Balance sheet and capital
Group – Balance sheet and capital Strong capital position across all metrics SHAREHOLDERS’ EQUITY (USDm) SOLVENCY RATIOS (%) 217% 31,178 196% 203% 189% -216 30,869 416 1,218 127% 122% 123% 121% -2,602 875 FY-15 Dividend1 NIAS Net CTA (excl. Pension Q1-16 Z-ECM SST2 URG/L Dividend) plans & other FY-1
Slide 16: Key messages
Key messages General Improved in line with expectations, further progress Insurance anticipated throughout the year Global Life Underlying improvement continues, masked by strong USD Growth in continuing operations of the Farmers Exchanges Farmers reflected in fee income Capital Very strong capital
Slide 17: 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 18: Appendix
@ ZURICH Appendix
Slide 19: GI – Combined ratio details
GI – Combined ratio details AY loss ratio lower than FY-15, expense ratio flat LOSS RATIO (%) EXPENSE RATIO (%) 71.8% 31.7% 31.4% 31.6% 30.5% 30.2% 68.3% 0.9% 29.7% 3.2% 3.5% 66.4% 65.7% 66.1% 14.0% 14.0% 14.7% 65.3% 13.5% 13.7% 13.9% 1.1% 2.3% 1.9% 1.4% 67.5% 67.3% 65.6% 65.4% 66.5% 65.2% 16.2% 16.
Slide 20: GI – Prior year development (PYD) by region
GI – Prior year development (PYD) by region Q1-16 PYD within expected range PYD (% OF NET EARNED PREMIUM) -1.8% -0.1% -1.6% -0.8% -1.5% -1.3% 3.7% -0.5% -1.5% 2.8% Unfavorable PYD 1.3% 1.0% 0.2% 1.1% 0.2% 0.4% 0.2% 0.4% 0.1% -0.1% -0.1% 0.1% -0.4% -0.4% -0.1% -0.6% -0.6% 0.0% -0.8% -0.8% Favorable P
Slide 21: GI – Catastrophes split by region
GI – Catastrophes split by region Last two years have been below our plan assumption CATASTROPHES (% OF NET EARNED PREMIUM)1 6.7% 1.9% 0.5% 3.4% 3.0% 0.7% 1.4% Ø 2.7% 2.3% 2.3% 1.9% 4.3% 0.3% 1.9% 0.0% 0.7% 0.6% 0.3% 0.5% 1.4% 0.8% 1.2% 0.1% 0.5% 1.1% 0.8% 0.6% 0.3% 0.1% 1.5% 0.7% 0.5% 0.4% 0.9% 1.1
Slide 22: GI Global Corporate – KPIs
GI Global Corporate – KPIs Some stabilization vs FY-15, further improvements expected Q1-16 KEY FINANCIALS GWP Zurich rate Combined USD 181m USD 114m Growth1 change2 Ratio -11% 2% 99% 95.5% 99.3% 22.5% 22.4% KEY DRIVERS 73.0% 76.9% GWP down mainly as a result of lower retention and new business vo
Slide 23: GI North America Commercial – KPIs
GI North America Commercial – KPIs Attritional LR improving, AY CR impacted by large losses Q1-16 KEY FINANCIALS GWP Zurich rate Combined USD 273m USD 178m Growth1 change2 Ratio -4% 2% 97% 95.3% 96.5% 31.6% 32.5% KEY DRIVERS 63.6% 64.0% Decrease in GWP includes some timing and other one-off items
Slide 24: GI EMEA – KPIs
GI EMEA – KPIs Good start to the year Q1-16 KEY FINANCIALS GWP Zurich rate Combined USD 226m USD 253m Growth1 change2 Ratio -3% 3% 95% 96.8% 94.8% 32.2% 31.6% KEY DRIVERS 64.6% 63.3% GWP down mainly driven by lower new business in UK, Germany and Switzerland Slightly higher rate changes driven b
Slide 25: GI International Markets – KPIs
GI International Markets – KPIs AY loss ratio continues to improve, growth impacted by exits Q1-16 KEY FINANCIALS GWP Zurich rate Combined USD 37m USD 82m Growth1 change2 Ratio 1% 5% 97% 100.5% 96.5% 42.5% 43.9% KEY DRIVERS 58.0% Growth in Latin America is more than offset 52.6% by the exit of lin
Slide 26: GI – Rate change monitor
GI – Rate change monitor Strong rate increases driven by re-underwriting actions Q1-16 ZURICH RATE CHANGE ASSESSMENT Business Assessment Solid rate increases above prior year levels reflecting focus on re-underwriting with lower levels Group in the US due to market pressures. Global Corporate Higher
Slide 27: GI – Natural catastrophe reinsurance
GI – Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES (USDm) 10 200 105 10 200 10 200 750 Single global USD 200m treaty, which can be applied to any region2 10 750 200 750 10 350 750 10 446 350 350 Single global USD 750
Slide 28: GL – New business by pillar
GL – New business by pillar Higher NBV in CLP and Retail Q1-16 KEY FINANCIALS1,2 APE (USDm) CLP single 1,192 NBM PVNBP 1,101 1,071 premium 398 443 386 362 388 369 27% USD 12.5bn USD 0.9bn 341 361 317 Q1-14 Q1-15 Q1-16 KEY DRIVERS NBV (USDm) NBV increase from general margin improvements more 240 254
Slide 29: GL – Net inflows & Assets under management
GL – Net inflows & Assets under management Positive net flows and growing local currency AuM excl. disposals NET INFLOWS BY REGION (USDbn)1 AUM DEVELOPMENT (USDbn)2 2.3 264 257 0.2 2 -2 6 0.0 35 38 1.8 0.5 0.1 0.5 0.2 103 112 0.2 0.6 0.1 1.4 0.4 1.0 116 116 0.2 0.1 0.0 -0.2 Balance as Net inflows Ma
Slide 30: Zurich Santander – Quarterly results
Zurich Santander – Quarterly results Continued growth in LC offset by adverse FX development PROFIT BEFORE TAX GI & LIFE (100%) INTANGIBLES AMORTIZATION (100%) 173 239 176 -16 -15 -13 -13 -12 163 177 181 -18 -18 -18 -17 170 174 147 151 -4 -3 -3 159 156 163 168 -6 -5 -4 142 127 131 143 -8 -7 -7 Q1-14
Slide 31: Farmers Exchanges – GWP and PIF/VIF
Farmers Exchanges – GWP and PIF/VIF1 Growth primarily driven by rate DEVELOPMENT OF GWP (USDm) DEVELOPMENT OF PIF/VIF (000’s) +3.6% +0.2% 4,848 19,016 19,052 4,679 1,927 +9.3% 8,109 8,211 1,763 +1.2% -8.3% 293 269 909 -1.9% 152 156 +2.8% 892 757 760 +0.5% 1,089 1,170 +7.5% 4,800 4,815 +0.3% 579 598
Slide 32: Farmers Exchanges – Combined ratio
Farmers Exchanges – Combined ratio Continued impact of unfavorable claim trends in Auto business COMBINED RATIO1 BY BUSINESS LINE (%) Auto 108.2% Auto 110.5% 100.1% 100.6% 106.1% 102.8% Bristol West2 101.8% Bristol West2 104.1% 21st Century 98.7% 21st Century 107.1% CA/HI2 99.2% CA/HI2 76.9% 97.9% 1
Slide 33: Farmers Exchanges – Combined ratio history
Farmers Exchanges – Combined ratio history Highest Q1 catastrophe losses in over 10 years QUARTERLY COMBINED RATIO (%) Incl. Incl. 17 Catastrophe Incl. 120 Ike & Gustav Events 13 Catastrophe Events Incl. 115 13 Catastrophe Incl. Events 13 Catastrophe 110 Events Incl. Incl. Excl. Texas storms Irene 1
Slide 34: Other Operating Businesses
Other Operating Businesses Q1-16 loss below the expected quarterly run-rate QUARTERLY BOP SPLIT (USDm) 20 -38 -24 -51 -64 -51 -48 -113 -137 -115 -191 -82 -133 -134 -171 -171 -146 -139 -167 -171 -172 -184 -149 -222 -219 -280 -286 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Headquarters Hold
Slide 35: Group Investments – Asset allocation
Group Investments – Asset allocation Sources of investment risk and return are balanced ASSET ALLOCATION1 RISK DIVERSIFICATION RISK DRIVERS2 Total Group Investments: USD 203bn 3% 6% 7% 0% 5% 100% 6% 1% 5% 32% 41% 40% 25% 15% 80% Sum of single Investment Investment security risks risks risk relative
Slide 36: Group Investments – Debt securities portfolio
Group Investments – Debt securities portfolio1 Debt securities portfolio is of a high quality BY CATEGORY BY RATING Total debt securities: USD 146bn 13% 1% 3% 21% 24% 47% 40% 17% 34% Government and government related bonds MBS/ABS2 AAA A Non-rated Corporate bonds AA BBB Non-investment grade 1 Accoun
Slide 37: Group Investments – Bond portfolio
Group Investments – Bond portfolio1 High quality and well diversified BY SEGMENT BY RATING BY COUNTRY Total bonds: USD 127bn 25% USA 9% 4% 10% United Kingdom 1% 17% 9% France 31% 9% Italy Bond 28% 9% Germany securities 8% Switzerland 6% Spain 64% 32% 3% Netherlands 60% 3% Australia
Slide 38: Group Investments – Government bonds & Other
Group Investments – Government bonds & Other1 High quality and well diversified BY SEGMENT BY RATING BY COUNTRY Total government bonds: USD 68bn 21% USA 8% 4% 15% Italy 0% 19% 9% France 31% 25% 9% United Kingdom Bond 9% Spain securities 9% Switzerland 5% Germany 64% 3% 3% Belgium 60%
Slide 39: Group Investments – Corporate bonds
Group Investments – Corporate bonds1 High quality and well diversified BY SEGMENT BY RATING BY INDUSTRY Total corporate bonds: USD 59bn 50% Financial Institutions 7% 3% o/w 85% Banks 14% 3% o/w 9% Insurance 35% Bond 31% 13% 18% Manufacturing securities 8% Utilities 5% Oil & Gas 64% 4% Tele
Slide 40: 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 0.47% 0.58% 0.52% Equity 0.44% Equity 0.60% Equity 0.50% 0.41% 0.38% Trade Yield 0.36% Trade Yield 0.65% at ~2.2%2 0.75% at ~2.1%2 0.70% Debt 0.59% Debt 0.
Slide 41: Group – Economic capital models
Group – Economic capital models Strong capital position across all metrics Z-ECM RATIO DEVELOPMENT (%) SST1 RATIO DEVELOPMENT (%) 11% 1% 0% -5% 1% 0% -4% -15% 6% 196% 189% -3% 122% 121% FY-14 Business Ins. Risk2 Market Market Cap. FY-15 FY-14 Business Ins. Risk2 Market Market Cap. FY-15 profit risk
Slide 42: Group – Z-ECM components
Group – Z-ECM components Well diversified capital base by risk type FY-15 AFR1 COMPOSITION (USDbn) RBC1 BY RISK TYPE AND BUSINESS 9% Market risk Shareholders equity 31 5% Re-ins credit risk 2% 7% P&R risk2 Dividend accrual 3 51% Natural cat risk 24% Life insurance risk Net intangibles 17 Operational
Slide 43: Group – Solvency ratio sensitivities
Group – Solvency ratio sensitivities1 Solvency ratios resilient to market movements SOLVENCY RATIO IMPACT2 121% Actual value as of FY-15 189% 123% Interest rate +100 bps 195% 118% Interest rate -100 bps 179% 120% USD appreciation +10% 192% Equities +20% 124% 192% 118% Equities -20% 185% 106% Credit
Slide 44: Group – EPS, BVPS and ROE calculations
Group – EPS, BVPS and ROE calculations1 EPS AND BVPS (CHF) BOPAT ROE AND ROE (%) No., CHF FY-15 Q1-16 USDm, % FY-15 Q1-16 Common shares issued 150.40m 150.48m SHE 31,178 30,869 Treasury shares 1.24m 1.23m Net URGL / CF hedges 2,850 4,067 Common shares outst. 149.16m 149.25 Adj. SHE 28,328 26,801 WAv
Slide 45: Group – Currency impact
Group – Currency impact Unfavorable FX impact highest in Global Life results Q1-16 KEY RESULTS KPI USDm reported at constant currency BOP 1,087 -16% -14% Group NIAS 875 -28% -25% GWP 9,115 -10% -5% NEP 6,452 -7% -3% General Net underwriting result 150 -35% -33% Insurance Investment income 488 +3% +8
Slide 46: Commentary
@ ZURICH Commentary
Slide 47: Page 3: Key messages
Page 3: Key messages Zurich’s operating results have improved significantly compared to the previous quarter. The General Insurance (GI) combined ratio is improving in-line with expectations and actions taken should further strengthen performance as the year progresses. Global Life (GL) has delivere
Slide 48: Page 4: Key financials
Page 4: Key financials Q1-16 Business operating profit (BOP) for the Group was USD 1.1bn and net income attributable to shareholders (NIAS) was USD 0.9bn. These results are a significant improvement compared to Q4-15, by USD 670m and USD 1.3bn, respectively. This result represents a good start to th
Slide 49: Page 5: Group – Business Operating Profit
Page 5: Group – Business Operating Profit The GI BOP for the quarter was USD 542m, compared to a loss of USD 120m in Q4-15, while the GL BOP of USD 317m was comparable year on year. Farmers BOP of USD 343m decreased 12% as growth in fee income was offset by an exceptional level of catastrophe losses
Slide 50: Page 6: General Insurance – Topline
Page 6: General Insurance – Topline For Q1-16 gross written premiums declined by 5% in local currency or 10% in US dollars. This reduction is mainly due to the focus on profitability and the impact of the broader soft market conditions. Achieved rate increases on renewal business increased to 3%. As
Slide 51: Page 7: General Insurance – Tiering results
Page 7: General Insurance – Tiering results In the second half of 2015 a set of actions were taken to restore profitability in GI. These actions mainly centered around three key themes - restoring technical excellence, enhancing governance and acceleration of the expense program. One key action was
Slide 52: Page 8: General Insurance – Loss Ratio details
Page 8: General Insurance – Loss Ratio details Good progress in the turnaround actions is also demonstrated in the development of the underlying loss ratios. The AY loss ratio excluding catastrophes for Q1-16 was 66.5%. This is roughly 2 percentage points better than the ratio for the second half of
Slide 53: Page 9: General Insurance – Combined ratio
Page 9: General Insurance – Combined ratio GI’s combined ratio of 97.7% for Q1-16 was 5.9 percentage points lower than FY-15 and 1.0 percentage point higher than Q1-15. The AY combined ratio ex-cat improved by 1.0 percentage point versus FY-15 and almost 3 percentage points against the poor third an
Slide 54: Page 10: General Insurance – BOP components
Page 10: General Insurance – BOP components The GI BOP for the quarter was USD 542m, compared to a loss of USD 120m in Q4-15. Compared to Q1-15, the decline in the GI underwriting result is reflected in the increase of the combined ratio by 1.0 percentage point. Investment income is up 3% on a repor
Slide 55: Page 11: Global Life – New business
Page 11: Global Life – New business Q1-16 Global Life new business APE volumes were flat in local currency compared to the prior year quarter, with increases in Latin America and Asia Pacific offset by decreases in EMEA and North America. The Group maintains its focus on protection, unit linked and
Slide 56: Page 12: Global Life – BOP by region
Page 12: Global Life – BOP by region Global Life BOP increased 11% in local currency, and was flat compared to the prior year quarter in US dollars, to USD 317m. In EMEA, earnings increased by 3%, with local currency BOP growing by 7%, as accelerated in-force management actions were partly offset by
Slide 57: Page 13: Farmers Exchanges – KPIs
Page 13: Farmers Exchanges – KPIs Farmers Exchanges, which are owned by their policyholders, sustained their growth momentum. Premiums grew 4% overall and 6% for continuing operations in Q1-16. Growth was driven by substantial rate increases in the Auto and Homeowner lines and supported by small gai
Slide 58: Page 14: Farmers – KPIs
Page 14: Farmers – KPIs Q1-16 Farmers Management Services BOP increased by 5%, mostly driven by higher management fees and reflecting continued premium growth. Farmers Re gross written premiums dropped 33% as the participation in the All Lines Quota Share reinsurance treaty was reduced from 10% to 8
Slide 59: Page 15: Group – Balance sheet and capital
Page 15: Group – Balance sheet and capital The decline in shareholders’ equity largely reflects the dividend payment approved at the AGM at the end of March, partially offset by first quarter net income and an increase in unrealized gains. The increase in unrealized gains was attributable to falling
Slide 60: Page 16: Key messages
Page 16: Key messages In summary, this result is a good start to the year with further improvement expected. GI’s combined ratio is improving in-line with expectations. The actions taken should further strengthen performance as the year progresses. Global Life delivered continued underlying improvem
Slide 61: For further information
For further information CALL US VISIT OR FOLLOW US Investor Relations 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 Investor Relations website Financial results and reports Events Patricia He
Slide 62: Calendar
Calendar: - May 31, 2016, DB Global Financials Conference 2016, New York - August 11, 2016, Half year results 2016 - September 27-29, 2016, BoAML Conference, London - November 10, 2016, Results for the nine months to September 30, 2016 - November 17, 2016, Investor Day, Zurich © Zurich Insurance Com
Zurich Insurance Group — Q1 2016 Earnings Presentation on 6ix