Zurich Insurance Group Ltd · SIX:ZURN

Zurich Insurance — H1 2014 Earnings Presentation

51 slides from Zurich Insurance's earnings presentation, Aug 7, 2014

  1. Slide 1: Half year results 2014

    Half year results 2014 Analysts and Media Presentation August 7, 2014 Zurich Insurance Group

  2. Slide 2: Key messages

    Key messages Martin Senn, Chief Executive Officer

  3. Slide 3: Key financials

    Key financials On track with our key targets HY-14 KEY RESULTS TARGET METRICS OVER STRATEGIC PERIOD HY-14 Target BOP BOPAT ROE1 12.5% 12 - 14% USD 2.6bn Q1-14 Target Z-ECM2 128% 100 – 120% NIAS Cumulative FC FY-14 Net cash 3-year target USD 2.1bn remittances > USD 3.5bn > USD 9bn 1 Business operatin

  4. Slide 4: Report card – Group

    Report card – Group Early days, but good progress GROUP STRATEGY ACTIONS UNDERWAY IN HY-14  Corporate: further enhancing combined GC / CLP model, on track to Prioritizing achieve >100 new common customers in 2014 investment in 1  Commercial: customer segmentation and analytics initiatives at NAC d

  5. Slide 5: Report card – General Insurance

    Report card – General Insurance Improving AY profitability, executing on “turnarounds” PRIORITY MARKETS MANAGE FOR VALUE GWP1 (USDm) BOP (USDm)  Exit from Zurich-branded UK aggregator distribution in April 19,995 1,652 19,532 1,369 83 52 20  Sale of Russia retail business in July 3,451 3,562 46 

  6. Slide 6: Report card – Global Life

    Report card – Global Life Growing in priority markets, in-force management initiatives underway PRIORITY MARKETS MANAGE FOR VALUE APE (USDm) NBV (USDm)  Exit of marginal positions (Taiwan, CLP Australia, Luxembourg) 2,373 515  Initiatives underway to deliver up to USD 100m BOP 4951 increase from i

  7. Slide 7: Report card – Farmers Exchanges

    Report card – Farmers Exchanges1 Positive momentum continues NET PROMOTER SCORE2 RETENTION3 35.6 33.3 75.3% 75.3% 30.2 29.8 30.0 74.9% 74.8% 74.7% HY-13 9m-13 FY-13 Q1-14 Q2-14 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 NET GAIN / LOSS OF AGENTS4 NEW BUSINESS COUNT GROWTH5 4.0% 45 -32 -2.9% -121 -6.2% -202 -9.1%

  8. Slide 8: Key messages

    Key messages General Improving accident year combined ratio, good progress with Insurance turnaround/exit businesses In-force management initiatives under way, priority market Global Life growth strategy progressing Farmers Positive trends continue Cash Cash remittances expected for full year >USD 3

  9. Slide 9: Financial highlights

    Financial highlights George Quinn, Chief Financial Officer

  10. Slide 10: Group – Business operating profit

    Group – Business operating profit Solid start to the year BOP BY SEGMENT (USDm) RECONCILIATION (USDm) +15% +32% 98 2,512 2,621 1,240 193 2,288 1,142 68 937 425 1,652 807 1,636 1,369 778 85 562 56 315 1,240 32.2% tax rate 659 634 368 352 659 341 837 227 276 597 696 756 12 57 93 17 31 -243 -232 -280 -

  11. Slide 11: General Insurance – Topline

    General Insurance – Topline Catch-up in topline with some rate pressure on US property GWP GROWTH IN LC (%) RATE CHANGE1 (%) Q2-13 Q1-14 Q2-14 11% GC 14% 5% 3% 1% 3% -1% NAC 5% 5% 4% 2% 3% 1% EMEA -4% 3% 2% 2% -2% -5% IM 12% 3% 4% 3% 27% 3% Total2 6% 4% 3% 2% 5% Q2-14 Q2-13 Q2-12 1 GWP development d

  12. Slide 12: General Insurance – Combined ratio

    General Insurance – Combined ratio Further improvement in AY combined ratio excl. catastrophes COMBINED RATIO SPLIT (%) COMBINED RATIO BY REGION (%) 99.1% 97.4% 3.0% 5.8% 97.7% 2.4% 95.7% GC 2.9% 95.9% 2.3% 2.6% 95.7% NAC 98.5% 95.5% 94.6% 90.9% 93.8% EMEA 101.3% 99.9% IM 99.5% 95.7% 0.0% Total -3.3

  13. Slide 13: General Insurance – BOP components

    General Insurance – BOP components Good profitability driven by improved underwriting result BOP BREAK DOWN (USDm) KEY DRIVERS (USDm) +44% 2 30 46 807 807 3 778 327 262 180 562 65 562 655 600 568 -11 -46 -58 -104 -13 -16 Q2-13 UWR Investment RCG NTR NCI Q2-14 Q2-121 Q2-13 Q2-14 Income Underwriting r

  14. Slide 14: Global Life – New business

    Global Life – New business Continued growth in APE and Assets under Management APE (USDm) NBM & NBV NET INFLOWS & AUM NBM (%) Net inflows (USDbn) 25.2 28.6 23.5 0.3 +22% 1,272 -0.6 17 -1.2 142 -1% +13% 1,039 55 NBV (USDm) AuM (USDbn) 42 874 264 262 280 157 348 29 37 18 12 247 32 234 135 198 51 48 28

  15. Slide 15: Global Life – BOP by region

    Global Life – BOP by region One-offs lead to a reduction in discrete quarter profit BOP BY REGION (USDm) KEY DRIVERS (USDm) -11% 352 368 2 315 -9 6 -9 3 352 315 44 -27 35 24 44 35 40 46 55 40 46 36 60 51 60 51 250 209 211 209 211 -1 -1 -28 -28 Q2-12 Q2-13 Q2-14 Q2-13 Europe Latin North APME Other Q2

  16. Slide 16: Global Life – Source of Earnings

    Global Life – Source of Earnings Growth in revenues and in new business investment BOP BY SOURCE OF EARNINGS (USDm) REGIONAL BOP & KPIs (USDm) HY-13 15% -55% -22% 5% nm Loadings & fees 1,581 497 3% 452 Inv. margin 296 397 8% 128 101 56 37 Technical margin 567 -7% -39 Operating costs -899 -3% EU US

  17. Slide 17: Farmers Exchanges – KPIs

    Farmers Exchanges1 – KPIs Positive signals in top-line performance continue GWP GROWTH (%) COMBINED RATIO (%)3 SURPLUS (USDbn)4 116.3% 36.6% 36.7% 111.7% 33.3% 108.3% 16.4% -0.9% -0.9% 16.2% 12.9% -2.1% 4.6 5.0 5.0 -2.6% 99.9% 95.5% 95.3% -3.7%2 1.0 1.0 1.0 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q2-12 Q2-13

  18. Slide 18: Farmers – KPIs

    Farmers – KPIs Expense savings compensate for lower management fees at FMS BOP (USDm) MGEP MARGIN (%)1 FARMERS RE CR (%)2 227 276 341 7.4% 7.4% 114.8% 110.4% 7.2% 15.6% 105.5% 15.0% 355 362 12.4% 349 99.2% 95.4% 93.1% -21 -73 -128 Q2-12 Q2-13 Q2-14 Q2-12 Q2-13 Q2-14 Q2-12 Q2-13 Q2-14 Catastrophes 3

  19. Slide 19: Group – Balance sheet and capital

    Group – Balance sheet and capital Very strong capital position SHAREHOLDERS EQUITY (USDm) CAPITAL MODEL RATIO (%) 34,670 -2,837 258% 278% 270% 261% 136 -98 33,699 991 206% 217% 185% 127% 837 121% 128% 114% Q1-14 Dividend1 NIAS Net CTA Pension HY-14 Z-ECM SST3 Solvency I URG/L (excl. plans & dividend

  20. Slide 20: Group – Free capital generation

    Group – Free capital generation Strong free capital generation and cash remittances 2013 FREE CAP GENERATION (USDbn) NET CASH REMITTANCES (USDbn) 4.3 4.2 4.2 4.0 0.3 > 3.5 1.0 -0.1 1.0 1.0 0.5 2.9 -0.7 2.3 -0.7 2.4 2.5 2.4 3.2 1.0 0.6 0.5 0.6 1.0 1.0 1.0 0.9 -0.8 -0.8 -0.8 -1.1 IFRS NIAS Accounting

  21. Slide 21: Key messages

    Key messages General Improving accident year combined ratio, good progress with Insurance turnaround/exit businesses In-force management initiatives under way, priority market Global Life growth strategy progressing Farmers Positive trends continue Cash Cash remittances expected for full year >USD 3

  22. Slide 22: 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’).

  23. Slide 23: Appendix

    @ ZURICH Appendix

  24. Slide 24: GI – Combined ratio details

    GI – Combined ratio details AY loss ratio further improved LOSS RATIO (%) EXPENSE RATIO (%) 69.4% 70.3% 67.6% 30.4% 29.7% 30.0% 29.9% 29.7% 29.7% 68.3% 4.4% 5.8% 3.2% 3.0% 66.1% 65.9% 13.6% 2.1% 13.5% 13.5% 13.4% 13.4% 13.1% 2.3% 68.0% 67.5% 64.6% 68.0% 67.8% 63.6% 14.5% 13.7% 13.9% 14.1% 13.5% 14.0

  25. Slide 25: GI – Shift of non-technical result

    GI – Shift of non-technical result Most of original non-technical result has been shifted to the CR SHIFTED AND REMAINING ACCOUNTS IMPACT ON COMBINED RATIO (%)  Accounts shifted to technical expenses: 2.1% 2.9% 2.7% 2.3% 2.6% 2.6% – Central charges GI – Amortization of intangible assets – Amortizat

  26. Slide 26: GI – Loss ratio details

    GI – Loss ratio details AY loss ratio further improved LOSS RATIO (%) 75.5% 69.4% 67.5% 67.6% 70.3% 9.7% 67.4% 68.6% 3.0% 67.7% 5.8% 1.6% 66.3% 2.2% 2.2% 3.7% 65.9% 1.6% 1.9% 2.3% 67.2% 67.9% 68.1% 68.5% 66.4% 67.8% 66.7% 69.0% 65.6% 63.6% -1.9% -3.3% 0.0% -2.7% -0.3% -3.1% -2.0% -1.2% 0.0% -4.2% Q1

  27. Slide 27: GI Global Corporate – KPIs

    GI Global Corporate – KPIs CR impacted by adverse PYD on large losses HY-14 KEY FINANCIALS GWP Zurich rate Combined USD 479m USD 401m Growth1 change2 Ratio 4% 2.4% 96% 92.2% 95.8% 20.7% 21.9% KEY DRIVERS 71.5% 74.0%  Growth driven by rate change and strong Q2 new business in US as a result of execu

  28. Slide 28: GI North America Commercial – KPIs

    GI North America Commercial – KPIs Good underlying growth with improved combined ratio HY-14 KEY FINANCIALS GWP Zurich rate Combined USD 365m USD 469m Growth1 change2 Ratio 3% 3% 96% 99.6% 96.3% 29.5% 30.8% KEY DRIVERS 70.1% 65.5%  Underlying growth at +3% following positive effects from rate tieri

  29. Slide 29: GI EMEA – KPIs

    GI EMEA – KPIs Broadly flat top-line with further progress in underlying CR HY-14 KEY FINANCIALS GWP Zurich rate Combined USD 407m USD 679m Growth1 change2 Ratio 0% 2% 95% 99.0% 94.7% 29.8% 30.1% KEY DRIVERS 69.2% 64.6%  We are seeing growth in UK and Spain, and in Switzerland and Germany personal

  30. Slide 30: GI International Markets – KPIs

    GI International Markets – KPIs Reduced growth partly driven by focus on profitability HY-14 KEY FINANCIALS GWP Zurich rate Combined USD 122m USD 97m Growth1 change2 Ratio 5% 3% 100% 101.5% 99.9% 41.9% 40.7% KEY DRIVERS 59.6% 59.2%  Underlying growth at 5%  Higher rate increases due to increased f

  31. Slide 31: GI – Rate change monitor

    GI – Rate change monitor Continued rate increases, with market pressure in US property ZURICH RATE CHANGE ASSESSMENT Business Assessment Rates increases are generally at adequate levels but we see some market pressure, mainly in US Group property lines Modest rate increases in all regions apart from

  32. Slide 32: GI – Natural catastrophe reinsurance

    GI – Natural catastrophe reinsurance Program further benefitted from lower reinsurance prices NATURAL CATASTROPHE REINSURANCE TREATIES1 (USDm) 30 20 30 150 150 30 500 500 20 150 20 30 10 20 500 150 Single global USD 150m treaty, which can be applied to any region2 10 10 930 750 300 500 Single global

  33. Slide 33: GL North America – Key financials

    GL North America – Key financials High new business strain and one-off items in the technical margin impacting BOP BOP – BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) HY-13 284 Loadings & fees 168 1 168 3% 243 Inv. margin 20 173 -24% 160 109 117 Technical margin 27 -52% 62 37 Operating

  34. Slide 34: GL Europe – Key financials

    GL Europe – Key financials BOP broadly flat excluding one-off impacts BOP – BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) HY-13 819 778 Loadings & fees 751 384 1,135 1% Inv. margin 171 272 4% 452 409 434 101 394 261 251 Technical margin 287 -11% Operating costs -464 5% FY-12 FY-13 HY-1

  35. Slide 35: GL APME – Key financials

    GL APME – Key financials Good growth in fee and technical margins BOP – BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) HY-13 176 Loadings & fees 157 92 249 5% 138 134 83 79 Inv. margin 30 -1% 56 Technical margin 68 6% Operating costs -134 -56 -3% -85 FY-12 FY-13 HY-14 Acquisition costs

  36. Slide 36: GL Latin America – Key financials

    GL Latin America – Key financials Strong growth in revenues in local currency BOP – BY SOURCE OF EARNINGS (USDm) KEY FINANCIALS & KPIs (USDm) HY-13 245 234 Loadings & fees 386 16 402 2% 191 155 Inv. margin 70 42% 130 128 119 86 Technical margin 145 11% Operating costs -128 0% FY-12 FY-13 HY-14 Acq

  37. Slide 37: GL – New business by pillar

    GL – New business by pillar Strong second quarter production DISCRETE Q2-14 KEY FINANCIALS APE (USDm) CLP single 1,272 NBM PVNBP 1,039 premium 874 419 290 282 USD 1.3bn 408 463 23.5% USD 12bn 250 342 340 390 Q2-12 Q2-13 Q2-14 NBV (USDm) KEY DRIVERS 264 262 198 61 79 59 26 85 78  Growing CLP APE due

  38. Slide 38: GL – Net inflows & assets under management

    GL – Net inflows & assets under management Positive net inflows and asset development NET INFLOWS BY REGION (USDbn) AUM DEVELOPMENT (USDbn) 0.3 272 280 0 5 2 32 32 0.6 0.2 0.1 0.0 0.0 0.1 0.1 0.1 0.2 119 117 -0.3 0.0 -0.1 -0.4 -0.5 -1.7 -0.6 128 124 -1.2 Q1-14 Net inflows Market FX HY-14 movements Q

  39. Slide 39: GL – MCEV free surplus roll-forward

    GL – MCEV free surplus roll-forward Positive development of free surplus transferred to Group FREE SURPLUS DEVELOPMENT (USDm) 297 189 -36 22 -648 15 -711 874 2,790 2,793 Opening Cash strain Expected Expected Operating Model Economic Dividends FX Closing free surplus from new transfer to contribution

  40. Slide 40: 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%) CORE SEGMENT BOP GI & LIFE (51%) -20 -20 -21 -20 -18 -19 -16 -21 -16 -13 -12 -11 -7 -25 -21 -8 Q4-12 Q2-13 Q4-13 Q2-14 Distribution agreeme

  41. Slide 41: Farmers Exchanges – GWP

    Farmers Exchanges – GWP Positive signals in top-line performance continue DEVELOPMENT OF GWP BY BUSINESS LINE (USDm) -1.5% -0.9% 9,477 9,335 4,804 4,760 4,391 4,203 -4.2% 2,141 2,062 -3.7% 2,338 2,379 +1.8% 1,281 1,305 +1.9% 860 885 +3.0% 434 448 +3.2% 495 496 +0.3% 223 240 +7.3% 1,087 1,162 +6.9% 5

  42. Slide 42: Farmers Exchanges – PIF/VIF

    Farmers Exchanges – PIF/VIF1 Further underlying improvement, decline driven by Direct Auto DEVELOPMENT OF PIF/VIF1 BY BUSINESS LINE (THOUSANDS) -1.0% -0.3% 19,298 19,114 19,164 19,114 9,962 9,765 -2.0% 9,836 9,765 -0.7% -1.1% -0.5% 4,875 4,820 4,843 4,820 414 416 +0.5% 413 416 +0.8% 886 944 +6.6% 91

  43. Slide 43: Farmers Exchanges – Combined ratio

    Farmers Exchanges – Combined ratio Combined ratio reflects high catastrophe losses in Q2-14 COMBINED RATIO BY BUSINESS LINE (%)1 100.9% 104.1% Auto Auto 99.6% 102.1% 106.1% 108.5% Home Home 111.2% 133.6% 101.8% 104.9% EA Business Insurance EA Business Insurance 111.1% 116.6% 101.0% 100.3% Bristol We

  44. Slide 44: Farmers Exchanges – Combined ratio history

    Farmers Exchanges – Combined ratio history Catastrophe losses drive volatility in quarterly combined ratio QUARTERLY COMBINED RATIO (%) Catastrophes impact1 Incl. Incl. Incl. 17 Catastrophe California 13 Catastrophe 120 Events wildfires Events Incl. 115 13 Catastrophe Events Incl. 13 Catastrophe 110

  45. Slide 45: Group Investments – Asset allocation

    Group Investments – Asset allocation Zurich’s sources of investment risk and return are balanced ASSET ALLOCATION (%)1 RISK DIVERSIFICATION2 RISK DRIVERS (%)2,3 Total Group Investments: USD 215bn 4% 5% 1% 5% 13% 1% 100% 4% 8% 35% 40% 24% 26% 80% 17% Sum of single Investment Investment security risks

  46. Slide 46: Group Investments – Debt securities portfolio

    Group Investments – Debt securities portfolio The debt securities portfolio is of a high quality BY CATEGORY (%) BY RATING (%) Total debt securities: USD 161bn 2% 12% 21% 23% 48% 40% 17% 37% Government and government related bonds MBS/ABS AAA AA A BBB Non-investment grade Corporate bonds 7 August 20

  47. Slide 47: Investment income yield

    Investment income yield1 Decline in investment yields slowed down GENERAL INSURANCE (%) GLOBAL LIFE (%) GROUP (%) 1.03% 1.71% 1.29% Equity 1.33% Equity 1.92% Equity 1.39% 1.27% 1.57% 1.34% 1.30% 1.73% 1.51% Debt 1.34% Debt 1.81% Debt 1.57% 1.65% 2.01% 1.79% 2.63% 2.77% 2.86% Real estate 2.82% Real e

  48. Slide 48: Group – Economic capital models

    Group – Economic capital models Very strong capital position Z-ECM RATIO DEVELOPMENT (%) SST1 RATIO DEVELOPMENT (%) 11% 3% -6% 3% 217% 206% 3% -2% -4% 4% 128% 127% FY-13 Business Market Dividend Model Q1-14 HY-13 Business Market Dividend Model FY-13 profits movements accrual changes profits movement

  49. Slide 49: Group – Z-ECM components

    Group – Z-ECM components Well diversified capital base by risk type Q1-14 AFR COMPOSITION (USDbn) RBC BY RISK TYPE AND BUSINESS (%) ALM / Market risk Shareholders equity 35 11% Operational risk 35% Business risk Dividend accrual 4 16% P&R risk1 2% Re-ins credit risk 4% Net intangibles 19 8% 3% Life

  50. Slide 50: For further information

    For further information CALL US VISIT OR FOLLOW US Investor Relations James Quin +41 44 625 21 10 André Meier +41 44 625 37 75 Michael Boardman +41 44 625 26 37 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

  51. Slide 51: Calendar

    Calendar: - September 30 – October 2, BoAML Annual Banking & Insurance CEO Conference - November 6, Results for nine months to September 30, 2014 - December 5, Investor update, London - February 12, 2015, Annual results 2014 © Zurich Insurance Company Ltd

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